[Senate Hearing 108-]
[From the U.S. Government Publishing Office]



 
  DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS FOR 
                            FISCAL YEAR 2004

                              ----------                              


                         THURSDAY, MAY 22, 2003

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 9:30 a.m., in room SD-124, Dirksen 
Senate Office Building, Hon. Conrad Burns (chairman) presiding.
    Present: Senators Burns, Domenici, Dorgan, and Byrd.

                          DEPARTMENT OF ENERGY

                        Office of the Secretary

STATEMENT OF HON. SPENCER ABRAHAM, SECRETARY

               OPENING STATEMENT OF SENATOR CONRAD BURNS

    Senator Burns. We're going to call the committee to order 
this morning, Mr. Secretary, thank you for coming. I've got a 
brief statement on my opening and then the ranking member, 
Senator Dorgan, will be along soon and we will take his 
statement and if he has questions, we will allow him to do 
that. He's running on a tight tether today, and I understand 
you are too. And I think we are going to have a stack of votes 
this morning, and with the President being in HC-5, once you 
get into the bowels of that building, it takes a while to free 
yourself.
    First of all, we're glad to see you here to discuss the 
budget this morning for the Department of Energy. I know we 
struggled a bit to get this hearing on your schedule and I know 
you made some changes to accommodate us, we appreciate that.
    The Department's request for activities under the 
subcommittee's jurisdiction represents an effective cut of 
around $120 million. That is a considerable reduction for 
energy activity. Of course the reason it falls under this 
committee is because of the vast amount of our energy found on 
public lands under our jurisdiction. We can quibble over 
transfers and deferrals, but I think it's fair that we discuss 
some of these reductions as that is the reason we hold these 
hearings.
    Within the total you have requested, there are some very 
healthy increases in some selected programs. The budget 
increases weatherization by $65 million, in keeping with the 
President's intention to double the program. The budget 
includes $40 million for the National Climate Change Technology 
Initiative for climate change-related research, $23 million of 
which is under this subcommittee's jurisdiction. And the budget 
increases fuel cell research within the Office of Energy 
Efficiency by $22 million, and includes the increases to 
support the President's Freedom Car Initiative.
    We are anxious to hear more about these proposals, Mr. 
Secretary, and I expect you will find at least conceptual 
support for many of them from this subcommittee. The problem is 
that the budget also includes fairly severe cuts in other 
important programs. The oil and gas programs within the Office 
of Fossil Energy have been cut in half. The fuels program 
within the Office of Fossil Energy has been completely 
eliminated, and the Industries of the Future program has been 
reduced about two-thirds.
    We recognize, Mr. Secretary, that you are compelled to 
operate under some fairly restrictive budget constraints and we 
are certainly not opposed to reducing some programs in favor of 
others as national priorities change, and as successes and 
failures in your research programs become known.
    But I think what you will find concerns us most is the 
severity of some of these reductions, and the fact that some of 
them may result in us failing to capitalize on important 
research that has been supported by this committee for many, 
many years, and the research done in those areas has been 
fairly sizable. It is important, Mr. Secretary, to maintain a 
robust and balanced R&D program in the Department, one that 
enhances our Nation's energy security and enables our economy 
to grow without sacrificing environmental quality, and I think 
the focus today will be whether your budget request is adequate 
to sustain such a program.
    Your testimony will help us as we begin to draft this 
appropriations bill under some very tight constraints and 
again, we appreciate you being here this morning. I think it 
will also help our deliberations on the energy bill, which I 
hope the Senate will return to after the Memorial Day recess.
    I now turn to our ranking member, my good friend from North 
Dakota, Senator Dorgan. Good morning.

              OPENING STATEMENT OF SENATOR BYRON L. DORGAN

    Senator Dorgan. Senator Burns, thank you very much, and 
thank you for holding this hearing.
    Senator Burns. You didn't bring any more weed this morning?
    Senator Dorgan. Since we're dealing with the Energy 
Department, I should have brought a gallon of gas perhaps, but 
the chairman is referring to a noxious weed that I brought to 
the last hearing, but I am not going to do that in the future. 
I didn't know it was very effective.
    Let me thank the Secretary for being here. The Secretary 
and I had a chance to visit yesterday, and I know that you are 
under certain restraints, that there really isn't any way that 
you could tell us or the audience, or for that matter the press 
what you really think of the Office of Management and Budget. 
So, I will not ask you about that, but let me raise a couple 
issues, some of the same issues that Senator Burns raised.
    You know I'm concerned about the decrease for energy 
conservation research, I talked to you about that yesterday. I 
think cutting energy conservation research is moving in exactly 
the wrong direction. I appreciate that the funding for the 
larger energy efficiency and renewable office funded in the 
energy and water bill is up slightly less than 1 percent, but 
renewable energy research, while important in its own right, is 
not a substitute for efforts focused on conserving the amount 
of energy we use. We use a prodigious amount of energy in this 
country as I've stated, and it is exactly the same calculation, 
and we consume 25 percent of the world's energy, which points 
to our need to focus on research and development efforts in 
reducing the amount of energy consumption, so I'm concerned 
about that.
    My colleague Senator Burns said that the budget severely 
undercuts fossil energy R&D, which accounts for 85 percent of 
the energy resources in this country. Over half of our 
electricity comes from coal, and oil and natural gas account 
for almost 100 percent of our transportation energy needs. 
Because of this, environmentally sound approaches to the 
management of fossil energy certainly is essential to our 
national energy security.
    Now, we need money for new initiatives, but money for new 
initiatives should not come from other initiatives that are 
also very important. We talk about a hydrogen economy and fuel 
cells, and I am very appreciative of the present research in 
that area and this is a direction we ought to head, I don't 
think you can overstate the importance of that. It is very 
important. I have said that we need an Apollo-type program, a 
program that is bold and aggressive, and I suggested around 
$6.5 billion over a period of years. But having said all that, 
I'm very impressed that the administration put itself on record 
saying let's move in this regard. So the question isn't the 
direction so much as it is velocity, and I hope that we can 
wrap this up into an Apollo-type program. But we should not be 
believing that even as we move in that direction we are going 
to somehow diminish the use of coal, oil and natural gas long 
into the future, and the ability to do that in a thoughtful way 
requires that we have adequate research.
    As Senator Burns knows, we have a Commerce Committee 
hearing ongoing at the moment and I have another appropriations 
subcommittee as well, so I will not be able to stay for 
questions, Mr. Secretary, but you and I covered most of our 
concerns yesterday in the meeting in my office. And again, I 
was pleased to serve with you in the Congress, here in the 
Senate, and I am really pleased you are where you are.
    Secretary Abraham. Me as well, thank you, Senator.
    Senator Burns. Thank you, Senator Dorgan. Mr. Secretary, we 
look forward to your statement.

               SUMMARY STATEMENT OF HON. SPENCER ABRAHAM

    Secretary Abraham. Thank you, Mr. Chairman, and you and the 
ranking member, we obviously served together for a number of 
years and have come to these projects we work on together from 
a background of previous successful collaboration, and I look 
forward to continuing that again this year.
    Mr. Chairman, what I propose is that I submit most of the 
testimony I have here for the record rather than in an oral 
presentation, give a very brief overview so that we can move 
ahead with the hearing.
    Our fiscal year budget for the Department of Energy, both 
the component within this subcommittee as well as the component 
within the Subcommittee on Energy and Water is a request for 
$23.4 billion, and we believe it will allow the Department to 
help address a number of issues that relate to America's safety 
and security. This amount is $1.3 billion above the fiscal year 
2003 budget request, which is a 5.9 percent increase overall.
    We do recognize, Mr. Chairman, the critical contribution of 
energy on national defense, that the environment and science 
and technology make to a prosperous as well as a peaceful 
future, and I think this budget continues that work. With 
regard to our energy work, the energy sector, this budget 
submission is collectively between both subcommittees $2.5 
billion. We think it will allow us to continue our wide-ranging 
efforts that will lead to the eventual transformation of our 
energy economy.
    I think the most exciting work and promising areas of long-
term research and technology expansion either fall wholly or in 
large part within the province of this subcommittee, so I think 
not just this year but in the years ahead, we are going to see 
a great deal of activity going on in programs that this 
subcommittee has appropriations responsibility for.
    Our fossil energy promotes this administration's belief 
that coal must be a critical part of our long-term energy 
future. We recognize coal is abundant, it is comparatively 
inexpensive and is going to be used here and around the world. 
Our administration appreciates environmental concerns regarding 
coal and will devote technology to answer those concerns and to 
guarantee the future widespread use of coal. That's the 
rationale between the President's Clean Coal Power Initiative, 
which seeks $2 billion over 10 years to companies that work on 
and test technologies that improve power plant generation and 
emission of coal.
    In addition, we recognize carbon management requires 
special attention and that's why our budget this year features 
a 60 percent increase for research into carbon sequestration, 
which in my view and I think in our judgment will be a key to 
finding methods and technologies to reduce, avoid or capture 
greenhouse gas emissions. More importantly, it is that interest 
as much as any which was behind our recently announced coal-
powered generation project of the future, we call it Future-
Gen, which will lead us to operate the world's first coal-
fired, emission-free power plant. Future-Gen will take on the 
challenge of cutting electricity emissions and sequestration of 
greenhouse gasses and promote the increased use of hydrogen in 
meeting future energy needs. It is one of, I think, the most 
bold steps we can take towards a pollution-free energy future.
    In addition to the game-changing research in the clean coal 
area, we are likewise engaged in another initiative that in my 
judgment will lead us to a transformation in the energy world 
with the development of hydrogen fuel cells, as Senator Dorgan 
referred to earlier, as a power source. Hydrogen is the most 
abundant element in the universe, with nearly a limitless 
supply, and the use of hydrogen eliminates many of the 
consequences currently associated with fossil fuels. Our 
administration is very optimistic about the use of hydrogen as 
the transportation fuel of the future. As the President noted 
in his State of the Union address, we are similarly exploring 
the use of hydrogen to generate electricity to heat our homes 
and power our businesses, proposing to spend about $1.7 billion 
dollars on hydrogen fuel cell research and development, and the 
development of the transportation applications of hydrogen.

                           PREPARED STATEMENT

    I can think of no other program with the potential payoff 
for our Nation's security, our economic security, our foreign 
policy and especially for the environment as the work we're 
going to be doing on hydrogen. I think some day people may look 
back on that initiative as one of the greatest achievements of 
this time, and perhaps connect it up to the activities of this 
subcommittee. We look forward to working with the committee on 
these exciting new ventures as well as our ongoing work related 
to weatherizaton assistance programs, natural gas, and a host 
of other topics that time doesn't permit me to go into 
discussion at this moment of these various other initiatives, 
as well as the ones I mention in my written testimony. I look 
forward in the Q and A session to having the chance to respond 
to any questions that you might have.
    [The statement follows:]

               Prepared Statement of Hon. Spencer Abraham

                              INTRODUCTION

    Mr. Chairman, and Members of the Subcommittee, it is a pleasure to 
be here today to discuss the President's fiscal year 2004 Budget 
request for the Department of Energy (DOE).
    The total fiscal year 2004 Budget request for the Department of 
Energy is $23.4 billion (excluding $123 million advanced appropriated/
deferred from fiscal year 2003). This amount is $1.2 billion above the 
fiscal year 2003 appropriated level. This Administration recognizes the 
critical contribution our work on defense, energy security, the 
environment and world-leading science and technology makes to a 
peaceful and prosperous future. Of the total $23.4 billion request, 
$1.7 billion is requested for programs funded in the Interior and 
Related Agencies Appropriation under the jurisdiction of this 
Subcommittee. The $1.7 billion Interior Appropriations request is $76.7 
million less than appropriated in fiscal year 2003.
    The total fiscal year 2004 Budget continues the Administration's 
commitment to ensure national defense and safeguard the Nation's energy 
security through advances in science and technology, as well as fulfill 
our obligation as the environmental stewards to our communities. While 
DOE's national policy objectives have not changed, this budget reflects 
a new approach toward conducting business at the Department of Energy. 
Reengineering efforts that we began in fiscal year 2002 have taken 
shape: programmatic activities are better focused to achieve primary 
mission objectives, budget priorities are set with improved measurable 
performance criteria, and corporate management initiatives reflect 
aggressive implementation of the President's Management Agenda.
    The President's fiscal year 2004 Budget for the Department of 
Energy reflects, and addresses, the critical challenges we face today 
and will continue to face in the coming decades. I have charted a 
course for the Department of Energy that emphasizes DOE's critical 
contributions to the Nation's national security and provides forward-
reaching solutions to America's energy problems. My priorities are to 
meet our responsibilities to maintain the nuclear stockpile; expand and 
make more comprehensive our non-proliferation activities; accelerate 
the environmental cleanup program; develop 21st century cutting edge 
advanced fuel cell and alternative energy technologies; maintain coal 
as a major, low-cost, domestically produced, energy resource through 
the Coal Research initiative; build and maintain a stable and effective 
national defense program to respond to the guidance in the Nuclear 
Posture Review with special emphasis on revitalizing laboratory and 
production plant infrastructure; continue our leadership to ensure 
nuclear power remains a key energy resource; and maintain a world class 
scientific research capability. The fiscal year 2004 Budget is focused 
to deliver on these priorities.
    As part of the Department's Strategic Planning process these 
priorities translate into six overlapping Departmental goals that form 
our core mission of National Security. All of the Department's planning 
and budgeting for fiscal year 2004 drives toward these six goals:
  --Maintain a safe, secure and reliable nuclear deterrent
  --Control nuclear proliferation
  --Reduce dependence on energy imports
  --Achieve a cleaner, healthier environment
  --Improve our energy infrastructure to ensure the reliable delivery 
        of energy, and
  --Maintain a world-class scientific research capability
    Formulation of this year's budget reflects significant management 
changes occurring within the Department of Energy. Guided by the 
President's Management Agenda and my management reforms started in 
fiscal year 2003, this budget implements integrated, long-term program 
planning and performance accountability. The Department is implementing 
a five-year programmatic and planning framework to provide an 
unprecedented opportunity to consider future impacts in determining 
this year's funding priorities. This budget was formulated to deliver 
measurable results to reach the Department's strategic goals. This 
achievement is a significant step toward reaching my key goal to focus 
DOE activities to adhere to the primary mission of national security. 
By streamlining program activities and management structures, the 
Department of Energy will more effectively and efficiently manage and 
produce the results expected by American taxpayers.

 PRESIDENT'S MANAGEMENT AGENDA AND NATIONAL ENERGY POLICY COORDINATION

    Rising to the challenge of the President's Management Agenda, the 
Department is beginning to improve how it manages, budgets, and plans 
for all programs, projects, and activities. By improving management, 
performance, and accountability, the Department is striving for a level 
of performance that keeps DOE programs safe, on track, and on budget. A 
system of scorecards is being used to evaluate the effectiveness of 
various programs and allocate resources to achieve this end. 
Performance measures are improving to ensure that they are specific, 
quantifiable, concise, comprehensive, and relevant to the American 
taxpayer. Also, in accordance with the President's commitment to an 
expanded and effective electronic government, DOE is centrally managing 
information technology investments to reduce waste, increase 
productivity, and provide increased corporate services at lower cost.
    Research and Development Investment Criteria.--The President's 
Management Agenda calls for consistent and sufficient evaluation of 
future research and development (R&D) investments and past performance. 
In response, the Department developed internal guidance for programs to 
score their R&D activities against the Administration's applied R&D 
investment criteria. This approach focuses R&D dollars on long-term, 
potentially high-payoff activities that require Federal involvement to 
be both successful and achieve public benefit. The Department will 
continue to work to develop consistent scoring and benefit estimation 
methods, to permit comparison of applied R&D programs across the 
Department.
    The applied R&D scorecard process is an important way the 
Department is integrating performance into the budget. The scorecard 
process is in its second year of development. The goal is to develop 
highly analytical justifications for applied research portfolios in 
future budgets. This will require the development and application of a 
uniform cost and benefit evaluation methodology across programs to 
allow meaningful program comparisons.
    The Department's Science programs also participate in the 
government-wide effort to evaluate basic research efforts against the 
criteria of quality, relevance, and performance. As part of this first 
year effort for basic research programs, the Office of Science has 
incorporated the principles of the investment criteria into the 
formulation of its Congressional budget narrative.
    Program Assessment Rating Tool.--In addition to the use of R&D 
investment criteria, the Department implemented a new tool to evaluate 
the management effectiveness of selected programs. The Program 
Assessment Rating Tool (PART) was developed by the Office of Management 
and Budget (OMB) to provide a standardized way to assess the 
effectiveness of the Federal Government's portfolio of programs. While 
OMB's objective for fiscal year 2004 was to evaluate 20 percent of each 
government agency, the Department of Energy reviewed nearly 60 percent 
of its activities through the PART process. The Departmental elements 
that participated were Environmental Management, Science, Fossil 
Energy, Nuclear Energy, Energy Efficiency and Renewable Energy, the 
Power Marketing Administrations, and the National Nuclear Security 
Administration.
    The structured framework of the PART provides a means through which 
programs can assess their activities differently than through 
traditional reviews. While some of the programs received less than 
favorable scores, the information exchange between the Department and 
OMB proved quite valuable. The current focus is to establish outcome- 
and output-oriented goals, the successful completion of which will lead 
to benefits to the public, such as increased national security and 
energy security, and improved environmental conditions. The Department 
will incorporate feedback from OMB into the fiscal year 2005 Budget and 
planning process, and will take the necessary steps to continue to 
improve performance. The results of the review are reflected in the 
Department's fiscal year 2004 Budget. The refocusing of the Fossil 
Energy Oil and Gas program was supported by the results of the PART 
review.
    National Energy Policy Office.--The Department of Energy has 
established a National Energy Policy Office to provide strategic 
direction within DOE and overall coordination within the Federal 
Government with respect to implementing national energy plan 
recommendations and activities to assure dependable, affordable, and 
environmentally responsible production, delivery, and use of energy. 
This Office's mission is to achieve measurable performance results and 
consistency in implementing our national energy goals through effective 
policy development, planning and management strategies that are 
integrated into DOE's budgeting process and that foster interagency and 
intergovernmental coordination, generate public-private collaboration, 
and enhance international cooperation. Through such coordination and 
integrated policy planning and budgeting, the Office will assure 
performance results that advance and safeguard our national energy 
security objectives by assuring access to reliable and affordable 
energy supplies through a balanced and diversified portfolio of energy 
sources and modernization of energy infrastructure; securing continuous 
improvement in energy efficiency and conservation through technology 
research development and deployment to manage effectively and extend 
our energy resources, reduce demand and lower costs; assuring 
environmental progress and sustainable growth; and assuring that a 
robust market guides pricing, technology deployment, energy efficiency, 
fuel selection and energy systems.

       INTERIOR AND RELATED AGENCIES APPROPRIATION BUDGET REQUEST

    I would now like to address some of the specifics of our fiscal 
year 2004 Interior and Related Agencies Appropriations request.
    In total for fiscal year 2004, we are requesting $1.7 billion. This 
amount is $76.7 million less than appropriated in fiscal year 2003. By 
appropriation, we are requesting $519.3 million for Fossil Energy 
Research and Development; $16.5 million for Naval Petroleum and Oil 
Shale Reserves; $36.0 million for the 6th payment in the Elk Hills 
School Lands Fund; $875.8 million for Energy Conservation; $1.0 million 
for Economic Regulation; $175.1 million for Strategic Petroleum 
Reserve; $5.0 million for the Northeast Home Heating Reserve; and $80.1 
million for the Energy Information Administration. In addition, fiscal 
year 2003 appropriations action advance appropriated $36.0 million for 
the 5th payment in the Elk Hills School Lands Fund and deferred $87.0 
million of Clean Coal Technology balances into fiscal year 2004. This 
brings the fiscal year 2004 total to $1.8 billion.
    I would now like to address some specifics of the Fossil Energy, 
Energy Conservation, and Energy Information Administration budget 
requests.

                      FOSSIL ENERGY BUDGET REQUEST

    Mr. Chairman, when he took over as Assistant Secretary for Fossil 
Energy last year, I asked Assistant Secretary Mike Smith to realign the 
Fossil Energy program to focus virtually and exclusively on supporting 
three of the President's top energy and environmental initiatives: 
Clear Skies, Climate Change, and Energy Security.
    To be included in the fiscal year 2004 Budget, Fossil Energy 
programs must either support the development of lower cost, more 
effective pollution control technologies or help diversify the Nation's 
future sources of clean-burning natural gas to meet the President's 
Clear Skies goals; expand the Nation's technological options for 
reducing greenhouse gases either by increasing power plant efficiencies 
or by capturing and isolating these gases from the atmosphere; or 
measurably add to the Nation's energy security by providing a short-
term emergency response (e.g., Strategic Petroleum Reserve) or a 
longer-term alternative to imported oil (e.g., hydrogen and methane 
hydrates).
    President's Coal Research Initiative.--The fiscal year 2004 Budget 
continues to meet the President's commitment to spend $2 billion on 
clean coal research over 10 years by providing $320.5 million for the 
President's Coal Research Initiative. Since our budget testimony last 
year, the Department has made significant progress on a new generation 
of environmentally-clean coal technologies.
    Our ``first round'' solicitation in the Clean Coal Power 
Initiative--the centerpiece of the President's clean coal commitment--
attracted three dozen proposals for projects totaling more than $5 
billion. On January 15, 2003, we announced the first winners of this 
competition--eight projects with a total value of more than $1.3 
billion, more than one billion dollars of which would be provided by 
the private sector. Industry has again stepped up to the table, 
offering both good ideas and significant private sector cost-sharing.
    In fiscal year 2004, we are requesting $130.0 million as the next 
``installment'' of the Clean Coal Power Initiative. At the present 
time, our plans are to issue competitive solicitations every 2 years--
the next one in the fall of 2004. As in the initial solicitation, we 
propose to combine 2 years of appropriations (and any available funds 
from prior solicitations) because of the size and scope of the 
projects.
    The President's Clean Coal Power Initiative is especially 
significant because it directly supports the President's Clear Skies 
initiative. The first projects, for example, included an array of new 
cleaner and cheaper concepts for reducing sulfur dioxide, nitrogen 
oxides, and mercury--the three air pollutants targeted by the Clear 
Skies initiative. To ensure that even more effective pollution control 
concepts continue to emerge as candidates for future clean coal 
competitions, we are also requesting $22.0 million for research into 
even cleaner and more affordable innovations for existing plants.
    Several of the recently-selected Clean Coal projects also help 
expand the menu of options for meeting the President's climate change 
goal of an 18 percent reduction in greenhouse gas intensity (carbon 
equivalent per GDP) by 2012, primarily by boosting the efficiencies of 
power plants (meaning that less fuel is needed to generate electricity 
with a corresponding reduction in greenhouse gases). To position even 
more advanced, high efficiency power generating concepts for future 
development and testing, we are requesting $64.0 million to continue 
research into integrated gasification-combined cycle and a companion 
effort in high-performance, multi-fuel-capable turbines. A key aspect 
of these advanced power concepts--which will make up key modules of our 
``Vision 21'' emission-free power plant of the future--is that they 
emit carbon dioxide in a way that makes the greenhouse gas easier to 
capture.
    Carbon management will become an increasingly important element of 
our coal research program. Carbon sequestration--the capture and 
permanent storage of carbon dioxide--has emerged as one of our highest 
priorities in the Fossil Energy research program--a priority reflected 
in the proposed budget increase to $62.0 million in fiscal year 2004 
from a fiscal year 2003 appropriated level of $39.9 million.
    Carbon sequestration, if it can be proven practical, safe, and 
affordable, can dramatically enhance our long-term response to climate 
change concerns. It could offer the United States and other nations one 
approach for reducing greenhouse gases that would not necessitate 
changes in the way we produce, deliver, or use energy.
    Beginning in fiscal year 2004, one of the cornerstones of our 
carbon sequestration program will be a national network of regional 
partnerships. This Secretarial initiative, which I announced in 
November, will bring together the Federal Government, state agencies, 
universities, and private industry to begin determining which options 
for capturing and storing greenhouse gases are most practicable for 
specific areas of the country. We hope to start at least five of these 
partnerships in fiscal year 2004.
    Our sequestration budget also includes support for the President's 
National Climate Change Technology Initiative Competitive Solicitation 
program. Funding from the Fossil Energy program will be combined with 
funding from the Office of Nuclear Energy, Science and Technology and 
the Office of Energy Efficiency and Renewable Energy to competitively 
fund technology R&D with the greatest potential to reduce, avoid, or 
sequester gas emissions.
    Another aspect of the President's Coal Research Initiative is the 
production of clean fuels from coal. Hydrogen has emerged as a major 
priority within the Administration and the Department of Energy as a 
clean fuel for tomorrow's advanced power technologies (such as fuel 
cells) and for future transportation systems. Within the Fossil Energy 
program, we have allocated $5.0 million for research into new methods 
for making hydrogen from coal.
    To provide fundamental scientific knowledge that benefits all of 
our coal technology efforts, our fiscal year 2004 Budget also includes 
$37.5 million for advanced research in such areas as materials, coal 
utilization science, analytical efforts, and support for coal research 
at universities (including historically black and other minority 
institutions).
    Other Power Systems Research and Development.--We are also 
proposing $47.0 million for continued development of fuel cells with an 
emphasis on lower-cost technologies that can contribute to both Clear 
Skies emission reductions, particularly in distributed generation 
applications, and Climate Change goals by providing an ultra-high 
efficiency electricity-generating component for tomorrow's power 
plants. Distributed power systems, such as fuel cells, also can 
contribute to the overall reliability of electricity supplies in the 
United States and help strengthen the security of our energy 
infrastructure.
    Natural Gas Research.--The President's Clear Skies Initiative also 
provides the rationale for much of the Department's $26.6 million 
budget request for natural gas research. Clear Skies legislation is 
likely to further increase demand for this clean-burning fuel; even in 
the absence of new environmental requirements, natural gas use in the 
United States is likely to increase by 50 percent by 2020.
    Our natural gas research program, therefore, is directed primarily 
at providing new tools and technologies that producers can use to 
diversify future supplies of gas. Emphasis will be increased on 
research that can improve access to onshore public lands, especially in 
the Rocky Mountain region where much of our undiscovered gas resource 
is located. A particularly important aspect of this research will be to 
develop innovative ways to recover this resource while continuing to 
protect the environmental quality of these areas.
    We also plan to establish a new industry-led, university consortia-
based program to develop breakthrough technologies that can help assure 
a continued supply of affordable natural gas beyond 2015. The focus of 
this program will be on projects that could revolutionize the way 
natural gas is supplied in the United States--a focus that is well 
beyond the type of research industry is now doing.
    Natural gas storage will also assume increasing significance in the 
United States as more and more power plants require consistent, year-
round supplies of natural gas. Toward this end, we will initiate a 
nationwide, industry-led consortium that will examine ways to improve 
the reliability and efficiency of our Nation's gas storage system and 
explore opportunities for LNG facility sitting.
    The most significant change in our Natural Gas Research program is 
the new work we are proposing in hydrogen. In keeping with our energy 
security goal of finding alternatives to traditional transportation 
fuels, we are proposing to spend $6.6 million to study innovative 
methods to produce hydrogen from natural gas. We will ask industry, 
academia, and our national laboratories to submit new ideas on hydrogen 
production and related research. Since the byproduct of gas-to-hydrogen 
processes will likely be carbon dioxide, this effort will also include 
research on ways to capture this greenhouse gas. This work will be 
closely coordinated with other efforts in the Office of Fossil Energy 
to capture and sequester carbon dioxide.
    Over the long-term, the production of natural gas from hydrates 
could have major energy security implications. Hydrates--gas-bearing, 
ice-like formations in Alaska and offshore--contain more energy than 
all other fossil energy resources. Hydrate production, if it can be 
proved technically and economically feasible, has the potential to 
shift the world energy balance away from insecure sources of supply. 
Understanding hydrates can also improve our knowledge of the science of 
greenhouse gases and possibly offer future mechanisms for sequestering 
carbon dioxide. For these reasons, we are continuing a research program 
to study gas hydrates with a proposed funding level of $3.5 million.
    Oil Technology Development.--The President's National Energy Plan 
calls attention to the continued need to strengthen our Nation's energy 
security by promoting enhanced oil (and gas) recovery and improving oil 
(and gas) exploration technology through continued partnerships with 
public and private entities.
    At the same time, however, we recognize that if the Federal oil 
technology R&D program is to produce beneficial results, it must be 
more tightly focused than in prior years. Consequently, our fiscal year 
2004 Budget request of $15.0 million reflects a reorientation of the 
program toward those areas where there is clearly a national benefit 
rather than solely a corporate benefit.
    One example is the use of carbon dioxide (CO2) injection 
to enhance the recovery of oil from existing fields. CO2 
injection is a proven enhanced oil recovery practice that prolongs the 
life of some mature fields, but the private sector has not applied this 
technique to its fullest potential due to insufficient supplies of 
economical CO2. A key Federal role to be carried out in our 
proposed fiscal year 2004 program will be to facilitate the greater use 
of this oil recovery process by integrating it with CO2 
captured and delivered from fossil fuel power plants.
    We will also refocus much of our Oil Technology program on a new 
Domestic Resource Conservation effort that will target partnerships 
with industry and universities to sustain access to marginal wells and 
reservoirs. These aging fields account for 40 percent of our domestic 
production, yet contain billions of barrels of oil that might still be 
recovered with ever-improving technology. A high priority effort in 
fiscal year 2004 will be to develop ``micro-hole'' technology. Rather 
than developing just another new drilling tool, the Federal program 
will integrate ``smart'' drilling systems, advanced imaging, and 
enhanced recovery technologies into a complete exploration and 
production system. Micro-hole systems may offer one of our best 
opportunities for keeping marginal fields active because the smaller-
diameter wells can significantly reduce exploration costs and make new 
drilling between existing wells (``infill'' drilling) more affordable. 
Using breakthrough technology like this to keep marginal fields in 
production preserves the opportunity to eventually apply even more 
advanced innovations that could recover even larger quantities of 
domestic crude that traditional oil recovery methods currently leave 
behind.
    Other Fossil Energy R&D.--Our budget also includes $124.3 million 
for other activities in our Fossil Energy program, including $92.8 
million for headquarters and field office salaries, $3.0 million for 
plant and capital improvements, $9.7 million for environmental 
restoration, $6.0 million for Federal matching funds for cooperative 
research and development projects at the University of North Dakota and 
the Western Research Institute, $2.8 million for electricity and 
natural gas import/export responsibilities, and $10.0 million for 
advanced metallurgical research at our Albany Research Center. The 
increase in funding at the Albany Center (up from $6.0 million in 
fiscal year 2003) reflects the Center's growing role in developing 
better materials for fuel cells and in studying new mineral carbonation 
concepts for carbon sequestration.

                           PETROLEUM RESERVES

    The Strategic Petroleum Reserve and Northeast Home Heating Oil 
Reserve are key elements of our Nation's energy security. Both serve as 
response tools for the President to use to protect U.S. citizens from 
disruptions in commercial energy supplies.
    Strategic Petroleum Reserve.--The President has directed us to fill 
the Strategic Petroleum Reserve to its full 700 million barrel 
capacity. The mechanism for doing this--a cooperative effort with the 
Minerals Management Service to exchange royalty oil from Federal leases 
in the Gulf of Mexico--is working well. We have been able to accelerate 
fill from an average of 60,000 barrels per day at the start of the 
President's initiative to a planned rate of 130,000 barrels per day for 
deliveries beginning this month.
    Because of the President's ``royalty in kind'' initiative, we have 
achieved the Reserve's highest inventory level ever, now at 600 million 
barrels. Our goal remains to have a full inventory of 700 million 
barrels by the end of calendar year 2005.
    Our fiscal year 2004 Budget for the SPR is $175.1 million, all of 
which is now in our facilities development and operations account. We 
do not require additional funds in the oil acquisition account because 
charges for transporting ``royalty in kind'' oil to the SPR are now the 
responsibility of the oil supplier. Also, because we have the authority 
to ``borrow'' funds from other Departmental accounts to support an 
emergency SPR drawdown, we no longer require the same amount of standby 
funding in this account. This has allowed us to use $5.0 million in 
funds previously appropriated for this purpose to support a portion of 
our fiscal year 2004 Fossil Energy R&D budget request.
    Northeast Home Heating Oil Reserve.--We are requesting $5.0 million 
for the Northeast Home Heating Oil Reserve, a decrease of $1.0 million 
from the fiscal year 2003 appropriated level. The decrease reflects 
cost savings realized from recompeting our commercial storage 
contracts. The 2-million-barrel reserve remains ready to respond to a 
Presidential order should there be a severe fuel oil supply disruption 
in the Northeast. A key element of this readiness is a new online 
computerized ``auction'' system that we implemented during the last 
year to expedite the bidding process. Installing and testing the 
electronic system (including tests with prospective commercial bidders) 
has been a major element of the Office of Fossil Energy's role in 
implementing the ``e-government'' initiatives in the President's 
management agenda.
    Naval Petroleum and Oil Shale Reserves.--The fiscal year 2004 
Budget request of $16.5 million is a decrease of $1.2 million from the 
fiscal year 2003 appropriated level. The Rocky Mountain Oilfield 
Testing Center (RMOTC), established at the Naval Petroleum Reserve No. 
3 in Wyoming, will be closed, resulting in a $3 million per year cost 
savings. RMOTC is more appropriately a private sector activity. We also 
intend to transfer the Naval Petroleum Reserve No. 2 in California to 
the Department of the Interior by the end of fiscal year 2003, although 
the transition and certain environmental compliance activities will 
continue into fiscal year 2004. We further expect to be able to reduce 
our funding requirements for equity redetermination studies for the 
Government's portion of the Elk Hills Naval Petroleum Reserve No. 1, 
which was divested in 1998. Of the four producing zones for which final 
equity shares had to be finalized, three have been completed; the 
fourth (the Shallow Oil Zone) is expected to be finished in fiscal year 
2005.

                   ENERGY CONSERVATION BUDGET REQUEST

    For our Interior appropriation funded programs in fiscal year 2004, 
we are requesting $875.8 million, $16.0 million less than appropriated 
in fiscal year 2003. The decrease reflects a shift in priorities among 
activities supported by the different appropriations, consistent with 
the Administration's R&D investment criteria and PART results, as I 
will describe through my testimony.
    Mr. Chairman, our fiscal year 2004 Budget reflects the new 
organization within EERE. Two years ago, EERE was divided into 31 
programs, in 17 offices, stovepiped into 5 market sectors. There were 
multiple overlapping layers of management and duplicative and 
inconsistent business systems that generated significant inefficiencies 
and made it difficult to ensure accountability.
    In response to the President's Management Agenda, we launched a 
dramatic restructuring of the EERE program in April 2002. This 
restructuring eliminated the 5 market sectors and 17 offices, 
streamlined 31 programs into 11, eliminated up to four management 
levels, and centralized administration functions into a single support 
organization with a focus on developing consistent, uniform, and 
efficient business practices. This is the most dramatic restructuring 
of EERE in at least 12 years and arguably in its history.
    The restructuring combined all the hydrogen and fuel cell 
activities, formerly scattered across 2 market sectors and 3 programs, 
into a single program for greater efficiency and synergy. It also 
combined all the bioenergy-related activities, formerly scattered 
across 3 market sectors and 3 programs, into a single program focused 
on advanced biorefineries.
    The fiscal year 2004 Budget is fully aligned with EERE's new 
management structure and strategic goals and together they will provide 
greater synergy and increased efficiency and productivity in the R&D 
and deployment activities lead by EERE.
    EERE's R&D and technology deployment efforts supported by the 
fiscal year 2004 Budget will provide Americans with greater freedom of 
choice of technology, while providing increased energy security, and 
reducing financial costs and impacts on the environment.
    Mr. Chairman, the Energy Conservation budget request has been 
developed with these challenges and opportunities in mind.
    FreedomCAR and Vehicle Technologies.--The FreedomCAR and Vehicle 
Technologies (FCVT) Program is developing more energy efficient and 
environmentally friendly highway transportation technologies to help 
reduce United States petroleum consumption. The long-term aim of the 
program is to develop ``leap frog'' technologies such as hydrogen-
fueled vehicles to provide Americans with freedom of mobility along 
with energy security, lower costs, and lower environmental impacts. 
Program activities include research, development, demonstration, 
testing, technology validation, technology transfer, and education that 
could achieve significant improvements in vehicle fuel efficiency and 
displacement of oil by other fuels which ultimately can be domestically 
produced in a clean and cost-competitive manner.
    In fiscal year 2004, the Department is requesting $157.6 million, a 
decrease of $19.7 million below the fiscal year 2003 appropriated level 
for the FreedomCAR and Vehicle Technologies program. The FreedomCAR 
portion of the budget is $91.1 million, an increase of $5.5 million 
above the fiscal year 2003 appropriated level. All funding for 
transportation fuel cell and hydrogen infrastructure activities is 
included in the Hydrogen, Fuel Cells, and Infrastructure Technologies 
program to accelerate RD&D activities to support both the FreedomCAR 
partnership and President's new Hydrogen Fuel Initiative.
    Fuel Cell Technologies.--In fiscal year 2004, we are requesting 
$77.5 million, an increase of $22.4 million above the fiscal year 2003 
appropriated level for Fuel Cell Technologies from Interior 
Appropriations. The fiscal year 2004 Budget supports fuel cell cost 
reduction and initiation of a fuel cell vehicle test and evaluation 
program.
    Americans currently depend on foreign sources for 55 percent of our 
oil-a dependence that is projected to rise to 68 percent by 2025. Since 
two thirds of the oil we consume is used for transportation, we must 
focus on alternative means of fueling transportation from domestic 
resources if we ever expect to reverse this trend.
    Hydrogen fuel cell vehicles require no petroleum-based fuels and 
emit no pollutants or carbon dioxide. Their development and commercial 
success would remove personal transportation as an environmental issue 
and substantially reduce our dependence on foreign oil
    The hydrogen needed to fuel these vehicles is domestically 
available in abundant quantities as a component of natural gas, coal, 
biomass, and even water through electrolysis using renewable or nuclear 
power. The challenge is to economically produce, deliver, store, and 
distribute hydrogen for use as a consumer fuel, and to engage the 
broader oil, energy, and power companies in this effort. To meet this 
challenge, the President's fiscal year 2004 Budget proposes a new 
Hydrogen Fuel Initiative, a $1.2 billion effort over five years, which 
will accelerate research and development activities to solve technical 
challenges in hydrogen production, delivery, storage, and distribution. 
When the vision of the President's Fuel Initiative is achieved, 
hydrogen will power the fuel cells that provide energy for our cars, 
trucks, homes, schools, and businesses.
    To support FreedomCAR and the Hydrogen Fuel Initiative, we need to 
make significant research and development investments to develop 
vehicles powered by hydrogen fuel cells and the infrastructure to 
support them. The government will be to help fund and coordinate the 
high-risk R&D work of numerous private sector partners and our National 
network of science laboratories. Government coordination of this 
undertaking will help resolve one of the difficulties associated with 
development of a commercially viable hydrogen fuel cell vehicle: the 
``chicken and egg'' question. Which comes first, the fuel cell vehicle 
or the hydrogen production and delivery-refueling infrastructure to 
support it? The President's Hydrogen Fuel Initiative, in conjunction 
with the FreedomCAR partnership, answers the question by proposing to 
develop both in parallel; that is, to augment the already significant 
investments in vehicle technologies with new investments in hydrogen 
and fuel cell technologies. By so doing, Federal investments can help 
advance commercialization of hydrogen fuel cell vehicles and 
infrastructure by 15 years, from 2030 to 2015.
    These efforts will enable the development of hydrogen fuel cell 
vehicles for the showroom floor by 2020. Success of these programs will 
begin to eliminate the need for imported oil, while simultaneously 
reducing emissions and greenhouse gases from America's transportation 
fleet without affecting the freedom of personal mobility we demand.
    Weatherization and Intergovernmental Activities.--In fiscal year 
2004, we are requesting $357.0 million for Weatherization & 
Intergovernmental Activities, $42.5 million more than appropriated in 
fiscal year 2003.
    The Weatherization and Intergovernmental Program activities support 
the President's National Energy Policy recommendations for rapid 
deployment of clean energy technologies and energy efficient products. 
The program's funding request also supports the President's commitment 
to increase funding by $1.4 billion over 10 years for the 
Weatherization Assistance Program, which improves the energy efficiency 
of dwellings occupied by low-income Americans.
    Our Weatherization Assistance Program request ($288.2 million, 
$64.7 million above the fiscal year 2003 appropriated level), supports 
weatherization of approximately 126,000 low-income homes. Based on 
historical data, the program anticipates that low-income families will 
save $1.80 in energy costs for every dollar invested over the life of 
the efficiency improvements. The Weatherization Assistance Program was 
assessed using the Administration's PART and was rated Moderately 
Effective.
    Our fiscal year 2004 request for other subprogram activities within 
the Weatherization and Intergovernmental Program are as follows: State 
Energy Program Grants ($38.8 million, $5.9 million less than 
appropriated in fiscal year 2003), State Energy Activities ($2.4 
million, $3.0 million less than appropriated in fiscal year 2003), and 
Gateway Deployment ($27.6 million, $13.3 million less than appropriated 
in fiscal year 2003). Within Gateway Development, there are several 
program shifts. For example, to avoid duplication of efforts, funding 
for International Market Development activities is now requested within 
the International Renewable Energy Program in the Energy and Water 
appropriation. The National Industrial Competitiveness through Energy, 
Environment, and Economics (NICE3) activity is terminated because the 
activities are within industry's capability and do not match up well 
against the Administration's R&D investment criteria. Other activities 
are being refocused to ensure program performance can be meaningfully 
evaluated.
    Building Technologies.--EERE's buildings technology R&D programs 
address technologies, techniques and tools to make residential and 
commercial buildings, both in existing structures and new construction, 
more energy efficient, productive and affordable. Strategies include 
system R&D to reduce overall residential and commercial building energy 
use, R&D focused on energy end uses such as water heating, food 
refrigeration, and clothes washing, and the development of building 
energy efficiency codes and national equipment energy efficiency 
standards. The Buildings program was assessed using the PART and was 
rated Adequate. Recommendations included refocusing R&D funding on 
long-term, high-risk, potentially high-payoff activities; evaluating 
potential duplication of Building program activities funded via the 
Energy and Water appropriation; and developing better performance 
measures. The request begins to address these recommendations.
    Our fiscal year 2004 Budget for the Interior-funded portion of the 
Building Technologies program is $52.6 million, $6.8 million less than 
appropriated in fiscal year 2003. The funding supports a portfolio of 
activities that includes solid-state lighting, energy efficiency 
improvement of other building components and equipment, and their 
effective integration using whole-building-system-design techniques, as 
well as the development of codes and standards.
    Emerging Technologies R&D.--In fiscal year 2004, we are requesting 
$21.8 million to conduct building components and equipment R&D. This 
amount is $9.4 million below the fiscal year 2003 appropriated level. 
The request reflects a redirection of near-term, low risk R&D in space 
conditioning and appliances to longer-term, higher-risk activities with 
a greater potential public benefits. For example, we are proposing a $5 
million investment to expand our Solid State Lighting research 
activities. Solid State Lighting represents a promising, new approach 
to efficient lighting systems. Our Solid State Lighting research will 
create the technical foundation to revolutionize the energy efficiency, 
appearance, visual comfort, and quality of lighting products by 
achieving efficiencies upwards of 70 percent (source efficiency).
    Residential Buildings and Zero Energy Buildings R&D.--The fiscal 
year 2004 Budget is $15.2 million, an increase of $2.9 million from the 
fiscal year 2003 appropriated level. The Department will pursue systems 
research on five promising technology areas, enhance activities to 
apply practices and approaches developed through Building America to 
existing residential buildings.
    Equipment Standards and Analysis Program.--We are requesting $9.0 
million, compared with $9.6 million in our fiscal year 2003 
appropriated level. The Department will continue the development of 
equipment test procedures and standards. We will be completing analyses 
that will add new products to the lighting and appliance standards 
program.
    Industrial Technologies.--The Industrial Technologies program 
partners with energy-intensive industries to develop and apply advanced 
technologies and practices that reduce industry's energy consumption 
and improve environmental performance. In fiscal year 2004, we are 
requesting $24.0 million, compared with the $62.1 million appropriated 
in fiscal year 2003, for the Industries of the Future (IOF) (Specific) 
programmatic area. The request reflects a determination that the 
program supports some activities for which the private sector has 
sufficient incentive to pursue without Federal support. The Department 
has re-focused its R&D efforts to higher priority technologies within 
the EERE portfolio, including hydrogen and advanced fuel cell 
technologies. The activities that continue in the IOF (Specific) 
programmatic area will focus on bringing existing projects to 
successful commercialization and pursuing longer-term, higher-risk 
activities with significant potential public benefits that industry 
would not undertake alone. We are also requesting $34.4 million, $2.1 
less than appropriated in fiscal year 2003, for the IOF (Crosscutting) 
programmatic area, which includes Industrial Materials of the Future 
($13.6 million); High Efficiency Combustion Systems ($2.0 million); 
Sensors and Control Technology ($3.8 million); and Industrial Technical 
Assistance ($14.8 million).
    Biomass.--For the first time we have brought a diverse industry 
together and produced a vision and R&D roadmap that has increased the 
level of industry investment. This roadmap has allowed us to begin the 
process of rebuilding the program and focusing on the most promising 
long-term opportunities for these technologies. We have improved our 
collaboration with other Federal agencies, especially the Department of 
Agriculture (USDA). In addition, the Farm Bill provided direction and 
mandatory funding to USDA to work with DOE in advancing biomass 
technologies. Our fiscal year 2004 request for Interior-funded portion 
of the biomass program is $8.8 million, compared with $24.6 million 
appropriated in fiscal year 2003. The request supports continuing R&D 
on the thermochemical and bioconversion process, and evaluating 
opportunities for the production of fuels and chemicals from 
intermediates (``platforms'') such as sugars from biomass and starch 
crops, synthesis gas from biomass gasification, and biomass oils. The 
request terminates black liquor gasification activities, which do not 
align well with the R&D investment criteria, as sufficient incentive 
exists for industry to pursue these activities alone.
    EERE bioenergy activities were integrated into one office to help 
focus resources on a limited and more coherent set of goals and 
objectives, increasing collaboration with industry, reducing overhead 
expenses, and exploiting synergies among similar activities in support 
of a future biorefinery industry. This focus on a clear set of goals, 
substantial leveraging of research funding with industry, and the 
transfer to industry of a number of demonstration activities that 
industry should continue to pursue without federal support is reflected 
in our request.
    Power.--Our Distributed Energy Resources Program leads a national 
effort to develop a flexible, smart, and secure energy system by 
integrating clean and efficient distributed energy technologies 
complementing the existing grid infrastructure. The program is 
supporting regional and state strategies to ensure electricity and 
reliability. By producing electricity where it is used, distributed 
energy technologies can increase grid asset utilization and reduce the 
need for upgrading some transmission and distribution lines. Also, 
because distributed generators are located near the point of use, they 
allow for the capture of the waste heat produced by fuel combustion 
through combined heat and power (CHP) systems. In fiscal year 2004, we 
are requesting $51.8 million, compared with $61.1 million appropriated 
in fiscal year 2003. The program is following an RD&D model, similar to 
Advanced Turbine Systems subprogram, completed in fiscal year 1999, in 
pursuing activities in microturbines, reciprocating engines, thermally 
activated devices and other areas. The program expects to meet the 
performance milestones for efficiency, environmental emissions and cost 
effectiveness for microturbines and reciprocating engines through cost-
shared RD&D and down selecting among several different approaches.
    Federal Sector.--The Federal Government is the Nation's single 
largest energy consumer. It uses almost one quadrillion British thermal 
units (Btu) of energy annually, or about 1 percent of the Nation's 
energy use. In fiscal year 2000, the Federal Government spent about $4 
billion in energy to heat, cool, light, and conduct operations in 
500,000 buildings. Simply by using existing energy efficiency and 
renewable energy technologies and techniques, the Federal Government 
can begin to lead the Nation toward becoming a cleaner, more efficient 
energy consumer. In fiscal year 2004, we are requesting $20.0 million 
for the Federal Energy Management Program to continue meeting the goals 
of reducing Federal energy consumption.
    Program Management.--The Energy Conservation Program Management 
budget component provides executive and technical direction, 
information, analysis, and oversight required for efficient and 
productive implementation of those programs funded by Energy 
Conservation appropriations in EERE. In addition, Program Management 
supports all Headquarters staff, six Regional Offices, the Golden Field 
Office in Colorado and several DOE employees at three Operations 
Offices to plan and implement EERE activities as well as facilitate 
delivery of applied R&D and grant programs to federal, regional, State, 
and local customers. In fiscal year 2004, we are requesting $76.7 
million for these activities, which is fairly level with the fiscal 
year 2003 appropriated level.

            ENERGY INFORMATION ADMINISTRATION BUDGET REQUEST

    For the Energy Information Administration (EIA), we are requesting 
$80.1 million, the same level as appropriated in fiscal year 2003. The 
requested funding will be used for ongoing data and analysis activities 
and critical data quality enhancements, so EIA can continue to 
disseminate accurate and reliable energy information and analyses to 
inform energy policy-makers. EIA's base program includes the 
maintenance of a comprehensive energy database, the dissemination of 
energy data and analyses to a wide variety of customers in the public 
and private sectors through the National Energy Information Center, and 
the maintenance of modeling systems for both near- and mid-term energy 
market analysis and forecasting.
    In fiscal year 2004, EIA's priority is to maintain high-quality 
core energy data programs and forecasting systems needed to provide 
timely data, analysis, and forecasts. EIA will complete the update and 
overhaul of its consumption surveys. EIA will continue to overhaul the 
electricity surveys and data systems to accommodate changes in the 
deregulated energy industry and improve data quality and accuracy in 
the petroleum, natural gas, and electricity areas.
    EIA continues to aggressively expand the availability of electronic 
information and upgrade energy data dissemination, particularly on the 
EIA Web site. The increased use of electronic technology for energy 
data dissemination has led to an explosive growth in the number of its 
data customers and the breadth of their interests, as well as an 
increase in the depth of the information distributed. During fiscal 
year 1997, EIA established a goal to increase the number of users of 
its Web site by 20 percent annually. In each of the succeeding years 
EIA has managed to either meet or exceed this commitment, with a 39 
percent increase in fiscal year 2002 while delivering more than 2,400 
gigabytes of information.
    EIA also has increased dramatically the distribution of its 
information by becoming the dependable source of objective energy 
information for the news media. By using this distribution channel EIA 
has ensured its energy data to be widely seen and used by the general 
public at minimal additional cost to the Federal Government.
    In May 2002, on short notice, and with no new budget resources, 
EIA, at my direction, began operation of a new weekly survey of natural 
gas in underground storage after the American Gas Association stopped 
operation of its weekly survey. This survey is the Nation's only weekly 
gas supply data and is crucial to decisions of supply planners in 
industry and utilities as well as to analysts assessing the current 
natural gas supply and demand situation, especially prior to the winter 
heating season.
    EIA culminated a three-year effort to revise its electric power 
data collection forms with a new set of surveys. The new surveys will 
collect information necessary to understand and evaluate many of the 
changes that have occurred in the electric power industry due to 
restructuring and retail competition by collecting additional 
information from the growing percentage of nonutility generators. EIA 
added to its E-Government initiatives by incorporating Internet data 
collection with this set of surveys.
    In the area of improving data quality, EIA has reprocessed twelve 
years of electricity data from nonutility generators and has revised 
its Annual Energy Review to present this data according to industry 
conventions, moving nonutility power producers' consumption from the 
industrial sector to the electric power sector. The revised data uses 
natural gas consumption supplied by nonutility electric generators in 
place of natural gas pipeline deliveries, providing a better 
representation of natural gas consumption. These revisions will be 
extended to other EIA publications this year.
    With increasing frequency, EIA has been requested by the 
Administration and Congress to produce comprehensive service reports 
that analyze current energy issues of major importance. The number and 
sophistication of these analytical requests have grown, often requiring 
EIA to postpone work on vital quality assurance activities, and 
requiring negotiation with the requestor on delivery dates and the 
scope of the study and final report. As in past years, EIA fulfilled 
several requests for special studies and investigations for the 
Administration and Congress. During fiscal year 2002, EIA expended 
nearly $2 million in resources to complete the 93 special reports and 
analyses during the fiscal year. In particular, EIA was asked by 
several Members of Congress to evaluate the impact of several 
provisions of the proposed House and Senate Energy Bills on energy 
demand, supply, prices, and on the economy. These analyses were often 
referred to Congressional floor debates and many were cited in revision 
to the proposed Senate bill. If this level of demand continues, EIA is 
expected to exceed $2 million in fiscal year 2004 to fulfill these 
requests for analyses and reports on topical energy issues.
    Mr. Chairman, and Members of the Subcommittee, this concludes my 
prepared statement. I would be happy to answer any questions you may 
have at this time.

    Senator Burns. Thank you, Mr. Secretary. We have been 
joined by the ranking member, and former chairman of the full 
committee, Senator Byrd this morning. Senator Byrd, if you have 
a statement, we would entertain that at this time.

              OPENING STATEMENT OF SENATOR ROBERT C. BYRD

    Senator Byrd. Mr. Chairman, thank you very much, and thank 
you, Mr. Secretary. Thank you, Mr. Chairman, for holding this 
hearing today so that the members of this subcommittee have an 
opportunity to review and discuss the administration's fiscal 
year 2004 budget request for the Office of Fossil Energy, the 
Office of Energy Efficiency, the Energy Information Agency, and 
the Strategic Petroleum Reserve. I appreciate your willingness 
to ensure the Secretary's appearance this morning. He's kind of 
hard to get hold of, but you brought him in. You are from the 
west, and when you go after them, you get them, right?
    Senator Burns. I wish I could say that about my fishing.
    Senator Byrd. Much of the $1.7 billion appropriated to the 
Energy Department through the Interior bill is directed towards 
research and development activities. These programs, 
particularly the fossil energy programs, are the linchpin to 
ensuring our Nation's energy security. Mr. Chairman, 52 percent 
of the electricity generated in this country comes from a coal-
fired power plant, and close to 100 percent of our 
transportation comes from oil and natural gas. Obviously, the 
importance of fossil fuels to our national and economic 
security cannot be overstated.
    Yet despite those facts and contrary to all the rhetoric 
that we hear coming from this administration, what is being 
proposed for the Office of Fossil Energy is simply disastrous. 
This budget cuts coal research 10 percent below the fiscal year 
2003 enacted level. It cuts natural gas research and 
development by 43 percent. It cuts oil research and development 
by 64 percent. And it would put 150 of the brightest fossil 
energy scientists out of work at the very moment we should be 
redoubling our efforts to find resources in an environmentally 
sound manner.
    Mr. Chairman, I look forward to working with you throughout 
the appropriations process to see what can be done to rectify 
these shortsighted and negative proposals. I know that 
resources will be particularly tight for fiscal year 2004, but 
this budget request cannot be adopted in its present form 
without doing serious damage to our Nation's energy security 
efforts. I would urge you and all the members of the 
subcommittee to resist going down that path.
    Thank you, Mr. Chairman.
    Senator Burns. Thank you, Senator.
    We discussed this when the Secretary was in my office, and 
we're going to find a way to get the job done the way it should 
be done. I'm always amazed at the mindset of some folks. The 
majority of our oil and gas is found on public lands. Yet, we 
vote every day to take those lands and those areas where that 
resource is found completely off the board when it comes time 
to inventory what we have in the event that we need them. So 
this thinking on oil and gas runs counter to some ideas here on 
the Hill of what we should be using.
    We spend a lot of money every year on the Strategic 
Petroleum Reserve, and send millions of barrels of oil down 
there, we simply buy it and put it in the ground. That's a cost 
to the taxpayer. The taxpayer is paying nothing for the natural 
reserves that we find on some of our outer continental shelf 
and our public lands. It is already there because Mother Nature 
stores it, but we are denied the right to inventory it and 
recover it, if it has to be recovered.
    About 2 weeks ago we had the opportunity to drive the fuel 
cell automobiles that General Motors had out here. I will tell 
you that looking at the numbers, and looking at the work that's 
being done, we are closer to a hydrogen society than we think 
we are. The work that's being done in hydrogen fuel cells is 
starting to see some results. So I'm very encouraged about 
that. Also the Secretary and I think there is a great 
possibility with Future-Gen.
    We have tons and tons of coal, and we should not back off 
in working on the technology to make it more feasible, to make 
it more acceptable to the environment, and to look at this 
great product we have because it is a source of the cheapest 
power that we produce today other than hydro. Hydro is the only 
one that can come close to that. So, Mr. Secretary, we talked a 
little bit about Future-Gen and its proposals, we look forward 
to working with you on that, and of course we also have some 
very distinct ideas on where it should be located, but 
nonetheless I think it is a bold step as far as our concerns.
    In the area of conservation, I believe you are aware of the 
solid-state lighting initiative which this subcommittee 
supported with an appropriation of around $3 million last year. 
You have requested $5 million for this program and there is 
significant promises that lay ahead in solid-state lighting and 
we've been a witness to a lot of that research and development. 
I understand the Department has investigated and calculated 
these potential benefits while developing a road map for the 
solid-state lighting program. Would you want to share with the 
committee your conclusions or have you drawn any conclusions, 
or where are you in that particular program?
    Secretary Abraham. Well, I think, Mr. Chairman that the 
conclusions we have to this point is we believe it is possible 
to produce higher quality lighting using advanced solid-state 
technology that could produce a 70 percent improvement over the 
best fluorescent lighting today. We are seeking about a 21 
percent increase in the lighting R&D budget from what we had 
submitted in 2003, in part to accommodate an increase in next-
generation solid-state lighting.
    So you know, I think the percentage of total electricity 
used in this country that's attributed to lighting is about 22 
percent of all of our electricity demand level, so if we can 
make gains in efficiency or breakthroughs in this area, it has 
a much broader application than a lot of the other things in 
which we do research. So I think we are exploring creating a 
more formal public/private kind of partnership and try to focus 
more on this issue. And I know that in the energy bill, this 
has come up as an area in which the Congress will want to take 
a lead in setting out a formalized process for this and it is 
an area where real potential exists.
    Senator Burns. For the information of the committee, we are 
talking about the use of fiber optics for the purpose of 
lighting. Senator, this can even be done through your drapes. 
They can change the tone of light and the amount of light. The 
folks who work what they call the midnight shift now, but in 
your day we worked graveyard, if you remember.
    Senator Byrd. The hoot owl.
    Senator Burns. The hoot owls. They can now make lighting in 
a plant to simulate a morning light, noon light, and an 
afternoon light, even though it's dark outside. It's a 
marvelous breakthrough. There is a consortium of manufacturers 
who have come together to support this lighting initiative. 
It's just like the Secretary says, when you talk about the 
possibility of a 70 percent savings in lighting costs alone in 
this country, you're talking about a big chunk of conservation. 
I really hope that the Department of Energy will take a closer 
look.
    According to the budget justification, a rather small off-
highway vehicle R&D program is being terminated because other 
research opportunities have higher impact on energy savings. In 
looking at the Department's own R&D road map off-highway, 
however, I find that off-highway uses account for 20 percent of 
the fuel used in the transportation sector. That is a huge 
amount and I don't think there are a lot of people that 
understand how much off-highway fuel is used in this country. 
Can you reconcile these figures with the energy use and the 
emissions with your decision to terminate a $3.5 million 
program?

              OFF-HIGHWAY VEHICLE R&D PROGRAM TERMINATION

    Secretary Abraham. As I understand, the principal focus of 
the work that has been done has been related to railroad 
applications, and I think in that area the amount of actual 
demand or the use of oil is pretty small compared to the daily 
total consumption of the country, which is about a quarter-
million barrels a day out of 12 million barrels a day of 
imports alone. So in terms of the priority somebody has to set 
when somebody sets a budget, we looked at that percentage 
versus the percentage that goes to the rest of the 
transportation sector and made the judgment that even if we 
were highly successful in the improvement of R&D in this area 
that it wouldn't have in terms of application that big of an 
effect, and I think that's the basis of that conclusion that 
you read.

                            GASOLINE PRICES

    Senator Burns. I think even though we're going into the 
vacation season gasoline prices are on everybody's mind. We saw 
the spike in February, and it's settled down to around $27 or 
$28 a barrel now. They tell me the domestic supplies are lower, 
our domestic production keeps going down. OPEC made an 
announcement the other day that they were going to watch their 
supplies. Can you give us an update on these fluctuating oil 
prices? And have you drawn any conclusions about what we should 
be doing about them?
    Secretary Abraham. Let me talk about the sense of the 
market for a minute and then what we should be doing. On the 
market itself, there is no question that we went through a 
period here over the last 4 or 5 months that was sort of the 
perfect storm in terms of problems. Just an incredible 
combination of events happened in a very short period of time. 
One of them was the strike in Venezuela, which took about 3 
million barrels of production out for a very long time, and 
much of the Venezuelan oil comes to the United States, that's 
one of our major supply sources. We also had a cold winter 
which made the demand go up during the winter heating season. 
We had in Nigeria a period of civil unrest that threatened some 
of the employees that worked in the oil sector there and they 
pulled people out of the fields and caused production in 
Nigeria to drop for a period. And we had the period leading up 
to the war in Iraq, we had the war, and since its beginning of 
course and even today, the production from Iraq was essentially 
halted. So this was a pretty amazing period of events.
    In one sense we saw some spikes in the market and you 
referred to them, we saw the market go from the mid-20s to even 
a little bit higher, to spike up into the high-30s for a brief 
period of time right before the war, I think the top limit it 
hit was $39.99 a barrel. And it has now come down and is 
stabilizing in the mid-to high-20 range. We would like probably 
less of that, to see, you know, obviously less of that 
volatility.
    On the other hand, if you compare this period to three 
similar periods in which a lot of international crises were 
taking place, from the last 30 years, the spike was 
substantially lower. In 1973 during the oil embargo that took 
place, prices spiked four-fold. In the 1979-80 period during 
the revolution in Iran, prices more than doubled. From the 
Persian Gulf War in 1990, 1991, prices doubled. But here they 
went up for a shorter period of time and by a much smaller 
amount.
    As a consequence, we have seen gasoline prices, the 
projection for gasoline prices for the summer based on our 
energy administration reduced substantially. At one point we 
were pointing to a summer-long average of almost $1.70 a 
gallon, and now it's $1.46 a gallon. We would like to see 
gasoline prices lower than that, but that's comparable or lower 
than two of the last three seasons, so in that sense we are a 
little more optimistic today than we would have been just 1 or 
2 months ago.
    What we would like to do in the long term is much more 
important, and I think the subcommittee cares how we address 
this. One, the chairman has talked about with me and talked 
publicly at some length about the need to diversify our 
international source of supply.
    Senator Byrd makes a good point. We will try to get our 
national labs focused on this challenge.
    So to complete the thought I was on before, Senator, the 
issue you have raised on a number of occasions about the 
diversification of where we have energy partnerships is 
important and Russia is one area I know you're interested in, 
and is one focus of our attention as well. Last year we hosted 
a summit between Russian energy companies and American energy 
companies, tried to bring them together to create an 
opportunity for people to become familiar with new project 
opportunities in Russia and the Caspian region generally. There 
is a lot of infrastructure that needs to be built in order for 
those resources to become available to the world market, but we 
see that as an opportunity. We see in Africa as well as our own 
hemisphere areas where greater production is possible. That's 
one part of the solution.
    A second part of the solution is the need to proceed 
producing more here at home, and the debate the Senate last had 
on the war and other production issues is critical to that.
    Finally, we try to look ahead, how can we reduce our 
dependence on foreign oil, and that's really the reason that 
the hydrogen proposal that we're talking about this morning, we 
see it as a way to address both the dependence on imports on 
the one hand and the environmental issues that relate to 
internal combustion engines on the other. And we are very 
confident that the research we're proposing and would be 
carried out with Congress's support to develop not just a fuel 
cell operating vehicle but the infrastructure to support it has 
the potential by 2020 to produce the capability to literally be 
operated on hydrogen fuel cells. The source of the hydrogen 
could be domestic in nature and it would change the game 
completely in terms of the dependence issue on the one hand and 
the issue of the environmental concerns on the other.
    The one thing I always point out to people is that these 
issues keep coming up. Every time there is a spike in energy 
prices, we all look for answers and then when the prices go 
back down it seems that the people sort of forget about it for 
a while and yet, the cycle continues. And whether it's a series 
of issues like the ones we have had this year or others, it's 
going to keep going in that sort of pattern until we get past 
this debate if we are successful, which I think we can be on, 
the hydrogen fuel cell initiative.
    Senator Burns. Senator, do you have a statement? I was 
going to go to Senator Byrd for his questions.

             OPENING STATEMENT OF SENATOR PETE V. DOMENICI

    Senator Domenici. I have a brief statement. First, I want 
to thank you, Mr. Chairman, and welcome the Secretary. It's 
good to have you here and great to be with you again. I am 
interested in the President's budget for fossil energy R&D and 
energy conservation programs of the Department, and related 
programs. It has been 2 years since President Bush submitted 
his comprehensive energy plan, and we renewed our commitment to 
passing a comprehensive energy act. I look forward to Senate 
action on Senate bill 14, which is pending on the calendar, and 
I thank you for the help you gave us in preparing that bill.
    I also thank Senator Byrd and his staff and others for the 
significant help they gave us for preparing the coal provisions 
of that bill, which we think are mighty powerful for America's 
future. I believe the programs under the jurisdiction of the 
Interior Subcommittee are critical to our Nation's future. The 
administration's proposal to develop a hydrogen-powered car 
through the FreedomCAR and FreedomFuel initiatives with about 
$1.5 billion spread over the next 5 years hold significant 
promise for the future and again, Senator Byrd, we will find 
provisions for that in Senate bill 14 as a part of a Senate and 
congressional policy, with some changes.
    The Clean Coal Power Initiative and the Coal Research and 
Technology Initiative in which DOE proposes to invest $2 
billion over 10 years focuses on our most abundant energy 
resource. Coal is necessarily part of our energy future, and we 
want it to be clean coal. Investments in more efficient energy 
technologies for industry, the building sectors, and 
transportation have big payoffs for the country.
    Conservation is an important component of our energy 
security. The administration plans to double the funding for 
weatherization assistance over 10 years will greatly advanced 
this goal.
    There are many good initiatives in the President's budget, 
and most necessarily come at the expense of our ongoing 
programs. You know of my concern, Mr. Secretary, over the 
repeat of the administration proposals to significantly reduce 
our investments in oil and gas technologies. These are not big 
programs but over a number of years they have contributed 
significantly to new technology by which we are discovering oil 
and gas underground. The budget proposes funding oil at 65 
percent below the currently enacted level and gas by 44 percent 
below the enacted level. Those are the funding levels.
    Congress has traditionally restored funding to these 
programs and I suspect, even though the budget is tight, that 
we will try again to set our priorities in these appropriations 
bills. It will be tough for us to provide funding for all the 
initiatives, but we are up to the task, and with the ranking 
member understanding these issues as he does, I believe somehow 
or another we are going to come through with a good 
Presidential budget being made better by this subcommittee.
    So I join my colleagues in welcoming you, Mr. Secretary, 
and look forward to an exchange of views. Before I am finished 
today, I will cite a technology that's going on in a little 
community in New Mexico and that I'm going to invite you to 
come and see. When it comes to the issue of clean coal, it is 
truly a marvel. We can't quite get it exposed, but it's 
something that the world should know about. I yield.
    Senator Burns. Senator Byrd.
    Senator Byrd. Thank you, Mr. Chairman, and thank you, 
Senator Domenici, for the good work you're doing, and you have 
made my statement already but I'm going to make it again, 
because I know the Secretary wants to hear it.

                   FOSSIL ENERGY RESEARCH BUDGET CUTS

    Mr. Secretary, 2 years ago, the administration ignored its 
own campaign rhetoric and proposed an 18 percent cut in funding 
for fossil energy research. At that time, I remember that 
speech that the President made in West Virginia, and that's why 
you're sitting right here today. He made that speech in West 
Virginia, he was going to add $2 billion to fossil energy 
research, so here you are. But for that, and his outreach to 
the steelworkers in West Virginia, he wouldn't be President and 
you wouldn't be Secretary.
    So at that time, you explained away the inconsistencies 
between the rhetoric and the reality by telling us that you 
were new to the job and that you did not have complete control 
of the budget. You told us just wait a year and we would see 
concrete evidence that the administration was truly committed 
to the kind of research needed to secure our national energy 
security.
    Last year, the President's budget proposed a 16 percent cut 
in the fossil energy account. You told us then, with all due 
respect, that despite its actions, the administration was 
indeed devoted to fossil energy research but that the Assistant 
Secretary was new to his job and did not have complete control 
of the budget. You also said that he was undertaking a top-to-
bottom review of all fossil energy programs and that that 
policy review would drive future budget requests.
    Now today, here comes the Secretary before us to present a 
budget request which again cuts fossil energy research by 16 
percent overall, including 13 percent from the Clean Coal 
program, 44 percent from natural gas research, and 58 percent 
from oil research. I think these requests constitute prima 
facie evidence that this administration lacks a coherent and 
comprehensive national energy plan. I can't believe that these 
cuts are based on sound policy decisions. Nor do I believe that 
anyone can seriously argue that in a $2.2 trillion Federal 
budget, $600 million invested in research that will allow us to 
utilize our most abundant energy resources in a sound manner is 
too much. Thus, I question you, Mr. Secretary.
    Can you point to anything in your top-to-bottom policy 
review that would suggest, even suggest a need for the level of 
cuts that this administration has proposed?
    Secretary Abraham. Well, let me try to preface my remarks 
if I could take a little additional time on this response by 
saying this administration absolutely is committed to and is 
working hard on programs that relate to maintaining the 
strength of coal and/or fossil fuels as part of our energy mix, 
and there should be no misunderstanding of that.
    Second, I want to also sort of talk briefly about the 
commitments we are making and the programs we are trying to 
launch.
    Third, I want to put in context, although just for your 
consideration, the chronology of how some of these budgets have 
been put together.
    Let me talk about the program, Senator. We obviously are 
demonstrating a greater level of commitment to putting the 
fossil fuel, and particularly the coal sector, to bring it into 
the 21st century and maintain it as a strong part of our energy 
mix. I base it on the rhetoric of people who accuse us of being 
far too committed to coal in the future. In fact, when we 
announced our hydrogen fuel vehicle program, people assailed it 
because they said you were going to burn dirty coal to create 
hydrogen.
    Our position is that for coal to succeed and survive and be 
successful, we have to address some of these environmental 
concerns, and we concluded that the carbon sequestration is a 
key component of that long-term vision for the use of coal. 
That's why that program is increased by 60 percent. That's a 
result of the review which we conducted.
    I am also convinced that we have to go beyond the 
laboratory and demonstrate to the world the capabilities that 
we have and the ability that we will have to actually operate a 
totally clean power plant, coal-based electricity generation 
facilities that sequesters 100 percent of the carbon. That's 
why we launched a $1 billion program in the new Future-Gen 
proposal which over the next decade and perhaps 10 or 12 years 
will be, I think the most ambitious new program in the area of 
fossil fuel that is being undertaken anywhere in the world. In 
fact, since we announced it, we have had many numerous nations 
contact us to ask if they can participate.
    Now, you have to----
    Senator Byrd. Mr. Secretary, my time is limited. You are 
still cutting the budget. Now, is there anything in the policy 
documents or in the administration's national energy policy 
that would convince Congress to massively scale back our 
national commitment to fossil energy research?
    Secretary Abraham. Let me apologize. I was taking extra 
time and I hope it won't come off Senator Byrd's time.
    Senator Burns. Nothing comes off his time.
    Senator Byrd. You see what respect age brings you. I am the 
ancient gnome of the Capitol.

                 PROGRAM ASSESSMENT RATING TOOL [PART]

    Secretary Abraham. Let me try to focus on that specific 
issue. First, in determination of some specific conclusions, 
one of the things which was included in the process of putting 
this budget together was the result of a series of analyses 
called PART scores, that analyzed various Department of Energy 
programs. It was a review conducted by the Office of Management 
and Budget, and regrettably from our point of view, the scores 
with respect to our natural gas and oil technology programs 
deemed those programs as currently constituted ineffective. 
After that process, with the programs in those areas deemed to 
be literally ineffective in their performance, not every part 
of them, but substantial parts of them, I did not feel I could 
come to this committee or the public and say we are asking for 
large amounts of money to support programs that have been rated 
as ineffective. We are in the process of reconfiguring those 
test programs.
    Second, I would say to the committee if the chronology 
could be thought about, we submitted this budget before this 
committee and this Congress passed its budget, and now the 
comparison to what was the enacted level of 2003 is being used 
to say that we proposed big cuts. And granted, there were marks 
in the House and Senate at the time, but we didn't have a final 
budget. We are proposing in R&D for fossil energy a $40 million 
increase over what we proposed last year.
    I would also note that we had available to us last time 
when we submitted our budget for our 2003 request, we had 
available advanced appropriations which we could include in 
that request. We still submitted a budget with an R&D----

                        FOSSIL ENERGY OMB BUDGET

    Senator Byrd. Mr. Secretary, would you provide the 
committee with the fossil energy budget submission that your 
Department presented to OMB, so the committee can compare it 
with what the administration has requested?
    Secretary Abraham. I don't know if such documents are 
normally provided in this kind of setting and I would have to 
check on whether that kind of document is provided.
    Senator Byrd. What I'm trying to get at is, I'm trying to 
get at what you really told the Office of Management and 
Budget--I suppose Mr. Mitch Daniels is still at the helm--what 
you really told OMB you needed and what, how we can compare 
that with what the administration requested. Perhaps then we 
will be in a position to make an adjustment that will help you 
meet your needs. And that's what the people I think want to 
see, they want to see careful handling of their money, but they 
also want to see research go forward so their children can be 
encouraged by the needs are that are going to confront them. 
Can you provide that?
    Secretary Abraham. Senator, I can't recall which documents 
we have made available or would make available. That which has 
been made available in the past, I will make available. I can't 
recall which of these sorts of submissions have ever been 
submitted to Congress.
    Senator Byrd. I can assure you that's not the first time 
that question has been asked and I can also assure you that the 
Appropriations Committee has been provided with the answers to 
such questions as they have been propounded to various 
department heads in the past. I have been around here 50 years 
and this is something the committee needs to know. See what you 
can do and see if you can provide that for the record.
    [The information follows:]

             Non-Release of Department's OMB Budget Request

    According to the Office of Management and Budget [OMB], the advice 
and counsel leading up to the recommendations that form the basis of 
the President's budget are part of the internal deliberative process of 
the executive branch. Similar to the pre-mark up activities of any 
congressional committee, the initial views and positions within the 
executive branch vary widely relative to the outcome in the President's 
budget. In order to assure the President the full benefit of advice 
from the agencies and departments, the administration treats these 
working papers, such as the Department's OMB budgets, as pre-
decisional, internal documents. Therefore, the Department's OMB budget 
is not releasable outside of the executive branch.

    Senator Byrd. Is my time up?
    Senator Burns. It is, and I would call on Senator Domenici.

                               CLEAN COAL

    Senator Domenici. Mr. Secretary, I want to compliment the 
administration on the continuing commitment to the Clean Coal 
Power initiative and to the Clean Coal Power and Coal Research 
initiative in the 2004 budget. I believe we should capitalize 
on our greatest strength in coal and nuclear, in both areas and 
address the risk areas. I think you are handling these in the 
right way now and I compliment you for it.
    I would like to assure you that coal initiatives will 
address issues associated with mining as well as the subsequent 
combustion process. For example, I want to cite this for you 
and for you, Senator Byrd. There is a small company in New 
Mexico in the city of Raton which has worked with a Russian 
institute through your Department's Initiatives for 
Proliferation Prevention to develop instruments that allow 
remarkable refinements in coal and how it is mined.
    This instrument, which actually mounts itself on a drill 
head, enables the drill to automatically, believe it or not, 
leave the last few inches of the top and bottom of the coal 
seam in place. The majority, it happens, of all the heavy metal 
contaminants are in those few inches of coal. Can I repeat? The 
majority of the metal contaminants, which are the worse, are in 
those few inches. This machine goes through the mine and leaves 
that there, never touches it, and it's geared to it, it's 
instrumented to it, it's all technology. What comes out is coal 
that is far less contaminated. Thus, the burden of what you 
have to do with it to clean it is dramatically reduced.
    I continue to believe that we should focus on research and 
development in clean coal. I like the big picture, let's 
produce a machine. I think the same way about nuclear, let's 
produce the new nuclear machine. But at the same time, there is 
research of this type and many like it, and I would like to 
call it to your attention because I believe it has some 
fantastic potential for America. I would hate to see it used 
exclusively in Russia for the next 8 or 10 years before we take 
a look. So I leave that with you and I will call it to your 
attention again, Mr. Secretary.
    Secretary Abraham. Thank you.

                               FUEL CELLS

    Senator Domenici. On oil and gas research, I'm disappointed 
in the request. I told you about it, but I believe we will work 
together on this committee to see what we can do about it.
    On fuel cells, the administration's proposed initiatives 
for fuel cells and hydrogen R&D have been very well received in 
the scientific community and in the Congress. The so-called 
FreedomCar and other things that go with it are excellent 
ideas. There is a serious question about whether that program 
is going to get us where we want to be fast enough, but in an 
economy where we don't have all the money in the world to 
spend, I believe for an initiative just announced to have $1.4 
billion is an excellent start.
    A recent report of the National Research Council raised the 
issue, essentially saying that in its assessment, that a number 
of the fuel cell demonstration projects seemed to be getting 
ahead of our progress on essential fuel cell R&D. Mr. 
Secretary, do you share my concern that we need more 
fundamental R&D to make progress on fuel cell technology?
    Secretary Abraham. Yes, we do. The challenges we have on 
the hydrogen fuel cell and FreedomCar initiatives are multiple. 
We have a challenge in bringing down the cost of the fuel cell 
itself. The price has come down a lot in recent years, but it 
still has a long way to go.
    Second, we have an issue relating to storage. We have to be 
able to store sufficient power on the vehicle to enable the 
range that they think you should be able to drive, that's 300 
miles, and there is research involved there. We have the 
production of the hydrogen, and one of the things that we are 
doing in this next 5-year period is to try to invest in a 
variety of production technologies, coal being a possible 
source, nuclear energy being a possible source, natural gas 
being a source, and renewable sources as well.
    Senator Domenici. Just for the record, I rode around in 
one. How much was the cost of that one?
    Secretary Abraham. The rental cost is in the $10,000 range.
    Senator Domenici. Aren't they worth more than a few million 
dollars each?
    Secretary Abraham. Yes.
    Senator Domenici. I would expect that if they are going to 
each cost $10 million, we will have to vote on whether we want 
to make any progress or not. Let me leave that.
    What is your assessment of research on liquid hydrogen, 
compressed gas, and carrier fuels that would transport hydrogen 
in vehicles?

                           HYDROGEN VEHICLES

    Secretary Abraham. At the end of the day, our belief is 
that some of these technologies, can work for near-term 
demonstrations of hydrogen vehicles. One of the major problems 
is that they, for example, the liquid tanks come nowhere close 
to meeting the volume targets, the issue I mentioned a moment 
ago. One of the ideas a few years ago was electric vehicles, 
and then people realized the distance you could drive was 
constrained. We recognize that for a hydrogen motor vehicle 
fleet to work, people have to see it as a comparable product to 
the product it's used to, it has to drive as far, sufficient 
power and size, but you have to be able to refuel and get home 
when you drive some place, and the storage issues are 
substantial for liquid tanks and compressed tanks.
    Fuels like gasoline or methanol can be used, you have to 
have an on-board processing unit, and the processors have been 
reduced dramatically in size. They are expensive and 
complicated projects, so again, we question whether either of 
these routes will get you to a vehicle comparably priced even 
after much development, which is why we tried to develop the 
fuel cell.

          FUEL CELL RESEARCH AT LOS ALAMOS NATIONAL LABORATORY

    Senator Domenici. I want to close my testimony here by 
making a suggestion to you. I note that the researchers at Los 
Alamos National Laboratory continue to make progress in fuel 
cell research, and I think you would concur in that statement. 
I think they are poised to be one of the centers of excellence 
in this area. I believe the Nation needs to create a center to 
integrate a number of the specialties to more easily develop 
commercially-ready fuel cell initiatives, and I think the 
Department ought to be thinking about a center, a focal point. 
I ask you to consider that and obviously in your consideration 
of it, if you might consider Los Alamos as a center of 
excellence to pursue more vigorously the various research 
moving efficiently towards a prototype and more ready-to-go-
fuel cell.
    Secretary Abraham. The answer would be of course as we move 
through those considerations, both the question of one or more 
centers will be examined, and we already have I think very high 
regard for the work that has gone on and continues at Los 
Alamos in this area. What we're trying at this stage to do is 
to determine the road map in kind of the logistics. I think we 
have an excellent road map in terms of the research pathway 
forward. A key part of that is we really make sure that the 
money that's needed, I think 80 percent is the amount that we 
believe has to be focused on basic research with a smaller 
percentage, 20 percent or so in terms of demonstrations, and 
now that we have that pathway for it, I think how we execute 
the pathway is what is important.
    We definitely know what the research challenges are and we 
hope to keep people realistic about the time frame. People 
think that somehow in 4 or 5 years, we can mandate or force the 
marketplace to move faster than it is prepared to move and I 
think that will undermine the success of this transformation. 
It took many, many years and a trillion dollars to build the 
petroleum infrastructure we have today and it's going to take 
time with respect to a hydrogen fuel infrastructure, and if you 
try to short-cut that, it would be counterproductive.
    Senator Domenici. But Mr. Secretary, the objective of 
moving as rapidly as you can in the most efficient manner to 
get to a consumer-ready fuel cell system is something you must 
look at every day, because that may not happen by having 
diffuse research that's going on with everybody excited about 
their little business.
    Secretary Abraham. You are absolutely correct and there is 
no question that the time issue is critical in the following 
respect. This has always been 30 years away.
    Senator Domenici. It's not now.
    Secretary Abraham. I will say this. It will be 30 years 
away if we don't put it on a fast track, don't fund it and 
don't move with the vehicles at the same time. Because as I 
think many of you are already well aware, which is a challenge 
itself, is we can't just build the car when there isn't a fuel 
system, or a fuel system when there is no car. We really have 
to move them both.
    Senator Domenici. Thank you very much. Thank you, Mr. 
Chairman.

                           HYBRID TECHNOLOGY

    Senator Burns. I want to follow up on that. You have cut 
Vision 21 on the hybrids and that tells me that the production 
or the results of that R&D has been on the negative side. Can 
you bring me up to date?
    Secretary Abraham. In the budget we submitted, we're 
seeking a higher amount than we did last year for hybrid 
technology because we do see developments in that area as still 
beneficial. However, we don't believe the hybrids are the final 
answer, we see this as a transitional step between where we are 
today with a basic, you know, internal combustion engine, 
traditional system and the day in 20 years or so when hydrogen 
vehicles are available. We would like to and believe there can 
be an expansion of other kinds of more fuel efficient vehicles 
and we see hybrids as a part of that transition, which is why 
you will see that we are proposing a slight increase in hybrid 
technology.
    Senator Burns. I am concerned about all these cuts in 
particular areas. I don't want you to weaken your hand when it 
comes to interagency governmental policy. I think you have to 
have a strong hand about interagency on these environmental 
issues, because I would like to see more cooperation between 
the Department of Energy and Department of the Interior. 
Sometimes those talks break down when we talk about either 
stationary or transportation fuels, so I would kick that up if 
we could. We are going to have new people to deal with at EPA, 
but this is very sensitive.
    I have some questions on off-shelf reserves. We talked 
about most of these issues privately, and I think we can deal 
with them. We look forward to working very closely with you as 
we develop this budget.
    Do you have any further questions, Senator Byrd?
    Senator Byrd. I do have some, Mr. Chairman. Shall I 
proceed?
    Senator Burns. You may.

                     CLEAN COAL TECHNOLOGY PROGRAM

    Senator Byrd. 2\1/2\ years ago, I referred to this earlier, 
candidate George Bush endorsed the Clean Coal Technology 
program, he committed to spend $2 billion over 10 years to 
support that program. That's $200 million a year, a very strong 
endorsement of coal, and I'm sure that's one of the reasons he 
was able to carry the State of West Virginia in the 2000 
election.
    But despite his promise, in fiscal year 2002 he only 
proposed $150 million, in fiscal year 2003 he again proposed 
$150 million, and this fiscal year 2004 budget proposes just 
$130 million. By my calculation, I use the old math, I don't 
think the new math will be far off the point, that's $170 
million behind on the promise. Rather than seeking $600 million 
for the Clean Coal program, as candidate Bush promised, the 
administration sought only $430 million, 38 percent less than 
what was pledged. That seems to be a credibility gap between 
what was said and what has taken place. What can you say, Mr. 
Secretary, to the people who heard Mr. Bush as a candidate 
proclaim if he was elected that he would spend $2 billion on 
the Clean Coal program, and does the administration have a plan 
to live up to its commitment?
    Secretary Abraham. I would state that we are $430 million 
ahead of where we were, and the administration has demonstrated 
those commitments, and in a variety of other regulatory debates 
that have gone on, that we are deeply committed, as I said 
earlier, to the coal sector and the role of coal in the energy 
mission. But I would just add to what I said earlier, that in 
addition to the Clean Coal Power initiative that you have 
discussed, there are 7 more years to go and we are mindful of 
the commitment that was made.
    We have just announced the Future-Gen program, which I 
believe will be a very substantial $1 billion program over the 
next 10 to 12 years, so it's my anticipation that the Future-
Gen program will be running parallel to the Clean Coal Power 
initiative and the combination of these over this time frame 
will at least reach the level that the President committed and 
could conceivably be a fair bit higher than that level when the 
price tags are added up at the end.
    Senator Byrd. Mr. Secretary, you seem to be counting all 
coal research. Mr. Bush cited in specificity the Clean Coal 
program, not coal in general, he said Clean Coal. And so, there 
is a credibility gap. He wasn't talking about all coal, he was 
talking about clean coal research when he used that figure.

                               FUTURE-GEN

    Secretary Abraham. Senator, again, I focus on our Future-
Gen proposal as being the greatest enterprise that will be 
undertaken to demonstrate how we can generate power with coal 
in an environmentally clean fashion. It complements the Clean 
Coal initiative that you referenced and so I believe, as I 
said, over the 10 years, I mean, the combination of those 
programs will more than meet the $2 billion commitment the 
President made.

                 NATIONAL ENERGY TECHNOLOGY LABORATORY

    Senator Byrd. The administration's request for the Office 
of Fossil Energy contains $92.7 million for employee salaries 
and expenses. Most of those people are assigned to the National 
Energy Technology Laboratory headquartered in Morgantown, West 
Virginia. On the face of it, it would appear to be a $5.5 
million increase over the fiscal year 2003 enacted level. But 
just as it did last year, the administration has again double 
counted $14 million in employee salaries previously authorized 
under the Clean Coal acts. The true request, therefore, is not 
$92.7 million, but, rather, $78.7 million, an 11 percent cut 
that translates into a loss of 150 jobs.
    The country cannot afford to lose 150 of the brightest 
fossil energy scientists we have. I can assure you that I will 
do everything I can to see to it that this budgetary sleight-
of-hand is reversed. In the meantime, would you please tell the 
committee the rationale for this decision, and is the 
Department of Energy responsible or as I would rather think, 
have you been dictated to by the Office of Management and 
Budget?
    Secretary Abraham. Senator, I take all the responsibility, 
because that's my job, and my only comment would be that we 
certainly will do our very best to address the issue of the 
work force. I'm happy to note that in addition to the money we 
had available to work with when we submitted the budget, the 
advanced appropriations which were included in the final 
enacted budget included an additional $80 million which we did 
not have access to when we made our submission for Clean Coal 
Technology. Obviously, the implementation of programs with that 
money will require us really to have more program direction and 
we'll work within that amount certainly to try to address the 
question of our work force.

               FOSSIL ENERGY PROGRAM TOP-TO-BOTTOM REVIEW

    Senator Byrd. Last year when you testified before the 
subcommittee, you told the subcommittee that you had directed 
the new assistant secretary to conduct a top-to-bottom review 
of all programs under his jurisdiction. And on November 21, 
2002, you wrote to me that the committee would be fully briefed 
on the contents of the review as soon as it had been approved 
by the Office of Management and Budget. The approval has now 
taken place and I know our subcommittee has, in fact, received 
a copy of the review, but I don't believe our staff has been 
fully briefed on its contents, nor have they had the 
opportunity to ask questions about the review's many 
recommendations. For example, it would be helpful to know more 
about the management reforms that have been proposed on page 4 
of the review for the Office of Fossil Energy and the National 
Energy Technology Lab in Morgantown. Given the fact that any 
such reorganization would have to be approved by the committee 
before it could be implemented, it's important to have these 
matters discussed with our staff as soon as possible.
    Can you tell us when you anticipate having the fossil 
energy staff brief the subcommittee staff?
    Secretary Abraham. I believe, Senator, in fact your staff 
brought this specifically to my attention, or at least that 
there has been inadequate communication between our staffers, 
this week on Tuesday. I conveyed that to my staff on Tuesday. 
My understanding is there was conversation yesterday with an 
offer actually to come up yesterday to provide an initial 
opportunity to have discussions, but because of the hearing 
that was happening today, that was not feasible. So it's my 
understanding there will be a meeting next week. I don't know 
that that will satisfy all of the issues, but it will be a 
starting point of what I hope will be much more frequent 
discussion and dialogue between the staffs. And I would make 
clear to you as I did to your staff, that if there is an 
inadequate level of this communication, please bring it to my 
attention and I will be happy to address it.
    Senator Byrd. Very well, thank you. If you do intend to 
move forward with a reorganization, can you tell the committee 
whether you expect to formally seek the committee's approval?
    Secretary Abraham. I guess I'm happy to try to answer that, 
but I'm not sure I can answer it at this time. Perhaps the 
Assistant Secretary, who is here--within the next week would be 
a time frame in which the request should be forthcoming.

                      COMPETITIVE SOURCING PROGRAM

    Senator Byrd. Very well, thank you. Mr. Chairman, I have 
just a couple other quick ones, if I may.
    One of the government-wide initiatives that I am 
particularly interested in is the administration's competitive 
sourcing program. As I understand it, the Office of Management 
and Budget essentially scores each department and agency on how 
well it complies with the President's management agenda. The 
various agencies are encouraged to submit management plans to 
the OMB and to meet competitive sourcing targets outlined in 
the President's budget. I have been informed by officials at 
OMB that these plans, while submitted to OMB for approval, may 
be released to the public at the discretion of the agency or 
department head.
    If this subcommittee is to recommend the appropriation of 
nearly $1.8 billion to the Department of Energy for the 
programs under the committee's jurisdiction, I think it's 
reasonable to expect a full accounting of any management plan 
or competitive sourcing plan submitted to OMB for approval. 
Will you please tell the committee the status of your 
Department's competitive sourcing plan, and will you agree to 
make it available to the Congress when it is complete?
    Secretary Abraham. Senator, I would be happy to make it 
available if it is--unless there are constraints I am unaware 
of. If it is being made available by other agencies, we 
wouldn't have a different viewpoint on that, and I would be 
glad to also provide, if the committee would like, some kind of 
personal briefing on it by the folks who have been engaged in 
the competitive sources work.
    [The information follows:]

      U.S. Department of Energy, Revised Competitive Sourcing Plan

                             [June 9, 2003]

                               BACKGROUND

    The Department of Energy [DOE] listed 9,889 full-time equivalents 
[FTE] on its 2001 FAIR Act Inventory as ``commercial,'' or about 67 
percent of DOE's total civilian workforce of 14,717 FTE. These figures 
include 3,409 commercial FTE at the Power Marketing Administrations 
[PMA]. Since the PMAs are largely funded by ratepayers and are already 
subject to the competitive forces of the marketplace, the Department 
and the Office of Management and Budget [OMB] mutually agreed to 
exclude the PMAs from the competitive sourcing initiative. 
Consequently, the Department's overall goal is to study 3,230 positions 
or 33 percent of its commercially coded FTE. In March 2002, DOE 
commenced studies on 972 FTE. As a result of further review and 
analysis, the total number of FTE included in the Department's first 
round of studies has increased to approximately 1,100. DOE plans to 
study an additional 2,100 FTE in fiscal year 2004 and beyond to reach 
its OMB mandated objective. It is expected that the taxpayers will 
benefit from the initiative, regardless of who wins the competitions, 
as a result of reduced costs, greater effectiveness, and increased 
responsiveness.

                     SUMMARY OF THE MANAGEMENT PLAN

    The Department plans to meet its goals through the use of in-house 
and contract support resources. The Department assembled a team of 
management, human resources, financial, acquisition and functional area 
analysts and defined the conversion, public-private competitions and 
privatization initiatives necessary to meet DOE's fiscal year 2002 and 
fiscal year 2003 performance targets. The Department awarded 
Performance Based Service Contracts (PBSC) to support the development 
of the management studies and competitions. The provisions of OMB 
Circular A-76 govern DOE's studies and competitions. The Department 
will continue its on-going studies and will conduct feasibility studies 
to determine the specific activities and related FTE that should be 
studied in future rounds. Business case anaylses will be the 
methodology employed, as well as a determination as to the studies' 
resource impacts and the ability of the Department to sustain its 
mission.
    Below is a further breakout of the fiscal year 2002/2003 plan by 
Departmental function and FTE. The name of the individual responsible 
for the Department of Energy's Office of Competitive Sourcing/A-76, 
with telephone number, is also provided.
    Competitive Sourcing Project Manager: Dennis E. O'Brien, Office of 
Management, Budget and Evaluation/CFO
    Phone Number: (202) 586-1690
    The Department, on March 22, 2002, announced an initial list of 927 
FTE to be competed in fiscal year 2002/2003. As anticipated, the number 
increased to approximately 1,100. It is expected that the scope of the 
studies and changes to the baseline will occur as the teams continue to 
review the functions and FTE under study.
    Announced cost comparison functions: Financial Services, 150 FTE, 
Department-wide. Revised to 159 FTE; Information Technology, 420 FTE, 
Department- wide. Revised to 642 FTE; Human Resources (training), 98 
FTE, Department-wide. Revised to 130 FTE; Logistics, 190 FTE, 
Department-wide. Revised to 220 FTE; Personnel Security Investigators, 
27 FTE, Department-wide. Study Deferred; Paralegal Support, 21 FTE, 
Department-wide. Exempted from further study; Graphics, 13 FTE; and 
Civil Rights Reviews, 8 FTE.
    These figures do not include contractor positions that are also 
being studied by the A-76 Teams.
    Overall the Department expects to compete at least 30 percent 
percent of its adjusted 2001 FAIR Act inventory upon the conclusion of 
its first round of studies.
    We estimate that the one-time additional budgetary cost of 
conducting these competitions will be about $6M (based on an estimated 
cost of $7,700 per FTE for a multifunction/multilocation study 
subjected to a full public-private cost comparison and other associated 
study and acquisition costs).
    The Department has completed the initial overview training program 
for competition managers, program managers, selected employees, and 
labor organizations that focused on the A-76 process. The Department's 
training emphasized performance and delivering quality service in the 
most cost-effective manner.

------------------------------------------------------------------------
                   Tasks                           Completion date
------------------------------------------------------------------------
Complete fiscal year 2001 FAIR Act           Completed.
 Inventory/Challenges/Appeals.
Develop Competitive Sourcing Plan..........  Completed.
    Identify functions, locations and FTE..  Completed.
    Coordinate program with employee labor   Completed.
     organizations.
    Establish communication/training         Completed.
     program.
    Publish guidance for functions with 10   Completed.
     or fewer FTE.
    Publish guidance for cost comparisons..  Completed
    Create tracking and reporting database.  June 2003.
Develop, plan and schedule fiscal year 2002/ Completed.
 2003 studies.
    Assemble team to review inventories/     Completed
     functions on sourcing plans.
    Review competitive sourcing plans and    Completed
     adjust as needed.
    Identify potential functional or         Completed
     geographic groupings.
    Determine schedule for function reviews  Completed
    Announce functions to be studied in      Completed
     fiscal year 2002/2003.
    Develop performance-based work           Completed
     statements for common functions.
Issue Guidance for fiscal year 2002 FAIR     Completed.
 Act Inventory.
Submit fiscal year 2002 FAIR Act inventory   Completed.
 to OMB.
Establish Study Team Organizations.........  Completed.
Select Study Team Support Contractors......  Completed.
Develop and submit for Secretarial approval  Completed.
 individual study action plans.
------------------------------------------------------------------------

         FISCAL YEAR 2004/05 COMPETITIVE SOURCING/A-76 PLANNING

    DOE is initiating a feasibility study to determine the FTE to be 
competed in fiscal year 2004-2005. This study will encompass cost 
benefit tradeoff analyses, identification of potential functions/
organizations and related FTE, identification of locations and 
recommended number of studies, identification of insourcing 
opportunities and characterization of mission/personnel and 
geographical impacts. The result will be the development of the most 
effective and efficient business case to support particular study 
areas.

                               INSOURCING

    DOE has and will continue to explore insourcing opportunities when 
it is deemed appropriate to fulfill mission requirements and in cases 
where significant efficiencies and economies can be achieved. The 
Department received approval under the fiscal year 2001 Energy and 
Water Development Appropriations Act to federalize its Emergency 
Operations contractor workforce. To-date, this has resulted in a 
conversion of 30 contractor positions with an additional 5 positions 
expected to be federalized by the end of fiscal year 2003. Overall, 
this national security related initiative will result in a net savings 
of $1.7 million annually. These savings will be redirected to enhance 
emergency operations training and to provide additional technical 
assistance to the field. Also during fiscal year 2003 and 2004, DOE 
will be soliciting organizations to identify insourcing opportunities 
warranting an A-76 study. To date, potential insourcing opportunities 
have been identified and are being investigated in the function of 
aircraft maintenance.

    Senator Burns. I think that would be helpful.

                    CLEAN ENERGY TECHNOLOGY EXPORTS

    Senator Byrd. I have one last question. Congress has urged 
the administration to support increased opportunities to open 
and expand international energy markets and export U.S. clean 
energy technologies to developing countries and other nations 
abroad. These efforts are very important to help meet our own 
energy security needs, addressing related economic job 
creation, trade, environmental, and climate change objectives. 
Additionally, such efforts could significantly aid in meeting 
other nations' infrastructure and development needs while also 
increasing the deployment of a range of U.S. clean energy 
technologies, including clean coal technologies.
    The Clean Energy Technology Exports, or CETE, will help 
meet that challenge. It had its genesis within the Senate 
Appropriations Committee and has had broad bipartisan support. 
The administration has talked about such ideas on occasion, but 
despite such rhetoric, the participating Federal agencies have 
done little, if anything, to implement the strategic plan. It 
seems to me that someone is sitting on their hands and missing 
a critical opportunity.
    Because the Department of Energy is a leading agency 
involved in the implementation of the CETE initiative as called 
for by the Congress and released by the administration in 
October of 2002, what specific actions is your agency taking to 
work with the other Federal agencies and to engage 
nongovernmental organizations, private sector companies, and 
other international partners with regard to this plan? And can 
you tell the committee when the Appropriations Committee will 
receive the required annual CETE progress report that was due 
to this committee on March 1, 2003?
    Secretary Abraham. Senator, here is what I know we have 
done. We have created a new Office of International Energy 
Market Development, and acting separately the Fossil Energy 
Division has developed an international program for clean coal 
which will augment the efforts of that. We have now been 
designated to be a co-chair of the interagency working group to 
try to promote clean energy exports, so that gives us a greater 
role in being able to move this ahead, which we intend to do.
    Obviously, a lot of work that we are engaged in is 
applicable to sharing internationally. But if I could just go 
beyond the confines of that program to reassure you that this 
is a high priority that I have personally become engaged with. 
We have a lot of meetings both in Washington, and occasionally 
in multilateral and international settings with developing 
countries who are just starting to look at how they can address 
their growing demand for energy with environmental concerns, 
and we have been looking at a lot of bilateral working groups 
to try to provide that assistance on that basis as well.
    It is probably the single most frequently requested support 
that I receive when I am having a meeting with an energy 
minister from a developing country because they are challenged, 
they don't have the technology to do the sorts of things they 
want in an environmentally clean or effective way. So I see it 
as an area of substantial growth on the international side of 
what we do, even in addition to the program which you talked 
about.
    I'm not sure what the status of the March 1 report is and 
if somebody with me can answer that, and if they can't, we will 
get you an answer for the record immediately.
    [The information follows:]

                Status of Clean Energy Technology Report

    The Department expects to submit the clean Energy Technology Report 
to Congress by the end of July 2003.

    Senator Byrd. Very well. If I have further questions, Mr. 
Chairman, I would like to submit them for the record.

                    SOLID STATE CONVERSION ALLIANCE

    Senator Burns. You might update us along the same lines 
with respect to the solid state conversion alliance. Can you 
update the committee on the progress of the program and how you 
propose allocating resources for fiscal year 2004, to ensure 
you have adequate resources for the team to fulfill its 
promises?
    Secretary Abraham. I will be happy to. I will comment in 
general here, I don't think there is at all disagreement as to 
the potential for solid state energy production the program is 
designed to achieve. I think we are in total agreement, as far 
as I can tell, which is, this is a program with which we are in 
agreement in terms of what the issue is, what is the pace at 
which we get there and what is the timetable that has the 
highest potential for success. So, I will be glad to get that 
information for the committee.
    [The information follows:]

                 Solid State Energy Conversion Alliance

    Overall, the Solid State Energy Conversion Alliance Program [SECA] 
is progressing extremely well. In fact, there is early interest from 
auto manufacturers in SECA type fuel cells as evidenced by BMW's 
arrangement with Delphi, one of the SECA industry team developers, to 
put a compact fuel cell unit for auxiliary power in the trunks of BMW 
vehicles by 2007.
    The SECA program is dedicated to developing innovative, effective, 
low-cost ways to commercialize solid oxide fuel cells [SOFCs]. The 
program is designed to move fuel cells out of limited niche markets 
into widespread market applications by making them available at a cost 
of $400 per kilowatt or less through the mass customization of common 
modules. SECA fuel cells will operate on today's conventional fuels 
such as natural gas, diesel, as well as coal gas and hydrogen, the fuel 
of tomorrow. The program will provide a bridge to the hydrogen economy 
beginning with the introduction of SECA fuel cells for stationary (both 
central generation and distributed energy) and auxiliary power 
applications.
    The SECA program is currently structured to include competing 
industry teams supported by a crosscutting core technology program. 
SECA has six industry teams working on designs that can be mass-
produced at costs that are ten-fold less than current costs. The SECA 
core technology program is made up of researchers from industry 
suppliers and manufacturers as well as from universities and national 
laboratories all working towards addressing key science and technology 
gaps to provide breakthrough solutions to critical issues facing SECA.
    The SECA industry teams collectively are making very good progress. 
Delphi, in partnership with Battelle, is developing a 5 kW (kilowatt), 
planar, 700C-800C, anode-supported SOFC compact unit for the 
distributed generation [DG] and auxiliary power unit [APU] markets. 
Delphi is expert at system integration and high-volume manufacturing 
and cost reduction. They are focused on making a very compact and 
light-weight system suitable for auxiliary power in transportation 
applications.
    General Electric is initially developing a natural gas 5 kW, 
planar, 700C-800C, anode-supported SOFC compact unit for residential 
power markets. GE is evaluating several stack designs and is especially 
interested in extending planar SOFCs to large hybrid systems. They also 
have a radial design that can simplify packaging by minimizing the need 
for seals. GE has made good progress in achieving high fuel utilization 
with improved anode performance using standard materials by optimizing 
microstructure.
    Cummins and SOFCo (formerly McDermott) are developing a 10 kW 
product initially for recreational vehicles [RVs] that would run on 
propane using a catalytic partial oxidation [CPOX] reformer. The team 
has produced a conceptual design for a multilayer SOFC stack assembled 
from low-cost ``building blocks.'' The basic cell, a thin electrolyte 
layer (50-75 micron) is fabricated by tape casting. Anode ink is 
screen-printed onto the one side of the electrolyte tape, and cathode 
ink onto the other. The printed cell is sandwiched between layers of 
dense ceramic that will accommodate reactant gas flow and electrical 
conduction. The assembly is then co-fired to form a single repeat unit.
    Siemens Westinghouse Power Corp. [SWPC] is developing 5-10 kW 
products to satisfy multiple markets. SWPC has developed a new tube 
design for their 5 kW units that use flat, high power density [HPD] 
tubes. This allows for a shorter tube length and twice the power output 
compared to their current cylindrical tube. It also results in more 
efficient manufacturing, assembly, and better volumetric power density.
    The Department is requesting $33 million in fiscal year 2004 for 
the SECA Program from several research budget elements. Primary funding 
of $23.5 million will be provided from the Distributed Generation Fuel 
Cells Innovative Concepts budget line. This funding will be primarily 
for the six industry teams. In addition, $6.0 million for SECA from 
Fuel Cells Advanced Research will be used for the SECA core technology 
program, $1.5 million for SECA from Advanced Research--for research on 
materials for coal-based SECA systems, and $2.0 million for SECA from 
Advanced Metallurgical Research (Albany), for metallurgical research 
applicable to general SECA systems. Additionally, in fiscal year 2004, 
we will begin funding the two additional SECA industry teams just added 
in fiscal year 2003--Fuel Cell Energy and Acumentrics. These industry 
teams represent additional industry design alternatives that will 
enhance the prospects of success of SECA fuel cells for a broader 
market. The SECA program cost-share levels range from 20-50 percent. 
For the industry teams the cost share begins at 20 percent and ends at 
50 percent for later phases.

    Senator Burns. Okay, I think that takes care of just about 
all our questions. There will be a couple more coming up. And I 
want to thank Senator Byrd for being here this morning, and for 
you. We know the scheduling is tough. We will leave the record 
open for a couple weeks and hopefully after the break, we will 
begin finalizing these appropriations.
    Secretary Abraham. Senator, thank you.

                     ADDITIONAL COMMITTEE QUESTIONS

    Senator Burns. There will be some additional questions 
which will be submitted for your response in the record.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]

              Questions Submitted by Senator Conrad Burns

                     HYDROGEN TRANSPORTATION SYSTEM

    Question. Your testimony refers to the difficult ``chicken and 
egg'' problem that confronts us as we discuss moving to a hydrogen-
based transportation system. No consumer is likely to invest in 
hydrogen or fuel cell products without adequate fueling infrastructure 
in place, and nobody will invest in fueling infrastructure without 
customers. How do you think we get past this problem?
    Answer. Launching a hydrogen-fueled transportation system does face 
the classic ``chicken and egg'' question as it relates to fuel cell 
vehicles and hydrogen infrastructure. Establishing a new fuel 
infrastructure such as hydrogen will be complicated, yet it will need 
to be largely in place when widespread fuel cell vehicle introduction 
starts. Strong market signals will be needed for this infrastructure 
development to happen, making low cost hydrogen production and delivery 
technologies essential. Transition strategies will have to be developed 
that are far more effective than what has been used to foster markets 
for today's alternative fuels. The exact nature of those strategies 
will depend on infrastructure and vehicle technologies that are far 
from being fully developed. Therefore, the Department is working with 
all stakeholders to develop both the vehicle and the infrastructure 
technologies in parallel. DOE's planning efforts have included the 
FreedomCAR Partnership Plan, the National Hydrogen Energy Roadmap, and 
R&D plans. These documents describe how DOE will integrate its ongoing 
and future vehicle and hydrogen R&D activities into a focused effort. 
This coordinated DOE effort will improve the effectiveness and 
accountability of DOE's research, development and demonstration (RD&D) 
activities and strengthen its contribution to achieving the technical 
milestones on the road to a hydrogen economy.
    Question. What have we learned to date from efforts to get other 
alternative fueled vehicles into the marketplace?
    Answer. Our experience with alternative fuels tells us that the 
issue of reasonable fuel availability must be resolved before 
widespread acceptance of dedicated alternative fueled vehicles is 
possible. DOE learned that consumers find it simply more convenient to 
operate fuel flexible vehicles with petroleum-based fuels rather than 
alternative fuels because of the lack of alternative refueling 
stations. In addition, natural gas, methanol and ethanol vehicles are 
limited to niche markets or certain regions because fuel for these 
vehicles isn't available nation-wide.
    Because hydrogen is a universal energy carrier made from various 
primary energy resources, we think it can be a standardized national 
fuel. This assumes successful resolution of technical and cost 
barriers, and development of codes and standards. To address these 
issues, the Department is launching a transportation and infrastructure 
partnership with industry and local government agencies to demonstrate 
and evaluate fuel cell vehicles under real operating conditions to 
obtain cost, performance and reliability information, and hydrogen 
fueling stations to validate efficient, clean, and economical hydrogen 
production, storage, and delivery technologies, including standard 
vehicle refueling interfaces, safety practices, and codes and 
standards.
    Question. Some have suggested that natural gas might be a logical 
bridge to a hydrogen based transportation system. Is there merit to 
this suggestion, or are we likely to have to make the leap directly to 
hydrogen from today's gasoline-based system?
    Answer. Hydrogen does present a long-term solution to America's 
energy security needs, and can do so with significant benefits for the 
local and global environment. Hydrogen is an energy carrier, not an 
energy resource like natural gas, and can be produced from a variety of 
domestic feedstocks. This feedstock diversity is a benefit unique to 
hydrogen and means we would not be dependent on any one energy 
resource.
    In the near-term, natural gas will be an important hydrogen 
feedstock. It is a good choice for near-term hydrogen production 
because the distribution infrastructure exists, and because the 
economics are presently more favorable than that of other feedstocks.
    Hydrogen production is not expected to increase demand for natural 
gas by any more than 5 percent in 2025, due to the small number of 
vehicles expected to be on the road. The vehicle infrastructure needed 
for these demands will be small. It is envisioned that as the hydrogen 
fuel cell vehicle fleet increases, our ability to produce hydrogen from 
other sources will grow to match it. In the long-term, we hope to 
generate hydrogen through renewable energy and other carbon-free 
processes, such as nuclear energy.

ADVANCED VEHICLE TECHNOLOGY PROGRAMS--PARTNERSHIP FOR A NEW GENERATION 
                   OF VEHICLES (PNGV) AND FREEDOMCAR

    Question. Your budget states that the FreedomCAR program will build 
on the successes of the Partnership for a New Generation of Vehicles 
(PNGV) program and learn from its failures. What were the successes of 
the PNGV program?
    Answer. PNGV provided the framework for government and industry to 
align previously independent research to address common societal goals. 
The partnership opened up new channels of communication between 
industry and government, which has provided both parties with access to 
more and better technical data.
    In its annual reviews of the PNGV, the National Research Council 
noted ``the substantial accomplishments already gained in pursuing the 
program so far'' (seventh report--2001) and observed that the 
partnership has ``enhanced cooperation at all levels and has achieved 
results more rapidly than would have been the case in the absence of 
partnership'' (6th report--2000). Selected concrete examples of 
technological achievements are listed below.
Enabling research
  --Increased the life of lithium ion batteries from 2 years to 7 years 
        for hybrid-electric vehicle drives.
  --Demonstrated that, under certain conditions, advanced diesel fuel 
        formulations can achieve particulate matter (PM) emission 
        reductions of up to 35 percent without compromising fuel 
        efficiency or raising oxides of nitrogen (NOX) 
        emissions.
Vehicle integration
  --The aluminum body structure on the Ford's Prodigy concept vehicle 
        is 53 percent lighter than a conventional steel design, and the 
        process used on the Prodigy is applicable to high volume 
        production.
  --In DaimlerChrysler's ESX3 concept vehicle, the unique thermoplastic 
        injection molded body system is estimated to reduce weight by 
        46 percent and cost by 15 percent versus conventional steel 
        structures.
  --General Motors' Precept concept vehicle proved the technical 
        feasibility of achieving 80 miles per gallon, however, high 
        cost remained as a major barrier toward commercialization.
PNGV Research successes migrating into production
  --Cadillac, Oldsmobile, and Chevrolet vehicles incorporate aluminum 
        door, deck, and hood panels by utilizing a PNGV developed 
        production processes.
  --The 2001 Chevrolet Silverado uses a 50-pounds lighter composite 
        pickup truck box.
  --The 2001 Jeep Wrangler utilizes a new, lighter, recyclable 
        thermoplastic hardtop.
    FreedomCAR will build on the technology advancements gained from 
successful PNGV R&D efforts. The new research portfolio, focused on 
longer range, higher risk research, will be applicable to a broader 
range of production vehicles.
    Question. What were PNGV's failures, and what have we learned from 
them?
    Answer. FreedomCAR is taking advantage of the technological 
progress made under the PNGV to build a stronger, better partnership 
more closely aligned with the Nation's needs. The centerpiece of the 
FreedomCAR Partnership is the effort to develop efficient, affordable 
fuel cell technologies that can help to reduce our Nation's petroleum 
consumption while eliminating vehicle emissions.
    One key improvement of FreedomCAR compared with PNGV concerns 
management structure. DOE, the agency that funded the majority of PNGV 
activities, now solely represents the government in the partnership, 
with consultation from other agencies as appropriate. The streamlined 
organizational structure improves communication with the industry.
    Another improvement is in the research time horizon and focus. The 
PNGV had a 10-year horizon and was aimed at a single vehicle platform, 
the mid-size sedan. In order to meet the accelerated 10-year horizon, 
some promising technologies (i.e., ultracapacitors) were prematurely 
downselected from the research portfolio. These technologies were 
unable to meet the requirements of the PNGV within the 10-year horizon. 
The single vehicle platform narrowed the research focus on a vehicle 
segment that was the highest selling segment at the start of the 
partnership but did not address the explosion in the sport utility 
vehicles.
    FreedomCAR is focused on performing R&D at the component and sub-
systems level and leaves the vehicle integration of these technologies 
to the automakers, offering more flexibility. As in the PNGV, 
FreedomCAR places significant effort on the core technologies 
supporting hybrids, such as advanced materials and batteries, not only 
because the work is essential for the hydrogen vehicle but also because 
of the near-term benefits possible from petroleum-fueled power sources 
in hybrid.

                  TRANSITION OF TECHNOLOGIES TO MARKET

    Question. In several places your budget request terminates or 
reduces funding for activities that are closer to the deployment end of 
the R&D spectrum, choosing instead to focus resources on more basic, 
high-risk research. Generally speaking I understand this philosophy, 
but at some point we run the risk of investing in a lot of 
technological advances that will sit on the shelf without some 
additional support for deployment or demonstration. Do you think your 
budget request is balanced in this regard?
    Answer. Yes, I believe it is balanced. About ten years ago these 
programs made a similar (but opposite) shift in their balance, moving 
some resources from more basic work to near-term and deployment 
efforts. That was never intended to be a permanent change in balance. 
To some degree, we have been living off accumulated intellectual 
capital, and we now need to move the balance back toward more 
fundamental research in order to replenish those reserves and refill 
the technology pipeline. This is not a wholesale change in our R&D 
balance, however: we are continuing to propose substantial funding in a 
variety of deployment activities.
    Energy markets are changing and our energy policies have matured. 
The unusually low energy prices of the 1990s made it particularly 
difficult for new technologies to enter the marketplace successfully, 
and our energy policies were focused on showing action on near-term 
reductions in greenhouse gas emissions. While today's energy prices are 
not high in historical terms, they are high enough to create 
significant economic incentives for energy efficiency in applications 
such as industrial processes.
    The progress we made on advancing hybrid vehicle technology has 
caused almost every major automobile manufacturer in the world to turn 
their attention to such vehicles, and competitive pressures are now 
growing to the point where most major auto manufacturers have announced 
production plans for at least some forms of hybrid vehicles. But the 
types of hybrids currently being announced and produced use 
conventional engine technologies, and do not offer the really dramatic 
gains in efficiency that we believe are possible with advanced 
technologies such as fuel cells and unconventional lightweight 
materials.
    In many cases, including hybrid and electric vehicles, the 
technologies we are currently deploying run the risk of remaining 
niche-market products unless technology breakthroughs or leapfrog 
approaches make their performance and economics so compelling that they 
become mainstream.
    Our energy and climate-change policies are now focused on the 2015-
2020 timeframe, and we have a renewed emphasis on energy security. In 
order to make a major market impact in that timeframe, products will 
need to be competitive in broad market segments, not just niche 
markets, which is driving our search for leapfrog technologies in 
activities such as the FreedomCAR Partnership, the Hydrogen Fuel 
Initiative, solid-state lighting for buildings, and distributed energy 
resources.
    Question. Take black liquor gasification, for example. We've 
invested significant funds to develop this technology in partnership 
with the pulp and paper industry, and the Department had expressed its 
intention to participate in at least three demonstrations of different 
gasification technologies. Now the budget proposes to terminate the 
program after only one partial demonstration. There is great potential 
for reduction in energy use and emissions if advanced technologies are 
deployed, but industry says the capital investment is simply too large 
to justify investing in an unproven technology. Is the industry just 
bluffing in your opinion?
    Answer. The Department did not request funds for the industrial 
gasification activities under the Interior Appropriation in fiscal year 
2004 based upon the state of technology advances made and a review 
using the Administration's R&D investment criteria, which helped guide 
this decision. The Department has invested substantially in R&D on the 
thermochemical conversion of biomass for producing power, fuels, and 
products that is directly applicable to the pulp and paper industry. We 
also are continuing with R&D on advanced technologies that will further 
lower the risk to industry for the deployment of these technologies. 
Additionally, we have committed available funds to complete our 
obligation for the black liquor gasifier demonstration at Big Island, 
VA.
    As discussed in the previous question, we believe that there are 
sufficient economic incentives for industry to adopt many new energy 
efficiency technologies such as black liquor gasification. When it 
comes to determining the appropriate Federal role in R&D, there is 
frequently an inherent tension between the Federal Government (acting 
as a prudent steward of taxpayer dollars while seeking to maximize 
benefits from a broad research portfolio) and industry (which seeks to 
minimize new technology development and acquisition costs in order to 
reduce outlays and achieve a greater financial return for its 
investors). Thus, while the Department does not wish to conclude that 
industry is ``just bluffing'' in this instance, we would note that we 
believe it would be shortsighted of industry should they decide not to 
bring this gasification technology to commercialization.
    Question. Do you think market forces will eventually compel 
companies to install these new technologies on their own, or that 
industry will be forced to do so because of regulatory pressure?
    Answer. Those factors and more will provide businesses with the 
incentive to use or market the technologies that we have been 
developing. Virtually all of our efforts are planned in conjunction 
with industry, and the ``road mapping'' process we have used means that 
we know the technologies we have developed are useful, and the roadmaps 
give the companies a good sense of how they can utilize the 
technologies for their own benefit. In the case of some industries, 
such as the automakers discussed above, it is competitive pressures 
that will lead to adoption of new technologies. In energy-intensive 
industries, such as pulp and paper and the ones we have worked with in 
our Industrial Technologies program, the companies would be financially 
shortsighted not to make use of the energy- and cost-saving 
technologies we have developed. In yet other industries, the regulatory 
pressures you allude to may become important--there is clearly more 
interest now among heavy truck and bus manufacturers in adopting more 
efficient, less-polluting engine technologies than there was prior to 
the recent tightening of heavy diesel emissions standards.

                        OFF-HIGHWAY VEHICLE R&D

    Question. According to the budget justification, the rather small 
Off-highway Vehicle R&D program is being terminated ``because other 
research opportunities have higher impact on energy savings.'' In 
looking at the Department's own R&D roadmap off-highway research, 
however, I find that off-highway uses account for 20 percent of fuel 
use in the transportation sector. I also find that of all mobile 
sources, large off-highway diesel engines contribute 20 percent of 
NOX emissions and 36 percent of particulate matter. Can you 
reconcile these figures on energy use and emissions with your decision 
to terminate a $3.5 million program?
    Answer. The definitions of ``Off-Highway'' and ``Non-Highway'' that 
DOE uses are found in the Transportation Energy Data Book, which is 
published annually by Oak Ridge National Laboratory for DOE. Off-
Highway includes vehicles that are used in construction and 
agriculture. These vehicles accounted for 3.4 percent of transportation 
energy use in 2000. Non-Highway includes aircraft, marine vessels, rail 
and pipeline. These activities accounted for 21.1 percent of 
transportation energy use in 2000. The Off-Highway Vehicle R&D effort 
within the FreedomCAR and Vehicle Technologies Program was aimed at 
saving oil in vehicles that account for less than four percent of the 
oil used in transportation, therefore the potential oil savings would 
be small relative to potential oil savings achievable by shifting these 
funds to other aspects of our transportation sector R&D portfolio.
    While off-highway vehicles currently contribute a 
disproportionately large amount of NOx and PM, we anticipate 
that EPA's existing and proposed future emissions standards, to be 
phased in over the next decade, will result in a significant decline in 
criteria pollutant emissions from these sources.

                     ENVIRONMENTAL IMPACTS OF FUELS

    Question. Your budget also eliminates funding for analysis of the 
environmental impacts of fuels, deeming this activity to be in the 
purview of other agencies. While I would agree that DOE shouldn't be 
duplicating the efforts of EPA or other Federal agencies, I think there 
have been times that the Department has had differences with EPA about 
the environmental impacts of various fuels or technologies. Are you at 
all concerned that termination of this program will weaken your hand in 
inter-agency policy or regulatory discussions?
    Answer. DOE's and EPA's complementary efforts to research the 
environmental impacts of alternative fuels have been ongoing for many 
years at this point. DOE's work was intended to ensure that emerging 
technologies do not have unforeseen negative environmental impacts, as 
was the case with tetraethyl lead and MTBE (methyl tertiary butyl 
ether). In addition, DOE activities investigated the environmental 
effects of fuels derived from diverse feedstocks such as biorenewables, 
oil sands (tar sands), and even hydrogen. EPA's efforts focus on the 
determination of the impacts of current technologies and fuels on the 
environment.
    The DOE work provided a feedback loop to the management of our 
research and development efforts, but we believe that the topics have 
been quite thoroughly researched now. If such feedback is needed for 
additional fuels in the future, we feel we can rely on external 
organizations. EPA will continue to conduct the comprehensive 
evaluations necessary to support regulations. Since their research, 
rather than ours, has been what has driven regulations, we do not 
expect any regulatory impact from the termination of our program.

                          PERFORMANCE MEASURES

    Question. First of all, let me acknowledge the work that your staff 
has done to be responsive to this committee's repeated calls for 
better, more clearly written budget justifications. I'm not saying it's 
a perfect document yet, but this year's product is an improvement in 
many areas over past years. Some of the more interesting displays in 
the justification are your Government Performance and Results Act 
estimates that project the benefits of your R&D programs. I know this 
is a complex undertaking, but the numbers do raise some interesting 
questions. Among the Energy Conservation R&D programs, the Industrial 
echnologies program, the Vehicle Technologies program and the Buildings 
Technologies program are expected to produce by far the largest savings 
in energy use, oil consumption, and carbon emissions. In spite of this, 
the Industrial Technologies program is taking the largest cut of any 
program, and the vehicle and buildings programs are being reduced as 
well. How should we interpret this seemingly conflicting information?
    Answer. Potential benefits are but one consideration in making 
difficult allocation decisions. Other considerations include program 
performance, relative priority, and alignment with the Administration's 
R&D investment criteria, among others (see response to next question). 
One aim of the R&D investment criteria is to ensure an appropriate 
Federal role exists, and that there are market barriers causing 
underinvestment by the private sector. In the case of many Industry 
Program R&D activities, firms have the financial incentive to invest in 
energy efficient technologies that can reduce their costs. Thus, the 
seemingly conflicting information you describe can be explained by our 
determination that, despite potentially large benefits, many industry 
R&D activities benefit firms more than the taxpayer, so there is less 
of a Federal role in these activities.
    We would make two important notes. First, on the whole, the 
reductions you identified were more than offset by increases in other 
programmatic areas. For example, reductions for some activities in the 
FreedomCAR and Vehicle Technologies program were more than offset by 
increases in the Hydrogen (in the Energy Supply account) and Fuel Cells 
subprograms. This represents a shift in funding from near-term 
technology issues that industry is very capable of addressing, such as 
combustion engines and petroleum-based fuels, to more advanced 
technologies that offer greater energy and carbon-emissions benefits in 
the long term, such as fuel cells for hybrid vehicles. Second, we 
continue to improve our modeling assumptions and scenarios so that we 
can better compare potential benefits of technology investments within 
and between programs. This effort is a priority in helping to implement 
the Administration's R&D investment criteria.
    Question. Aside from the expected benefits in terms of energy 
savings and emissions reductions, what other inputs are used as you 
develop your budget request?
    Answer. We seek a portfolio balance among a number of criteria:
  --the energy savings and emissions reductions that you've already 
        mentioned, plus
  --other benefits like:
    --energy security,
    --pollution reduction, and
    --net economic benefits to society;
  --program performance and alignment with the Administration's R&D 
        investment criteria, which include many policy considerations 
        such as:
    --the need for, or appropriateness of, a government role in a given 
            technology (typically a clear public benefit with a market 
            failure or friction that precludes optimal private 
            investment);
    --plans for merit-based, competitive program execution;
    --industry's apparent commitment to adopting or marketing a 
            technology (often as evidenced by their willingness to 
            cost-share);
    --clearly-defined performance measures and decision-points for the 
            R&D area;
    --a technology's or industry's track record of progress based on 
            those performance measures; and
    --maintaining a portfolio balance of near-, mid-, and long-term 
            technology RD&D in each of the major sectors of our 
            economy.

             FOSSIL ENERGY--DOMESTIC OIL PRODUCTION/IMPORTS

    Question. First, I would like to commend the Department's efforts 
to keep an eye on energy markets through the work of the Energy 
Information Administration. However, I am extremely concerned that the 
Department seemingly ignores its own information in the formulation of 
budget priorities. During the early stages of the recent war with Iraq, 
crude prices shot to $38 a barrel and have recently stabilized at a 
lower level. However, all indicators seem to illustrate crude prices 
are rising again and stocks are low. Can you update us on the current 
state of the highly fluctuating oil markets?
    Answer. We expect oil markets to continue to be volatile but well 
within the high and low limits established in the last two years. 
Supplies are dependent on the rate at which Iraqi exports return to 
market, the stability of West African production, recovery in 
Venezuela, the reaction of other non-OPEC producers to current prices 
and, of course, the level of exports from OPEC countries. Demand may 
also deviate from expectations, as the world's economies grow at rates 
different from projections. Given the current level of oil inventories, 
news will tend to move prices up and down rather quickly, but we do not 
expect them to approach either the highs set earlier in 2003 or the 
lows reached in early 2002.
    Question. This Subcommittee has an acute interest in energy 
production, as most domestic production comes from land and waters 
under our jurisdiction, and the Fossil Energy portfolio under DOE 
requires our close attention due to the Administration's lack of 
adequate commitment to domestic energy R&D. Can give us a sense of how 
current crude imports compare to prior years as a percentage of 
domestic consumption?
    Answer. In March 2003, the most recent month for which complete 
monthly data is currently available, the ratio of average U.S. crude 
oil imports to average domestic petroleum consumption (or products 
supplied) is estimated to have been 46.0 percent. The comparable 
percentage for March 2002 was 44.7 percent and for March 2001 it was 
48.3 percent. For the first three months of 2003, the ratio of average 
U.S. crude oil imports to average domestic petroleum consumption is 
estimated to have been 43.2 percent. The comparable percentage for the 
first three months of 2002 was 45.6 percent and for the first three 
months of 2001 it was 46.4 percent. For the years 1997-2002, the ratio 
of the annual average U.S. crude oil imports to annual average domestic 
consumption ranged from a low of 44.2 percent in 1997 to a high of 47.5 
percent in 2001, and for 2002 it was 46.3 percent.
    Question. It is my understanding the recent reductions in crude 
costs are directly related to increasing imports. Given these trends, 
can you explain why your budget reduces funding for the Fossil accounts 
focused on increasing domestic oil production by 65 percent from the 
enacted level?
    Answer. The Office of Fossil Energy has completed its Top to Bottom 
Review, and is beginning to implement it. The review provides a solid 
first step towards a new program direction, emphasizing results and 
focusing on customer groups in order to more effectively carry out the 
President's energy plan to increase energy security and improve the 
environment through his Clear Skies and Climate Change initiatives.
    Certain program areas and projects that do not address the specific 
goals of this new direction will be terminated. As stated in the 
President's Management Agenda, spending large budgets without a clear 
goal does not necessarily achieve good results.
    These changes were also in part a response to the results of the 
Investment Criteria Scorecards that were completed as part of the 
President's Management Agenda initiative for better R&D Investment 
criteria.
    Additionally, the Program Assessment Rating Tool (PART) was 
completed for all program elements. Analysis of PART showed that the 
program did not link annual activities and outputs to long-term 
benefits. These outcomes reinforced the new program direction.
    Question. Your own testimony before the House Interior Subcommittee 
last month states, ``Previous oil program funding was spread thinly . . 
.'' In my opinion reducing a ``spreadly thin'' [sic] budget by 65 
percent when it is the primary budget focused on enhancing domestic oil 
recovery technologies seems a little haphazard at best. Can you 
reconcile this proposed reduction with your written testimony for the 
House and trends in domestic production?
    Answer. The completed Top to Bottom Review, conducted by the Office 
of Fossil Energy resulted in a new program direction, emphasizing 
results and focusing on customer groups in order to more effectively 
carry out the President's energy plan to increase energy security and 
improve the environment through his Clear Skies and Climate Change 
initiatives.
    Certain program areas and projects that do not address the specific 
goals of this new direction will be terminated. As stated in the 
President's Management Agenda, spending large budgets without a clear 
goal does not necessarily achieve good results.
    These adjustments in the program's investment portfolio were also 
in part a response to the results of the Investment Criteria Scorecards 
that were completed as part of the President's Management Agenda 
initiative for better R&D Investment criteria.
    Additionally, the Program Assessment Rating Tool (PART) analysis 
completed for all program elements showed that the program did not link 
annual activities and outputs to long-term benefits. These outcomes 
reinforced the new program direction.
    Question. An alarming highlight of last month was what appears to 
be an all-time monthly record for gasoline imports. It is bad enough to 
be dependent upon other nations for raw natural resources, but it is 
even more alarming that we now are becoming increasingly dependent upon 
foreign nations to produce refined product. Can you explain whether 
this dependency on foreign gasoline is an anomaly or part of a trend?
    Answer. In almost every year, gasoline demand increases. This 
increase can either be supplied by more production from refineries or 
increased gasoline imports. In recent years, suppliers have more 
economically increased supplies through the use of imports. There are 
several reasons for this.
    First, for many countries, they produce more gasoline than they can 
consume. In Europe, for instance, diesel fuel and other middle 
distillates are the most important part of the barrel, and thus, 
surplus gasoline is produced. With the United States being the world's 
largest consumer of gasoline, it is thus not surprising that increasing 
amounts of gasoline arrive from Europe each year. In addition, if 
refiners were to increase gasoline production it would merely reduce 
the amount of other products that are produced, or else would require 
an increase in refinery throughput. The latter is an option only when 
refinery economics dictate that it would lead to increased income. This 
would usually require high product prices with comparatively lower 
crude oil prices. If, however, refiners kept the same throughput, but 
instead produced more gasoline at the expense of production of other 
petroleum products, that would dampen prospects for rebuilding low 
inventory levels for those products, e.g. distillate fuel.
    That being said, it is likely that product imports, including those 
for gasoline, will continue to increase over the next several years. Of 
course, the alternative is to get the increased supplies needed form a 
source that would be less economical, thus putting an additional strain 
on the U.S. economy.
    Question. What are the factors for this reliance and does the 
ongoing effort of the Department to divert domestic crude into the 
Strategic Petroleum Reserve have a tangible impact?
    Answer. North America and Europe have long been integrated markets 
for refined petroleum products. This integration has proved beneficial 
for both the United States and Europe, allowing the best possible 
utilization of refineries and inventories. At times the United States 
is an importer of products and at others it exports to Europe depending 
on market conditions. At the moment, Europe is increasing its 
consumption of diesel fuel relative to gasoline, thereby making its 
surplus gasoline available for export to the United States at 
reasonable prices. The fact that the Strategic Petroleum Reserve is 
acquiring crude oil probably has only a marginal impact on oil prices, 
and whatever that impact, it is the same for United States and foreign 
refiners. Therefore, whether the Strategic Petroleum Reserve acquires 
or does not acquire crude oil is immaterial to the level of U.S. 
imports of refined products.

             FOSSIL ENERGY--DOMESTIC GAS PRODUCTION/IMPORTS

    Question. In February 2003, the gas markets were subject to 
unprecedented spikes as natural gas availability hit rock bottom. 
You'll remember that when you were serving in the Senate, similar cost 
spikes hit the electricity markets, leading to public outcry and the 
subsequent failure of many businesses. Could you update us on the 
natural gas markets?
    Answer. Natural gas markets have recovered from the unprecedented 
spikes in February 2003 but they remain tight. Spot market natural gas 
prices were in the $5.24 to $6.24 range in May while natural gas 
inventories were at least 29 percent below the five-year average for 
this time of the year. Recent inventory additions have been at record-
levels and the situation appears to be improving. However, the Energy 
Information Administration (EIA) projected in its June 2003 Short-Term 
Energy Outlook that natural gas prices will remain well above average; 
they are expected to average $5.50 to $6.00 per million Btu for the 
remainder of the year; 2004 natural gas prices are expected to ease 
slightly.
    As I said at the time of that report, the nation's stocks of 
natural gas in underground storage are unusually low due to weather 
factors and declines in both domestic production and net imports. 
Industry is already responding by significant increases in storage 
rates, with record net injections reported in each of the first two 
weeks of June, but a hot summer could increase demand for natural gas 
that may jeopardize storage refill, and thus, exacerbate the problem.
    I had previously asked the National Petroleum Council to conduct a 
study of natural gas in the United States that is expected to be 
released later this year but, in my view, we cannot wait to take action 
on the problem. Therefore, I have called for a special meeting on June 
26 during which the National Petroleum Council will gather information, 
and discuss problems and solutions.
    Question. What steps are the Department taking to help alleviate 
these gas supply problems?
    Answer. In the near-term, we are working to better understand U.S. 
natural gas needs. In March 2002, we requested that the National 
Petroleum Council, an advisory body to the Secretary of Energy, conduct 
a comprehensive study of the North America natural gas market (supply, 
transmission, and demand issues through 2025). The results of this 
study will be delivered in September of this year.
    We are also called on the Council to hold a National Gas Summit on 
June 26 to gather information from State and Federal officials, 
consumer groups, and industry experts, and discuss actions and develop 
recommendations that can be taken immediately to address the near-term 
natural gas situation. Among the measures expected to be discussed are 
those related to energy efficiency, conservation, and fuel switching. 
DOE will also publish a paper dealing with the issues associated with 
expanded supplies of natural gas from the Rocky Mountain region.
    Question. I know the Natural Gas Technologies accounts under Fossil 
Energy focuses on exploration and production techniques as well as 
developing advances in infrastructure to prevent failures and enhance 
delivery capabilities. Unfortunately your budget request suggests 
reducing these activities from $47 million to $26 million. Can you 
explain the disconnect between the information collected by your 
Department and the direction the Research and Development Accounts 
appear to be headed?
    Answer. The President's Natural Gas Technology research and 
development program under Fossil Energy accounts is intended to 
complement and enrich the existing portfolio of ongoing industry 
sponsored natural gas research and help ensure that long-term, high-
risk technology options in exploration and production, gas hydrates, 
natural gas storage, and delivery reliability are explored.
    The Office of Fossil Energy has completed its Top to Bottom Review, 
and is beginning to implement it. The review provides a solid first 
step towards a new program direction, emphasizing results and focusing 
on customer groups in order to more effectively carry out the 
President's energy plan to increase energy security and improve the 
environment through his Clear Skies, Climate Change, and Energy 
Security initiatives.
    Certain program areas and projects that do not address the specific 
goals of this new direction will be terminated. As stated in the 
President's Management Agenda, spending large budgets without a clear 
Federal goal does not necessarily achieve good results.
    These changes were also in part a response to the results of the 
Investment Criteria Scorecards that were completed as part of the 
President's Management Agenda initiative for better R&D Investment 
criteria.
    The Office of Management and Budget's analysis of Fossil Energy's 
Natural Gas Technology Program Assessment Rating Tool (PART) 
submissions showed that overall the Natural Gas Technology program did 
not successfully link annual activities and outputs to measurable long-
term benefits. These outcomes reinforced the new program direction and 
a reduction in the fiscal year 2004 budget request for Fossil Energy's 
Natural Gas Technology research and development program.
    Question. Your budget also proposes a ``new'' initiative to produce 
hydrogen from natural gas sources. Much like your testimony on the Oil 
Research Development accounts, I believe our natural gas infrastructure 
is spread too thin. The prior administration envisioned a world based 
on natural gas, but without backing the vision with investment in 
technology. I fear the current administration is doing the same. While 
we are shifting all this demand to natural gas, domestic production is 
not increasing at a similar rate. How to you believe we prevent a 
demand crunch in the natural gas markets without investing in new 
technology?
    Answer. The majority of the funding in our natural gas research 
program is directed to long-term technology development--where the 
government has a key role. These efforts will help ensure that adequate 
supplies of natural gas are available to meet the long-term increase in 
demand--about a 50 percent increase by 2025.
    Natural Gas Exploration and Production-Sustainable Supply program 
will provide new tools and technologies that can improve access, 
economics and environmental performance of onshore gas operations. 
Significant emphasis will be placed on public lands in the Rocky 
Mountain region where much of the nation's undiscovered gas resource is 
located.
    Natural gas storage will also assume increasing significance as 
more power plants require consistent, year-round supplies of natural 
gas. A nationwide, industry-led consortium will develop ways to improve 
the reliability and efficiency of the nation's gas storage system.
    Over the long-term, the production of natural gas from the U.S.'s 
vast deposits of methane hydrates, which is a program goal, could 
strengthen energy security and provide a major component of the 
Hydrogen Fuels Initiative. Understanding hydrates will also improve the 
scientific understanding of greenhouse gases and offer possible 
mechanisms for sequestering carbon dioxide. In the near-term, 
implications for drilling or producing oil and gas near or through 
hydrate formations will be defined, to avoid environmental issues that 
could arise with conventional oil and gas operations.
    The environmental science program will focus on defining and 
mitigating issues constraining produced water from coal bed methane 
production.
    Question. On the same topic, you list a new $6.5 million Hydrogen 
from Gas initiative under the Natural Gas Technology account. However, 
you reduce the Fuels account under Fossil Energy Research and 
Development from $31 million to $5 million. It is my understanding we 
were already performing substantial work in the Fuels budget that 
focused on hydrogen as a product. Could you detail how much DOE plans 
to focus on hydrogen production in the fiscal year 2003 Fossil 
Accounts?
    Answer. In fiscal year 2003, the Transportation Fuels & Chemicals 
budget line in the Fuels program request was $5 million for Syngas 
Membrane Technology (SMT) activity with an additional $17.1 million 
added by Congress to increase this activity and to support the ongoing 
Early Entrance Coproduction and Ultra Clean Fuels (UCF) programs, and 
the new Hydrogen from Coal Research (HCR) program. Since syngas is a 
mixture of carbon monoxide and hydrogen and a few of the UCF projects 
produce syngas as an intermediate on the path to liquid fuels, it is 
fair to say that some of the Syngas Membrane Technology and UCF 
programs could be considered Hydrogen Programs. However, to be 
efficient, the projects would have to be modified with a substantial 
change in direction. Thus, the funding for fiscal year 2003 that 
focuses on hydrogen as a product includes the new HCR (about $2.4 
million), SMT (about $6 million), and UCF (about $5.4 million).

                          FOSSIL ENERGY--FUELS

    Question. Mr. Secretary, I am interested in your decision to 
essentially stop all advanced research in the Fossil program. For 
fiscal year 2003, Congress provided $31 million to continue research 
aimed at developing cleaner fuels from domestic fossil sources 
including coal, gas and petroleum. The strides made in producing new 
fuel products such as ultra clean diesel have given hope that we can 
produce and use much cleaner burning fossil fuels in the near term. Can 
you explain why you believe we should abandon research that is arguably 
on the verge of creating marketable solutions to near term 
environmental concerns?
    Answer. The President's budget request for fiscal year 2004 of $5 
million for the Fuels/Transportation Fuels and Chemicals program is to 
perform supporting research for the Administration's FutureGen and 
Hydrogen Fuel Initiatives. In addition, $6.55 million is being 
requested in the Natural Gas Technologies program--Emerging Processing 
Technology budget to support research on natural gas to hydrogen as 
part of the Administration's Hydrogen Fuels Initiative. The Department 
believes that this budget request is appropriate to support a balanced 
energy research program within the budget constraints in fiscal year 
2004. In addition, considerable work is being conducted in the private 
sector on natural gas to liquids processes and we believe that industry 
is prepared to meet the promulgated EPA Tier II standards. The 
Department believes that research dollars would be better spent in 
longer-term fuels research such as that which is associated with the 
production, storage and delivery of hydrogen from coal and natural gas.
    Question. You assert in your request that portions of the fuel 
programs proposed for elimination have been shifted to the Oil and Gas 
programs, which have been reduced by 65 percent and 44 percent 
respectively. Could you show the Subcommittee where exactly this 
research shows up in the Oil and Gas programs, and explain what level 
of funding will be provided under your proposal for fiscal year 2004?
    Answer. In fiscal year 2003, the Fuels Program provides funding for 
both natural gas and coal based programs even though the Fuels Budget 
line is found in the Coal & Power Systems budget. However, in fiscal 
year 2004, the Fuels activities, which are related to production and 
delivery of hydrogen, will be split into two budget lines, one will 
remain in the coal program under Fuels and the other program activity 
will be moved to the Oil and Gas Program under the Emerging Process 
Technology activity in the Natural Gas Program. In fiscal year 2004, 
$6.555 million has been provided for this budget area.
    Question. Will all ongoing contracts continue at the level of 
funding agreed to by the contractors and DOE?
    Answer. The President's budget request for fiscal year 2004 of $5 
million for the Fuels/Transportation Fuels and Chemicals program is for 
conducing research activities to develop advanced, lower cost 
technology for the production of hydrogen from coal for the 
Administration's FutureGen and Hydrogen Fuel Initiatives. In addition, 
$6.55 million is being requested in the Natural Gas Technologies 
program--Emerging Processing Technology budget to support research on 
advanced, lower cost natural gas to hydrogen technology, which is also 
part of the Administration's Hydrogen Fuels Initiative. The Department 
believes that the budget requests are appropriate to support a balanced 
energy research program within the budget constraints in fiscal year 
2004. To the extent that funds are available, it is planned to continue 
those projects that can adjust their scopes of work to fit the new 
longer-term program goals. However, it is not likely that all contracts 
can be continued.

 FOSSIL ENERGY--DISTRIBUTED GENERATION--FUEL CELLS--VISION 21--HYBRIDS

    Question. Mr. Secretary, I have long been a proponent of fuel cell 
technology and am as frustrated as anyone else is with our inability to 
mass-produce fuel cells at a price point that makes them commercially 
viable to most markets. Your proposal to reduce the Vision 21 Hybrids 
account by $8.4 million peaks my interest as the Department has long 
touted the wonders of the Vision 21 program. With a reduction of this 
amount, I can only imagine one of two outcomes. Either we have hit the 
price point and these units are ready for mass development, or the 
technology has underperformed and DOE is making the decision to abandon 
the program. I don't believe we have Vision 21 Hybrids being produced 
commercially, so can you explain the decision that led to the reduction 
in this program?
    Answer. The $13.5 million for Vision 21 Hybrids in the fiscal year 
2003 budget is for the completion of DOE-funded work on tubular solid 
oxide fuel cell systems and fuel cell/turbine hybrid systems. The 
fiscal year 2004 budget request of $5 million supports a redirected 
Vision 21 enabling cost reduction and performance enhancement program 
to emphasize SECA-based low-cost, Vision 21 fuel cell/turbine hybrid 
and Vision 21 zero-emissions system concepts.
    Question. Are we on target with the goals set by DOE and will we 
continue on target at this funding level?
    Answer. The Department's goals for tubular solid oxide fuel cell 
turbine hybrids systems will be achieved with the conclusion of 
activities in fiscal year 2003. Tests on a first-of-a-kind tubular 
solid oxide fuel cell/turbine hybrid system have contributed valuable 
design knowledge that will be used in the next phase of the Vision 21 
hybrids program, which is focused on SECA-based hybrid systems. The 
funds proposed for fiscal year 2004 are appropriate for the re-directed 
effort focused on SECA-type fuel cells.

    FOSSIL ENERGY--DISTRIBUTED GENERATION--FUEL CELLS--SOLID STATE 
                 ELECTRICITY CONVERSION ALLIANCE (SECA)

    Question. Mr. Secretary, I am extremely interested in the SECA 
program and am watching its progress with high hopes. I know that DOE 
has recently decided to add two new industry teams to the program, yet 
has proposed reducing funding for the core program from $33.8 million 
to $23.5 million. I am concerned that reducing the funding and trying 
to support additional teams will cause the program to slow, when it is 
poised to make great strides. Additionally, it is my understanding some 
teams may be under performing, and some of the competing technologies 
may show little promise for future development. Can you update the 
Subcommittee on the progress of the SECA program and explain how you 
propose allocating resources in fiscal year 2004 to ensure we are 
providing sufficient resources to the teams showing the most promise?
    Answer. The Solid State Energy Conversion Alliance (SECA) Program 
is progressing extremely well with implementation as planned and 
promised. The SECA industry teams are making good progress towards 
their Phase 1 performance targets for prototype demonstrations in 
fiscal year 2005/fiscal year 2006. In fiscal year 2003, the second full 
year for the initial four industry teams, the teams have built, tested, 
and evaluated small single ``button'' cells, completed designs for 
multi-cell stacks, improved performance, and reduced proof of concept 
volume. The new industry teams represent design alternatives that will 
enhance the prospects of success of SECA fuel cells for a broader 
market.
    The Department is requesting in fiscal year 2004, $33 million for 
the SECA Program from several research budget elements. Primary funding 
of $23.5 million will be provided from the Distributed Generation Fuel 
Cells Innovative Concepts budget line. This funding will be primarily 
for the six industry teams. In addition, $6.0 million for SECA from 
Fuel Cells Advanced Research will be used for the SECA core technology 
program, $1.5 million for SECA from Advanced Research--for research on 
materials for coal-based SECA systems, and $2.0 million for SECA from 
Advanced Metallurgical Research (Albany), for metallurgical research 
applicable to general SECA systems.

 NAVAL PETROLEUM AND OIL SHALE RESERVES--ROCKY MOUNTAIN OIL TECHNOLOGY 
                             CENTER (RMOTC)

    Question. I notice the Naval Petroleum Account proposes closing the 
Rocky Mountain Oil Technology Center (RMOTC). Could you provide the 
committee with the number of industry proposals to partner with this 
facility for each of the past five years?
    Answer. RMOTC received 151 proposals from fiscal year 1999 through 
the current fiscal year 2003. These proposals were from a variety of 
small businesses, major industry leaders, and international consortia 
and cover testing related to: drilling technology, coal bed methane, 
oil shale production, enhanced oil recovery, CO2 
sequestration, produced water management, environmental rehabilitation, 
renewable energy development, homeland security, reservoir services and 
flow assurance. The proposals are broken down accordingly; 25 in fiscal 
year 1999; 25 in fiscal year 2000; 31 in fiscal year 2001; 29 in fiscal 
year 2002; and 41 fiscal year 2003 (YTD).
    Question. It is my understanding industry partnerships to promote 
advanced oil recovery utilize this center with great success. I am also 
aware of renewed interest by industry to re-examine the potential of 
oil shale production. If we were to follow your recommendation to 
reduce the oil program by 65 percent and close RMOTC, what other 
avenues are available for independent producers to partner with DOE to 
research avenues of increasing domestic production?
    Answer. The President's budget does request $41.6 million for 
research and development in oil and natural gas, and that money will be 
targeted to the most promising opportunities. We hope that industry 
will independently increase its funding for recovery research, which 
would be appropriate, and the Administration supports across the board 
tax incentives for R&D and investment in domestic production of all 
kinds. An important action the Government could undertake is to 
increase access to lands for oil and gas exploration resulting in 
increased domestic production without any cost to taxpayers.
    If the Center were closed, those activities would have to be 
conducted at private facilities such the Gas Technology Institute's 
Catoosa test facility in Oklahoma.
    Question. Is it your belief DOE holds no responsibility to work 
with industry to advance domestic fossil fuel production?
    Answer. The Department of Energy supports private industry 
development of domestic fossil fuels in every way. We are committed to 
research to increase the recoverable resource base of oil and natural 
gas and research to reduce the cost of production and protect the 
environment. We have a national laboratory working on ways to mitigate 
the environmental impacts of fuels production and consumption. We 
support tax and regulatory changes that would encourage domestic energy 
production, and we support making Federal lands available for 
exploration and development of fossil fuels. The Department of Energy 
fully supports the Administration's National Energy Plan, which makes 
explicit its support for more domestic energy production of every type.

                        FOSSIL ENERGY--FUTUREGEN

    Question. Mr. Secretary, we talked a little bit about the FutureGen 
proposal when you came to see me earlier this week. Montanans are very 
excited about this project and my office has been working with our 
Governor's office and a large group of other entities wanting to make 
sure Montana is given full consideration as a possible site for the 
project. Can I have your assurance the Department will work with me and 
the State of Montana to make sure Montana's unique geographic and 
geological offerings are taken into full consideration as the site 
selection process moves forward?
    Answer. I can assure you that we will be glad to work with Montana, 
and any other interested states, to ensure that the FutureGen site 
selection process will be a fair and open competitive process. Montana 
will be given full consideration, along with other sites proposed for 
evaluation.

                          SOLID STATE LIGHTING

    Question. In reply to: believe you're aware of the Solid State 
Lighting Initiative, which this subcommittee supported last year with 
an appropriation of $3 million. Your budget request includes $5 million 
for this program, which has significant promise in terms of energy 
savings, environmental benefits, and lower costs to consumers. I 
understand that the Department has investigated and calculated these 
potential benefits while developing a ``Road Map'' for the solid-state 
lighting program. Would you share with the Committee the Department's 
conclusions?
    Answer. The Department believes that solid state lighting has the 
potential to create the technical foundation to revolutionize the 
energy efficiency, appearance, visual comfort, and quality of lighting 
products for general illumination by achieving efficiencies upwards of 
70 percent (source efficiency). In consultation with industry, the 
Department has estimated long-term benefits, which include annual 
savings of nearly 40 percent of lighting energy and $19 billion in 
consumer expenditures by 2020. As with all benefits modeling, the 
assumptions have a large impact on the results. Because modeling 
procedures and assumptions used to generate this estimate are different 
from those used in EERE GPRA models, we cannot directly compare the 
estimated benefits of this initiative to other EERE or other 
Departmental applied R&D activities. But we intend to improve the 
consistency in our modeling efforts. As a stand-alone document, the 
multi-sector forecast, Energy Savings Potential of Solid State Lighting 
in General Illumination Applications, is available at: 
www.eere.energy.gov/buildings/documents/.
    As solid state lighting represents the most promising approach to 
more efficient lighting systems of the future, success in the 
initiative will retain the technology base and jobs in the United 
States (while facing increased product competition from Pacific Rim 
corporations supported by their governments) and will widely enable 
more efficient lighting systems to be applied widely. The potential for 
such technology is quite significant, given the very low performance 
characteristics of present incandescent (1 percent efficient in 
delivered, useful light) and fluorescent systems (20 percent).
    The Department has held seven workshops over the past two years to 
plan out a broad agenda for research and development focused on 
improving the performance of compound semiconductor science in the 
application of general illumination. More than 300 participants 
attended these workshops (including the conventional lighting industry, 
compound semiconductor industry, academia, National Labs, research 
institutions, and other government agencies). In general, R&D is 
necessary in several areas: quantum efficiency, lifetime, performance, 
packaging, infrastructure, and first cost. The most recent summary 
document on this research agenda, The Promise of Solid State Lighting 
for General Illumination, is available at: www.eere.energy.gov/
buildings/documents/.

                          SOLID STATE LIGHTING

    Question. How far has this technology developed and what is the 
nature of the research that has to be concluded?
    Answer. Solid state lighting (SSL) exists today in a monochromatic 
form (i.e. single color such as red or green). Currently, SSL is used 
for ``exit'' signs and traffic control lights, and offers several 
attributes beyond energy savings, such as durability and longer 
lifetime. Additionally, the auto industry is converting incandescent 
lamps applications to solid state devices (e.g. LED tail lights). To 
save significant energy, the science and engineering of SSL needs to 
mature in several performance metrics to be capable of competing in the 
general illumination market with high quality white light, which is the 
focus of the DOE SSL research.
    White light SSL is in its infancy, with many prototypes in the 5 to 
10 lumens per Watt (LPW) range. Newer prototypes perform in the 15 to 
25 LPW range, about what an incandescent can do. Future research needs 
cover six concept areas:
    Efficiency.--The ability of solid state light sources to convert 
electrons into photons is governed by three basic elements: (1) 
materials systems; (2) internal quantum efficiencies (IQE); and (3) 
external quantum efficiencies (EQE). Materials system research 
evaluates semiconductor materials, studying the performance and 
limitations of materials. IQE measures a material's ability to convert 
electron-hole pairs into photonic emissions, and is largely a function 
of the material system selected. EQE measures the amount of light that 
leaves the semiconductor device and is available for collection and 
use.
    Lifetime.--Technologies lasting in excess of 50,000 hours are 
sought. SSL research will focus on advancing our basic science 
understanding of the role of impurities, defects, crystal structure and 
other factors closely related to materials systems choices.
    Lighting Performance.--(a) basic material properties and (b) 
semiconductor physics directly impact the evolution of photon 
wavelength, emission bandwidth and ultimately, color. For the future, 
emission spectrum approaching the spectral power distribution of 
natural sunlight is required.
    Device Design.--Research will focus on (a) geometrical optical 
engineering and (b) optical simulation within the compound 
semiconductor--increases of 5 to 10 times present levels of optical 
coupling are predicted. Research on structures of the individual layers 
of materials will be required, as will integration of the substrate 
geometry and optics.
    Packaging.--Investigate packaging requirements such as sealing out 
moisture and oxygen, managing heat transfer, and protecting optical 
material from UV degradation. SSL technology will assemble them into an 
optimized light delivery system.
    Manufacturing.--Research will concentrate on significant first cost 
reduction through aggressive development of suitable manufacturing 
technologies and technical elements of the distribution infrastructure, 
such as technology standards.

              CLIMATE CHANGE TECHNOLOGY INITIATIVE (NCCTI)

    Question. The budget request includes $40 million for a new Climate 
Change Technology Initiative; $23 million of which is funded through 
this subcommittee. Why is it necessary to establish a new, separate 
program for this purpose?
    Answer. The President's National Climate Change Technology 
Initiative Competitive Solicitation program is intended to complement 
and enrich the existing portfolio of ongoing research throughout the 
Federal government and help to ensure that all possible technology 
options are explored. The program is unique and warranted because 
funding will be allocated solely on the basis of the potential for a 
technology to contribute in significant ways future reductions or 
avoidances of greenhouse gas emissions, and/or their capture and 
sequestration (permanent storage). No program, past or present, has 
made technology-neutral funding allocations in this manner. In general, 
successful proposals would be focused on novel approaches for 
contributing to broader technological goals, or on innovative ways of 
solving or circumventing technical barriers to progress along a 
plausible line of technology development
    Question. Weren't climate change objectives already folded into 
many of the Department's R&D programs like the Carbon Sequestration 
program within the Office of Fossil Energy?
    Answer. Many of the existing DOE R&D programs aim to provide 
multiple public benefits such as increased energy security, reduced 
emissions of pollutants, and reduced emissions of carbon dioxide. The 
purpose of the NCCTI program is to focus solely on potential climate 
change benefits. In doing so, we expect to identify R&D opportunities 
that complement and enrich existing R&D programs. The responses to the 
NCCTI Request For Information, released in November 2002 and closed in 
January 2003, suggest that there are certain categories of novel 
concepts (e.g., crosscutting evaluation methodologies, research that 
does not clearly fall into the basic or applied research areas) that 
show great promise for reducing greenhouse gas emissions and that are 
unlikely to be eligible for or selected in procurements conducted under 
existing DOE programs.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici

                      CLEAN COAL POWER INITIATIVE

    Question. I compliment the Administration on continuing its 
commitment to the Clean Coal Power Initiative and Coal Research 
initiative in the fiscal year 2004 budget with a request of $320.5 
million overall. I firmly believe that we should capitalize on our two 
greatest strengths in electricity supply--coal and nuclear. In both 
cases, we should address risk areas. I'd like to ensure that the coal 
initiatives would address issues associated with mining as well as the 
subsequent combustion processes. For example, a small New Mexico 
company in Raton has worked with Russian institutes, through the 
Department's Initiatives for Proliferation Prevention program, to 
develop instruments that allow remarkable refinement in how coal is 
mined. This instrument, which actually mounts on the drill head, 
enables the drill to automatically leave the last few inches at the top 
and bottom of a coal seam. The majority of the serious heavy metal 
contaminants in the seam are concentrated at the edges of the seam; 
thus this new tool allows dramatically cleaner coal to be mined. When 
burned, that coal then burns much more cleanly. I continue to believe 
that we should focus on coal at the source in the coal R&D program and 
in the Clean Coal Power initiative. Mr. Secretary, does the Clean Coal 
Power Initiative include opportunities for advancing exciting new 
technologies like this, no matter what part of the overall coal 
utilization cycle they impact?
    Answer. The current structure of the Clean Coal Power Initiative 
(CCPI) focuses on demonstrating advanced technologies that will provide 
clean, efficient, reliable and affordable electricity from coal. In 
order for a technology to qualify for consideration under CCPI, it must 
be proposed as part of an integrated power system that utilizes clean 
coal. If a proposed technology, associated with another part of the 
coal utilization cycle (such as mining), is integrated into the coal 
power system, it could be considered under CCPI.

                          OIL AND GAS RESEARCH

    Question. I'm very disappointed to note that oil and natural gas 
technology research and development funds were again sharply cut in the 
Administration's budget. Oil technology R&D is reduced by nearly 65 
percent below the fiscal year 2003 enacted level (from $42.3 million to 
$15 million in the President's request), and natural gas R&D is reduced 
by nearly 44 percent from ($47.3 million to $26.3 million in the 
President's request). These two energy sources play major roles in 
current national energy supplies. In New Mexico, I've noted how 
improved extraction technologies, which depend on continued research 
and development, have helped to boost production of old wells. The 
Senate bill would support R&D of the type done at the Petroleum 
Recovery Research Center at New Mexico Institute of Mining and 
Technology in Socorro. How would the Administration's reduced budget 
for oil technologies impact ongoing strong R&D programs, such as this 
one at New Mexico Tech?
    Answer. The proposed budget would have no impact on the Petroleum 
Recovery Research Center at New Mexico Institute of Mining and 
Technology in Socorro, as there are no outstanding mortgages on 
projects with this institution. The proposed fiscal year 2004 budget 
does require the elimination of $5.9 million for projects being 
conducted at other universities. However, only $1.3 million is for 
projects that support the newly aligned oil program. This shortfall 
will be addressed by extending the projects over a longer period of 
time.
    The new direction for the oil program resulting from a complete 
strategic review of the program, emphasizes results and focuses on 
customer groups in order to more effectively carry out the President's 
energy plan to increase energy security and improve the environment 
through his Clear Skies and Climate Change initiatives.
    These changes were also in part a response to the results of the 
Investment Criteria Scorecards that were completed as part of the 
President's Management Agenda initiative for better R&D Investment 
criteria.
    Additionally, the Program Assessment Rating Tool (PART) was 
completed for all program elements. Analysis of PART showed that the 
program did not link annual activities and outputs to long-term 
benefits. These outcomes reinforced the new program direction.
    Question. What is the Administration's rationale for nearly 
terminating these R&D programs as the nation makes a comprehensive 
effort to increase our energy security and independence through 
reducing dependence on foreign sources and developing new sources of 
domestic energy?
    Answer. The Office of Fossil Energy has completed its Top to Bottom 
Review, and is beginning to implement it. The review provides a solid 
first step towards a new program direction, emphasizing results and 
focusing on customer groups in order to more effectively carry out the 
President's energy plan to increase energy security and improve the 
environment through his Clear Skies and Climate Change initiatives.
    Certain program areas and projects that do not address the specific 
goals of this new direction will be terminated. As stated in the 
President's Management Agenda, spending large budgets without a clear 
goal does not necessarily achieve good results.
    These changes were also in part a response to the results of the 
Investment Criteria Scorecards that were completed as part of the 
President's Management Agenda initiative for better R&D Investment 
criteria.
    Additionally, the Program Assessment Rating Tool (PART) was 
completed for all program elements. Analysis of PART showed that the 
program did not link annual activities and outputs to long-term 
benefits. These outcomes reinforced the new program direction.

                OIL AND GAS--FEDERAL TRANSMISSION SITING

    Question. Congestion and inadequate transmission infrastructure has 
an impact on consumers. The Electric Power Research Institute estimated 
that transmission reliability losses cost the economy $120 billion 
annually. Contained in S. 14 is a provision to accelerate the 
permitting of transmission lines across federal lands. The provision 
requires the Department of Energy to take the lead in coordinating the 
federal permitting efforts in order to accelerate and improve the 
siting process. Do you believe that DOE can assist in this role and 
reduce the time and costs associated with permitting transmission 
facilities?
    Answer. The process for obtaining permits for transmission lines 
across federal lands has been a major source of delay and unnecessary 
cost in the development of new transmission projects, particularly in 
the West where much of the land is federally owned. Better coordination 
is needed among a wide range of parties, including project developers, 
state agencies, Native American tribes, and federal agencies. DOE is 
well positioned to help facilitate this coordination.

                               FUEL CELLS

    Question. The Administration's proposed initiatives for fuel cells 
and hydrogen R&D have been very well received in the scientific 
community and in the Congress. The FreedomCAR and FreedomFuel proposals 
would receive about $235 million in the Energy Conservation budget 
specifically to work on vehicle technologies ($157.6 million) and fuel 
cell technologies ($77.5 million). Another $88 million would go to 
hydrogen technology R&D through the Energy Efficiency and Renewable 
Energy budget. These initiatives hold great hope for this nation to 
move away from our heavy reliance on petroleum products for 
transportation.
    Mr. Secretary, you know of my strong support for moving toward a 
hydrogen economy, but I have some concerns about the mix of the program 
between essential R&D and demonstration programs. A recent letter 
report of the National Research Council raised this issue essentially 
saying that in its assessment the number of fuel cell demonstration 
projects seem to be getting ahead of our progress on essential fuel 
cell R&D. Mr. Secretary, do you share my concern that we need more 
fundamental R&D to make progress on fuel cell technology?
    Answer. The April 4, 2003 interim letter report from the National 
Academy of Sciences (NAS) recommended that fundamental and exploratory 
research should receive additional budgetary emphasis, and the DOE 
should develop a careful plan for evaluating, funding, and validating 
emerging technologies for hydrogen production, transportation, storage, 
and end-use. Within the background, the interim report stated that, 
when properly used, demonstrations have a place in a balanced research 
program because they can lead to cost reductions and accelerate the 
development of codes, standards, environmental permitting, and 
strategies for inspection and monitoring. But, demonstrations also risk 
distorting budgets and diverting effort toward technology with limited 
potential. Development of a careful plan for funding and evaluating 
demonstrations to address this risk will serve the public interest.
    Since the time of the NAS letter, the DOE Office of Science (SC) 
hosted a workshop to determine the basic science needs that support 
hydrogen and fuel cell technology development. SC is currently 
developing a research plan based on the outcomes of that workshop. The 
DOE plan is based on the Hydrogen Vision and Roadmap that were 
developed in collaboration with over 200 technical experts. The current 
DOE plan includes 80 percent of funding for research and development 
and 20 percent of funding for technology validation. These technology 
validation projects are cost-shared 50/50 by industry partners. Strong 
leveraging of Federal dollars indicates private sector support of the 
RD&D pathway we have outlined and that our research validation approach 
is sound. The results of technology validation are critical to refining 
and directing future research and development efforts.
    Question. What is your assessment of the progress of R&D on liquid 
hydrogen, compressed gas, and on several carrier fuels that would 
transport hydrogen in vehicles?
    Answer. Liquid and compressed hydrogen tanks are relatively mature 
technologies that are suitable for near-term demonstrations of 
hydrogen-powered vehicles. Development of pressurized insulated vessels 
has reduced evaporative losses in liquid tanks. However, liquid tanks 
do not meet the volume targets for on-board storage and liquefying 
hydrogen incurs a sizable energy penalty. Development of low-permeation 
liners, high-strength fibers, and conformable tanks has led to 
fabrication of 5,000 and 10,000 psi gaseous hydrogen tanks. However, 
these compressed gas tanks do not result in the required 300-mile range 
while also meeting vehicle weight and space requirements. Therefore, 
the long-term effort of the DOE program will be the development of low-
pressure, solid-state materials that store hydrogen, such as carbon 
nanotubes, hydrides and alanates.
    Question. What in your view is the appropriate mix of fuel cell R&D 
and demonstration projects?
    Answer. Every research activity must be evaluated with 
consideration to its own particular factors, including the state of 
research progress. At this point, we believe that an 80/20 fuel cell 
R&D/demonstration mix, where demonstration projects require a minimum 
50 percent cost share by industry, is appropriate.
    Question. I note that researchers at Los Alamos National Lab 
continue to make great progress in fuel cell research and are poised to 
be a center of excellence in this area. I believe the nation needs this 
center to integrate a number of separate specialties to more 
efficiently develop commercially-ready fuel cell systems. Previous 
budget submissions led me to believe this was also part of the 
Administration's thinking. What is the Department's current position on 
establishing a national fuel cell research center?
    Answer. We appreciate the major advances that Los Alamos National 
Laboratory (LANL) has made in polymer electrolyte membrane (PEM) fuel 
cells and that they hold seminal patents in the field. For example, 
LANL scientists were responsible for achieving the breakthrough that 
allowed a 90 percent reduction in the platinum required by fuel cell 
electrodes. This breakthrough significantly lowered the cost of PEM 
fuel cells and stimulated the large-scale automotive industry 
investment that exists today.
    With respect to establishing a national center for fuel cell 
research, the Department is currently studying this concept.
    Question. What level of funding for fuel cells could be effectively 
utilized to advance this exciting technology as rapidly as possible?
    Answer. The Fossil Energy and Energy Efficiency and Renewal Energy 
Fuel Cells Programs are working with partners to accelerate the 
development and successful market introduction of these technologies.
    In fiscal year 2004, the Fossil Energy Budget Request is $44.5 
million for the continuation of the entire program, with emphasis on 
the Solid State Energy Conversion Alliance (SECA) where efforts are 
underway to drastically reducing fuel cell costs to make them more 
broadly applicable and widespread commodity in the competitive, mature 
distributed generation and auxiliary power markets. Funding at the 
requested level will allow six competing SECA industry teams and about 
19 core technology participants to advance the technology at an 
accelerated pace.
    In fiscal year 2004, the Energy Efficiency and Renewal Energy 
(EERE) budget request is $77.5 million for development of polymer 
electrolyte membrane fuel cells in support of the President's 
FreedomCAR and Hydrogen Fuel Initiative. This request level is 
appropriate for EERE's planned fuel cell R&D and is consistent with our 
technology roadmap plans. Research in membranes, electrodes, fuel 
processing and system components will lead to $30/kW engine costs, 60 
percent energy efficiency and 5,000 hours durability on hydrogen. 
Fiscal year 2004 funding for fuel cells and hydrogen is the first year 
of the President's Initiative, which will accelerate commercialization 
of hydrogen fuel cell vehicles by 15 years to 2015.

                   HIGH TEMPERATURE SUPERCONDUCTIVITY

    Question. If I could change subjects for a moment, I would like to 
ask you about the Energy Efficiency and Renewable Energy budget, and 
high temperature superconductivity R&D. It is my sense that within DOE 
there is support to move into grid-level demonstration projects to 
begin effective utilization by utilities of high-temperature 
superconductivity technology for more reliable supplies of electricity. 
The request of $76.9 million for electricity reliability activities is 
9 percent below the $85 million approved for fiscal year 2003 and does 
not move us in that direction.
    Answer. Within the $76.9 million request, there are significant 
grid-level demonstration projects that will be more visible in fiscal 
year 2004 in which utilities will begin effective utilization of high 
temperature superconductivity. The most notable is a planned Long 
Island installation of a superconducting transmission power cable able 
to serve 300,000 homes. This could lead to a future superconductivity 
``backbone'' being put in place to supply electricity to most of Long 
Island. Similar projects are planned in Albany, NY, and Columbus, OH. 
Our intent is to move as rapidly as possible to effective utilization 
of several types of grid technologies (transmission and distribution 
cables, transformers, generators, and fault current limiters) while 
maintaining research on higher capacity, cost-effective, 
superconducting wires and other key enabling technologies.
    Question. What is the major thrust of the Department's fiscal year 
2004 budget proposal for high-temperature superconductivity?
    Answer. In the Department's fiscal year 2004 budget proposal for 
high-temperature superconductivity, the major thrust is to improve 
Second Generation superconducting wire (longer lengths, higher 
capacity, lower-cost processing) through collaboration of university, 
national laboratory, and private company scientists; while 
simultaneously moving as rapidly as possible to effective utilization 
of transmission and distribution cables by installing and testing 
different cable types in the electric grid. The latter work is carried 
out by industry teams consisting of a utility, cable manufacturer, 
superconducting wire supplier as well as special expertise from the 
national labs and universities.
                                 ______
                                 
             Questions Submitted by Senator Robert C. Byrd

       TECHNOLOGY TRANSFER--CLEAN ENERGY TECHNOLOGY EXPORT (CETE)

    Question. Mr. Secretary, Congress has urged the Administration to 
support increased opportunities to open and expand international energy 
markets and export U.S. clean energy technologies to developing 
countries and other nations abroad. These efforts are very important to 
helping meet our own energy security needs while at the same time 
addressing related economic, job creation, trade, environmental, and 
climate change objectives. Additionally, such efforts could 
significantly aid in meeting other nations' infrastructure and 
development needs while also increasing the deployment of a range of 
U.S. clean energy technologies, including clean coal technologies. The 
Clean Energy Technology Exports (CETE) Initiative will help meet that 
challenge. It had its genesis within the Senate Appropriations 
Committee and has had broad bipartisan support. The administration has 
talked about such ideas on occasion, but despite such rhetoric, the 
participating federal agencies have done little, if anything, to 
implement the strategic plan. It seems you are just sitting on your 
hands and missing a critical opportunity. Because the Department of 
Energy is a leading agency involved in the implementation of the CETE 
Initiative as called for by the Congress and released by the 
Administration in October 2002, what specific actions is your agency 
taking to work with the other federal agencies and engage non-
governmental organizations, private sector companies, and other 
international partners with regard to this plan?
    Answer. The Department is involved in many activities with other 
federal agencies, non-governmental organizations, private sector 
companies and international partners to expand the market for clean 
energy technologies. One such effort is the current joint working group 
on U.S.-China Olympic cooperation. This cooperative effort is 
consistent with CETE objectives and aims to deploy clean energy 
technologies for the 2008 Summer Olympic Games, by facilitating U.S. 
industry interest in the Chinese market, and promoting U.S.-made 
equipment and services while protecting the global environment. One of 
the eleven areas of mutual interest for cooperation is clean coal 
technology. To this end, the Department's Office of Fossil Energy has 
developed a plan to: use U.S. NOX Control Technologies for 
Beijing region power plants; jointly design coal preparation plants; 
and reach out to U.S. industry on business opportunities.
    Question. Can you tell me when the Appropriations Committee will 
receive the required annual CETE strategic plan progress report that 
was due to this committee on March 1, 2003?
    Answer. The Department expects to submit the CETE report to the 
Congress by the end of July 2003.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein

                        NUCLEAR WEAPONS TESTING

    Question. Mr. Chairman, thank you for holding this hearing and 
Secretary Abraham, thank you for coming. I am interested to hear your 
answers to many subjects important to Californians. Among them are the 
Administration's position on the use and development of low-yield 
nuclear weapons; banning fraud and manipulation in the energy sector; 
and the President's hydrogen fuel and fuel cell car proposals in the 
fiscal year 2004 Department of Energy Budget. First and foremost, I 
want to focus on the Administration's position on the use and 
development of low-yield nuclear weapons. The President is right that 
the greatest threat facing the United States lies in the global 
proliferation of Weapons of Mass Destruction, and terrorist access to 
those weapons. But I am deeply concerned that by appearing to focus its 
national security strategy on its nuclear arsenal, current U.S. policy 
may well actually encourage proliferation, alienate our friends and 
allies, and promote a backlash against the United States. Instead of 
ratcheting back on our reliance on nuclear weapons with the Cold War 
over, the administration seems to be looking for new ways to use our 
nuclear advantage to restructure our forces so that they are more 
``usable''--blurring the lines between nuclear and conventional forces 
and legitimizing the idea that nuclear weapons can be used.
    Like it or not, the United States sets the pace when it comes to 
international norms regarding nuclear weapons, and, in fact, just 
considering the use of these weapons much less actually using them 
threatens to undermine our efforts to stop proliferation and makes us 
less safe, not more.
    The administration's Nuclear Posture Review, released in January 
2002, stressed the importance of being prepared to use nuclear weapons. 
The review noted that we must plan to possibly use them against a wider 
range of countries. And it said that we need to develop new types of 
weapons so that we can use them in a wider variety of circumstances. 
According to press reports the review also explicitly listed seven 
nations Russia, China, Iran, Iraq, Syria, Libya, and North Korea 
against which the United States should be prepared to use nuclear 
weapons even though most of those nations do not have nuclear weapons 
themselves. That means the Administration is contemplating the first 
use of nuclear weapons in a conflict.
    Indeed, a few months after issuing the nuclear posture review, 
President Bush signed National Security Presidential Directive-17, 
which, according to press reports, abandons a bipartisan policy of 
ambiguity and explicitly says that the United States might use nuclear 
weapons to respond to a chemical or biological attack. Clearly the 
administration seems to be moving toward a military posture in which 
nuclear weapons are considered just like other weapons in which their 
purpose is not simply to serve as a deterrent but as a usable 
instrument of military power, like a tank, a fighter aircraft, or a 
cruise missile.
    I believe that such an approach is not in our nation's interest, 
nor is it consistent with our standards and values. A first use of 
nuclear weapons by the United States should be unthinkable, and 
responding to a non-nuclear attack with nuclear weapons violates a 
central tenet of just war and U.S. military tradition. There is no 
question that in the post 9/11 era a full range of policy options for 
dealing with new and uncertain events should be on the table. But in my 
view, nuclear options should not be considered as an extension of 
conventional options because this inevitably lowers the threshold for 
use.
    So, if the United States is seeking to develop nuclear weapons 
which blur the distinction between conventional and nuclear forces and 
lowers the threshold for the possible use of these weapons, we must 
consider the message that this sends to the rest of the world. I 
believe that it is critical that the United States sets a very high 
international standard for nuclear restraint. If we do not, we may well 
encourage others to develop their own standards and their own nuclear 
arsenals.
    Using nuclear weapons, even ``small'' ones, would cross a line that 
has remained sacrosanct for almost 60 years. Using a small nuclear 
weapon makes the use of all nuclear weapons more permissible it 
legitimizes their use and legitimizing nuclear weapons promotes their 
spread. It also puts us in greater danger should we ever have to fight 
a nuclear power.
    Moreover, there is no real evidence that the United States needs to 
use nuclear weapons in the scenarios outlined in the Nuclear Posture 
Review or NSPD 17.
    The most often-cited need for new nuclear weapons is to destroy 
underground bunkers. But the most important factor in destroying a 
deeply buried target is knowing exactly where it is. And if we know 
exactly where it is, we can either destroy it with conventional weapons 
or deny access to it by destroying entrances and air ducts.
    Earlier this year, at an Energy Committee Hearing, I asked you 
whether Secretary Rumsfeld had been quoted correctly in The Washington 
Post, on the 20th of February, when he said that the Administration had 
no plans to develop new low-yield nuclear weapons. You said yes, he had 
been quoted correctly, that the Administration was only studying 
adaptations of existing weapons.
    This week on the Floor of the Senate I offered an amendment to 
strike the controversial provision in the Defense Authorization Bill 
that will end a 10-year-old ban on research and development of low 
yield nuclear weapons.
    The Defense Authorization Bill would repeal the decade old 
``Spratt-Furse'' provision, which bans all development leading to the 
production of nuclear weapons with yields of fewer than five kilotons. 
I believe this prohibition should remain in full force because 
repealing it:
  --Provides the United States no military benefit;
  --Could lead to the resumption of nuclear testing;
  --Undermines efforts to halt the proliferation of Weapons of Mass 
        Destruction; and
  --Blurs the line between conventional and nuclear weapons.
    Now that the ban will be repealed, what are the exact plans for the 
Administration's study, development, and testing of low-yield nuclear 
weapons?
    Answer. The Department has no research currently under way to 
develop low-yield or other new nuclear weapons at the Department's 
nuclear weapon design laboratories. However, the Department of Defense 
and Department of Energy have begun a two to three-year study on 
potential modifications to current stockpile gravity bombs, the B61 and 
the B83. The study, known as the Robust Nuclear Earth Penetrator (RNEP) 
phase 6.2 study, will assess the feasibility, design definition, and 
cost for modifications of providing a robust earth penetrating weapon 
to address the threat posed by hard and deeply buried facilities.
    The RNEP concept is being studied as one of a number of possible 
means to deal with emerging threats. Development, production and 
fielding of the RNEP concept would not require nuclear testing.
    There has been no decision to move the RNEP to engineering 
development. Should this occur in the future, the Department of Energy 
would request funds from Congress as a separate budget line item, 
consistent with Section 3143 of Public Law. 107-314, in the President's 
budget request for that year.
    I appreciate your observation that ``a full range of policy options 
for dealing with new and uncertain contingencies should be on the 
table.'' I believe that the Department's work will not blur the 
distinction between nuclear and conventional weapons. I also encourage 
you to seek the views of the Department of Defense on the issues you 
raise regarding military utility of low-yield weapons and their 
potential contribution to the deterrent.
    Question. What exactly will you do differently when this Defense 
Authorization Bill is passed?
    Answer. Repeal of the prohibitions of Spratt-Furse would allow the 
NNSA's weapons laboratories to examine more fully the technical 
options, the investigation of which is currently prohibited by law and 
to a lessor extent by the Spratt-Furse provisions of the House bill. 
There are problems in attempting to confine intellectual efforts to 
``research only'' rather than ``research and development'' because 
these lines are often not clear. In the end, Congress controls these 
activities which could lead to a recommendation to initiate engineering 
development, since the Department of Energy would request funds from 
Congress as a separate line item in the President's budget request for 
that year.
    Question. Will the Administration seek to test these weapons?
    Answer. The Administration remains committed to adhering to a 
moratorium on nuclear weapons testing. At the same time, the 
Administration has no intention of resubmitting the CTBT to the Senate 
for ratification.

                             ENERGY MARKETS

    Question. Now I would like to turn to the energy markets. Over the 
past few years, we have seen corporate scandal after corporate scandal 
in the news--and nowhere has there been more fraud and market abuse 
than in the energy sector. In March, the Federal Energy Regulatory 
Commission issued its ``Final Report on Price Manipulation in Western 
Markets'' which confirmed there was widespread and pervasive fraud and 
manipulation during the Western Energy Crisis. The overwhelming 
evidence uncovered demands that California receive full and complete 
refunds and that FERC revise the state's long-term contracts to remedy 
the manipulation that has taken place and to deter future abuse.
    Three years ago, this month California's energy market began to 
spiral out of control. The crisis forced the State of California into a 
severe budget shortfall. It forced the state's largest utility into 
bankruptcy and nearly bankrupted the second-largest utility. Now three 
years and $45 billion in costs later, we have learned how the energy 
markets in California were gamed and abused.
    Yet the Senate Energy Bill doesn't prevent the type of gaming that 
went on during the energy crisis. The Senate bill only bans one type of 
specific manipulation--wash trades in the electricity market--but it 
does not address the natural gas market, nor does it prevent other 
forms of fraud and manipulation that took place in California and were 
detailed in the Enron memos as ``Fat Boy,'' Ricochet,'' ``Death Star,'' 
and ``Get Shorty.''
    Does the Bush Administration support banning the type of fraud and 
manipulation that Enron engaged in?
    Answer. The Administration strongly opposes illegal market 
manipulations and supports the prevention of fraud and manipulation in 
the nation's energy markets. It would not be appropriate to discuss 
cases involving Enron, and other energy firms that are still pending 
before FERC and in other forums, and this answer should not be 
understood as presuming the outcomes of those cases.
    Question. FERC Chairman Pat Wood and FERC Commissioner Bill Massey 
support conforming the penalty and refund provisions in the Federal 
Power Act with those of the Natural Gas Act. Does the Bush 
Administration also support these changes?
    Answer. Yes.
    Question. Section 1121 of Senator Domenici's Energy Bill prevents 
the Federal Energy Regulatory Commission from issuing any rulemaking on 
the proposed Standard Market Design until July 1, 2005. What are the 
Bush Administration's views on delaying the Standard Market Design 
rulemaking until this date--especially in light of the recent revisions 
proposed by the FERC Commissioners in their White Paper?
    Answer. In the White Paper FERC demonstrated its willingness to 
work with state regulators and industry to accommodate regional 
perspectives in the design of regional transmission organizations 
(RTOs) and other matters related to the formation and operation of 
regional wholesale markets for electricity. The Administration opposes 
blocking the FERC from any final rulemaking in this area for two years, 
which could prevent FERC from taking needed action to maintain 
stability in regional electricity markets.
    Question. In a speech last week to the National Petroleum Council, 
you made some comments about the current conditions in our natural gas 
markets. As you know, low U.S. production, low inventories, and high 
prices are battering industries that rely on natural gas as a raw 
material or energy source. In addition to the chemical, aluminum, and 
fertilizer industries--the ethanol industry is also dependant on 
natural gas. Since most ethanol plants rely solely on natural gas, is 
this the time to mandate billions of gallons of ethanol into our fuel 
supply and force many more ethanol plants to be built?
    Answer. New, modern dry mill ethanol plants use about 40,000 BTUs 
of natural gas per gallon of ethanol produced (76,000 BTUs). A small 
additional amount of natural gas will be used in the production of 
fertilizer used to grow corn. For the incremental 2.5 billion gallons 
that would need to be produced to reach the 5 billion gallon per year 
target under a renewable fuels standard, natural gas demand would be 
about .075 TFC higher in 2015. This would be an increase of about half 
of 1 percent in expected 2015 gas demand. We do not believe this is a 
significant amount given the potential factors that will drive natural 
gas supply and demand over the next 10-20 years.
    Question. Is the ethanol mandate something DOE is considering in 
evaluating our long-term natural gas needs?
    Answer. As discussed in the answer above, we do not believe that 
the impact of a 5 billion gallon per year renewal fuels standard will 
have a significant impact on future natural gas demand.

                             HYDROGEN FUEL

    Question. I support research and development efforts to make 
hydrogen fuel and fuel cell powered automobiles a reality. In fact, 
companies and universities based in California have been at the 
forefront of developing hydrogen and fuel cell technologies. However, I 
am concerned about the overwhelming amounts of energy it will take to 
extract hydrogen fuel on a large scale. Since the actions we take today 
will influence what kind of hydrogen economy develops 10 or 20 years 
from now, how does the Administration propose to generate this large 
amount of energy?
    Answer. A big advantage of hydrogen as a transportation fuel is its 
potential to be produced efficiently and economically via a number of 
processes and from a variety of domestic resources, such as natural gas 
and other fossil fuels, abundant renewables, and nuclear. The 
Department has established a balanced effort to research and develop 
hydrogen production capabilities from all of these resources. Today, 
the most cost-effective and efficient process is steam reforming of 
natural gas. Natural gas reforming is a route for producing hydrogen, 
particularly in the near term because of its current economics and the 
availability of existing infrastructure. Use of coal with 
sequestration, renewable resources, and nuclear are other routes for 
producing hydrogen over the long term. Although hydrogen production in 
the future is not likely to come from natural gas alone, an Energy 
Information Administration (EIA) calculation indicated that if 36 
million hydrogen fuel cell vehicles were on the road by 2025, it would 
add about 5 percent to total natural gas that will be used in the 
United.States that year. This increase would be more than offset by 
natural gas demand reduced by new advanced technologies and efficiency 
improvements to existing technologies under development within the EERE 
portfolio. EERE's analysis, based on our fiscal year 2004 budget 
request, indicates that by 2020 the industrial, buildings, and other 
portions of our portfolio will be freeing up some 11 percent of 
expected natural gas demand. In the future, hydrogen will likely be 
produced from a diverse suite of domestic resources, such as 
renewables, nuclear, natural gas and, if carbon capture and 
sequestration technologies are perfected, coal. Thus, the domestic 
resources needed to produce large amounts of hydrogen are available 
and, with continued research and development, the necessary production 
processes should meet required efficiency and cost objectives to 
facilitate a fuel cell vehicle commercialization decision by industry 
in 2015.

                                ELK HILL

    Question. The Department of Energy entered into a Settlement 
Agreement with the State of California to compensate the State for its 
interest in the Elk Hills oil reserve. The Settlement Agreement calls 
for the State to receive compensation in seven annual installments. The 
Department has met its obligations for the first five installments. Mr. 
Secretary, will the Department continue to meet its obligations under 
this Agreement?
    Answer. Estimates for the total for the remaining payments have 
been as high as $118 million; however, until final equity and final 
cost determinations are made, the precise amount is speculative. The 
President's budget for fiscal year 2004 requests $36 million for the 
payment to California, indicative of the Department's intention to meet 
its obligation to California. Under the agreement, if equity has not 
been finalized by July 2003 (which it will not be), DOE and the state 
should confer, and DOE must determine whether any or all of the seventh 
installment should be deferred.
    Question. DOE has held back $26 million in compensation due to the 
State because DOE has taken 6 years to finalize the split of the 
proceeds from selling Elk Hills. Under DOE's Settlement Agreement, for 
the sixth installment in fiscal year 2004, the State is entitled to 
half of the balance in the Elk Hills School Lands Fund that's left 
after this holdback. Thus, the State is entitled to $59 million in Elk 
Hills compensation for fiscal year 2004, not the $36 million requested 
in your budget. Mr. Secretary, what is the Department's view of an 
appropriation of the full $59 million?
    Answer. The Settlement Act provided for 9 percent of the net sales 
proceeds to be reserved in a contingent fund in the Treasury for 
payment to the State, subject to appropriation. The Department's 
estimate of 9 percent of the net sales proceeds was $324 million, of 
which $298 million has already been deposited into the contingent fund. 
The Department will adjust the amount in the contingent fund once all 
divestment related costs and final equity have been determined. It is 
now apparent that the final equity determination will not be completed 
until fiscal year 2006. Since 9 percent of the net revenues can only be 
calculated after final equity and final costs are determined, the 
amount of the two ``equal'' final payments is contingent upon events 
that have not yet occurred, and it will be impossible for Congress to 
appropriate an amount for fiscal year 2004 that would be known to be 50 
percent of the remaining payment.

                         CONCLUSION OF HEARINGS

    Senator Burns. Thank you all very much. The subcommittee 
will stand in recess subject to the call of the Chair.
    [Whereupon, at 10:56 a.m., Thursday, May 22, the hearings 
were concluded, and the subcommittee was recessed, to reconvene 
subject to the call of the Chair.]
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