[Senate Hearing 107-858]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 107-858
 
    TECHNOLOGY TRANSFER PROGRAMS AND COMPETITIVENESS IN THE GLOBAL 
                              MARKETPLACE
=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                                   to

   RECEIVE TESTIMONY ON THE EFFECTIVENESS AND SUSTAINABILITY OF U.S. 
TECHNOLOGY TRANSFER PROGRAMS FOR ENERGY EFFICIENCY, NUCLEAR, FOSSIL AND 
 RENEWABLE ENERGY; AND TO IDENTIFY NECESSARY CHANGES TO THOSE PROGRAMS 
       TO SUPPORT U.S. COMPETITIVENESS IN THE GLOBAL MARKETPLACE

                               __________

                           SEPTEMBER 18, 2002


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman
DANIEL K. AKAKA, Hawaii              FRANK H. MURKOWSKI, Alaska
BYRON L. DORGAN, North Dakota        PETE V. DOMENICI, New Mexico
BOB GRAHAM, Florida                  DON NICKLES, Oklahoma
RON WYDEN, Oregon                    LARRY E. CRAIG, Idaho
TIM JOHNSON, South Dakota            BEN NIGHTHORSE CAMPBELL, Colorado
MARY L. LANDRIEU, Louisiana          CRAIG THOMAS, Wyoming
EVAN BAYH, Indiana                   RICHARD C. SHELBY, Alabama
DIANNE FEINSTEIN, California         CONRAD BURNS, Montana
CHARLES E. SCHUMER, New York         JON KYL, Arizona
MARIA CANTWELL, Washington           CHUCK HAGEL, Nebraska
THOMAS R. CARPER, Delaware           GORDON SMITH, Oregon
                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
               Brian P. Malnak, Republican Staff Director
               James P. Beirne, Republican Chief Counsel
              Jennifer Michael, Professional Staff Member
                    Bryan Hannegan, Staff Scientist







                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Baca, Sylvia, Vice President, Health, Safety and Environment, BP 
  America, Inc...................................................    21
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     1
Logan, Jeffrey, Senior Research Scientist, Advanced International 
  Studies Unit, Pacific Northwest National Laboratory............    26
Renberg, Dan, Member of the Board of Directors, Export-Import 
  Bank of the United States......................................    36
Schochet, Daniel N., Vice President, ORMAT Technologies, Inc., 
  Sparks, NV.....................................................    16
Smith, Carl Michael, Assistant Secretary for Fossil Energy, 
  Department of Energy; accompanied by Robert Dixon, Senior 
  Advisor, Office of Energy Efficiency and Renewable Energy; 
  George Person, Acting Director, Office of American and African 
  Affairs, Office of Policy and International Affairs; and Bill 
  Trapmann, Energy Information Administration, Office of Natural 
  Gas............................................................     3

                                APPENDIX

Responses to additional questions................................    39


    TECHNOLOGY TRANSFER PROGRAMS AND COMPETITIVENESS IN THE GLOBAL 
                              MARKETPLACE

                              ----------                              


                     WEDNESDAY, SEPTEMBER 18, 2002

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 9:35 a.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman, 
chairman, presiding.

OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW 
                             MEXICO

    The Chairman. The hearing will come to order. Thank you all 
for coming.
    This morning we are here to consider the general subject of 
technology transfer, more specifically the role the Government 
can and should be playing to support private sector efforts to 
achieve sustainable energy policies in developing countries. 
Given the positions that have been taken by the Bush 
administration at the recent World Summit on Sustainable 
Development in Johannesburg, I felt that it was important to 
also try to hear from the Department of State. Unfortunately, 
they declined to testify.
    Technology transfer and deployment is one of the most 
important issues for the health of the world environment and 
economy. Commitments made today to energy technologies and 
related infrastructure will influence the world energy system 
for much of this century. The right public policies can 
significantly reduce inefficiencies in the system from the 
source to the end use.
    For the most part, governments do not make direct 
investments. The private sector does. A striking example that I 
have found disturbing is how poor natural resource development 
policy is resulting in the complete loss of valuable resources 
in many countries. I recently was in Africa with the majority 
leader and other Senators, and became very much aware of this 
problem, particularly in Nigeria. In the absence of modern 
technology and sound resource policy, developing nations are 
building in excessive costs and locking out environmental 
protection, and diminishing their own development potential.
    Cooperation at the international level promotes outcomes 
that are favorable to U.S. interests, including the sharing of 
costs and risks of developing new energy technologies. We need 
to do a better job of focusing on the long term when it comes 
to energy policies and greenhouse gas emissions, and the 
failure to do so means pushing the consequences of global 
climate change onto future generations.
    U.S. participation in the global environmental facility and 
the many energy initiatives discussed at the World Summit on 
Sustainable Development has in my view been paltry at best. The 
United States is behind by about $210 million in its funding of 
the Global Environmental Facility. The United States declined 
several leadership opportunities on clean energy issues at the 
World Summit on Sustainable Development in August, key issues 
in which the United States was absent included renewable energy 
and the World Bank Group's Global Initiative on Gobal Flaring 
Reduction.
    This World Bank global flaring reduction initiative seeks 
to support the efforts of the oil industry and national 
governments to reduce the wasteful venting and flaring of gas 
by identifying areas where common approaches and collective 
actions can strengthen existing efforts. The immediate need for 
oil export revenues often leads governments of oil-producing 
countries to disregard the importance of developing the 
associated natural gas resources. This neglect has a high cost 
for individuals and local communities. I mentioned the 
circumstance we encountered in Nigeria.
    The acceleration of greenhouse gas concentrations from the 
wasteful venting and flaring of natural gas. That is obviously 
a major concern as well. Key to making progress in this area is 
the development of public-private partnership to build local 
infrastructure. In Johannesburg, the World Bank launched its 
Global Gas-Flaring Reduction Public-Private Partnership to 
address this.
    Recognizing the World Bank initiative as a good business 
proposition, the oil and gas industry is an active participant 
in this. Regrettably, our own government has not been. The Bush 
administration has chosen to sit on the sidelines and to watch 
other countries take the lead. As the world's largest importer 
of crude oil and oil products and user of those, the United 
States should join with industry and the world community to 
provide leadership in addressing this problem. I hope we can 
hear some comments and suggestions from today's witnesses that 
will help us to move forward in designing a national energy 
policy that is consistent with the need to develop a consensus 
on how to improve our government management of greenhouse gas 
technology programs and allowing the benefits of the technology 
that we have to be used worldwide.
    I want to thank everyone for being here. Our first witness 
today is Mike Smith, who is the Assistant Secretary for Fossil 
Energy at the Department of Energy. I think this is the first 
testimony you have given to our committee, at least in 
sometime, since we confirmed you, and we are glad to have you 
here and look forward to hearing your views. Then I will have a 
few questions. Why don't you go right ahead.

STATEMENT OF CARL MICHAEL SMITH, ASSISTANT SECRETARY FOR FOSSIL 
  ENERGY, DEPARTMENT OF ENERGY; ACCOMPANIED BY ROBERT DIXON, 
   SENIOR ADVISOR, OFFICE OF ENERGY EFFICIENCY AND RENEWABLE 
ENERGY; GEORGE PERSON, ACTING DIRECTOR, OFFICE OF AMERICAN AND 
 AFRICAN AFFAIRS, OFFICE OF POLICY AND INTERNATIONAL AFFAIRS; 
AND BILL TRAPMANN, ENERGY INFORMATION ADMINISTRATION, OFFICE OF 
                          NATURAL GAS

    Mr. Smith. Thank you, Mr. Chairman, very much. I do have a 
formal written statement that I would offer for the record.
    The Chairman. We will include that statement, and all of 
the written statements of witnesses in the record.
    Mr. Smith. Thank you, Mr. Chairman.
    The statement I have submitted for the record covers topics 
that cross virtually the entire Department of Energy. Some go 
well beyond my area of responsibility in fossil energy, 
therefore I have with me today several staff members from other 
organizations within the Department who will assist me in 
answering some of your more detailed questions.
    Mr. Chairman, the Department of Energy takes technology 
transfer very seriously, both as it applies domestically and as 
it positions our domestic firms to compete more vigorously 
overseas. Globally, our aggressive policies of industrial 
partnering and technology transfer have well-positioned U.S. 
firms to compete in the world marketplace.
    We are still the leaders in technology for producing clean 
power from coal and exploring and producing oil and natural gas 
and converting the power of the wind and sun into usable 
energy, and in producing energy efficient machines and 
appliances. This technological leadership is especially 
important, recognizing that in the first half of this century 
the market for new energy technologies just in the world's 
developing and transitioned economies could approach $25 
trillion.
    In your letter of invitation, Mr. Chairman, you asked that 
we address several specific elements of international 
technology transfer. First, you referenced the 1999 report by 
the President's Committee on Advisors on Science and Technology 
PCAST that examined the Federal role on global cooperation on 
energy innovation. The committee recommended that an 
interagency working group be created. This group would improve 
the coordination in bringing a new strategic vision to U.S. 
international energy research, development, demonstration, and 
deployment.
    Subsequent to the PCAST report, the Senate added language 
to the report accompanying the fiscal year 2001 appropriations 
bill that directed the formation of the clean energy technology 
export, or CETE, working group. Although not referenced in the 
PCAST study directly, the Senate report closely mirrored the 
recommendations of PCAST.
    CETE is co-chaired by the Energy Department, the Department 
of Commerce, the U.S. Agency for International Development, and 
six other agencies participate. The President's national energy 
policy, issued in May 2001, referenced the establishment of 
CETE, and the President has subsequently cited the importance 
of this interagency group in carrying out portions of his 
climate change initiative.
    Last year, the nine CETE agencies submitted their first 
annual status report to the Congress. In the near future, the 
5-year strategic plan for the initiative will be submitted to 
Congress, which will include possible examples of future 
projects and time horizons.
    You asked, Mr. Chairman, about the actions we are taking to 
counter low competitiveness in renewable energy technologies 
from foreign developers. At the recent World Summit for 
Sustainable Development in Johannesburg, which the chairman 
mentioned, the administration announced the Clean Energy 
Initiative, powering sustainable development from village to 
metropolis. This initiative is intended to be a framework to 
encompass a large number of key development issues through 
partnerships with other countries and organizations.
    The Clean Energy Initiative has three focus areas, first, 
new access to energy services through the U.S. Agency for 
International Development, second, increasing the efficiency of 
energy generation, supply, and use through the Department of 
Energy, and third, changing vehicle and domestic energy use 
patterns through the Environmental Protection Agency. We expect 
this initiative to further the recommendations of the PCAST 
study and to help build practical partnerships for implementing 
clean energy and efficiency projects. This could include gas 
flaring initiatives, which I will discuss in more detail in a 
moment.
    We also believe that the CETE initiative can be one of the 
principal means we have for assuring that we are working in 
support of U.S. industry's competitiveness abroad. The CETE 
initiative, the Clean Energy Initiative, and the national 
energy policy are all consistent and complementary.
    You asked, Mr. Chairman, about whether export controls or 
other regulatory impediments hinder or prevent U.S. companies 
from participating in commercial activities internationally. In 
our discussion with private sector officials, areas have been 
identified where the U.S. Government may be able to accelerate 
the international deployment of clean energy technology.
    In many cases, one of the highest priority actions we can 
take is to assist the governments of developing countries in 
adapting a policy, legal and regulatory framework that will be 
more receptive to clean energy technologies and foreign 
investors. As an example, we are working closely with China in 
advance of the upcoming Beijing Olympics to identify 
opportunities for the application of U.S.-developed clean 
energy technologies.
    Finally, Mr. Chairman, you asked about the practice in 
several nations of venting and flaring natural gas, and the 
World Bank's initiative to reduce the loss of this valuable 
energy resource. My formal statement goes into the issues of 
gas flaring in some detail, but let me summarize it with three 
major points.
    First, about 60 percent of all gas flaring and venting 
occurs in just eight countries. Second, the global flaring of 
natural gas as a percentage of total oil production has 
declined significantly in the last 20 years. In 1977, for 
example, OPEC nations flared approximately 50 percent of the 
gas they produced. Earlier this year, the current president of 
OPEC reported that today just 8 percent of their total gas 
production is flared.
    Third, the Department is working on two fronts to help 
reduce gas flaring at home in the programs I oversee. We are 
developing new technologies that could convert natural gas into 
high quality fuels like methanol and low sulfur diesel. The 
advantage is that in many cases these products can be shipped 
to markets through an existing oil pipeline infrastructure.
    Internationally, we have a large number of bilateral and 
multilateral efforts underway to promote the development and 
commercial use of natural gas resources as an alternative to 
venting or flaring. Beginning on page 9 of my submitted 
testimony, I have listed some of those international efforts, 
although as my formal statement says the list is actually 
longer than the items cited.
    We are actively engaged in discussions with the World Bank 
and with other U.S. Government agencies, foreign energy 
ministries, and the private sector regarding the global gas-
flaring reduction initiative. We generally support efforts to 
fully utilize this gas. It is my understanding that at the 
recent Johannesburg meeting, the issue was discussed in a panel 
forum held in conjunction with the world summit.
    Before committing to specific financial or other support, 
we want to examine the details of the proposed effort by the 
World Bank and consult with other potential partners. As 
Secretary Abraham committed to you in an August 13 letter, we 
will keep you informed of our progress with the World Bank as 
details emerge.
    Thank you again, Mr. Chairman, for allowing me to testify 
this morning.
    [The prepared statement of Mr. Smith follows:]
   Prepared Statement of Carl Michael Smith, Assistant Secretary for 
                  Fossil Energy, Department of Energy
    I am representing several elements of the Energy Department today 
in presenting this testimony on U.S. energy-related technology transfer 
programs. The Department takes seriously the importance of transferring 
federally-supported technologies to the private sector where they can 
be applied for the public good.
    Throughout our agency's existence we have made technology transfer 
a fundamental part of the Department's overall mission. Over the past 
50 years, the U.S. government has financed more of the world's 
scientific research and technology development than any other nation. 
These federal investments have paid off handsomely for our Nation. The 
U.S. economy and technology sectors are the envy of the world, thanks 
in large part to our unique innovative capacity. From information 
technology to biotechnology to materials science, U.S. scientists and 
high tech workers are generating new products and trail-blazing 
revolutionary discoveries every day.
    For example, within the Office of Fossil Energy, the organization I 
oversee, more than 90 percent of the research and development we pursue 
is conducted in partnership with the private sector. Almost all of it 
involves some form of private sector cost-sharing which ensures that 
the non-federal participant has a vested interest in the successful 
commercial application of the emerging technology. We also regard the 
transfer of knowledge and technology from R&D programs at our national 
laboratories and universities as one of our highest priorities.
         technology transfer from an international perspective
    It is useful when discussing the important topic of energy 
technology transfer to consider the current world energy outlook. The 
clean energy policies the U.S. government adopts today will have 
profound influence on the shape of the global energy system for many 
decades to come.
    Between now and 2050, the combined growth of the energy sector in 
developing and transition economies will account for over half of 
global energy growth. Ninety percent of the markets for energy 
efficiency, coal, nuclear, and renewable energy technologies are 
expected to occur in these countries in the coming decades and 
investments in new energy technologies in these markets will likely 
approach $15 to $25 trillion.
    While energy sector modernization will help improve the standard of 
living and health standards in these countries, rapid growth in total 
world energy use will also pose new challenges. If future energy use 
trends continue, the world could witness increased air pollution 
problems as well as increased levels of atmospheric carbon dioxide. 
That is why it is important to encourage international adoption of 
energy efficient fossil fuel technology, nuclear power, and renewable 
alternatives.
    Strategic investments in advanced clean energy technologies by the 
U.S. private sector in partnership with the U.S. government will 
increase U.S. market share and competitiveness in these growing markets 
while addressing environmental concerns and increasing U.S. jobs.
    Public/private cooperation in international clean energy technology 
development and deployment provides opportunities for U.S. companies to 
access global markets. By working with government, U.S. companies can 
gain access to innovative ideas and work to open doors to these world 
markets. For the U.S. government, this cooperation will help lower the 
cost of energy for U.S. consumers, spurring economic growth. It could 
also help reduce international dependence on oil supplies from volatile 
regions and potentially reduce nuclear proliferation risks.
  the report of the president's committee of advisors on science and 
      technology on international cooperation on energy innovation
    In your letter of invitation, Mr. Chairman, you asked specifically 
about the 1999 report by the President's Committee of Advisors on 
Science and Technology (PCAST) entitled Powerful Partnerships: The 
Federal Role in International Cooperation on Energy Innovation. This 
report was one of the most noted efforts by the government in recent 
years to address U.S. competitiveness in the international clean energy 
market.
    The report concluded that existing Federal activities in support of 
U.S. technology transfer were scattered among several agencies, each of 
which focused on its efforts individually or in certain circumstances 
engaged with only a small number of other U.S. government agencies.
    PCAST determined that a new strategic vision and coordinating 
structure could link the disparate initiatives of the U.S. government 
and unite them into a coherent effort. The PCAST report recommended the 
creation of an interagency working group that would improve the 
coordination of U.S. international energy research development, 
demonstration, and deployment.
    Senate Report 106-395, on the FY 2001 Energy and Water Development 
Appropriations Bill, directed the formation of such a working group 
that would improve the federal government's role in promoting exports 
of clean energy technologies, working in collaboration with U.S. 
industry. This working group on Clean Energy Technology Export (CETE) 
is co-chaired by the Department of Energy, the Department of Commerce, 
and the U.S. Agency for International Development. Six other agencies 
of the U.S. government also participate in the working group, including 
the Departments of State and Treasury, the Environmental Protection 
Agency, the Export-Import Bank, the Overseas Private Investment 
Corporation, and the U.S. Trade and Development Agency.
    I have included further discussion of the CETE initiative below as 
it relates to efforts to counter the potential loss of international 
competitiveness in renewable technology.
              administration position on coeect and corect
    COEECT The Committee on Energy Efficiency Commerce and Trade 
(COEECT) was an interagency working group formed for the purpose of 
assisting the U.S. energy efficiency industry to compete in the 
international market against competitors who received substantial 
export assistance from their governments and against barriers to entry 
into foreign markets. COEECT's purpose was to increase energy 
efficiency exports, thus creating U.S. jobs and reducing global 
environmental pollution. To accomplish this mission, COEECT consulted 
and collaborated with representative industry groups and relevant 
Federal agency heads to coordinate and leverage the actions and 
programs of the Federal Government affecting the export of energy 
efficiency products and services.
    COEECT produced and distributed specific market assessments of 
energy opportunities and supported state-level peer-exchanges with a 
range of countries to help develop federal and local energy efficiency 
regulations and programs. COEECT focused on market development, 
financing, training, education, and management.
    COEECT was initially funded in FY 1993 and received peak funding in 
FY 1995 and FY 1996 with $1.116 million provided in both years. 
Congressional appropriations for COEECT declined after FY 1996. Given 
the desire of Congress to decrease funding for this program, the 
Department chose, in FY 2002, to fund programs that ranked higher on 
our priority list.
    CORECT The Committee on Renewable Energy Commerce and Trade 
(CORECT) was a 14-member interagency working group of the Federal 
Government. The primary objective of CORECT was to increase U.S. 
competitiveness in the export or transfer of Renewable Energy 
technologies. CORECT worked with U.S. Export Council for Renewable 
Energy (ECRE) in establishing export strategies and identifying 
barriers. CORECT's partners also included multilateral and regional 
development banks, commercial banks, foundations and other non-
governmental organizations.
    CORECT also worked with Latin America and the Caribbean (LAC), Asia 
and the Pacific, Africa, and Eastern Europe and the Commonwealth of 
Independent States. LAC was the highest priority market. In the time 
since it began in 1984, CORECT built a strong partnership with the U.S. 
renewable energy industry. This led to the strengthening of U.S. 
exports in solar, wind, geothermal, hydropower and biomass 
technologies.
    In 1997, the Department's request for funding of CORECT was not 
approved by Congress, nor was it approved the following year. Given the 
desire of Congress to no longer fund CORECT, the Department has not 
requested any funds for this initiative since 1998.
       improving competitiveness in renewable energy technologies
    To improve competitiveness in clean energy technologies, including 
renewables, the Administration has proposed funding in its FY 2003 
budget request to support the Clean Energy Technology Export (CETE) 
Initiative.
    The CETE initiative is a senior-level, multi-agency, multi-
technology partnership that combines the resources of the U.S. federal 
government and the capabilities of the U.S. private sector to 
facilitate the export of clean energy technologies abroad. The CETE 
Working Group will approve CETE program activities, approve the 
framework for assessing program performance, commit agency roles in 
support of CETE, and submit an annual report to Congress. This body 
will outline the most effective manner for carrying out the designated 
activities and establish a detailed timeline for the achievement of 
project goals and for project completion.
    CETE can improve the ability of the United States to respond to 
international competition, stimulated by market demand, by leveraging 
the resources of federal agencies effectively and efficiently and by 
raising policy issues that may hamper the export of U.S. technologies 
abroad. Because the United States is a leader in clean energy 
technology, expanding the global markets for clean energy technology 
and encouraging open competition for these new markets will result in 
substantially greater gains for U.S. exports.
    Senate Report 106-395 requested the preparation of a five-year 
strategic plan for the CETE program and annual status reports. The 
first annual status report was prepared in consultation with all the 
nine participating CETE agencies and submitted to Congress in April 
2001. Since the submission of this annual report, the Administration 
has enunciated a similar vision in the international component of the 
National Energy Policy and in other official statements by the Office 
of the President. These Administration statements have called for U.S. 
national initiatives to promote the development, export and use of 
clean energy technologies, especially in developing countries and 
countries in transition. Illustrative examples of possible CETE 
projects and time horizons are included in the CETE five-year strategic 
plan, which will be submitted to the Congress in the near future.
 export controls and regulatory impediments that hinder u.s. companies
    U.S. industries also have expressed the view that they are 
constrained in some cases by government regulation. Policies such as 
complex tax rules and trade sanctions against foreign countries often 
reduce the competitiveness of U.S. industries in foreign markets. 
Although trade sanctions can be an important U.S. foreign policy tool, 
competitors often fill the void in these markets, thereby expanding 
their market share at the expense of U.S. companies.
    Consultations with private sector representatives over the past 
several months indicate that the U.S. private sector has identified 
areas where the U.S. Government can help accelerate clean energy 
technology. These areas include assistance to developing countries in 
implementing a policy, legal, and regulatory framework that will be 
more receptive to clean energy technologies and foreign investors.
    The U.S. Agency for International Development spends a substantial 
percentage of its energy budget on policy and regulatory reform in 
developing countries which helps open energy markets to U.S. industry. 
The U.S. Department of Commerce is in the best position to address U.S. 
industry views on the various export controls administered by federal 
departments and agencies.
 the importance of public-private partnerships in regard to the world 
             bank's global gas flaring reduction initiative
    Your letter of invitation, Mr. Chairman, also asked that we discuss 
gas flaring reduction.
    Defining Gas Venting and Flaring. Gas venting and flaring are two 
ways of disposing of natural gas. Gas flaring refers to gas that is 
ignited and burned at either the site of production or at the 
processing plant or refinery. Gas venting involves a release of the gas 
directly into the atmosphere without burning. Gas venting can occur at 
several points along the supply chain during field production, during 
transmission, or at the point of final use. Because released or 
escaping natural gas, which is predominantly methane, is hazardous and 
potentially explosive, when gas releases are anticipated, it is safer 
to flare the gas than vent it.
    According to the World Bank, sixty percent of all gas flaring and 
venting occurs in just 8 countries (Algeria, Angola, Indonesia, Iran, 
Nigeria, Mexico, Russia, and Venezuela).
    In the United States, gas is not allowed to be vented at refineries 
or natural gas processing plants, but is sometimes permitted at the 
point of production for testing well productivity at the startup of 
production. Whenever venting and flaring occur, this represents the 
loss of a valuable energy commodity.
    In addition, some emissions from flaring and the methane emissions 
from venting pollute the environment and are generally unhealthy to 
humans and ecosystems. Methane is a more potent greenhouse gas than 
CO2, and its impact on global climate may be 20 times 
greater than that of CO2. Natural gas flaring and venting on 
a worldwide basis accounts for approximately 1 percent of the carbon 
dioxide emissions resulting from the consumption of fossil fuels.
    U.S. Gas Flaring Regulations and Data Collection. In the early 
1940's, gas flaring in the U.S. began to decrease largely because 
states took the lead in addressing gas flaring as a resource 
conservation and environmental safety issue. All of the state actions 
to prevent the waste from flaring were subsequently upheld in courts. 
Blowout preventers are technology required by states and the federal 
government for on and offshore wells to prevent blowouts that waste 
vast quantities of oil and gas. It is important to note that oil and 
gas producers in the U.S. have embraced these regulations and 
technologies because conservation of oil and gas is profitable to them. 
Also, unlike in many other countries where the central government owns 
all of the oil and gas resources, in the United States it is individual 
producers under state or federal regulations that control the amount of 
methane that goes into the air. Notably, the United States has a long 
history of regulatory practice and technology development to address 
gas flaring and venting.
    In the United States, gas flaring regulations are determined by 
each state and the relevant state agencies unless the resource is on 
Federal land. Most states do not allow flaring except in case of an 
emergency. Offshore on the Outer Continental Shelf (OCS), companies 
operating on federal leases have to report their production and gas 
flaring to the Minerals Management Service (MMS). In order to flare 
gas, companies are required to get a permit from MMS if the flaring is 
to last longer than 48 hours. In addition, oil wells can flare up to 48 
hours when doing equipment change-outs or maintenance.
    On Federal onshore and Native American oil and gas leases, the 
restrictions are less significant because in most cases companies do 
not flare gas at all but rather sell it commercially through already 
existing pipelines available in the oil and gas fields. No gas flaring 
is permitted except in very limited circumstances authorized in advance 
by the appropriate Bureau of Land Management (BLM) field office, and 
usually would apply to a new well for cleanup purposes, well testing, 
and emergency equipment problems. The BLM also monitors gas plants for 
flaring purposes, which is approved for only a limited amount, for 
example, when there is an equipment malfunction. In those cases it must 
be for safety reasons.
    Generally, both the Energy Information Administration (EIA) and the 
Department of Interior's Minerals Management Service (MMS) combine gas 
flaring and venting data as a single reporting category. Annual data on 
gas venting and flaring in the United States have been compiled from a 
variety of MMS and State agency sources for years beginning with 1936. 
The EIA has been collecting annual data since 1995 through voluntary 
submissions from the States and MMS. The underlying producer or 
reservoir data have not, however, been available to EIA to support data 
validation or adjustments for standard definitions and procedures. 
Current data shows that the United States flared and vented an average 
of 105 billion cubic feet (bcf) of natural gas per year since 1998. 
This amounts to approximately one-half of one percent of gross natural 
gas production during the period.
    Status of International Gas Venting and Flaring Data. It is 
difficult to get an accurate picture of international trends in gas 
venting and flaring. There are several sources of data available on 
international gas flaring and venting in other parts of the world, but 
statistics are not available for some countries, and much of the 
existing international data available to the public is uncertain. Given 
these limitations, the figures that are available from the EIA, the 
World Bank, and CEDIGAZ (Paris-based gas industry information agency) 
show that natural gas flaring and venting for the world as a whole 
declined steeply in the early 1980's, and have since leveled off at 
approximately 3500-4000 bcf (about 100-110 billion cubic meters) per 
year since then. In 2000, flaring and venting worldwide was equal to 
about 3 percent of global gross natural gas production.
    On Sept. 4, 2002, at the World Petroleum Congress, Nigeria's 
Rilwanu Lukman, the president of the Organization of Petroleum 
Exporting Countries (OPEC) noted that just 8 percent of OPEC's total 
gas production is burned off today compared with 50 percent in 1977.
    The United States generally supports improvements in international 
energy statistics including natural gas supply, demand, venting and 
flaring. The U.S. is a member of the International Energy Agency (IEA), 
the Asia Pacific Economic Cooperation (APEC) and the United Nations 
(UN) and works with each to support the preparation of sound, reliable 
international statistics. DOE represents the U.S. at meetings of these 
organizations, sharing U.S. energy information with member countries 
through their data programs and working with member countries on a 
range of statistical issues.
    DOE also participates in the global ``Joint Oil Data Exercise'' 
that is being led by APEC, the European Union (EU), the IEA, the 
Organization of Petroleum Exporting Countries (OPEC), the Latin 
American Energy Organization (OLADE), and the UN. The Joint Oil Data 
Exercise is an effort geared to the timely reporting of oil information 
to help make the current markets more transparent. DOE also 
participates in the International Energy Forum which is also beginning 
to examine data quality issues. Further, at the recent U.S.-African 
Energy Ministerial conference held in Casablanca, Morocco, in June 
2002, DOE expressed a strong interest in the development of an African-
wide energy data initiative currently being supported by the IEA and 
the World Energy Council.
    Reasons for Gas Flaring. Worldwide, most gas is flared or vented 
for economic reasons, generally one of the following: a lack of markets 
to sell the gas; a lack of infrastructure such as an integrated gas 
pipeline network to use the gas locally; and an inability to convert 
the gas to a refinery feedstock or usable fuel such as diesel fuel, 
liquefied natural gas (LNG) or liquefied petroleum gases (LPG) due to 
financial, infrastructure, and/or market constraints. Also, development 
of the gas sector is so costly that in some cases it would take away 
from resources needed for oil development and therefore retard oil 
development prospects. Gas associated with oil production cannot always 
be inexpensively reinjected since in many cases only a very small 
percentage of gas that would be flared is needed to maintain reservoir 
pressure.
    There are three principal outlets for utilizing gas that would 
otherwise be flared international markets, domestic markets, and 
reinjection to maintain well pressure. All three of these outlets 
require considerable investments to ensure the gas' commercial 
viability. International markets for flared gas could include cross-
border pipelines or converting flared gas to liquefied natural gas 
(LNG) for export. LNG is in many respects an alternative to pipelines 
for monetizing remote or stranded gas resources. Many economies, 
including the United States, EU, China and others, import LNG to serve 
restricted market areas. Advances in LNG technologies have reduced 
costs and improved efficiencies in the LNG value chain: liquefaction, 
transportation and re-gasification.
    Regional cross-border pipelines provide a means to export the gas, 
such as with the proposed West African Gas Pipeline, for electric power 
demand. For domestic markets, if an integrated pipeline system is in 
place, the flared gas could be utilized for electricity for industrial, 
residential, and commercial purposes. Gas-to-liquids technology is 
costly, but if available, liquid products could be produced that could 
be marketed locally, such as diesel fuel.
    Flared gas could also be converted to LPG, providing a cooking 
fuel. However, often the gas market has to be developed in a country in 
order to be able to use it. The cost of developing a gas infrastructure 
is high, usually requiring assurances of long-term demand for the gas 
and policies and regulations in place to support it. Due to the income 
levels of many developing countries, the population often cannot afford 
to pay for the gas.
    The National Energy Policy (NEP) released in May of last year 
includes recommendations for expanded development and utilization of 
natural gas resources. The DOE, in support of the NEP, has been 
involved in research and development, policy coordination and 
regulatory activities domestically, bilaterally and multilaterally in 
this area.
    Department of Energy (DOE) Research and Development. The Department 
of Energy is involved directly and indirectly in research and 
development activities and as a partner with other organizations to 
assist in gas flaring reduction. DOE has recently spent approximately 
$10 million per year on novel conversion concepts and development of 
ceramic membrane technology to convert natural gas to synthetic gas 
that can be used to make environmentally superior fuels (i.e. hydrogen, 
methanol, and ultra-low sulfur diesel). This research is primarily 
focused on bringing stranded domestic gas to market, but these 
technologies could also be used to convert flared gas to usable 
products around the world.
    International Activities Aimed at Reducing Gas Flaring. Bilaterally 
and multilaterally, DOE is working with various countries and 
organizations to promote the development and utilization of natural gas 
resources, which, in turn, will directly contribute to the reduction of 
gas flaring and venting.
    The examples that follow do not constitute a comprehensive list of 
all DOE/USG international activities in the natural gas sector. In 
every case, however, it is our goal to promote international best 
practices in the establishment of natural gas policies and regulations 
that will promote sustainable gas development and use and minimize 
flaring and venting. Only a handful of countries are responsible for 
the bulk of gas flaring and venting and, whenever possible, we are 
looking to refocus our international efforts on these countries.

   World Bank: DOE has been actively engaged in discussions 
        with the World Bank and various U.S. Government agencies, and 
        others, about the World Bank's initiative to reduce global 
        flaring of natural gas. DOE is supportive of this important 
        initiative in principle. We are considering the appropriate 
        nature and scope of our support for this initiative, including 
        possibly through direct funding, in-kind contributions, and 
        working to enlist greater U.S. and international support.
   In Nigeria, through an interagency agreement with the U.S. 
        Agency for International Development (USAID), DOE is providing 
        $100,000 to the World Bank to assist the Government of Nigeria 
        with developing a downstream gas strategy that will assist in 
        addressing gas flaring. Through this same interagency 
        agreement, DOE is also providing assistance to the Government 
        of Nigeria in reviewing regulations governing the use of 
        pipeline facilities for transport of crude oil, petroleum 
        products and natural gas and developing guidelines for common 
        carrier and open access regulation of new and existing 
        pipelines. These guidelines will be presented in the form of a 
        manual that will be circulated to key Nigerian decision-makers 
        for comments. DOE will also assist in preparing a brochure for 
        investors in the natural gas sector in Nigeria. The brochure 
        will cover key topics of interest to private investors, such as 
        the existing legal, fiscal, and regulatory regime. The USG, 
        through its contractors, is also conducting an analysis of the 
        current fiscal regime for gas development in Nigeria and 
        comparing that with existing practices in other countries.
          The West African Gas Pipeline (WAGP), is a proposed gas 
        transmission pipeline project designed to connect Nigeria's gas 
        reserves to markets in Benin, Togo, and Ghana (with Ghana being 
        the primary market for the gas). The Governments of these four 
        countries, together with the Economic Community of West African 
        States (ECOWAS), Chevron and Shell, are partners in the 
        process. The gas supplies from Nigeria will be used to generate 
        electricity and available for sale to other gas producers in 
        the four partner countries. USAID has provided technical advice 
        to the project. Some of the gas from Nigeria that is currently 
        flared will be sold through the West African Gas Pipeline.
   In Algeria, DOE, in conjunction with the Government of 
        Algeria, is exploring the expansion of LNG trade between our 
        two nations, and adding to the gas supply of the U.S. while 
        reducing gas flaring in Algeria. On May 29, 2002, we held a 
        Preliminary LNG Roundtable that started the dialogue on 
        expanding this LNG trade. On November 27, 2002, we are planning 
        a ministerial level roundtable that will be led by Secretary 
        Abraham and Algerian Minister Khelil.
   For Asia Pacific Economic Cooperation (APEC), DOE is the 
        United States Government's energy representative to APEC. In 
        1998, APEC Energy Ministers endorsed a Natural Gas Initiative 
        that recommends policy and regulatory steps to accelerate 
        investment in natural gas supplies, infrastructure and trading 
        networks in the APEC region. APEC members agreed to undertake 
        this initiative because they realized that public financing 
        could not meet the significant increase in demand for natural 
        gas projects over the next twenty years. This initiative was 
        sponsored by the United States and Japan and developed in close 
        cooperation with the business community, and within the context 
        of APEC's overall goals of economic cooperation, trade, and 
        investment liberalization. The initiative suggests thirty-six 
        policy and regulatory reform options to reduce perceived risks 
        for private investors and sponsors. APEC's Energy Business 
        Network has identified ten priority options among the thirty-
        six. In addition, APEC Energy Ministers have endorsed a program 
        to assist APEC members who request practical advice on the 
        implementation of recommendations. The APEC Energy Business 
        Network provides expert teams, which have visited Thailand, 
        Peru and the Philippines.
   In India, DOE has been active in implementing a 
        recommendation in President Bush's National Energy Policy (NEP) 
        directing ``the Secretary of Energy to work with India's 
        Ministry of Petroleum and Natural Gas to help India maximize 
        its domestic oil and gas production.'' Key actions taken 
        include organizing the ``Indo-U.S. Conference on Building 
        Natural Gas Markets in India,'' held April 17-18, 2002, in New 
        Delhi, and having a senior DOE official join the Indian Oil 
        Minister this past June in Houston to help promote U.S. 
        investment in the Indian upstream oil and gas sectors.
   In Bangladesh, under a Participating Agency Service 
        Agreement with USAID, DOE has conducted a gas resource 
        assessment with the U.S. Geological Survey. The goal was to 
        assess the technically recoverable undiscovered gas resources 
        of Bangladesh that might be found in a 30-year period (2000 
        2030). Through this interagency agreement, the Energy 
        Information Administration established a program in energy data 
        collection techniques, dissemination techniques and analysis 
        methods that helped to improve the expertise of the Government 
        of Bangladesh's staff analysts and associated organizations, 
        including Petrobangla. Under a second agreement with USAID, 
        DOE's Clean Cities Program will conduct a workshop in 
        Bangladesh on the development of compressed natural gas 
        technology.
   In Venezuela, DOE has commented on draft versions of 
        Venezuela's draft natural gas policy, and is exploring ways to 
        assist with the development of the natural gas sector, 
        including regulatory capacity building and research and 
        development activities.
   Under the North American Energy Working Group, a trilateral 
        consultative mechanism with Canada and Mexico, there is a 
        Natural Gas Experts Group exploring ways to enhance gas 
        development, trade, and interconnections. Bilateral informal 
        gas talks are ongoing with Canada.
          There is a U.S.-Mexico Cross-Border Working Group to promote 
        trade, interconnections, and expanded development and 
        utilization of natural gas in Mexico. With DOE support, this 
        group is planning several technical and regulatory workshops 
        that will include United States and Mexican Government 
        counterparts from government and industry.
   With Russia, on May 24, 2002, Presidents Bush and Putin 
        issued a Joint Statement on the New U.S.-Russian Energy 
        Dialogue. This Joint Statement gave the responsibility for 
        implementing this Dialogue to the Department of Energy and 
        specifically to the Russian-American Working Group on Energy 
        Cooperation. Secretary Abraham had laid the foundation for the 
        Working Group in November 2001, during his meeting with Russian 
        Energy Minister Igor Yusufov. The Working Group will deal with 
        a number of energy issues including, global oil markets; 
        investment; technology; and information exchange. In the 
        technology area, discussions are under way on how to deal with 
        the serious Russian problem of gas flaring associated with the 
        production of oil. Current ideas include use of the gas-to-
        liquid technology to transform the gas into a liquid that can 
        be used either on site or put into oil pipelines for shipment 
        to markets.
   With Kazakhstan, in December 2001, the United States and 
        Russia signed an Energy Partnership Declaration. Under this 
        Energy Partnership, there have been extensive discussions on 
        the appropriate utilization of Kazakhstan's extensive natural 
        gas resources. The U.S. Trade Development Agency has provided 
        funding for feasibility studies to study the issue. It remains 
        an area of active discussion and study.
   With China, the U.S. Government has encouraged China in its 
        plans to increase natural gas use. A U.S.-China Oil and Gas 
        Industry Forum was established in 1998 to foster bilateral 
        cooperation and discussion on oil and gas development. The 
        Forum has had four successful sessions, most recently in July 
        2002, in Houston. An exchange of natural gas experts between 
        the United States and China was also sponsored under this 
        Forum. In addition to DOE activities, the Environmental 
        Protection Agency (EPA) sponsored, in cooperation with China's 
        State Development Planning Commission, a two-year study on 
        expanding natural gas use in China. The study was completed in 
        April 2002. DOE is also participating in a major assessment of 
        China's energy prospects, infrastructure, potential and 
        policies being conducted by the IEA in Paris. The study 
        identifies policies and investment frameworks needed to 
        encourage greater use of natural gas in China.
                               conclusion
    Our ability to create new knowledge and technological innovation 
will directly impact our national prosperity, security and global 
influence. American technological leadership is anything but assured in 
today's global economy. We face more challenges to our innovative 
capacity and long-term competitiveness than ever before.
    By continuing our ongoing interagency efforts, our international 
outreach effort, and government-industry partnerships, we can continue 
to meet the competitive challenges in the evolving world energy market. 
In these partnerships, industry can get better access to new knowledge 
and leverage it more effectively. Realizing this win-win through 
effective technology partnerships may prove to be the key to America's 
continued leadership in the 21st century.
    This completes my prepared statement. I will be pleased to answer 
any questions the Committee Members may have.

    The Chairman. Thank you very much. This Clean Energy 
Initiative that I gather was announced by our own State 
Department that you referred to at the Johannesburg meeting, 
what are the concrete actions that are currently underway 
within the Department of Energy or elsewhere in the 
administration to implement that?
    Mr. Smith. If I could, Mr. Chairman, with the chair's 
permission, I was not at the Johannesburg summit. Other 
officials from DOE were, but I would ask Mr. Bob Dixon, who is 
our senior advisor in our Office of Energy Efficiency and 
Renewable Energy, if he could address the chair.
    The Chairman. Sure. Have a chair there.
    Mr. Dixon. Good morning, Mr. Chairman. Robert Dixon, Office 
of Energy Efficiency and Renewable Energy for the record. Thank 
you for your question. Since returning from the World Summit on 
Sustainable Development in Johannesburg, there have been a 
series of planning meetings, among the participating agencies, 
the Department of Energy, EPA, AID, State and others, to 
develop an implementation plan, an action plan for the three 
elements of the President's announcement.
    The plans are in draft form. We are consulting among the 
technical agencies with the State Department, we are also 
working with our private sector and non-government organization 
partners to vet these plans, and we expect the plans will 
continue to be refined and polished.
    The Chairman. If you would tell me the three elements of 
this initiative again.
    Mr. Dixon. Yes. There are three pieces. The first piece 
deals with the development of renewable energy resources. That 
effort is led by the Agency for International Development. The 
second piece----
    The Chairman. And this is to assist underdeveloped 
countries in developing renewable energy resources, is that an 
accurate description?
    Mr. Dixon. Yes, Mr. Chairman.
    The second piece is a piece that deals with energy 
efficiency improvement in developing countries around the 
world, and that piece of work is led by the Department of 
Energy, and then the third piece again deals with 
transportation systems and communities and that work is led by 
the Environmental Protection Agency.
    The Chairman. I would gather that anything we might do in 
the way of assisting some of the countries that have this 
practice of gas flaring going on, that would be under the 
second of these, increasing the efficiency of energy use, is 
that right? If it is covered under this initiative, it would be 
covered under that section?
    Mr. Dixon. Yes.
    The Chairman. Is it going to be covered as a part of this 
initiative, or is it not?
    Mr. Dixon. The intent is to coordinate all the pieces in 
our international portfolio, and I need to turn to Mr. Person 
or Mr. Gale behind me to go into any further detail.
    The Chairman. Okay, anyone who has got detail, I would just 
be interested in knowing if we are actually going to do 
anything on this subject. I cannot determine that we have as 
yet, and I wondered if there is any plan for us to do anything 
on this subject.
    Mr. Smith. Mr. Chairman, this is Mr. George Person, who is 
from our Policy and International shop. He is the Director of 
American and African Affairs in our Policy and International 
Office.
    Mr. Person. Good morning, Mr. Chairman. As Mr. Dixon noted 
earlier, we are in the process of developing followup 
activities from the summit, and talking with some of the 
colleagues that were there. It was emphasized that natural gas 
flaring reduction clearly would be one of the energy efficiency 
elements that we would seek to coordinate, and so I will be 
coordinating more closely with some of those colleagues next 
week to see how we can weave in elements of our natural gas 
development strategy, including whatever role we play in the 
World Bank initiative, and to the broader WSSD followup 
activity.
    The Chairman. I know I did get this letter from Secretary 
Abraham when I inquired about why we were not participating in 
the World Bank effort, and I gather from Mr. Smith's testimony 
this morning that we are still looking at that. Where will the 
decision be made in the administration on the extent of our 
involvement in that World Bank effort? Is it the Department of 
Energy? Is it the Department of State? Is it the White House? 
Where is that decision made?
    Mr. Smith. Mr. Chairman, it is my understanding it will be 
a joint decision, that we are monitoring those activities that 
are now--in fact, there is a meeting today, I understand, and 
we are closely looking at that and developing our policy, and 
we will coordinate with those other agencies, but it is an area 
of interest, of course.
    The Chairman. But it will be a joint decision made by this 
interagency task force that is working on this initiative, is 
that what I am to understand?
    Mr. Smith. I do not know, Mr. Chairman, specifically, but I 
would be happy to determine that and report promptly back to 
the committee.
    The Chairman. If you could let us know as to exactly how 
this decision is going to be made, and who will make it, that 
would be very useful. I am encouraged that there is more 
coordination, but obviously, if there is nobody actually 
feeling it is their responsibility to do anything, you can 
coordinate a long time.
    Mr. Smith. Certainly I will be happy, Mr. Chairman, to 
fully report to the committee on that.
    [The information referred to follows:]

    Regarding the World Bank's Gas Flaring Initiative, Chairman 
Bingaman requests that Mr. Smith report back to him on how and 
by whom a decision will be made on whether or not the U.S. will 
participate in the World Bank's Gas Flaring Initiative.
    The Department of Energy (DOE) is the lead agency and is in 
discussions with other U.S. Government entities, including 
White House offices and the Department of State, regarding the 
nature and scope of U.S. participation. We will keep you 
apprised of our progress.

    The Chairman. Thank you.
    The Energy Information Administration database on domestic 
gas-flaring is based on voluntary submissions from the various 
States and from the Department of the Interior. I understand 
there have been some problems in collecting data. There have 
been major and fairly frequent revisions of that data once it 
is collected. Have you looked at this? Do you know, are there 
actions we need to take in order to improve the quality of this 
data? How do we ensure that we are collecting decent data for 
ourselves, and then secondly, I guess, how could we assist with 
the collection of better data internationally?
    Mr. Smith. Mr. Chairman, that, of course, has been a 
problem to get accurate numbers, and there are several sources 
for numbers, and the Energy Information Administration does 
track that worldwide. I do have Mr. Bill Trapmann from EIA, who 
I think can answer the chairman's question a little bit more 
specifically.
    The Chairman. Very good.
    Mr. Trapmann. At EIA we have been in the short term 
recently working with the States on data quality issues that we 
have become aware of. We have tried to coordinate with them on 
improvements in their data collection and reporting.
    Longer term, we are looking at the possibility of 
collecting production data directly from major producers in an 
attempt to get this information more directly from the source. 
We hope that that would improve the timeliness and quality of 
this information.
    The Chairman. It would seem that that would make a lot of 
sense. As you see it, is there legislation required in order 
for you to change that mode of collection, or is it just a 
decision you need to make and advice producers that you want 
that information? How does that work?
    Mr. Trapmann. I do not believe there is legislation 
required for that collection authority. It is a decision we 
would have to make based on the expected benefits versus the 
cost of the program.
    The Chairman. Do you have any time frame for making that 
decision?
    Mr. Trapmann. I am not aware of a set time frame. We are 
expecting to have our review of the possible or potential 
project by sometime next summer.
    The Chairman. So next summer, you would have again--tell 
me, what would you have by next summer?
    Mr. Trapmann. We would have looked at the possibility of 
conducting a new survey with direct collection of these data 
items from the companies themselves.
    The Chairman. Would you be ready next summer to decide 
whether to begin obtaining information directly from the 
producers?
    Mr. Trapmann. I think we would have to get back to you on 
that. I am not aware of how the decision process would be 
structured for this.
    The Chairman. Do you know, can you advise, are any of the 
folks who are here from the Department of Energy advised about 
what is the current state of collection of data 
internationally, or do we have any knowledge of that, or have 
we paid any attention to that?
    Mr. Trapmann. We do pay attention to the international 
sphere. The EIA does not have collection authority for 
international data. We rely on secondary sources, the World 
Bank, for example, as a provider of these data items.
    The Chairman. So if they do not have the information, you 
would not have access to it, either?
    Mr. Trapmann. I do not believe so.
    The Chairman. All right. Well, I do think if you could 
perhaps get back to us as to how some of these decisions are 
being made in the Department, how they are expected to be made, 
not just the Department but in the Government generally, I 
think that would be useful.
    Frankly, I have had difficulty understanding why--as the 
world leader in technology development and oil and gas 
production generally, it seems unusual to me that we are not 
providing some level of leadership in this World Bank effort, 
unless we disagree with it, and I have not found anyone in the 
administration who has told me a reason why we would disagree 
with what they are doing. It would seem to be a fairly logical 
and straightforward way in which we could assist much of the 
underdeveloped world and ourselves at the same time.
    [The information follows:]

    The following is the Energy Information Administration's 
(EIA) response to Chairman Bingaman's request for information 
regarding EIA's decision-making process for a new survey on gas 
flaring data:
    The project described by Mr. Trapmann is a multi-year 
project to improve basic natural gas production data. The 
exploration of data collection options and related work is 
scheduled to end in June 2003. According to this plan, the 
assessment and testing of selected data collection options 
would occur during the remainder of calendar year 2003. A 
decision to proceed with any option, to be made by the EIA 
Administrator, will depend on its relative merits and available 
resources. Public input will be a key aspect of any decision to 
change EIA data collection operations. Prior to any new data 
collection survey, EIA would invite public comment on the 
proposal through a Federal Register notice. The decision is 
expected to be made in December 2003 and would be followed in 
2004 by a request for Office of Management and Budget (OMB) 
approval of data collection authority and reporting burden. 
System design and implementation would be conducted in the 
latter half of 2004. Data collection would start early in 2005. 
Only the initial feasibility study is funded at present. 
Subsequent project work requires multi-year funds.
    The primary intent of the current phase of this EIA project 
was the examination of options for the collection of improved 
production data. However, the recent indication of greater 
interest in venting and flaring data can be accommodated by a 
shift in the work plan. The expanded scope and possible 
acceleration of project schedule would increase the associated 
costs.

    Well, I appreciate very much the testimony, and we will 
probably have other follow-up questions in the future.
    Mr. Smith. Thank you again, Mr. Chairman.
    The Chairman. Thank you very much. Why don't we go to our 
second panel, Mr. Daniel Schochet, who is with ORMAT 
International, Sylvia Baca, who is vice president of health, 
safety, and environment with British Petroleum, and Jeffrey 
Logan, who is the senior research scientist with Pacific 
Northwest National Laboratory. Thank you all very much for 
being here. I appreciate it very much.
    If you will each take 6 or 8 minutes, however much time you 
need to make the main points in your testimony, the main points 
you believe we should focus on, and we will include your entire 
statement in the record.
    Mr. Schochet, if you would start.

    STATEMENT OF DANIEL N. SCHOCHET, VICE PRESIDENT, ORMAT 
                 TECHNOLOGIES, INC., SPARKS, NV

    Mr. Schochet. Yes, thanks, Mr. Chairman.
    The Chairman. I hope that is the right pronunciation.
    Mr. Schochet. That is absolutely correct. I appreciate 
that, Mr. Chairman. I want to thank you for this opportunity to 
testify. I am vice president of ORMAT Technologies of Sparks, 
Nevada. My testimony is based on ORMAT's experience in the 
development of geothermal projects in the United States and in 
16 countries worldwide. We have been successful in 
international competition in the transfer of geothermal 
technology. However, we are currently facing barriers which 
increasingly hamper if not preclude future investment in 
international projects.
    What we find is that lenders are reluctant to make long-
term loans for renewable energy projects in areas such as 
Eastern Africa, where there are high country risks, and this 
despite the fact that Kenya and Uganda, with their combined 
population of 50 million, could be 100-percent geothermal 
powered.
    Just by way of introduction, ORMAT employs 600 technical 
staff worldwide. We are a technology based company, with annual 
sales somewhat over $100 million primarily from geothermal 
projects, including 700 megawatts in 17 countries, of which 200 
megawatts are in the United States, and these plants range from 
200 kilowatt village power units to 130 megawatt central 
station power units. We also have a number of projects which 
use our technology to generate electricity from recovered 
industrial waste heaps.
    I would like to address the issues identified by the 
committee in the following manner. First, U.S. agency programs 
have been effective in supporting international private 
investments, but we find that such support has weakened in past 
years.
    An example of the support, in 1985, with a U.S. Department 
of Energy $50 million loan guarantee, ORMAT developed in 
California the first large scale commercial binary power 
project. This project was successful, and it repaid its 
guaranteed loan with a private refinancing 1 year after plant 
startup. Though we were awarded projects in developed countries 
based on competitiveness, and by developed countries I am 
speaking of New Zealand and the Azores and others, in 
developing countries the competition from foreign countries 
supported by their aid agencies was often impossible to 
overcome.
    Our breakthrough came in the Philippines in 1991, where we 
won two small geothermal projects using a mixed credit loan 
from Ex-Im Bank and USAID. Subsequently, two larger projects 
totalling $250 million in value were awarded to us, and this 
was by 1995, both with the support of the Ex-Im Bank, and these 
loans have since been 50 percent repaid, so this was a 
successful example of U.S. agency activities.
    Second, U.S. energy firms are competitive in the world 
market, but we do need some additional support in overcoming 
barriers to effective technology transfer and private 
investment. As I said, though, we have won international 
projects on the basis of performance and costs. We are meeting 
increasing barriers to financing, and these include country 
risk, the creditworthiness of the power purchaser, financing 
barriers, including difficult access to multilateral agency 
funds, and institutional barriers.
    As examples, in Guatemala, with the IFC leading a group of 
institutions, a complicated review process delayed the 
financing of a 27 megawatt geothermal project for 3 years and 
resulted in unnecessarily increased cost. In this case, we were 
only able to execute the project by taking the construction 
risk ourselves.
    We are currently developing the Olkaria III geothermal 
project in Kenya, where a $50 million investment by ORMAT in 
drilling and construction has removed all the technical risks. 
However, the private lenders and investors, as well as the 
multilateral agencies, are reluctant to provide long term 
financing due to the risks inherent to Eastern Africa.
    Mr. Chairman, in considering my suggestions for 
improvement, I want to note, and I agree, that the 
implementation of viable renewable energy projects in 
developing countries could create a pattern for their 
sustainable economic development. In that case, public-private 
partnerships will provide the only solution for financing such 
projects. We feel a USAID and U.S. Ex-Im should again team up 
to support the competitiveness of U.S. firms by providing 
specifically credit support and enhancements, front end 
contingent grants and loans, and long term debt and equity. 
This would mitigate country risks and attract private 
investments, and I want to say that we are believers in 
contingent grants, rather than pure grants. This would mean 
that if a project is successful, the project revenues would 
repay the grant in full.
    In addition, since a healthy domestic renewable energy 
industry is essential for export market, Congress should 
support the use of renewable energy by the passage of the H.R. 
4 energy bill, including the renewable portfolio standard, and 
the extension of the production tax credit for all renewable 
technologies, including, we hope, the recovered industrial 
waste heat.
    It is important to add, Mr. Chairman, that industry is also 
working on the challenges this hearing is exploring. Next April 
in Kenya we will participate in a conference hosted by the 
Business Council for Sustainable Energy. This conference will 
have its objective to determine how to overcome the barriers to 
geothermal development in East Africa.
    I understand, Mr. Chairman, you were recently in Kenya and 
undoubtedly heard a great deal about the geothermal potential 
in that country. Well, ORMAT's Olkaria III geothermal project, 
as the first private power project in Kenya, has opened a new 
development chapter. This can be the success story which 
unlocks the vast geothermal potential in Eastern Africa. We 
think Olkaria III is the ideal case for another interagency 
teaming success story, hopefully with the support and guidance 
of this committee.
    Thank you, and I would be happy to answer any questions.
    [The prepared statement of Mr. Schochet follows:]
    Prepared Statement of Daniel N. Schochet, Vice President, ORMAT 
                     Technologies, Inc., Sparks, NV
    Mr. Chairman, distinguished members of the committee, ladies and 
gentlemen, thank you for the opportunity to appear before you. My name 
is Dan Schochet, I am Vice President of ORMAT Technologies, Inc. of 
Sparks Nevada. ORMAT Technologies was initially based in Hopkinton, 
Massachusetts from 1972 to 1984 when we moved our U.S. headquarters to 
Sparks, Nevada, where our geothermal activities have since been 
centered.
    My testimony today is based on the direct experience of ORMAT in 
the development, investment and operation of renewable geothermal 
energy projects in the USA and 16 other countries. In particular we 
have invested our corporate funds in the ownership of geothermal power 
projects in the Philippines, Guatemala, Nicaragua, and Kenya as well as 
in the USA.
    We have been successful in international geothermal competition and 
have participated in the transfer of geothermal technology. We also 
enjoy excellent relationships with our international colleagues. 
However we are currently facing barriers, which increasingly hamper, if 
not preclude, future investment in such international renewable energy 
projects.
    Renewable energy projects are capital intensive since the initial 
cost includes the lifetime supply of fuel energy. They are typically 
less than 100 MW and considered as small. This creates a natural 
reluctance on the part of lenders to make long-term loans for such 
projects. This is particularly true in Eastern Africa, where the 
potential for geothermal development is enormous. For example both 
Kenya and Uganda, with a combined population of 50 Million, could be 
100% geothermal powered. With this tremendous geothermal potential, 
power sectors, which are beginning to undergo reform, should capitalize 
on this underutilized resource.
    Kenya already has a geothermal success with the operation of the 
multilateral funded Olkaria I geothermal project. ORMAT's Olkaria III 
geothermal project, as the first private power project in Kenya, has 
opened a new development chapter. However to turn this project into a 
U.S. success story in Kenya, which can unlock the vast geothermal 
potential in Eastern Africa, we need to first make Olkaria III into a 
U.S. interagency teaming success story.
                             ormat profile
    By way of introduction, The ORMAT Group of Companies, founded in 
1965, employs some 600 engineers, technical specialists, and staff 
world wide, with annual sales of over US$ 100 million, primarily 
related to renewable energy. As a value-added and technology-based 
company we develop and manufacture renewable and sustainable power 
generation systems and projects, fuelled from locally available energy 
sources. These include:

   Over 700 MW of geothermal power plants in 17 countries, 
        including 200 MW in the USA. These plants range in size from 
        200 kW village power units in Thailand and Austria to a 130 MW 
        central station power plant in the Philippines. Some 150 MW of 
        these geothermal power plants are currently owned and/or 
        operated by ORMAT in the USA , Kenya, Guatemala, Nicaragua and 
        the Philippines,
   ORMAT also built successful demonstration projects 
        generating electricity from otherwise unused industrial waste 
        heat in a cement plant, on a pipeline compressor station and on 
        a refuse derived fuel installation.
                                 issues
    To address the issues identified by this Committee, I would like to 
note the following:
1. Effectiveness of U.S. Agency Programs in Supporting International 
        Private Investment
    Our company has enjoyed the benefits of U.S. agency programs and 
leveraged the assistance from various agencies to support both domestic 
and overseas projects, with significant U.S. industrial value added and 
technology transfer components. Some examples are:

   In 1985 we acquired the East Mesa, California geothermal 
        project, which was eligible for a U.S. DOE $50M loan guarantee. 
        With the guaranteed loan we developed the first commercial 
        scale binary geothermal power plant. This successful project 
        repaid the guaranteed loan, with a private re-financing one 
        year after plant startup; and jump-started private sector 
        investment in the U.S. geothermal industry.
   Internationally, in developed countries such as New Zealand, 
        Iceland and Portugal, ORMAT was awarded projects based on our 
        experience and competitiveness. But in developing countries, 
        the competition of Japanese, French and Italian companies 
        supported by their Aid Agencies was impossible to overcome. Our 
        breakthrough came in the Philippines where, with U.S. 
        government advocacy, ORMAT won two 16 MW projects on a Build-
        Transfer-Operate (BTO) basis in 1991, using mixed credit loans 
        from Ex-Im Bank and USAID. This successfully introduced ORMAT's 
        clean sustainable technology into the Philippines.
   We subsequently won a project in the Philippines, for a 130 
        MW plant, in which we incorporated 85% U.S. content and used 
        specially modified GE steam turbines. CalEnergy Company made 
        the equity investment as the project owner and ORMAT executed 
        the Engineering Procurement and Construction (or EPC) turnkey 
        construction contract. 50% of the Ex-Im loan to CalEnergy has 
        now been repaid. ORMAT was subsequently awarded a U.S. 
        Department of Commerce E award: the only U.S. geothermal 
        company so honored.
   We also received a 50 MW, competitive award in the 
        Philippines, for optimizing existing geothermal plants without 
        drilling new wells. This project, in which ORMAT invested $15M 
        of corporate funds as an equity owner, was constructed with a 
        term loan of $45M from the U.S. Ex-Im Bank, fast tracked from 
        application to closing in 6 months as their first project 
        financing for Small Business. Approximately 43% of this loan 
        has been repaid to date.
2. Consistency of U.S. Policies Addressing Technology Transfer and 
        Private Investment
    ORMAT's overseas projects operate with locally hired and trained 
engineers and technicians. There are no expatriates employed at any of 
our facilities, and our factory engineers provide support, often by 
real time linked computers, along with periodic visits to provide 
refresher-training courses.

   During the 1995-2002 period we constructed a number of power 
        plants for our account as well as for other owners overseas, 
        where we were able to take advantage of our U.S. geothermal 
        technology transfer by utilizing our engineers from ORMAT's 
        Philippine operations staff to assist in the construction and 
        training in several other countries.
   Despite ORMAT's ongoing investment in international 
        geothermal projects, with their concomitant technology 
        transfer, the support from U.S. agencies has waned in past 
        years. Though small grants for studies and conferences have 
        been forthcoming, these have not as yet addressed the real 
        problems of supporting private investment in technically sound 
        renewable projects, and overcoming market and institutional 
        barriers in developing countries.
3. Relative Competitive Position of U.S. Energy Firms in the World 
        Market
    From a competitive standpoint ORMAT has been able to win projects 
internationally on the basis of its track record, its technical 
superiority and the cost effectiveness of its equipment and services. 
However there have been increasing competitive barriers, particularly 
in the areas of project financing, where we are often faced with strong 
Japanese and European competitors.

   Our development in Guatemala was executed, with the IFC 
        leading a group of institutions financing the 25MW Zunil 
        project. However, here we encountered a complicated structure 
        and review process, which a small project cannot support, and 
        which delayed the financing for 3 years and resulted in 
        unnecessarily, increased costs. Completion of this project was 
        only possible because ORMAT took the risk of the construction 
        financing.
   We are currently developing the Olkaria III geothermal 
        project in Kenya, where a $50M investment by ORMAT in the 
        drilling of wells and in construction of the first phase power 
        plant, has removed all technical project risk. We are in the 
        process of pursuing the long-term loan for the project, however 
        the private sector lenders and investors, as well as the 
        multilateral agencies, who are normally involved in such energy 
        projects, have displayed a reluctance to provide financing due 
        to the Eastern African country risks.
4. Barriers to Effective Technology Transfer and Investment
    Financing of renewable energy projects in international markets and 
the entry into these markets in general are hampered by various 
barriers, consisting primarily of:

   Country Risk Barriers: Most Renewable Energy projects in 
        developing countries face country risks that private sector 
        investors and lenders will not accept. Currently with even U.S. 
        Investor Owned Utilities undergoing credit downgrading, the 
        utilities in areas like Eastern Africa are simply not 
        considered as commercially creditworthy.
   Market Barriers: Renewable Energy projects are relatively 
        small and the cost of the review process may be prohibitive.
   Institutional Barriers: The playing field is not level for 
        Renewable Energy projects, which often require specific 
        regulatory framework, when compared with larger conventional 
        energy projects, which are more attractive to the host country 
        and the agency involved.
   Financial Barriers: These include barriers resulting from

                --Competition from Japanese, French and Italian 
                companies in projects   supported by their export 
                agencies, and
                --Difficult and lengthy access to multilateral 
                financial institution funds.
5. Suggestions for Improvements
    Mr. Chairman and members of the Committee, I would like to make 
several suggestions for improving this situation. Since energy is vital 
to poverty alleviation and economic growth in developing countries; 
enabling implementation of viable renewable energy projects would 
create a pattern of sustainable and environmentally sound development. 
Due to the country risks and barriers, we believe that Public-Private 
Partnerships provide the most effective and often the only solution for 
financing such projects, as follows:

   U.S. agencies, such as U.S. AID and U.S. Ex-Im, should again 
        team up to support the competitiveness of U.S. energy firms by 
        providing either credit support or other enhancements to 
        attract both investment and long-term project loans. Such a 
        joint approach can overcome barriers to meet the financing 
        needs of projects in Developing Countries, where U.S. interests 
        are of concern, and creditworthiness support is required.
   Examples of governmental inter-agency cooperation includes 
        the support which helped U.S. exporters penetrate the 
        Philippine geothermal market, where ORMAT obtained two project 
        finance loans from Ex-Im Bank for over $200MM, and successfully 
        competed against credits from other countries. Here U.S. 
        Government funding was 1/3 grant and 2/3 loan.
   Front-end contingent grants or soft loans, to defray a 
        portion of initial capital expenditures can be leveraged to 
        share and mitigate country and market risks;
   Long-term senior and/or subordinated debt, and equity 
        participation by U.S. agencies can provide a platform for 
        private sector investment and technology transfer, and
   Finally, we realize that a healthy domestic renewable energy 
        industry is essential to support a successful export market. We 
        therefore respectfully request that the support of the U.S. 
        Senate and Congress for the use if renewable energy in the USA 
        and abroad be demonstrated by the passage of the Energy Bill. 
        This should include the Renewable Portfolio Standard (for 
        Geothermal, Wind, Solar, Biomass and Recovered Waste Heat) as 
        well as the extension of the Production Tax Credit to all 
        renewable energy technologies. This will accelerate the market 
        introduction of new technology and give U.S. firms a jump start 
        in export markets.
          east africa--where the philippines was 12 years ago
    I want to close my testimony by noting that at the World Summit on 
Sustainable Development the U.S. and other nations committed themselves 
to supporting the New Partnership for Africa's Development (NEPAD). The 
partnership's goal is to secure energy access for at least 35 per cent 
of the African population within 20 years.
    Our Case In Point here, is the potential for geothermal development 
in Eastern Africa, a U.S. interest area, with enormous resources in 
every country along the Rift Valley. For example both Kenya and Uganda, 
with a combined population of 50 Million, could be 100% geothermal 
powered.

   With this enormous geothermal potential, and with power 
        sectors beginning to undergo reform, East Africa may be able 
        capitalize on this as yet underutilized resource;
   Recognition of this large potential within the area, and of 
        the need for Public Private Partnerships is evidenced by the 
        support given to the East African Geothermal Energy Development 
        Initiative announced at the World Summit for Sustainable 
        Development in Johannesburg by the U.S. Business Council for 
        Sustainable Energy (one of the lead partners along with UNEP). 
        Supporting U.S. agencies for this initiative included USAID, 
        USTDA, U.S. Geological Survey, and others.
   Kenya is already a genuine geothermal success story with 
        technology transfer in the Olkaria I geothermal project from 
        many countries, including Iceland and New Zealand.
   Olkaria III, in Kenya, as the first private power project in 
        Kenya has opened a new development chapter; and this geothermal 
        success story in Kenya can unlock the vast geothermal potential 
        in East Africa. Olkaria III is the ideal case for another 
        interagency teaming success story.

    The Chairman. Thank you very much. Before I ask any 
questions, let us hear from the other two witnesses. Sylvia 
Baca, we are very glad to have you here, representing BP.

 STATEMENT OF SYLVIA BACA, VICE PRESIDENT, HEALTH, SAFETY AND 
                 ENVIRONMENT, BP AMERICA, INC.

    Ms. Baca. Thank you, Mr. Chairman. It is good to be back. 
It has been 3 years today that I was before this committee for 
my confirmation hearing, so it seems fit that I am back once 
again.
    The Chairman. Well, we miss you in that old job.
    Ms. Baca. Thank you, Mr. Chairman.
    Again, thank you for the opportunity to participate in 
today's discussion. As you know, BP is a major energy company 
with 110,000 employees, operating in about 100 countries around 
the world. We are involved in the exploration, production, and 
transportation of crude oil and natural gas, also in refining, 
marketing of fuels, manufacturing of petrochemicals, as well as 
in the production of solar and gas-fired power generation.
    BP is the largest oil and gas producer in the United 
States, and nearly half of our assets and our people are here 
in this country, Mr. Chairman. At BP, Mr. Chairman, we believe 
that energy and environmental policy can go hand in hand. We 
are committed to achieving an appropriate balance between the 
two, and to finding new ways to deliver clean products while 
minimizing our impact on the environment.
    Mr. Chairman, through this hearing today, the committee is 
evaluating barriers to effective technology transfer and 
investment in clean energy, as well as looking at the 
importance of public-private partnerships to reducing gas 
flaring and venting.
    Mr. Chairman, you are to be commended for your interest and 
attention to this important international issue, and it is 
going to require the participation of all stakeholders, and 
that is government, industry, nongovernmental agencies, in 
order for any sort of real material results to be achieved.
    The World Bank gas-flaring study we believe was a first 
important step in highlighting the issues that are associated 
with flaring and venting. This study aims to support the 
petroleum industry and national governments in efforts to 
reduce flaring and venting of gas associated with the 
extraction of crude oil. We participated in this study. We 
support many of the findings of the study, and we have recently 
reiterated our support for the initiative at the World Summit 
for Sustainable Development in Johannesburg earlier this month. 
We did have a contingent from BP who participated in 
Johannesburg.
    I would first like to say that BP's flaring and venting 
reduction activities are aligned with our overall health, 
safety, and environment corporate policies, and that is to 
minimize and do no harm to the environment. Our policy is to 
eliminate continuous hydrocarbon gas disposal by flaring and 
venting. Our business units have aggressive improvement plans 
in place to achieve this policy, and until elimination is 
totally achieved we are using the best available technology to 
deliver reduction results.
    It is increasingly recognized that international flaring 
and venting not only are wasting valuable natural resources, 
but they also contribute significant greenhouse gas emissions 
to the atmosphere. The ratio of gas vented to gas flared is 
very crucial, because the impact of methane on the environment 
is about 21 times greater than that of CO2, so the 
significance of these reductions is very clear.
    Despite commitments by governments and companies, global 
flaring levels have remained virtually constant since 1983, and 
as we know, much of the incremental growth in global oil 
production will come from countries and regions that currently 
have large flaring problems. Therefore, companies and countries 
will face a major challenge in finding outlets for this gas 
that would otherwise be flared.
    From BP's perspective, Mr. Chairman, the single most 
important step that can be taken to address gas flaring on an 
international scale is the further development of international 
and domestic natural gas markets. If these markets develop, 
incentives will be in place to encourage local governments to 
monetize their natural gas resources, rather than them being 
left to be vented.
    Further development of international markets will also 
create a positive social and economic benefit, including the 
reduction and lowering of greenhouse gas emissions, as well as 
improving poverty and also providing a means of cost-effective, 
reliable, clean fuels for these economies that otherwise would 
not have access to them.
    Mr. Chairman, one of the potential solutions to global gas 
flaring exists in the form of North American natural gas, where 
the demand is expected to grow substantially in the coming 
decade to about 30 TCF per year. It is generally agreed that 
traditional suppliers of North American supply will be 
insufficient, and therefore other sources will have to be 
tapped in order to meet the growing demand.
    Supply sources include Canadian as well as Alaskan natural 
gas, and LNG from Trinidad and West Africa. We believe that 
these LNG supply sources can compete in the U.S. market, and 
will play a role in meeting that demand. However, post 
September safety and security issues have complicated the 
debate around LNG, and have forced governments and others to 
reexamine policies related to the siting and the expansion of 
LNG facilities.
    Natural gas reinjection is another means of reducing 
flaring. Gas reinjection is used in many areas throughout the 
world to increase pressure in oil reservoirs and thereby 
enhance oil recovery. Much of this is being done on the North 
Slope in Alaska. Other options include reinjecting gas into 
reservoirs for later use when markets can be further developed.
    All of these options will be enhanced through government 
policies that encourage participation. These can be achieved 
through sound fiscal and regulatory frameworks that provide 
incentives for investment. Simply stated, Mr. Chairman, BP 
views gas flaring and the associated hydrocarbon losses as not 
only an economic but an environmental issue. Such losses, we 
believe, are a distinct area, through the performance 
management and good business practices, significant operational 
and environmental improvement can be achieved.
    I would like to share with you just a couple of examples 
where we are reducing our flaring and venting. In Egypt, Mr. 
Chairman in recent years gas was just an unwanted byproduct and 
even considered a nuisance at our operations. In fact, most of 
it had been just directly vented into the atmosphere.
    Since those days, much has been done to capture the gas and 
to reduce our emissions. Many of the fields have had pressure 
support through gas reinjection and a system of pipelines has 
been put in place, and we have now been able to provide energy 
to the local economy. Gas that would have otherwise been flared 
and wasted has now been captured and is being used in the Egypt 
fuel economy, is being used to support natural gas vehicles, as 
well as fuel butane for the local economy. This has proven to 
be not only good for the Egyptian economy and the environment, 
but has also been a good business option for us as well.
    In the United States, Mr. Chairman, in an area you are 
familiar with, the Western United States, specifically the San 
Juan Basin, we have replaced approximately 2,500 valves that 
separate our fluids from gas at the wellhead and, as a result, 
we are now capturing about 2.9 million cubic feet of gas per 
day that would otherwise have been emitted into the air. That 
gas we are selling on the open market.
    Best practices, Mr. Chairman, 4 years ago BP set up an 
internal network to facilitate the exchange of ideas and 
technology for the improvement of our environmental 
performance. This network of employees facilitates the best 
practice sharing and problem-solving through an interactive 
means. This is how we transport our technology across our 110 
business units across the world.
    Also, as you know, Mr. Chairman, we are engaged in the 
development and marketing of renewable energy as well. We are 
one of the largest solar provider companies in the world, and 
we have an aggressive program in place to aggressively grow our 
solar market here in the United States as well and worldwide.
    Also, we have recently engaged in a contract with Chevron-
Texaco in Norway to conduct a wind project, and so we are 
taking steps forward in wind energy as well.
    So Mr. Chairman, with that, I would be happy to answer any 
questions you might have.
    [The prepared statement of Ms. Baca follows:]
 Prepared Statement of Sylvia Baca, Vice President, Health, Safety and 
                     Environment, BP America, Inc.
    Mr. Chairman and Members of the Committee, I am Sylvia Baca, Vice 
President of Health, Safety and Environment for BP America, Inc. Thank 
you for the opportunity to participate in this discussion today about 
technology transfer and natural gas flaring.
    BP is a major energy company with 110,000 employees operating in 
over a 100 countries around the world. We are involved in the 
exploration, production and transportation of crude oil and natural 
gas; refining and marketing of fuels; manufacturing and marketing of 
petrochemicals, and solar and gas-fired power generation. BP is the 
largest oil and gas producer in the US and has nearly half of its 
assets, resources and people (45,000 employees) in this country.
    At BP we believe energy and environmental policy go hand-in-hand. 
We are committed to achieving an appropriate balance between the two 
and to finding new ways of delivering clean products while minimizing 
impacts to the environment.
    While the science is still provisional, in recent years evidence of 
global warming has accumulated, suggesting that human activities are 
having an impact on the climate. BP believes that the debate is too 
important to ignore and therefore, our company has made public 
commitments to reduce our emissions globally. Since making those 
commitments, tremendous advances have been made across our company to 
translate them into real results. In many instances, our experience has 
demonstrated that it is possible to improve both environmental and 
business performance.
    Through this hearing, the Committee is evaluating barriers to 
effective technology transfer and investment in the energy industry as 
well as the importance of public-private partnerships to reduce gas 
flaring.
    The Committee is to be commended for its attention to this 
important international issue that will require participation of all 
stakeholders--government, industry and non-governmental organizations--
to achieve material results.
    The World Bank gas flaring study was an important first step in 
highlighting the issues associated with gas flaring. The study aims to 
support the petroleum industry and national governments in efforts to 
reduce flaring and venting of gas associated with the extraction of 
crude oil. We participated in the study, support many of the findings 
and reiterated our support for the initiative at the World Symposium 
for Sustainable Development in Johannesburg earlier this month.
    I would first like to say that BP's flaring and venting reduction 
activities are aligned with our overall health, safety and 
environmental policy goals--to do no harm to the environment.
    Our policy is to eliminate continuous hydrocarbon gas disposal by 
flaring and venting. Our business units have improvement plans in place 
to achieve this policy and until elimination is achieved, best 
available technology will be used to deliver reductions.
    It is increasingly recognized that international flaring and 
venting not only waste valuable natural resources but also contribute 
significant sources of GHG emissions. The ratio of gas vented to gas 
flared is crucial because the impact of methane on the environment is 
about 21 times greater than that of CO2 so, the significance 
of these reductions is quite clear.
    It is estimated that global flaring and venting totals almost 10 
bcf/d. Of this, 50% occurs in Africa and countries of the Former Soviet 
Union; with Nigeria being the single largest contributor at about 20% 
of world total. (There are efforts underway in Nigeria to bring down 
the level of flaring over the next several years however, the challenge 
will be to do so while production is increasing.)
    Despite commitments by governments and companies, global flaring 
levels have remained virtually constant since 1983. As we know, much of 
the incremental growth in global oil production will come from 
countries and regions that currently have large flaring problems. 
Therefore, companies and countries face a major challenge in finding 
outlets for this gas that would otherwise be flared. According to the 
World Bank Global Gas Flaring Reduction report, global oil production 
capacity is forecast to increase by 60 percent from 2000 to 2020, and a 
similar trend can be expected for associated gas production. If 
existing regional ratios of gas flared to oil produced are maintained, 
forecasts for incremental oil production imply increased levels of 
flaring will also increase by similar amounts during the same period.
    However, substantial reductions in flaring during the next 20 years 
may be possible if current national and corporate policies and 
strategies designed to reduce flaring continue. These reductions can be 
achieved by greater gas utilization in international and domestic 
markets, site use and re-injection. The key challenge is developing 
markets for this resource.
    From BP's perspective, the single most important step that can be 
taken to address gas flaring on an international scale is the further 
development of international and domestic natural gas markets. If these 
markets develop, incentives will be in place to encourage local 
governments to monetize their natural gas resources, rather than 
allowing them to be vented. Further development of international gas 
markets will create positive social and economic benefits including 
lower GHG emission, poverty reduction and cost-effective, reliable, 
clean fuels through greater energy supply diversity.
    One potential solution to global gas flaring exists in the form of 
the North American natural gas market where demand is expected to grow 
substantially in the coming decade (to @30 TCF/YR). It is generally 
agreed that traditional supply sources in North America will be 
insufficient and therefore, other supply sources will have to be tapped 
in order to meet growing demand. Supply sources include Canadian and 
Alaskan natural gas and LNG from Trinidad and West Africa. We believe 
that these LNG supply sources can compete in the US market and will 
play a role in meeting demand. However, post-September 11 safety and 
security issues have complicated the LNG debate and have forced 
governments to re-examine policies related to sighting and expansion of 
LNG facilities.
    Natural gas re-injection is another means of reducing flaring. Gas 
re-injection is used in many areas throughout the world to increase 
pressure in oil reservoirs and thereby enhance oil production. Other 
options include re-injecting gas into reservoirs for later use when 
markets are further developed.
    All of these options will be enhanced through government policies 
that encourage participation. This can be achieved through sound fiscal 
and regulatory frameworks that provide incentives for investment.
    By focusing on gas flaring and greenhouse gas emission reductions 
at BP, we have added hundreds of millions of dollars of value to the 
company. Much of this has been delivered through improvements in energy 
management and energy efficiency. For example, we can now track 
reductions to specific projects where technologies have been 
implemented to reduce emissions. And, as an added benefit, we are able 
to share these practices across the company.
    Simply stated, BP views gas flaring and the associated hydrocarbon 
losses as an economic and environmental issue. Such losses are a 
distinct area where, through performance management and good business 
practice, significant operational, economic and environmental 
improvements can be achieved.
    Now I would like to share a few of our gas venting/flaring and GHG 
reduction success stories.
    Egypt--In the early years, gas was an unwanted by-product, even a 
nuisance. In fact most of it was vented directly to atmosphere. Since 
those days much has been done to capture the gas and reduce emissions. 
Many of the fields have had pressure support through gas re-injection, 
and a pipeline network now supplies an onshore gas plant. Gas that 
would have otherwise been wasted is now captured and used as fuel in 
Egypt; to power vehicles and butane is available for heating and 
cooking. This has proven to be not only good for the Egyptian economy 
and the environment but also extremely good business.
    San Juan Basin--Sometimes the solutions are quite simple. For 
example, in our lower-48 gas business unit, we replaced approximately 
2500 valves that separated fluids from gas at the wellhead. As a 
result, we are now capturing approximately 2.9 million cubic feet of 
gas per day instead of emitting it into the atmosphere.
    Texas--We have taken a holistic approach to energy management at 
our Texas City refinery. We have implemented a range of process changes 
to drive down energy cost--this has enabled us to reduce greenhouse gas 
emissions by 300,000 equivalent CO2 tones.
    West Trinidad--A new flaring strategy, combined with improved 
operational control have delivered an approximately 18% reduction in 
the amount of gas flared. These reductions have helped to counteract 
other flaring increases in the region and the ongoing program to 
address emissions in Trinidad will provide the further reductions over 
the next few years. By the end of 2004 we will have eliminated routine 
gas disposal.
    North Sea--We have had substantial voluntary reductions in the 
North Sea which enabled BP to actively engage in the United Kingdom 
Emissions Trading Scheme. This is an example of a market mechanism that 
is providing an actual incentive for further reductions.
    Technology Transfer in BP--Four years ago, BP set up an internal 
network to facilitate the exchange of ideas in technology and to 
improve environmental performance. This network of employees 
facilitates best-practice sharing and problem solving through 
interactive means. The network allows for instant access to corporate-
wide knowledge and allows for sharing of best practices across the 
company.
    As an energy company, BP is also engaged in the development and 
marketing of renewable energy solutions; solar and wind, in particular. 
With nearly 20% of the global market, BP is one of the world's leading 
solar companies. In 2001, BP Solar produced over 57 Megawatts of solar 
cells with $200 million in sales. Our intention is to increase annual 
sales to 300MW by 2007 and to use solar to provide access to energy to 
5 million people. We can imagine a future where the windows, walls and 
roofs of buildings power entire homes and businesses. Recently, we 
announced plans with Chevron-Texaco to build a 22.5 MW wind farm at our 
jointly owned Nerefco refinery near Rotterdam. The aim is to generate 
electricity equivalent to the consumption of 20,000 households, thereby 
displacing some 20,000 tones of CO2 annually.
    The fact is, there are barriers to widespread use of these 
products. This is due largely to costs structures and design 
limitations. However, we do envision a future where substantial markets 
will emerge for these products. In our view, governments around the 
world are engaged in a constructive fashion to encourage the use of 
these products, largely through tax and regulatory policy.
    Mr. Chairman and members of the committee, I want to thank you 
again for the opportunity to be here today. I would again like to 
commend you for your focus and leadership on this important global 
issue. I would be happy to answer any questions.

    The Chairman. Thank you very much for your testimony.
    Why don't we go ahead with your testimony, Mr. Logan.

STATEMENT OF JEFFREY LOGAN, SENIOR RESEARCH SCIENTIST, ADVANCED 
    INTERNATIONAL STUDIES UNIT, PACIFIC NORTHWEST NATIONAL 
                           LABORATORY

    Mr. Logan. Thanks, Mr. Chairman. I appreciate the 
opportunity to testify here today on U.S. technology transfer 
programs.
    Engaging, developing, and transitioning economies in energy 
and environmental issues matters profoundly to the United 
States. When the ``Iron Curtain'' fell, Congress supported 
programs that successfully engaged the former Soviet Union, 
using minimal resources but leveraging profound change. 
Relatively secure programs helped secure weapons of mass 
destruction and prompt energy and environmental policy reform, 
and to organize investments that made major improvements in 
people's lives. U.S. programs have helped change the 
fundamental relationship between America and its former 
enemies, and made America more secure.
    America benefits from the transfer of efficient and clean 
energy technology to developing and transitioning economies in 
three ways. First, it creates jobs at home and improves our 
trade balance, second, it reduces global environmental impacts 
by cutting carbon dioxide, methane, and sulfur dioxide 
emissions from energy conversions, and third, it generates 
security benefits by helping less stable countries and regions 
to develop their economies.
    This contribution to international development gives people 
a stake in peace and stability by helping them achieve their 
own aspirations. We see this outcome in better relations with 
Russia and China as a result of cooperation in trade.
    Much of the world's energy future will be set in concrete 
over the next few decades. The largest investments in energy 
supply and conversion systems will occur in developing and 
reforming countries, and these will soon lock in technologies 
for decades to come. The long lead time required to move 
technologies through the innovation pipeline means that efforts 
to deploy technology in the second quarter of this century need 
to be started today.
    The Advanced International Studies Unit at Pacific 
Northwest National Lab with support from the EPA, the 
Department of Energy, the Agency for International Development, 
the World Wildlife Fund, and several private foundations, has 
built nongovernmental not-for-profit organizations in Russia, 
the Ukraine, Bulgaria, Poland, and the Czech Republic. These 
organizations have developed world class expertise, each with 
staffs of 15 to 50 people. Each center is now self-sustaining 
and fully independent.
    Together with the centers, we have helped organize over $1 
billion in energy efficiency investment projects in transition 
economies over the past 5 years. Similar efforts in China have 
contributed to greater transparency and market reform in that 
large country. China offers a case study in the role of energy 
sector cooperation, with special relevance for large countries 
like India and Pakistan.
    China has long suffered severe economic constraints and 
environmental problems due to distorted markets, outdated 
technologies, and inefficient management. Ongoing Sino-U.S. 
collaboration on energy efficiency and fuel-switching helps to 
catalyze additional measures to improve energy efficiency, 
reduce pollution, and boost U.S. exports in energy 
technologies.
    Successful cooperation relies heavily on local experts in 
partner countries. In some foreign assistance efforts, donor 
personnel provide all the leadership and utilize most of the 
resources, and when the aid money is exhausted, they return 
home with little to show for their efforts in the target 
country.
    By contrast, American efforts to build energy efficiency 
centers in transition economies have anchored long-term 
substantive engagement between American experts and local 
energy specialists. This approach acknowledges and invests in 
existing human resources, engaging both public and private 
sectors in each country.
    Our partnerships with transition and developing countries 
have relied on three technology transfer mechanisms, policy 
reform, financing, and capacity building. Policy reform, which 
means getting prices right and making prices matter, can 
support development and cut pollution by reducing distortions 
and subsidies that encourage energy waste. Programs to develop 
financing multiply the effectiveness of Government funds by 
helping to provide conditions necessary to attract investors.
    Lack of credit, collateral, or funds to prepare business 
plans are the biggest barriers to energy efficiency and fuel 
switching in many economies. Some of the most practical work 
U.S. agencies have done to address these problems have been in 
capacity building. This approach is illustrated by our effort 
to create centers of local expertise and to promote reform and 
innovation for the deployment of energy efficiency and selected 
supplyside technologies. Our experience in the former Soviet 
Union, Eastern Europe, and China has proven the value of 
capacity building and project finance as a means of 
accelerating the transition to a democratic market economy.
    The Central European nations of Poland, Hungary, and the 
Czech Republic are prime examples of the value of this 
development path, and U.S. programs in these three have 
contributed measurably. These countries have eliminated much of 
the energy waste that stem from the legacy of central planning 
by implementing hard budget constraints, meaningful energy 
prices, institutional reform, and economic restructuring. 
Nations failing to implement those measures elsewhere have 
robbed citizens of economic and social well-being, creating 
conditions that increase the risk of proliferation of weapons 
of mass destruction.
    Building the foundations of energy sector innovation means 
enhancing management and technical capacity, reforming the 
energy sector, and organizing finance for innovative 
investment. Mr. Chairman, U.S. self-interest would be served by 
increasing international energy cooperation, particularly with 
the transition and developing economies, where most energy 
demand growth will occur this century.
    U.S. economic, environmental, and national security 
interests are tightly linked to global energy use. Energy 
technology innovation improves our security, helps the United 
States avoid inflation and recession, expands our market share 
in multibillion, multihundred billion dollar per year global 
energy technology markets, and mitigates atmospheric emissions 
in the fastest growing energy demand markets.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Logan follows:]
    Prepared Statement of Jeffrey Logan, Senior Research Scientist, 
  Advanced International Studies Unit, Pacific Northwest National Lab
    Engagement in energy and environmental problems in developing and 
transition countries matters profoundly to the United States. When the 
Iron Curtain fell, Congress supported programs that successfully 
engaged the Former Soviet Union using minimal resources but leveraging 
profound change. Relatively small programs helped secure weapons of 
mass destruction and prompt energy and environmental policy reform and 
to organize investments that made major improvements in people's lives. 
U.S. programs have helped change the fundamental relationship between 
America and its former enemies, and made America more secure.
    International engagement through support of policy reform and 
technology transfer especially by leveraging private sector investment 
brings security, environmental, and trade benefits to Americans. (See 
Box 1.) Unfortunately, distractions and competing demands may cause us 
to miss historic opportunities to correct problems in unstable and 
underdeveloped regions.

_______________________________________________________________________
            Box 1.--The U.S. Stake in Global Energy Markets
Economic
Development
Energy technology exports
  
Environmental Mitigation
Local air quality
Regional acid rain
Global warming
  
U.S. Leadership
Energy Science
Supply- and demand-side technology
  
International Security
More secure supplies of foreign oil
Nuclear non-proliferation
Political stability in developing countries
  
U.S. Values
Human rights
Civil society
Equity, self-determination, stewardship

    U.S. President's Committee on Advisors on Science and Technology, 
Powerful Partnership: The Federal Role in International Cooperation on 
Energy Innovation (Washington, D.C.: The White House Office of Science 
and technology Policy, June 1999). available at http://www.ostp.gov/
html/P2E.pdf.

_______________________________________________________________________
    The transfer of efficient and clean technology from the United 
States to developing and transition economies helps the United States 
in three main ways. First, most directly, it creates jobs at home and 
improves our trade balance. Second, it reduces global environmental 
impacts by reducing carbon dioxide, methane, and sulfur dioxide 
emissions from energy conversion. And third an often overlooked but 
extremely important contribution it generates security benefits by 
helping unstable countries and regions to develop their economies. This 
contribution to international development gives people a stake in peace 
and stability by helping them achieve their own aspirations. We see 
this outcome in better relations with Russia and China as a result of 
cooperation and trade.
    Energy matters greatly for global environment, for regional 
security in key parts of the world, and for the future of some of the 
world's poorest people. U.S. assistance in South and Central Asia can 
help create partnerships in these areas by developing financing for 
energy productivity investment projects, especially in demand-side 
efficiency and natural gas development and transportation.
    Development is constrained in many areas because energy utilization 
infrastructure is inadequate to provide for basic human needs, economic 
development, and environmental protection. In India and Pakistan, per 
capita energy use is only one-tenth that of the United States and 
frequent power shortages interfere with production and constrain 
delivery of basic services. We have an opportunity to help develop 
cleaner, low-risk energy alternatives than these nations might adopt 
otherwise. And it should not be forgotten that developing country 
carbon emissions will likely surpass those from developed countries 
within the first half of this century, highlighting the need for 
developing country participation in an international effort to reduce 
the risk of climate change.
                               what works
    The greatest leverage for energy and environmental engagement comes 
with supporting market-based policy reform and in developing financing 
to implement emissions-reducing projects. Economic reform getting 
prices right and making prices matter can support development and 
reduce pollution in countries including India, China, Russia, and 
Brazil by reducing distortions and subsidies that encourage energy 
waste. Programs to develop financing multiply the effectiveness of 
government funds by helping to provide conditions necessary to attract 
investors. Lack of credit, collateral, or funds to prepare business 
plans are the biggest barriers to energy efficiency and fuel switching 
in many economies.
    The experience of Central Europe proves that general economic 
reform works to improve the energy and environmental balance. It is 
well known that the formerly planned economies ranked as the most 
energy wasteful in the world. Energy intensity (energy per unit of real 
output) serves as an index of reform, as an indicator of successful and 
unsuccessful policies. Our latest data show that not only has Central 
Europe cut energy intensity by one third over the last decade, but that 
Russia and Ukraine have finally begun to follow suit. Reducing energy 
intensity has had major benefits for the economies and environment of 
the formerly planned economies. (See Figure 1.)* The region has 
achieved this success by implementing hard budget constraints, 
meaningful energy prices, institutional reform, and economic 
restructuring. Russia and Ukraine, for example, have recently more than 
doubled their rates of collection of utility payments to over 90 
percent.
---------------------------------------------------------------------------
    * Figures 1-3 have been retained in committee files.
---------------------------------------------------------------------------
    Some of the most practical work U.S. agencies have done to address 
these problems has been in what we call ``capacity building.'' (See Box 
2.) This approach is illustrated by our effort to create centers of 
local expertise to promote reform and innovation for the deployment of 
energy-efficiency and selected supply-side technologies. Our experience 
in the Former Soviet Union, Eastern Europe, and China has proven the 
value of capacity building and project finance as a means of 
accelerating the transition to a democratic market economy. Countries 
that have adopted energy sector reforms have more rapidly achieved 
civil society combined with economic recovery, which in turn have 
helped foster peace and security. The Central European Nations of 
Poland, Hungary, and the Czech Republic are prime examples of the value 
of this development path, and U.S. programs in these three have 
contributed measurably. These countries have eliminated much of the 
energy waste that stemmed from the legacy of central planning by 
implementing hard budget constraints, meaningful energy prices, 
institutional reform, and economic restructuring. Nations failing to 
implement those measures elsewhere have robbed citizens of economic and 
social well-being, creating conditions that increase the risk of 
proliferation of weapons of mass destruction. Building the foundations 
of energy-sector innovation means enhancing management and technical 
capacity, reforming the energy-sector, and organizing finance for 
innovative investment.

_______________________________________________________________________
                Box 2.--Elements of Technology Transfer
Building human skills
Reforming Energy policy
Leveraging private investment
  

_______________________________________________________________________
    Successful cooperation relies heavily on local experts in the 
partner countries. In some foreign assistance efforts, donor personnel 
provide all the leadership and utilize most of the money and, when the 
aid money is exhausted, return home with little to show for their 
efforts in the target country. By contrast, American efforts to build 
energy efficiency centers in the former Soviet Union have anchored 
long-term substantive engagement between American experts and local 
energy specialists in the transition economies. This approach 
acknowledges and invests in existing human resources, engaging both 
public and private sectors in each country.
    The Advanced International Studies Unit, with support from the 
Environmental Protection Agency, the Department of Energy, the Agency 
for International Development, the World Wildlife Fund, and private 
foundations, has built non-governmental, not-for-profit organizations 
in Russia, Ukraine, Bulgaria, Poland, and the Czech Republic. These 
organizations have developed world-class expertise each with staffs of 
15-50 people. Each center is now self-sustaining and fully independent. 
Together with the centers, we have helped organize over $1 billion of 
energy-efficiency investment projects in transition economies over the 
past five years. (See one example in Figure 2.)
    Similar efforts in China have contributed to greater transparency 
and market reform in that large country. China offers a case study in 
the strategic role of energy sector cooperation, with special relevance 
for large countries like India and Pakistan. China has long suffered 
severe economic constraints and environmental problems due to distorted 
markets, outdated technologies, and inefficient management. The World 
Bank estimates that approximately eight percent of the country's gross 
domestic product is lost each year due to pollution that damages human 
health, natural ecosystems, and physical infrastructure. Fortunately, 
China has made progress with energy efficiency having reduced the 
energy required to produce its GDP by one-third or more. China's post-
reform economy has grown faster than energy use for more than two 
decades. Ongoing Sino-U.S. collaboration on energy efficiency helps to 
catalyze additional measures to improve energy efficiency, reduce 
pollution, and boost exports of U.S. technology.
Policy Development
    Assistance objectives can be linked to assistance mechanisms 
including policy assessment, investment project development, and 
technology information provision. Examples of productive activities can 
be drawn from the experience of the existing centers created with U.S. 
support. For example, the Polish energy efficiency center, FEWE, helped 
draft Poland's Energy Law that provides for utility investments in 
energy efficiency. FEWE specialists served on the steering committee 
that developed regulations for implementing this law. The center in the 
Czech Republic, SEVEn, has bolstered local efforts to improve 
efficiency by drafting energy strategies that have been implemented in 
Prague, Plzen, Tabor, Bechyne, Mimon, Nymburk, and Cesky Krumlov. Each 
plan was tailored to the needs of the specific locality and included 
methods for cutting costs by implementing energy efficiency projects. 
The Russian Center CENEf developed energy conservation laws that have 
been enacted in Chelyabinsk, Tula, Nizhnii Novgorod, Sakhalin, 
Kostroma, Ryazan, and Yaroslavl. The U.S. Department of Energy 
continues to provide support for similar programs, but unfortunately 
the sums available for such efforts are extremely limited.
    Another example comes from work in Bulgaria with EnEffect, the 
center in Sofia, which has worked with the Global Environment Facility 
to support municipalities in developing their own energy efficiency 
offices and infrastructure. This effort has recently been supported by 
the Agency for International Development through its Municipal Energy 
Efficiency Network. But, again, the resources available for this and 
similar efforts are quite small.
    The Chinese center, BECon, helped develop the energy conservation 
law approved by the Chinese National People's Congress in 1997, and has 
since assisted provincial-level ministries in developing the 
regulations, standards, and monitoring and enforcement measures needed 
to implement the law. Significantly, BECon has worked with the World 
Bank to create and develop the first-ever energy-conservation service 
companies in China.
Business Partnerships
    The centers can assist companies to do business in their countries 
by providing the most successful avenue for technology transfer foreign 
investment. The existing centers have been successful at helping 
private companies analyze existing and potential new markets for their 
products, identify barriers and ways to overcome them, and access 
information on privatization, tax, property, and other laws that affect 
the company through the following:

   Filling information needs for industry through interaction 
        with firms and regional industry experts.
   Gathering information on financial and technical resources 
        and conducting market surveys for companies and their products.
   Preparing business plans and feasibility studies.
   Working with energy efficiency experts and in-country 
        authorities to develop innovative ways to finance energy 
        efficiency investments.

    Similar efforts could follow the model of the business development 
work of the existing six transition economy centers. A sampling of 
their experience follows. ARENA-ECO was instrumental in securing $50 
million in investment for energy efficiency improvements in 15 
industrial facilities and initiating a $30 million program to upgrade 
the efficiency of schools and hospitals in Kiev; BECon worked with 
Armstrong International to help establish the U.S.-Chinese joint 
venture Kangsen-Armstrong Company, Ltd. to produce high-efficiency 
steam traps in China. The plant began production in 1995 and the annual 
production capacity of 100,000 steam traps per year will likely be 
expanded; SEVEn in 1995 helped establish the first energy service 
company (ESCO) in the Czech Republic, and it continues to do business 
with industry, schools, and hospitals in that country.
    Local centers of expertise can be designed to help introduce 
market-based approaches for the utilization of new technologies in 
developing countries. To fulfill this objective, local experts could 
conduct major efforts to develop policies, create partnerships among 
local and American businesses, demonstrate and train specialists in new 
energy systems, and to educate the public.
    Such centers can be not-for-profit, non-governmental independent 
entities. The centers help forge partnerships between suppliers of 
modern energy-efficient equipment and services and in-country partners. 
For these business efforts to succeed, the centers encourage legal 
reform to develop incentives for energy conservation. In the centers we 
established more than a decade ago, the effort has yielded a large body 
of collaborative research. In addition, new domestic laws and 
international agreements have been enacted to support energy 
efficiency. Independent evaluations of the transition economy centers' 
have been very positive, and the program has won a number of 
prestigious international prizes, including three Global Technology 
Leadership Awards (International Energy Agency) and two International 
Energy Project of the Year Awards (Association of Energy Engineers).
    These examples illustrate the types of accomplishments that 
continued and expanded engagement can be expected to achieve, with 
specific accomplishments appropriately tied to priority objectives and 
activities. The key is selecting the people with the qualifications and 
motivation to do the job, and providing them with the necessary 
equipment and technical resources through the core period. (To learn 
more, the interested reader is encouraged to visit www.pnl.gov/aisu.)
                    the need for renewed engagement
    Energy cooperation in Central Europe and China has accelerated 
development and ameliorated environmental conditions, even while 
cutting the costs of providing basic energy services. It would be 
reasonable to take the best elements of those successes and apply them 
to reduce the risk of proliferation in the South Asia, the Middle East, 
and Central Asia. This effort could build good will and more open 
market-based systems by investing in people, leveraging indigenous 
scientific capabilities, and supporting local experts. Our experience 
has shown that tackling fundamental problems can help minimize future 
conflict.
    For example, the U.S. government could support new centers of 
regional energy cooperation. These centers might have as their goals 
development of local capacity and working together to solve regional 
development problems stemming from energy investment constraints. This 
effort should be focused on clean systems like natural gas and energy 
efficiency technologies to ensure cleaner, more-affordable investment 
without causing new environmental or security-related concerns. A key 
focus could be to develop project-based financing on a regional basis. 
This effort will address a major failure of international energy 
development in the targeted countries, which is the lack of investment 
in infrastructure and productive capacity necessary for creating jobs. 
Countries like Pakistan and India do not lack technical skills to 
utilize energy for productive purposes. However, many such developing 
economies still require the entrepreneurial and financial planning 
skills necessary to develop, implement, and manage fungible projects. 
The purpose of this proposed effort would be to provide training in 
business plan preparation to fill the need for entrepreneurial skills, 
and to use the training as an opportunity to develop and finance 
serious, job-creating investments. U.S. experts have extensive 
experience in such efforts, having led in numerous successful projects 
of this type in countries around the world.
    Another key component of an international energy strategy led by 
the U.S. would be establishing a natural gas network connecting the 
Caspian Region and South Asia and another connecting Russia and China. 
Helping China develop its own natural gas resources would bring major 
benefits for the United States by reducing China's level of carbon 
dioxide and methane emissions, and with them the risk of global 
warming. It should be noted that China's gas resources have been 
overlooked and understated. (See Figure 3.)
    By creating the skills to meet the needs for regional security, 
investment, regulatory reform, and infrastructure development, U.S. 
government and industry could work together to accelerate development 
and promote stability through inter-dependence. Such efforts would 
require strengthening regional cooperation and communication, and 
improving the relationships that are necessary for U.S. companies to 
operate in these markets. Greater use of natural gas in South Asia can 
address chronic air pollution problems, improve economic efficiency, 
reduce greenhouse gas emissions, and expand business opportunities for 
U.S. oil and gas companies.
    South Asia and China have shown encouraging signs of accelerating 
development of the natural gas sector, but important hurdles remain. 
Comprehensive policy frameworks have yet to emerge to help guide 
investment, allocate scarce resources, and minimize risk. Local 
companies are often hindered by outdated technologies and management 
practices, resulting in inefficiency and high cost. Natural gas 
projects especially among end-users are slow to develop due to 
conflicting authority, lack of incentives, and entrenched coal 
interests. Personnel in these countries' gas sectors are not fully 
prepared to function in the increasingly market oriented economies and 
need training in finance, regulation, policy, safety, planning, and 
management. Expanded use of natural gas can help Asian economies 
improve air quality, increase economic efficiency, and reduce growth in 
greenhouse gas emissions. Despite these advantages, Asia's natural gas 
sector has been relatively slow to develop.
    To adequately address the opportunities for U.S. engagement in the 
energy markets of transition and developing countries around the world, 
an expert review panel in 1999 called for a doubling of U.S. government 
support for international activities described in this testimony. In 
the much more challenging international environment of today, this 
funding could be considered an investment in global security. 
Legislation already adopted by the Senate wisely adopts that approach 
and deserves the support of the American people.
                               conclusion
    Much of the world's energy future will be set in concrete over the 
next two decades. The largest investments in energy supply and 
conversion systems will occur in developing and reforming countries, 
and these will soon ``lock in'' technologies for decades to come. The 
long lead-time required to move new technologies through the innovation 
pipeline let alone penetrate markets means that efforts to deploy 
technology in the second quarter of this century need to be started 
today.
    Great leverage for greenhouse gas emissions reductions comes with 
supporting market-based policy reform and in organizing financing to 
implement energy technology transfer in developing and transition 
economies. Economic reform getting prices right and making prices 
matter can help reduce emissions in countries as diverse as Brazil, 
China India, Pakistan, Russia, Saudi Arabia, and Ukraine by reducing 
distortions and subsidies that encourage energy waste. Efforts to 
organize investment financing for energy innovation can multiply the 
effectiveness of government funds.
    U.S. self interest would be served by increasing international 
energy cooperation, particularly with the transition and developing 
economies where most energy demand growth will occur this century. U.S. 
economic, environmental, and national-security interests are tightly 
linked to global energy use. Energy technology innovation improves our 
security, helps the United States avoid inflation and recession, 
expands our market share in multi-hundred-billion dollar per year 
global energy-technology markets, and mitigates atmospheric emissions 
in the fastest-growing energy demand markets.

    The Chairman. Thank you very much for your testimony. Let 
me just ask a few questions.
    Mr. Schochet, let me ask you first, your testimony 
indicates that you believe there has been a decline in the 
level of support from the Ex-Im Bank and from USAID for U.S. 
companies such as your own that are trying to engage in 
projects in some of these countries. Is that an accurate 
paraphrase of what you said?
    Mr. Schochet. Yes and no. There has been a decline in 
support, but I do not believe that I want this to be a 
criticism of Ex-Im. I think this is more a criticism of the 
constraints placed on Ex-Im with regard to where they finance 
and how they finance Ex-Im is a bank, and as a bank, for 
example, they are currently cooperating with us and looking at 
our project in Kenya, and because it is in the process of 
undergoing financing I cannot really speak about it, but I can 
say this.
    They are looking at it as a bank would, whereas I believe 
that U.S. Government policy in an area of concern should allow 
them a greater latitude in dealing with issues, for example, in 
Eastern Africa, so that a private sector bank simply will not 
make a loan in Eastern Africa because they will not take the 
country risk, or they say the utility in Kenya is not 
creditworthy, and in fact the World Bank private sector 
financing and the IFC has said the same thing.
    We really do not want Ex-Im to come to the same conclusion. 
They are almost our last and best hope, and we feel that what 
Ex-Im should be looking at is a bank, but a bank that is 
implementing U.S. policy, so we feel to that extent the support 
of Ex-Im and USAID is weakening, and I think it is weakening 
primarily because the policy perhaps constrains them from 
taking more aggressive action in providing credit support and 
loans.
    The Chairman. And which policy is it that you are saying 
constrains Ex-Im Bank that was not in place before? Mr. 
Schochet. I think the policy they have--and again, I am 
circumspect because I do not want to be placed in a position of 
criticizing an excellent agency. I think perhaps they are 
acting too much like a bank, and not enough like an extension 
of U.S. export policy.
    The Chairman. All right. Let me ask Sylvia Baca about her 
testimony here. You indicated that BP is cooperating, as I 
understand it, with the World Bank initiative to reduce the 
flaring and venting of natural gas, and is doing that as a 
corporate entity irrespective of the policy of the U.S. 
Government in this area. Is that an accurate description of 
what your company's policy is?
    Ms. Baca. Mr. Chairman, the World Bank initiative went out 
and asked for various partners to come to the table to discuss 
what the practices are out there, and BP was very happy to 
cooperate on that.
    The Chairman. Separate from the World Bank effort, or in 
coordination with the World Bank effort, is there a move, on 
the part of oil and gas producers, to adopt a set of best 
practices, or acknowledge what the best practices are related 
to this issue, in order to come to a more uniform agreement on 
that?
    Ms. Baca. I cannot really speak for any of the other 
industries, but I can tell you from our perspective that as I 
said in my testimony, we look at flaring and venting as not 
only an environmental problem for us, but it is an economic 
problem as well. As long as the resource is being flared or 
vented, it is being wasted, so we look at it on two fronts. We 
are looking at it from an economic lens as well as an 
environmental lens.
    We do share lots of operations with partners, other 
companies, and I think we have taken an aggressive stand in 
terms of our deep desire to reduce the emissions and so we are 
actively working with our partners where we have the joint 
venture situation to aggressively implement reductions, whether 
they be on the flaring or venting side.
    The Chairman. The example you have in your testimony about 
the replacement of 2,500 valves in the San Juan Basin, when did 
that happen?
    Ms. Baca. Mr. Chairman, this was very recently. This was in 
the last couple of years. As you know, Lord Brown made a 
commitment that BP would reduce its greenhouse gas emissions by 
10 percent, to the 1990 Kyoto baseline, so we went around the 
company looking for various places where we could make those 
reductions. This was an area where we gained a significant 
amount of reductions in the United States.
    As you know, that whole San Juan Basin, Wyoming Basin, 
there is a lot of methane production gong on there, and by just 
a simple change-out of our wellheads there we were able to 
significantly reduce our greenhouse gas emissions. That methane 
was being vented into the atmosphere. We have been able to 
capture it, turn it around, and sell it. We are making money on 
it.
    The Chairman. And I gather that none of this was required 
by any regulatory agency?
    Ms. Baca. No, Mr. Chairman. This was not required.
    The Chairman. So other producers that are operating in that 
basin may be continuing to vent, not having done the changeover 
of valves that you are talking about?
    Ms. Baca. That is quite likely, Mr. Chairman.
    The Chairman. Now, is that peculiar to the San Juan Basin 
that there is no regulation of such venting, or is that common 
throughout the continental United States?
    Ms. Baca. Mr. Chairman, I do not know the answer to that 
question, but I can get back to you on that.
    The Chairman. I would appreciate that.
    Mr. Logan, let me ask you, your laboratory has focused on a 
lot of these issues of how to improve energy efficiency and 
reduce environmental impacts of energy production. Have you 
done anything to try to rank, order, or prioritize which are 
the problems that are most in need of attention, which are the 
areas where the greatest progress can be made, the easiest, 
those kinds of questions?
    Mr. Logan. Yes, Mr. Chairman. That is actually a very 
region-specific question. Most of our work has occurred in the 
transition economies such as the former Soviet Union, where the 
legacy of central planning and very, very low energy prices 
made energy waste endemic throughout the economy, and some very 
simple measures could make tremendous impact in those 
countries.
    The Chairman. And what have you identified as the most 
attractive targets to deal with first, to really make progress 
there in the former Soviet Union countries, if you have done 
that?
    Mr. Logan. Well, in the industrial sector, helping to 
implement reforms so that energy prices do matter, helping to 
train entrepreneurs in how to prepare a business plan so that 
they can get financing, and helping to train people in the 
Government to develop regulations and legal reforms, things 
like that, are probably the most useful in those sets of 
countries.
    The Chairman. Okay. I have had concerns in trying to think 
about what policies we ought to spend our time working on. I 
have had difficulty trying to compare a policy to reduce 
venting and flaring of gas, for example, against a policy to 
reduce industrial emissions, and to see which of those would 
have the largest benefit. Have you done any analysis of that 
sort of thing?
    Mr. Logan. Well, as Ms. Baca mentioned, the greenhouse 
impact of methane emissions, which is basically what vented or 
flared gas is, are 21 times more powerful than standard carbon 
dioxide emissions, but you would have to look at each country 
individually.
    Nigeria, for example, probably the most powerful impact 
would come from preventing or capturing the methane emissions 
that occur there, and as you probably know, from a business 
point of view making practical use of natural gas that would 
otherwise be flared requires a full chain of upstream, 
midstream, and downstream uses, so not only do you need to 
capture the gas and have pipelines to send it to markets, but 
you also have to make sure that there are end users in each of 
those markets to make use of the gas, and that would require, 
again, the same types of issues that we are talking about here, 
making sure that economies are transparent, making sure that 
there are regulations and rules in place, making sure that 
people are trained in how to get financing for their projects.
    The Chairman. These organizations you have helped 
establish, these not-for-profit organizations in Russia, 
Ukraine, Bulgaria, Poland, the Czech Republic, you say these 
organizations have developed world class expertise. What are 
they expert on? What information are they able to provide that 
we do not otherwise have, or that the policymakers in those 
countries do not otherwise have?
    Mr. Logan. For example, in China, the Beijing Energy 
Efficiency Center is assisting the World Bank in creating 
energy service companies, and this is a first-time activity for 
that type of business in China, and they are advising the World 
Bank and working with the Chinese government to make sure that 
the environment is satisfactory for energy service companies to 
operate in China. That is one type of expertise that these 
energy efficiency centers have.
    I do not work directly with the efficiency centers in most 
of the former Soviet Union countries, so I am probably not good 
at answering that question, but I can ask William Chandler to 
respond to that as soon as he returns from overseas travel.
    The Chairman. You also say the centers, each of these 
centers, are now self-sustaining. How can they be self-
sustaining? Who gives them money?
    Mr. Logan. The centers were initially set up with what we 
call core funding, and the U.S. Environmental Protection Agency 
and the Department of Energy provided 3 years of guaranteed 
funding for each of the centers, and they were generally 
amounts ranging from $200,000 to $400,000 for the establishment 
of each center. Now, each center has----
    The Chairman. $200,000 to $400,000 per year?
    Mr. Logan. It depends upon the country, but I think it was 
in total.
    The Chairman. So $200,000 to $400,000 spread over a 3-year 
period?
    Mr. Logan. Yes, Mr. Chairman. Now, each of these centers is 
doing business with private sector companies, with their own 
Governments, with multilateral lending agencies, and a variety 
of foundations, and that is where they get their support now.
    The Chairman. All right. Well, there are a great many 
issues embedded in this general subject of technology transfer 
and how we should be assisting the rest of the world in the 
efficient use of their energy resources and environmentally 
responsible use of their energy resources. I do not think we 
really can begin to scratch the surface of it here, but this is 
useful testimony to sort of lay a groundwork for further 
investigation of the issue. I appreciate you all testifying, 
and we will undoubtedly follow up on this in some future 
hearings.
    Thank you all very much.
    [Whereupon, at 10:40 a.m., the hearing was adjourned.]

    [Subsequent to the hearing, the following statement was 
received for the record:]
 Prepared Statement of Dan Renberg, Member of the Board of Directors, 
                Export-Import Bank of the United States
    Thank you for the opportunity to provide the Committee with 
information on the important role the Export-Import Bank of the United 
States (Ex-Im Bank) is playing in technology transfer by offering 
companies the financing packages they need to win global competitive 
bids. While Ex-Im Bank is predominately oriented to support capital 
goods exports, we are also supporting services, services such as the 
training of local workers needed to maintain and use high-tech systems 
equipment used in plants.
    As the U.S. government's export credit agency, Ex-Im Bank has 
financed over $400 billion in U.S. goods and services exports since its 
inception in 1934. Ex-Im Bank's primary role is to finance and 
facilitate U.S. exports by filling commercial financing gaps and to 
level the playing field for U.S. exporters. In fiscal year 2001, Ex-Im 
Bank supported $12.5 billion in U.S. exports under our loan, guarantee 
and insurance programs. This financing assisted 2,358 export sales. 
Sales that helped sustain thousands of U.S. jobs. Last year, 90 percent 
of the transactions authorized by Ex-Im Bank supported small business 
exports. The transactions provided short (up to one year), medium (one 
to seven years) and long-term (over seven years) financing to 
creditworthy international customers, both public and private-sector 
working capital Guarantees to U.S. exporters.
    Ex-Im Bank's financing is in accordance with the Organization for 
Economic Cooperation and Development (OECD) arrangement, which 
established the financing parameters for most national export credit 
agencies. Under the arrangement, Ex-Im Bank provides the maximum 
allowable loan/guarantee repayment terms, allows support of up to 85 
percent of U.S. content, and sets guidelines for interest rates at the 
Commercial Indicative Reference Rate (CIRR) or market prevailing rate.
    Currently, Ex-Im Bank has special initiatives for environmental 
exports, small business, and lending directly to municipalities in 
certain countries. As a result of Ex-Im Bank's Environmental Exports 
Programs, which consists of pro-active business development and 
enhancements to our programs, transactions approved under the program 
have grown from 13 in 1994, to 71 in 2001, totaling over $1.5 billion 
or a 446.2 percent increase. Under this program, renewable energy 
exports have been a major focus. From 1980-2001, Ex-Im Bank supported 
over 58 projects worth over $2 billion in renewable energy goods and 
services exports. To increase Ex-Im Bank's support of these exports, 
Ex-Im Bank is working in close partnerships with the Department of 
Commerce, Energy, Environmental Protection Agency, and renewable 
energy, energy efficiency trade associations.
    Renewable energy includes solar, wind geothermal, hydro-power, 
biomass, and possibly new technologies such as fuel cells. The growth 
potential in this market is enormous with the value of the world's 
power generated from renewable energy estimated at $7 billion up from a 
billion dollars in 1990, and projected to reach $82 billion by 2010. In 
this area, Ex-Im Bank has supported $653.4 million in exports since 
1992, which consisted of $442.2 million geothermal, $11.7 solar, $13 
million wind, $160.9 million hydro and $25.7 million biomass exports.
    Wind energy has been the fastest growing new source of electricity 
since 1998, with a 30 percent average per year growth and a total 
market value at $4 billion. In the U.S., there are 10,000 MW, with 
6,000 to 7,000 under construction. This is three times what they were 
in the early 90's. Currently, Danish turbines account for 60 percent of 
U.S. capacity, and U.S. firms have 30 percent of the wind market share.
    Another growing area is solar photovoltaics, which increased 37 
percent in 2000 to a total market of $2.5 billion. Solar power costs 
have fallen 65 percent from 1990 to 2000, to 40 cents/kw and is 
estimated to fall to 10 cents/kw by 2010. In 1996, the U.S. was the 
world's leader in photovoltaics with a 40 percent market share; 
however, Japan is the current world leader (what is their market 
share).
    Ex-Im Bank's financing has been a key component of these renewable 
energy companies export success. In 1995, Ex-Im Bank provided a medium-
term guarantee for a three-year loan for one $440,000 wind turbine from 
Zond Energy Systems, Inc. (Zond Energy), Tehachapi, California, to a 
cement maker in Mexico. Zond Energy also received a $12.5 million tied 
aid direct loan in 1996 to finance three wind energy projects in China 
to match Danish ``soft loan'' terms. In 1996, a $49.7 million direct 
loan was provided to build, own, and operate four geothermal 530 KM 
power in Manila to Onnat Leyte Co. Ltd., which included the training of 
local workers in maintaining the geothermal plant system. More 
recently, in 2001 Ex-Im Bank provided a six-year extended loan to 
support a $700,000 sale of solar panels by BP Solar International, a 
small company in Linthicum, Maryland, to a utility in Argentina. In 
addition, AstroPower, Inc., a small company in Newark, Delaware, 
purchased short-term insurance, which enabled the company to offer four 
separate open account credit lines to solar energy dealers worldwide, 
including a $9,000 credit line to a dealer in South Africa.
    While Ex-Im Bank support in this area has increased, much more 
needs to be done to increase U.S. market share of renewable energy 
exports. Therefore, Ex-Im Bank is increasing our international business 
development efforts to major public, private buyers to stimulate 
demand-pull for U.S. exports. We are also conducting joint initiatives 
with the Department of Energy and the Department of Commerce in Brazil, 
Mexico, India, China, and other target markets to identify and pursue 
procurement opportunities. In addition, we are increasing domestic 
business development efforts that focus on closer collaboration with 
leading exporters, outreach efforts to small business exporters, and 
our Public Affairs efforts to highlight our successes. Furthermore, we 
will raise with Treasury and the interagency group the possibility of 
having the U.S. propose within the OECD to extend the repayment terms 
for renewable energy exports to 15 years in order to match those of 
nuclear energy. However, we will need to consider the potential trade-
offs of such a proposal, both within the domestic budget and among 
other U.S. issues of interest within the OECD, in determining the 
appropriate strategy. Finally, we have just recently established a 
Renewable Energy Exports Advisory Committee to assist and advise Ex-Im 
Bank on ways to increase exports in this area.
    But the biggest challenges to increasing U.S. renewable energy 
exports are market barriers to renewable energy use, lack of awareness 
of Ex-Im Bank financing among U.S. exporters and key foreign buyers, 
and tied aid terms offered by other governments. To address these 
problems, Ex-Im Bank is committed to coordinating with the Department 
of Energy and the Department of Commerce and to identifying new methods 
of supporting renewable energy and energy efficiency industries as they 
pursue opportunities in the global marketplace.
                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

                                     ORMAT Technology Inc.,
                                       Sparks, NV, October 8, 2002.
Committee on Energy and Natural Resources, U.S. Senate, Washington, DC.

Attention: Jonathan Black, SD-312

Subject: Response to Questions by Senators Bingaman and Murkowski

    Dear Jonathan: I want to personally thank Chairman Bingaman, the 
Members of the Committee and the Staff for inviting me to appear before 
the Committee on Energy and Natural Resources on September 18, 2002.
    It was an honor to be able to appear and testify on Export 
Investment and Technology Transfer before this most important 
committee. I hope that my comments were of interest to the Chairman and 
that my testimony was useful to the members.
    Attached hereto are the answers to the question asked by the 
Chairman at the hearing and the questions forward from Senator 
Murkowski subsequent to the hearing.
    If any of the members or staff have any additional questions, 
please do not hesitate to contact me directly, or my colleague John 
Garrison at the Business Council for Sustainable Energy in Washington, 
DC.
    Again I want to thank you for the courtesy and kind consideration 
extended to me by the Committee Staff and I remain,
            Sincerely yours,
                                           Daniel Schochet,
                                                    Vice President.
               Response to Question From Senator Bingaman
    Question. What recommendations does ORMAT have with regard to the 
role of the U.S. Export-Import Bank in financing renewable energy 
projects in developing countries?
    Answer. (a) ORMAT believes that in areas where U.S. interest 
dictates, the Bank should apply special conditions to stimulate private 
renewable energy projects. This was very successful in the Philippines 
in the mid 1990s. In the case of geothermal energy projects, we would 
recommend that Ex-Im actively seek out projects and work with finance 
agencies in Central America and Eastern Africa. These areas do not have 
indigenous fossil fuels and geothermal electrical power generation is 
cost-effective in real unsubsidized terms, when compared to electricity 
generated by use of imported fossil fuels.
    (b) Ex-Im needs to demonstrate, and increase, its commitment to 
clean and renewable energy projects. Additional staff and Bank 
resources should be dedicated to renewable energy projects to allow Ex-
Im to maintain uninterrupted focus on such projects. Greater 
flexibility should also be afforded loan officers to apply innovative 
methods when financing clean energy exports. For example, the Bank 
should increase limited or non-recourse financing for renewable energy 
projects. ORMAT recommends that Ex-Im endorse a voluntary initiative 
launched at the World Summit on Sustainable Development by the Global 
Legislators for a Balanced Environment (GLOBE) that calls upon the G8 
countries to promote the large-scale transfer of renewable energy 
technologies to developing countries by devoting 10 percent or more of 
their energy export finance portfolios to the renewable energy sector 
by 2010.
    (c) A third recommendation is to have a ``team'' effort to 
coordinate and leverage the activities of Ex-Im with those of other 
agencies, such as USAID, OPIC and TDA. We understand that this effort 
is already underway with the formation of the ``Clean Energy Technology 
Export Initiative'' (CETE). However, it is imperative that CETE 
explicitly includes renewable technologies as a dedicated component. 
ORMAT fully supports the creation of CETE and strongly recommends that 
clean energy companies be given a role in its development.
    (d) Since the period granted for nuclear energy projects by the 
OECD countries is 10 to 15 years, it is recommended that renewable 
energy projects also be granted the same long-term debt financing 
repayment terms. It is our understanding that Ex-Im need only notify 
the OECD that it is making longer-term credit available for renewable 
energy projects, and that concurrence by the OECD is not required.
             Responses to Questions From Senator Murkowski
    Question. What kinds of projects have been most successful in 
achieving transfer of technology to other countries?
    Answer. It is difficult to say whether there is a standard ``type 
of project'' that clearly stands out as having the greatest success in 
achieving technology transfers. From ORMAT's perspective, geothermal 
power projects have been very successful in transferring technology to 
other countries. These projects are local labor intensive both during 
construction and the subsequent long-term operation. In addition to 
requiring the development of a supporting infrastructure, geothermal 
projects create a long-term industry with high paying technical jobs 
manned by locally recruited and trained staff. This has been proven in 
the Philippines, Kenya and elsewhere. Thus geothermal projects create 
not only a sustainable technology transfer, but also a sustainable 
industrial development with a trained cadre of indigenous specialists 
who can participate in additional in-country geothermal related 
development.
    Question. Are there different barriers or issues for different 
kinds of energy technologies (efficiency, renewable, nuclear, fossil)?
    Answer. Yes there are. In particular renewables face institutional 
and financing barriers based on the fact that: (a) renewable and energy 
efficiency projects are often relatively small both in the amount of 
power they produce and in terms of the amount of financing they need 
when compared to fossil fuel projects and hence often cannot compete 
for the attention of government agencies with limited manpower to 
conduct project reviews; (b) renewable projects are capital intensive 
since the initial cost includes the construction expenses, including 
the equipment and a lifetime supply of fuel, and this often results in 
higher initial costs even when total lifetime costs are competitive; 
(c) in developing countries fossil fuel is often subsidized and 
electricity costs appear to be more economical than renewable energy; 
(d) developing countries often lack the regulatory framework to support 
private renewable projects; and (e) financing barriers exist due to 
cumbersome and costly review and approval procedures, more suited for 
large projects than for smaller renewable projects.
    Question. To what extent are U.S. energy partnerships with other 
countries hindered by the U.S. lack of participation in the Kyoto 
Protocol and its ``market-based mechanisms''? Will this be a more 
significant problem if Kyoto enters into force?
    Answer. ORMAT has found that many international clean energy 
projects have been delayed because Lesser Developed Countries (LDCs) 
have put off energy efficient and/or renewable energy projects until 
the Clean Development Mechanism (CDM) comes into force for fear that: 
(a) they may lose the future, and as yet undefined, benefits of the 
CDM; and (b) the CDM benefit may not apply if a project is unable to 
prove that it would not have been built were it not for the CDM.
    Should the Kyoto Protocol enter into force, without U.S. 
participation, U.S. clean energy companies will be placed at an even 
greater disadvantage than they are now with respect to their European 
counterparts, by being denied access to CDM and not being able to take 
part in the Kyoto emissions trading scheme (a potential source of 
income from the sale of emissions allowances or credits). The end 
result will be a loss of U.S. jobs and with it a decrease in U.S. 
competitiveness.
    Question. Are private-sector technology transfer programs more or 
less successful than similar Federal programs?
    Answer. Federal programs often train people very well, who then 
emigrate to the U.S. or other industrial nations for better paying 
jobs, thus creating a ``brain drain.'' From our perspective, private-
sector technology transfers through clean energy power projects are 
more successful than Federal programs. In the geothermal industry, for 
example, the long-term operations of the power projects create well 
paying jobs locally, which promote future use of geothermal technology 
in country. There are 22 geothermal countries, including the U.S., 
where such opportunities have been created.
    In many cases, such as Kenya and the Philippines, geothermal 
technology transfer has created sustainable industrial development. In 
the case of the Philippines, the industrial development was created by 
the private sector, but in the case of Kenya it was by the public 
sector (World Bank and UN). The advantage of the private sector is that 
technology transfer creates long-term sustainable relationships leading 
to future exports. The addition of Federal programs to support such 
private-sector technology transfer can help keep trained people in 
place and contribute to the economic development of their country both 
by providing sustainable electrical power from clean indigenous 
resources and also by creating conditions conducive to increasing 
exports from the U.S. and high paying long term employment for the 
local population.
    Question. What should be the proper balance of resources and 
activities between the public and private sectors?
    Answer. In developing countries the standards applied to investment 
in the U.S. or the OECD are often not applicable. Private industry can 
and should assume the technology, development, and project performance 
risks. However the country risks, including credit worthiness, 
institutional barriers and exploration risks (in the case of geothermal 
energy), need to be supported by the public sector. This is especially 
true in countries with fragile economies and mixed economic systems. 
The balance between private and public sector resources should be 
applied to balance the risks so as to enable investment by the private 
sector in those projects, which benefit those countries where long-term 
U.S. interests are at stake.
                                 ______
                                 
   Responses of Jeffrey Logan and William Chandler to Questions From 
                           Senator Murkowski
    The text below addresses questions raised by Senator Murkowski 
following testimony provided on 18 September 2002. In addition to the 
information here, readers are encouraged to see the attached document 
on energy efficiency centers* in transition economies that address many 
of the questions in more detail. The document is also available on-line 
at http://www.pnl.gov/aisu/pubs/center.pdf.
---------------------------------------------------------------------------
    * The document has been retained in committee files.

    Question 1. What kinds of projects have been most successful in 
achieving transfer of technology to other countries?
    Answer. Successful U.S. technology transfer projects help other 
countries meet their economic development needs without compromising 
environmental quality. They allow consumers to save money on energy 
bills, reduce emissions of damaging local pollutants such as sulfur 
dioxide and particulates, and improve global energy security. These 
measures also reduce greenhouse gas emissions. While public funding can 
help lay the groundwork for effective technology transfer projects, in 
the end, only the private sector has the resources and incentives to 
address the challenge of climate change on the scale required.
    Energy technology gets transferred through the market place and in 
conjunction with finance and investment. Thus, projects designed to 
facilitate private sector investment have been most successful. 
Experience from Battelle's Advanced International Studies Unit 
indicates that successful projects must address specific barriers and 
give in-country partners a stake in the outcome. Successful examples of 
technology transfer projects conducted with Battelle's assistance 
include ``classical'' energy efficiency, fuel switching, methane 
mitigation, district heating, combined heat and power, building codes 
and appliance standards, and financing facility projects.
    Question 2. Are there different barriers or issues for different 
kinds of energy technologies (efficiency, renewable, nuclear, fossil)?
    Answer. Some of the key barriers involved in technology transfer 
are similar across the range of energy technology types. Consumers and 
decision-makers in developing countries lack information on energy 
technologies, rendering them incapable of evaluating the most economic 
alternative when all costs are included. These markets often lack 
transparency and legal foundations so investors perceive higher risk.
    Other barriers are distinct and depend on the specific technology 
in question. Energy efficiency markets, for example, face additional 
challenges in developing and transition economies. Western energy 
efficiency markets have evolved over decades, creating along the way 
the regulatory, legal, and financial infrastructure necessary to do 
business. This business, being decentralized and distributed in nature, 
requires much preparation to make it work. Market creation and market 
conditioning are vital for most energy efficiency technologies.
    Renewable energy technologies, on the other hand, face higher 
barriers because they usually can't compete with traditional fossil 
fuel options unless full environmental costs are considered. 
Technological barriers, such as connecting wind turbines to local power 
grids, are also often specific. Nuclear power plants, which require 
very high up-front costs, raise risk premiums and magnify normal market 
distortions.
    Question 3. To what extent are U.S. energy partnerships with other 
countries hindered by the U.S. lack of participation in the Kyoto 
Protocol and its ``market-based mechanisms''? Will this be a more 
significant problem if Kyoto enters into force?
    Answer. It is too early to define how U.S. energy partnerships have 
been hindered by absence of the U.S. in the Kyoto Protocol, but it is 
likely there will be a significant impact. European commercial 
interests in natural gas development are turning away U.S. competition 
in part based on Kyoto. In Russia, U.S. coal mine methane efforts are 
being diverted to European interests. Key developing countries like 
China have already turned to Europe and Japan to collaborate on 
promoting the development and use of carbon-friendly technologies. U.S. 
energy suppliers could be cut out of markets for the next decade.
    If Kyoto enters into force, the lack of U.S. participation will 
likely have a significant impact on energy partnerships vital to U.S. 
interest. (See Box 1). European countries and Japan are developing al 
ties with the research, policy-making, and private sector communities 
in developing countries associated with the Kyoto Protocol, 
particularly the Clean Development Mechanism (CDM). In China, for 
example, both the Dutch and Japanese governments have funded projects 
that will influence how China participates in CDM and what technologies 
will be important to focus on. In Russia, the U.S. has set up a coal 
mine methane center, but it may be most useful to the Europeans now.

_______________________________________________________________________
            Box 1.--The U.S. Stake in Global Energy Markets
Economic
Development
Energy technology exports
  
Environmental Mitigation
Local air quality
Regional acid rain
Global warming
  
U.S. Leadership
Energy Science
Supply- and demand-side technology
  
International Security
More secure supplies of foreign oil
Nuclear non-proliferation
Political stability in developing countries
  
U.S. Values
Human rights
Civil society
Equity, self-determination, stewardship

    U.S. President's Committee on Advisors on Science and Technology, 
Powerful Partnership: The Federal Role in International Cooperation on 
Energy Innovation (Washington, D.C.: The White House Office of Science 
and technology Policy, June 1999). available at http://www.ostp.gov/
html/P2E.pdf.

_______________________________________________________________________
    Question 4. Are private-sector technology transfer programs more or 
less successful than similar Federal programs?
    Answer. Public and private sector technology transfer programs are 
often complementary. In many developing countries, markets may be too 
distorted for private sector investment to flow, so market 
transformation programs funded with Federal resources can help lower 
the investment risk. Federal programs can help condition the market by 
defining new policy measures such as energy efficiency legislation and 
regulation, funding feasibility studies or loan guarantee programs, and 
informing the public on how to evaluate appliance purchases, for 
example. Federal programs should be limited to helping condition the 
market so that all technologies can compete on a level playing field; 
they should not attempt to pick the technology winners.
    Question 5. What should be the proper balance of resources and 
activities between the public and private sectors?
    Answer. In general, public sector programs should be restricted to 
ensuring a level playing field and working to correct market failure. 
Only the private sector has the resources and incentives to address the 
challenge of climate change on the scale required.
    In almost all developing and industrialized countries, both public 
and private sector participation is essential for greater penetration 
of carbon-friendly energy technologies. Public sector programs are 
essential to condition the market and inform stakeholders so that all 
participants make enlightened decisions. The public sector should focus 
mainly on leveling the playing field so that the market can pick the 
best technology, rather than trying to do that task itself. The exact 
balance between public and private sectors will depend on specific 
conditions in a particular market and the speed at which technology 
transfer is to occur.
    In some cases, the distinction between public and private sector 
activities is not clear. In many countries, private sector non-
governmental organizations are playing an active role in addressing 
market distortions and failures that public bureaucracies are unable or 
unwilling to address. Most governments now acknowledge the important 
role served by these foundations and NGOs given the competing demand 
for resources in today's world.
                                 ______
                                 
                                                         BP
                                 Los Angeles, CA, October 25, 2002.
Hon. Jeff Bingaman,
U.S. Senate, Committee on Energy and Natural Resources, Washington, DC.
    Dear Honorable Bingaman: Thank you for the opportunity to testify 
before the Committee on September 18, 2002. Enclosed are the questions 
and answers submitted for the record. I hope the answers are 
satisfactory and acceptable to the Committee.
    Please feel free to call me with any questions.
            Respectfully yours,
                                                       Sylvia Baca.
[Enclosure].

    Question 1. Is it peculiar to the San Juan Basin that there is no 
regulation of the venting, or is that common throughout the continental 
U.S.?
    Answer. The change that BP did on the pneumatically actuated valves 
of the oil & gas production separators in the San Juan Basin was a BP 
(Amoco) voluntary initiative as part of its participation in the U.S. 
EPA Natural Gas Star Program. This was not routine venting, just 
bleeding of natural gas when the separator valves were actuated by 
natural gas (mainly methane). BP switched valves and procedures to 
avoid this emissions seepage.
    In general, standard practice used is that natural gas associated 
with oil production was not carefully metered if the gas had no market 
value and if it was not part of the production agreement. In recent 
years companies started to value this gas and capture it for sale. 
Also, current regulations on emissions from production operations vary 
throughout the U.S. depending on their Ozone attainment status and the 
respective State Implementation Plan (SIP) under the Clean Air Act--
Local authorities control emissions of Volatile Organic Compounds 
(VOCs) from which methane is excluded (by definition) and these kind of 
emissions or venting might not be addressed by existing rules or 
practices.
    Question 2. What kind of projects have been most successful in 
achieving transfer of technology to other countries?
    Answer. Most successful projects are those that are done 
collaboratively with local authorities while engaging local academic 
institutions to facilitate knowledge transfer. Specifically, national 
and local authorities need to make the proper commitment and enable the 
new technologies via their strategic plans. As an example, such an 
approach was used by BP in its ``Clean Cities'' program that has 
brought cleaner fuels to 100 cities around the world, ahead of 
regulatory mandates.
    Question 3. Are there different barriers or issues for different 
kinds of energy technologies (efficiency, renewable, nuclear fossil)?
    Answer. The most common barriers are associated with the different 
level of training required, with nuclear technologies probably 
requiring the highest proficiency. For other energy sources cost of 
resources and services as well as licensing requirements could be a 
barrier to entry if no proper incentives are available within the 
framework of national strategic energy planning. In addition, issues 
around political instability and governance slow down the 
implementation of many large energy and infrastructure projects, which 
require long lead times and assurances of an enabling environment.
    Question 4. To what extent are U.S. energy partnerships with other 
countries hindered by the U.S. lack of participation in the Kyoto 
Protocol and its ``market-based mechanisms?''
    Answer. The U.S. is viewed with suspicion and its motives are being 
questioned since it has withdrawn from the Kyoto Protocol and has not 
offered yet an alternative action plan. In a move towards sustainable 
energy many of the emerging global partnerships strive to demonstrate 
their environmental acceptability by documenting supplementary benefits 
from such projects. To achieve this goal these energy partnerships 
would like more certainty in ``Carbon Risk'' pricing to ensure a stable 
market for carbon reduction projects. As an example, over a year ago 
when the U.S. was still considering the Kyoto Protocol, the GRG trading 
price was $ 25/per ton of Carbon, while now it has declined to 5/per 
ton, as all the U.S. emissions reductions allocations are being 
factored out of the emerging trading markets.
    Question 4a. Will this be a more significant problem if Kyoto 
enters into force?
    Answer. If the Kyoto Protocol enters into force, the U.S. will not 
have the ability to receive emissions reduction credits for projects it 
is undertaking in other countries, neither through Joint Implementation 
projects (with Annex 1 countries) nor through the Clean Development 
Mechanism (with developing countries). This might impact U.S. companies 
doing business abroad, since they will have to work through overseas 
subsidiaries in countries that ratified the Kyoto Protocol. This could 
result in the transfer of the emission reductions credits, created by 
these projects, to the emissions allocation budget of other countries.
    Question 5. Are private sector technology transfer programs more or 
less successful than similar Federal programs?
    Answer. Private sector technology transfer projects are successful 
when operated by commercial interests through their contacts in host 
countries and when they are tailored to local needs. Federal programs 
that reach out only to other national governments, without involving 
other stakeholders, are less efficient and are not always sustainable. 
Sectoral industry association can help in facilitating, collaborative 
activities among members in conjunction with governmental and other 
interested organizations.
    Question 6. What should the proper balance of resources and 
activities be between the public and private sectors?
    Answer. The emerging consensus following the World Summit on 
Sustainable Development is that implementation of projects on the 
ground are best done in Partnerships, where the political/national 
objectives are specifically spelled out, targets are clear, a 
governance framework is in place and all relevant stakeholders are 
invited to participate. What is needed from the public sector is to 
create the enabling framework and provide positive market signals to 
the private sector. The public sector can also be pivotal in funding 
education, research and development, establish centers of excellence to 
assist with knowledge transfer and retention, and provide a resource 
base for implementation.
                                 ______
                                 
                              Department of Energy,
               Congressional and Intergovernmental Affairs,
                                  Washington, DC, October 31, 2002.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: On October 16, 2002, we sent you the edited 
transcript of the September 18, 2002, testimony given by Carl Michael 
Smith, Assistant Secretary for Fossil Energy, regarding the 
effectiveness and sustainability of U.S. technology transfer programs 
for energy efficiency, nuclear, fossil and renewable energy.
    Enclosed is one of the inserts requested by you. Also, enclosed are 
the answers to three questions submitted by you for the hearing record.
    The remaining insert and the remaining answers to questions from 
you and Senators Murkowski and Graham are being prepared and will be 
forwarded you as soon as possible.
    If we can be of further assistance, please have your staff contact 
our Congressional Hearing Coordinator, Lillian Owen, at (202) 586-2031 
or Barbara Barnes at (202) 586-6341.
            Sincerely,
                                        Dan R. Brouillette,
                                               Assistant Secretary.
[Enclosures].
              Responses to Questions From Senator Bingaman
        statement regarding eia's gathering of gas flaring data
    Question 4. Regarding the testimony of Bill Trapmann on the 
gathering of gas flaring data by EIA from the States and the work that 
is currently going on as to the survey, is legislation required to 
implement the long term plan for collecting data (mention of a new 
survey w/data coming directly from domestic producers)?
    Answer. EIA has collection authority under the Federal Energy 
Administration Act of 1974 to gather energy data, such as the 
production data under consideration, from energy firms. Additional 
legislative authority is not needed to collect data from that source.
                  projected timeline for eia's project
    Question 5.What is the projected timeline (start and finish date) 
for the project that was described by Mr. Trapmann? Will DOE be ready 
by next summer to decide? How is the decision being structured? (I.e., 
who will decide and when?) In general, how are decisions on this made?
    Answer. The project described by Mr. Trapmann is a multi-year 
project to improve basic natural gas production data. The exploration 
of data collection options and related work is scheduled to end in June 
2003. According to this plan, the assessment and testing of selected 
data collection options would occur during the remainder of calendar 
year 2003. A decision to proceed with any option, to be made by the EIA 
Administrator, will depend on its relative merits and available 
resources. Public input will be a key aspect of any decision to change 
EIA data collection operations. Prior to any new data collection 
survey, EIA would invite public comment on the proposal through a 
Federal Register notice. The decision is expected to be made in 
December 2003 and would be followed in 2004 by a request for Office of 
Management and Budget (OMB) approval of data collection authority and 
reporting burden. System design and implementation would be conducted 
in the latter half of 2004. Data collection would start early in 2005. 
Only the initial feasibility study is funded at present. Subsequent 
project work requires multi-year funds.
    The primary intent of the current phase of this EIA project was the 
examination of options for the collection of improved production data. 
However, the recent indication of greater interest in venting and 
flaring data can be accommodated by a shift in the workplan. The 
expanded scope and possible acceleration of project schedule would 
increase the associated costs.
             current state of gas flaring data (collection)
    Question 6. What is the current state of gas flaring data 
(collection) internationally? What can be done to improve it?
    Answer. At present, there are no international standards for gas 
flaring information and there is no single international data 
collection system for gas flaring. The Organization of Petroleum 
Exporting Countries (OPEC) collects gas flaring data from its 11 
members. However, the information is incomplete and the quality is 
uncertain. At a national level, some countries around the world collect 
the information and release the statistics but many countries do not. 
In general, the current state of global gas flaring information is 
poor.
    The data could be improved by (a) developing internationally-
accepted definitions for gas flaring and (b) developing an 
international system for collecting and disseminating the information. 
In general, it helps if global systems are encouraged and developed by 
multinational organizations. Organizations such as the International 
Energy Agency, the OPEC, the United Nations and others have influence 
over members and can get consensus about definitions and standards. The 
U.S. could assist by encouraging international organizations to develop 
definitions for gas flaring and to develop systems for collecting and 
disseminating the information.
                                 ______
                                 
                              Department of Energy,
               Congressional and Intergovernmental Affairs,
                                  Washington, DC, November 6, 2002.
Hon. Jeff Bingaman,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Mr. Chairman: On September 18, 2002, Carl Michael Smith, 
Assistant Secretary for Fossil Energy, testified regarding the 
effectiveness and sustainability of U.S. technology transfer programs 
for energy efficiency, nuclear, fossil and renewable energy. On October 
31, 2002, we sent you the answers to three questions and one insert for 
the record.
    Enclosed are the answers to the 16 remaining questions submitted by 
you and Senators Graham and Murkowski.
    Also enclosed is the insert that you requested. This will complete 
the hearing record.
    If we can be of further assistance, please have your staff contact 
our Congressional Hearing Coordinator, Lillian Owen, at (202) 586-2031 
or Barbara Barnes at (202) 586-6341.
            Sincerely,
                                        Dan R. Brouillette,
                                               Assistant Secretary.
[Enclosures].
               Responses to Questions From Senator Graham
    For decades the United States and other nations have relied heavily 
on the petroleum reserves of the Persian Gulf. There is no doubt that 
this dependence carries with it significant political and economic 
pressures. For this reason, I am interested in the fossil fuels 
supplies in the Western Hemisphere--which have the potential to provide 
the world with vast supplied [sic] of oil and natural gas.
    In light of this, I am interested in any actions that the 
Department of Energy may be taking to develop additional energy 
supplies, foster transfers of technologies to other Western Hemispheric 
nations, and increase cooperation on energy issues among the nations in 
our hemisphere.
    Question 1. What can the DOE and the federal government do to 
enhance energy cooperation and technology transfers in the Western 
Hemisphere?
    Answer. The instability in the Middle East and the volatility of 
oil prices provide a strong reminder of the need for continuing and 
developing Western Hemisphere energy cooperation as a key component in 
strengthening U.S. energy security. The Department has been actively 
involved in promoting Western Hemisphere energy cooperation to this 
end, both bilaterally and multilaterally.
    In an effort to identify initiatives that would assist in 
increasing the reliability and security of the U.S. energy supply, and 
help restore the economic vitality and viability of many of our Western 
Hemisphere neighbors, the Department holds regular consultations with 
its neighbors; initiated cooperation under several science and 
technology cooperative agreements, including with Brazil, Canada, 
Mexico, and Venezuela; and regularly hosts policy, regulatory, and 
technical conferences, roundtables, and seminars. Particularly over the 
last ten to fifteen years, such interactions have all led to 
significant levels of collaboration and key technological transfers 
between our neighbors that have advanced U.S. and regional economic and 
energy security objectives.
    Question 2. How can the Department of Energy work to find ways to 
increase the supplies of oil and gas, indeed of all energy resources 
including solar and renewables, as well as energy efficiency, in 
Western Hemisphere countries?
    Answer. Bilaterally and multilaterally, including through 
interactions with other U.S. agencies and international financial 
organizations, the Department of Energy's overall objectives have been 
to develop mechanisms and relationships that will provide the 
Department and its constituents with expanded access to their 
counterparts in the region, promote the development of policy and 
regulatory frameworks and business practices that will attract foreign 
investment, encourage increased energy resource development and expand 
bilateral and regional energy trade.
    The Department also works closely with the private sector to 
identify opportunities in which U.S. energy firms can invest, develop, 
manage and/or supply technical services--including oil and gas 
exploration, development, and transportation--as well as equipment and 
technology. The Department of Energy continuously works to encourage 
and promote an increased U.S. commercial presence in the Hemisphere 
through missions to the region, consultative roundtables and dialogues 
with industry, the facilitation of access to senior Western Hemisphere 
government representatives, and advocacy for the utilization of U.S. 
goods and services and transparency and contract sanctity in various 
countries.
    Question 3. What steps is the Department of Energy taking to help 
increase cooperation on energy issues among countries of the Western 
Hemisphere?
    Answer. To promote Western Hemisphere energy cooperation and 
technology transfers, increase the region's energy supply, and 
strengthen the energy security of the hemisphere, the Department of 
Energy, through public and private interactions, will continue to 
bilaterally and multilaterally engage its neighbors at all levels. 
Specific activities include:

   Leading cooperation under the Hemispheric Energy Initiative 
        (HEI), which is the energy component of the Summit of the 
        Americas process. The HEI is comprised of energy 
        representatives from the 34 democratically-elected nations in 
        the Western Hemisphere. The Ministers and/or their staffs 
        explore possible areas of cooperation and develop partnerships 
        for sustainable energy development and use. These initiatives 
        reflect the countries' commitment to promote regulatory reform, 
        technical transfers, energy efficiency, renewable energy, rural 
        electrification, regional integration, energy security, and 
        increased oil and gas production and trade.
   Fostering energy cooperation and communication, including 
        under the presidentially-mandated North American Energy Working 
        Group, to enhance North American energy trade, development and 
        interconnections; promote regional integration; and increase 
        North American energy security. The U.S. Department of Energy, 
        Natural Resources Canada, and the Mexican Secretariat of Energy 
        are the co-leads for the trilateral consultative mechanism. 
        Activities include exploring policies, regulations and 
        technological innovations to encourage the expansion and 
        acceleration of resource development, especially oil and 
        natural gas, as well as energy efficiency, renewable energy, 
        clean power, and nuclear energy, as appropriate; fostering 
        discussions on ways to improve cross-border interconnections; 
        and identifying and eliminating barriers, both physical and 
        regulatory, to optimal energy trade.
   DOE established the Hemispheric Sustainable Energy Fund at 
        the Inter-American Development Bank (IDB), which requires DOE 
        approval on specific projects, to help prepare and define 
        sustainable energy projects to the point where they may receive 
        financing from the IDB or leverage financing from other 
        financial institutions. The Fund fosters private sector 
        participation in clean energy development, including renewable, 
        natural gas, and energy efficiency, in Latin America, and 
        provides grant and equity support for private sector 
        application of new and innovative energy technologies and 
        techniques. Approved projects are a compressed natural gas 
        transportation project in Peru, an electric utility demand-side 
        management project in Dominican Republic, and an energy 
        efficiency project with a Brazilian water utility.
   Continuing cooperation following the DOE-hosted Western 
        Hemisphere energy regulators conference in March of 2002, which 
        focused on the need to create, harmonize and implement 
        transparent and stable regulatory frameworks in order to 
        establish a favorable climate for compatible development of the 
        hemisphere's energy sector and greater private sector 
        investment.
   Providing financial assistance and support to a proposal 
        submitted by Florida International University to establish a 
        Center for Hemispheric Energy Cooperation and Technology. The 
        proposed Center would help identify and implement initiatives 
        that will increase technology transfer within the Western 
        Hemisphere, which will result in increased production in the 
        hemisphere. .
   Continuing bilateral energy policy, regulatory and technical 
        interactions with Canadian and Mexican officials to promote 
        increase resource exploration and development through increased 
        foreign investment and energy trade, and enhanced science and 
        technology cooperation.
   Continuing to regularly meet and interact with Canadian, 
        Mexican, and Venezuela energy representatives through the 
        Department's longstanding energy consultations, other bilateral 
        mechanisms and multilateral fora.
   Cooperating with the Chilean government on developing a 
        market for natural gas, including as an alternative fuel for 
        the transportation sector.
   Establishing regular consultations and expanding technical 
        cooperation and commercial opportunities with Brazil (South 
        America's biggest and most influential country and an economic 
        giant).
   Undertaking bilateral and multilateral consultations and 
        establishing cooperative activities with Bolivia and Peru 
        regarding the development of natural gas domestic and 
        international markets.
   Supporting energy integration in Central America and the 
        region's effort to develop stronger transmission ties and 
        electric system integration, including through consultations 
        that would help develop markets for U.S. firms, enhance cross-
        border trade and cooperation, and foster a dialogue on 
        regulatory reform issues.
   Maintaining linkages with the Caribbean region, especially 
        with Trinidad and Tobago (a major exporter of liquefied natural 
        gas to the U.S.) and the Dominican Republic.
              Responses to Questions From Senator Bingaman
    Question 1. What concrete actions have the Department of Energy 
taken so far towards implementing the Clean Energy Initiative (CEI) 
announced by the Administration at the World Summit on Sustainable 
Development? What is the implementation plan?
    Answer. The Department is in the process of identifying ongoing 
programs that contribute to the overall organizing framework of the 
CEI. We have also begun a series of interagency meetings to set 
priorities for projects and target countries. Perhaps most importantly, 
we are discussing the CEI with the private sector and other governments 
to develop meaningful partnerships. It is our goal to identify the most 
useful and effective activities--for example, the gas flaring 
initiative--to coordinate with the private sector and foreign parties. 
We have drafted an Implementation Plan and expect to begin circulating 
the Plan to U.S. governmental and private sector entities for input and 
comments in October.
    In addition, the Environmental Protection Agency (EPA) is moving 
forward with implementation of its efforts under the Clean Energy 
Initiative. For EPA's partnership targeting pollution from vehicles, 
the Agency is working with its global partners to convene an initial 
meeting in November to better understand current fuel specifications 
and vehicle technologies in key regions, develop goals, objectives, and 
a detailed initial work plan for the partnership, and discuss options 
to coordinate partnership activities. For EPA's indoor air pollution 
partnership, the Agency is consulting individually with each of the 
current and potential partners, and will soon convene a meeting of 
partners to begin jointly developing a plan for implementation.
    Question 2. Is U.S. participation in the World Bank Gas Flaring 
Reduction Initiative covered/expected under the CEI? If so, under which 
of the three points would it fall?
    Answer. The U.S. Government participation in the World Bank Gas 
Flaring Reduction Initiative would be covered under the Energy 
Efficiency for Sustainable Development category of the Clean Energy 
Initiative (CEI). The Department of Energy has the lead for this 
element of the CEI. A major goal of the World Bank Gas Flaring 
Reduction Initiative is to provide energy savings by not flaring and 
venting associated gas. Energy savings would result in more efficient 
production and supply, not wasting gas resources in association with 
oil production, and realizing environmental benefits.
    Question 3. Regarding the World Bank Gas Flaring Reduction 
Initiative, where will the decision--as to whether or not the U.S. will 
sign on--be made--the Department of State, DOE or the Administration/
White House? Who will make this decision? And when?
    Answer. The Department of Energy (DOE) is the lead agency and is in 
discussions with other U.S. Government entities, including White House 
offices and the Department of State, regarding the nature and scope of 
U.S. participation. We will keep you apprised of our progress.
             Responses to Questions From Senator Murkowski
          barriers to the export of clean energy technologies
    Question 1. What are the principal barriers to deploying existing 
technologies in developing countries?
    Answer. The private sector has indicated that one of the greatest 
challenges to exporting clean energy technologies to developing and 
transitional economies is often the lack of the necessary energy, 
transparency and environmental regulatory structures needed to build 
capacity in partner countries, create public-private partnerships, and 
disseminate information. Knowledge of the benefits of clean energy 
technologies and the know-how to use them are also often lacking.
    In addition, the private sector has indicated that one of the 
greatest challenges to exporting clean energy technologies comes not 
from U.S. government regulation, but from competition from foreign 
companies that receive a higher level of export promotion support from 
their government. For instance, in 1998, Germany spent 17 cents per 
thousand U.S. dollars of GDP on export promotion and France spent 16 
cents. By contrast, the United States spent only half of one cent.
    Question 2. What additional mechanisms, policies, institutions or 
funding are necessary in the U.S. to achieve greater success (e.g. loan 
guarantees for projects)? In host countries?
    Answer. Consultations with private sector representatives over the 
past several months indicate that the U.S. private sector has 
identified areas where the U.S. Government can help accelerate clean 
energy technology. These areas include:

   assistance to developing countries in implementing a policy, 
        legal, and regulatory framework that will be more receptive to 
        clean energy technologies and foreign investors;
   assistance in financial packaging so that developing 
        countries find U.S. clean energy technologies as inexpensive as 
        alternatives being offered by competing countries;
   access to government risk-sharing partnerships in promising 
        but uncertain markets, including financial and technical 
        assistance;
   assistance in removing barriers to the completion of 
        specific field projects where U.S. government intervention may 
        enable closure; and
   participation in discussions with regard to the application 
        of government funds in support of export promotion programs.

    In many cases, the relative importance of these different areas of 
support may differ between larger and smaller firms.
    Question 3. When will the 5-year plan for the Clean Energy 
Technology Exports (CETE) program be complete?
    Answer. The CETE 5-year strategic plan is completed and has been 
approved by all participating agencies and OMB. It is expected that the 
strategic plan will shortly be transmitted to Congress.
    Question 4. Can CETE function usefully as a single organizing 
program for all international technology transfer activities?
    Answer. It is possible that CETE could function as a single 
organizing program for all international technology transfer activities 
because it is a senior-level, multiagency, multi-technology partnership 
that combines the resources of the U.S. federal government and the 
capabilities of the U.S. private sector to facilitate the export of 
clean energy technologies abroad, but it is not certain that it can 
meet all the needs of the various tech transfer programs. One thing 
seems obvious: CETE can go a long way toward helping to organize many 
of these tech transfer activities.
    CETE focuses on three categories of action: (1) establishing 
effective structures for collaboration; (2) assisting host governments 
in establishing the investment frameworks that will be more receptive 
to clean energy technologies; and (3) enhancing the competitiveness of 
U.S. technologies and services in international clean energy technology 
markets.
    In response to input from industry representatives, CETE will 
include three major categories of program elements: (1) timely 
assistance to industry in solving problems with current clean energy 
technology projects in developing countries; one of the mechanisms used 
will be a Project Assistance Team; (2) ``fast track'' mechanisms for 
facilitating and assisting industry with new projects where a federal 
government partnership is requested, such as in financial packaging; 
and (3) multi-agency CETE ``signature initiatives'' originated by the 
CETE agencies, in consultation with industry and other affected 
parties.
    CETE will be implemented by the interagency Working Group at a high 
level of agency leadership, which will approve CETE program activities, 
approve the framework for assessing program performance, commit agency 
support of CETE, and submit an annual report to Congress. The Working 
Group will be assisted by an external Federal Advisory Committee (FAC), 
which will advise the Working Group regarding the appropriateness of 
the portfolio of activities for achieving program objectives, assist in 
assuring effective linkages with U.S. nongovernmental partners, 
annually evaluate the progress of the CETE program, and produce a 
publicly available annual report to the Working Group.
    Question 5. If not, how can these programs be coordinated to 
maximize success and reduce overlap?
    Answer. As outlined in the response to Question Four, it is 
possible that CETE could function as a single organizing program for 
all international technology transfer activities because it is a 
senior-level, multi-agency, multi-technology partnership, but it is not 
certain that it can meet all the needs of the various tech transfer 
program's.
    Question 6. What is the status of the 90+ clean energy partnership 
agreements negotiated by DOE with other countries?
    Answer. These agreements are active and cooperation is ongoing. 
Information can be provided on a specific agreement if desired.
    Question 7. How do these partnerships fit into broader DOE policy 
goals regarding technology transfer?
    Answer. These agreements promote cooperation in the development and 
deployment of clean-energy technologies and help create receptive 
import markets in which these technologies can compete.
    Question 8. What activities are generally carried out under each?
    Answer. Currently the Office of Policy and International Affairs 
(PI) and DOE program offices participate in many clean-energy 
technology agreements. These agreements pertain to energy and 
environmental security, energy sector reforms in foreign countries, 
clean energy development and deployment, and nuclear security. PI 
serves as the primary Department of Energy (DOE) point of contact for 
international relations with foreign countries and international 
organizations and works with DOE program offices to leverage resources 
and organize activities that support our energy and foreign policy 
objectives. Examples of such agreements include:

   With China, DOE signed a Statement of Work with the Ministry 
        of Science and Technology in China in 1998 to develop an energy 
        efficient building demonstration project. The project will 
        demonstrate, in part, the role that U.S. energy efficient and 
        renewable energy technologies can play in reducing the demand 
        for energy in China. The construction of the building has 
        begun. Under the project, China will provide the funding for 
        the base building, while the U.S. private sector will 
        contribute the incremental costs due to the energy 
        improvements.
   In India, DOE's National Renewable Energy Laboratory (NREL) 
        has been engaged with India's Solar Research Center (SRC) since 
        1993. The principal objectives were to help strengthen joint 
        U.S./India capacities for energy technology innovation, promote 
        technologies to increase energy conservation, and promote 
        technologies for a cleaner energy supply. Under the Memorandum 
        of Understanding (MOU) between NREL and SRC, concluded in 2000, 
        DOE anticipates a resumption of, and enhanced cooperation in, 
        renewable energy development and utilization between DOE and 
        SRC, as well as other institutions in the U.S. and in India. 
        The MOU, together with a resumption of fossil energy 
        cooperative projects under the bilateral Coal Advisory Group, 
        focused primarily on R&D capacity building to address 
        combustion and environmental issues related to coal-fired power 
        generation such as combustion efficiency, coal cleaning, and 
        fly ash characterization and utilization. These activities are 
        anticipated to have a beneficial local and global environmental 
        impact.
   DOE also is working toward the deployment of clean energy in 
        Peru. In July 2001, Lima, Peru, inaugurated its ``Clean Cities 
        Peru'' program under a bilateral agreement between DOE and 
        Peru's Ministry of Energy and Mines. The signed Memorandum of 
        Understanding focuses heavily on natural gas use, and includes 
        collaboration in the areas of energy planning and analysis, 
        natural gas markets, pricing and deregulation, distributed 
        generation technologies using natural gas (such as fuel cells), 
        and planning for the ``Clean Cities Peru'' program and the 
        future use of natural gas in the transport sector.
    Question 9. What is DOE doing to remove the major obstacles to 
encouraging the increased production of indigenous energy supplies and 
the more efficient use of energy throughout North America and Latin 
America?
    Answer. Both bilaterally and multilaterally, the Department of 
Energy has been actively involved in promoting Western Hemisphere 
energy cooperation, including through policy, scientific, and technical 
consultations and technology demonstration and deployment activities 
with Brazil, Canada, Mexico, and Venezuela, to encourage the removal of 
barriers to increased energy production, energy efficiency, and energy 
trade. Through the North American Energy Working Group, which the 
Department of Energy co-leads with Natural Resources Canada and the 
Mexican Secretariat of Energy, we are working to more fully more 
integrate energy markets and to identify and remove barriers to 
increased energy production and trade. The Department is also working 
through public-private dialogues, including industry roundtables and 
advocacy activities for U.S. companies, to encourage the implementation 
of governmental policies and procedures that will attract increased 
foreign direct investment.
    Question 10. What are DOE's plans to foster greater cooperation 
among the countries in the Western Hemisphere on issues relating to 
energy production, cooperation, technology transfer, and sustainable 
energy policies?
    Answer. Bilaterally and multilaterally, including through 
interactions with other U.S. agencies and international financial 
organizations, the Department of Energy plans to enhance existing 
relationships with key countries such as Brazil, Canada, Mexico, and 
Venezuela, and formalize relationships with other countries on energy 
policy, regulatory issues, and science and technology activities to 
promote the implementation of sustainable energy policies and to 
attract foreign investment to support expanded energy production and 
efficient energy practices.
    The Department will also continue to work closely with the private 
sector to identify opportunities in which U.S. energy firms can help 
explore and develop oil and gas resources in various Western Hemisphere 
countries and provide technical services to promote enhanced efficiency 
and to address environmental issues.

                                    

      
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