- DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS FOR FISCAL YEAR 2005

[Senate Hearing 108-795]
[From the U.S. Government Publishing Office]

DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2005

----------

THURSDAY, MARCH 4, 2004

U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:32 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Conrad Burns (chairman) presiding.
Present: Senators Burns, Stevens, Bennett, Dorgan, Byrd,
Leahy, Reid.

DEPARTMENT OF ENERGY

Office of the Secretary

STATEMENT OF HON. SPENCER ABRAHAM, SECRETARY

OPENING STATEMENT OF SENATOR CONRAD BURNS

Senator Burns. We will call the Appropriations Subcommittee
on the Interior to order.
Welcome, Mr. Secretary.
Secretary Abraham. Good to be with you.
Senator Burns. Appreciate that.
Secretary Abraham. Thank you.
Senator Burns. We are glad to have you here to discuss the
President's fiscal year 2005 budget request from the Department
of Energy. Due to the tortured evolution of jurisdictions in
Congress, your Department is relegated to ``related Agency''
status in our subcommittee. The Interior Department gets its
name on the bill, but we rarely ever hear of the Energy aspect
of this. We appreciate that you are here for the good or the
bad, but nonetheless we know that what you do at the Department
of Energy is important to the country, and in a lot of ways it
is related for the simple reason that Interior and Energy
should be working together. They support development of
technologies that can slow our growing dependence on foreign
oil. Your programs also support the development of technologies
that promote the more efficient use of all forms of energy,
which enables our economy to grow without sacrificing
environmental quality.
The Department of Energy's budget, under this subcommittee,
is roughly $1.7 billion. Direct comparisons with current
funding levels is a bit complicated due to the use of
revisions, deferrals, and advance appropriations, but generally
speaking, your budget request reflects a zero sum situation. A
handful of administrative priorities, such as FutureGen and
weatherization, were given large increases. These increases are
paid for by steep reductions in a range of ongoing R&D programs
such as oil and gas research, industrial technology,
distributed generation, and coal fuels. As a general matter,
Mr. Secretary, I think it is appropriate that the budget
posture, given the current fiscal climate, the budget committee
will be going into the mark-up session today, so it is clear
that what you have recommended here and what has been
recommended to us up in budget will be dealt with.
With that in mind, it is clear in our discussions that we
need to center around tradeoffs as opposed to where the next
additional Federal dollar should go, I do not foresee that
there will be any additional Federal dollars for any programs
coming up. This is going to be a tough budget year. We have
invited you here today to explain some of those priorities
you've set within your budget requests. If we go along with the
reductions that you propose in oil and gas R&D or distributed
generation research, what do we lose? If we go along with the
major investments you propose in FutureGen, carbon
sequestration, and weatherization, then what do we get? We
might not necessarily agree on all of the answers but by and
large I am sure we will have an informative discussion before
it is all over.

PREPARED STATEMENT

So again, Mr. Secretary, thank you very much for coming
this morning. We appreciate your time; we know that you are
busy at this time of the year.
[The statement follows:]

Prepared Statement of Senator Conrad Burns

Welcome Mr. Secretary. We're glad to have you here to discuss the
President's fiscal year 2005 budget request for the Department of
Energy.
Due to the tortured evolution of jurisdictions in Congress, your
department is relegated to ``Related Agency'' status in our
subcommittee nomenclature. The Interior department gets its name on the
bill (along with most of the attention--good and bad), while your
programs tend to get somewhat less scrutiny.
But there is no question in my mind that the DOE programs under
this subcommittee's jurisdiction support critical national goals.
They support development of technologies that can slow our growing
dependence on foreign oil--something that is essential to our national
security. And down the road those technologies may help free us from
our dependence on oil imports once and for all.
Your programs also support development of technologies that promote
the more efficient use of all forms of energy; enabling our economy to
grow without sacrificing environmental quality.
The President's fiscal year 2005 budget request proposes roughly
$1.7 billion for DOE programs under our jurisdiction.
Making direct comparisons with current funding levels is a bit
complicated due to the use of rescissions, deferrals, and advance
appropriations. But generally speaking, your budget request reflects a
``zero sum'' situation.
A handful of Administration priorities such as FutureGen and
Weatherization are given large increases. These increases are paid for
by steep reductions in a range of ongoing R&D programs, such as Oil and
Gas research, Industrial Technologies, Distributed Generation, and Coal
Fuels.
As a general matter, Mr. Secretary, I think that is an appropriate
budget posture given the current fiscal climate. In just a few minutes
the Senate Budget Committee is going to begin to mark up this year's
budget resolution, and it is clear that it will recommend less
discretionary spending than contemplated in the President's request,
not more.
So with that in mind it is clear our discussions need to center
around tradeoffs, as opposed to where the next additional Federal
dollar should go. I don't foresee there will be any additional Federal
dollars for these programs.
We have invited you here today to explain to us the priorities
you've set within your budget request. If we go along with the
reductions you propose in Oil and Gas R&D, or Distributed Generation
research, what do we lose? If we go along with the major investments
you propose in FutureGen, carbon sequestration and Weatherization, what
do we get?
I'm not sure we'll necessarily agree on all the answers by lunch,
but am sure we'll have an informative discussion.
Again, Mr. Secretary, thank you for coming today. I know you have a
number of different Congressional committees to which you must answer,
and we appreciate your time.

Senator Burns. Welcome Senator Dorgan, my co-chair on this
committee, I look forward to your statement.

OPENING STATEMENT OF SENATOR BYRON L. DORGAN

Senator Dorgan. Senator Burns, thank you very much and Mr.
Secretary thank you for being with us. You and I have talked
prior to this hearing and you know that I feel that we have a
fiscal policy that does not work, increases in funding for
large areas of the budget, defense and homeland security
coupled with tax cuts, tax cuts and more tax cuts means that we
have very large budget deficits and they are growing, not
receding. I know my colleague, Senator Burns, will be working
with the budget committee this morning trying to grapple with
all that but I just do not think this adds up. And you see the
final result of it as you take a look at these individual
budget requests from the administration. Senator Burns asked
the right question, what is the consequence of cutting some of
these funding areas such as clean coal technology. What is the
consequence of cutting that funding, fossil energy R&D, coal
research, oil research, natural gas research? And so, we need
to think through all of this carefully. I really do hope, even
as we consider the individual appropriations bills, that we
find a way, in a bi-partisan way, to put our fiscal policy in
some kind of thoughtful order, because it is not there today.

ENERGY AND ENVIRONMENTAL RESEARCH CENTER (EERC)

I am going to ask you some questions about some specifics.
The EERC, which is located in North Dakota, has been
recommended for a cut. I know that we have talked about that
and I want to ask you some questions about that, I think that
is a very important institution. The issue of purchase power
for the Western Area Power Administration (WAPA), we need to
fix the budget recommendation there. I would love to see us,
and I think it is important for us to have targets and
timetables with respect to hydrogen and fuel cell initiatives;
I support the President very much in that area. I believe that
we should do even more than he recommends and I believe we
should have targets and timetables. And the energy savings
performance contracts need to be extended; it makes no sense
for us not to extend them. We need to work together to find a
way to do that posthaste in my judgment. These and a few other
areas are areas I will ask you some questions about today.
Mr. Secretary, thank you for coming back to the Senate and
making another return visit. I appreciate your testimony today.
Senator Burns. Thank you, Senator Dorgan, and Mr.
Secretary, the time is yours.

SUMMARY STATEMENT OF HON. SPENCER ABRAHAM

Secretary Abraham. Mr. Chairman, Senator Dorgan.
Senator Burns. We will give you 15 minutes to sum up
everything that you do down there.
Secretary Abraham. Well, Mr. Chairman, as you know we have
submitted a fairly lengthy testimony, opening statement to the
committee and I would like to submit that for the record, and
just make a shorter statement here.
Senator Burns. It shall be made a part of the record.
Secretary Abraham. Obviously, it is always a pleasure for
me to come back to the Senate and to have a chance to discuss
our Department with former colleagues. Obviously this budget
request builds on a number of programs and successes which we
have worked on over the last 3 years. I am proud of a lot of
things that the Department of Energy has accomplished in terms
of working towards providing energy, economic and national
security to the American people. But in particular I am very
proud and I want to just make a statement on the record today
of the fine people, the men and women who work in the
Department and whose dedication makes our success possible. I
want to acknowledge the fact that a testament, I think, to
their dedication and commitment is a recent announcement by the
Office of Management and Budget which ranked the Department of
Energy first among Cabinet level agencies in terms of the
implementation of the President's Management Agenda, really the
scorecard for managerial performance. This evaluates a number
of criteria but it recognized the Department of Energy as the
Cabinet level agency leading the pack with regard to management
improvement. And so, as you can imagine, we are all proud of
that, but that happened because people in the frontlines of our
facilities and at the Department's main offices have done a
great job, the career people who really work very hard to
implement these programs that we debate and discuss in the
budget process. I just want to make that statement as an
initial point here today.
The submission which we make this year tries to continue
charting the focus on the management of resources to accomplish
our four key areas of focus, defense and national security,
energy security, world-class scientific research and
environmental stewardship. As you noted, the total request for
our budget, $1.7 billion, is requested for programs funded by
this subcommittee. Those programs are in the areas of fossil
energy, energy conservation, and the Energy Information
Administration. And as I said, my written statement goes into
some detail on a number of the components of those. I would
like to emphasize just two or three of the priority areas here
today.

FOSSIL ENERGY BUDGET

The Department's Fossil Energy program seeks new
technologies and methodologies to help take advantage of our
vast supplies of energy in an environmentally safe fashion. The
centerpiece of these programs is our clean coal and carbon
sequestration initiatives, which account for about 60 percent
of the fossil energy request. They aim at insuring that our
Nation's 250-year reserves of coal can be used without concern
about environmental impact. We are very excited about those
programs, particularly about a program we launched last year
called FutureGen. This 10-year program, costing approximately
$1 billion in total, is designed to create the world's first
zero emission fossil fuel plant. I think we have made good
progress in the first 12 months working on this program and we
expect to have continued progress in fiscal year 2004 and 2005.
And when it is operational, this will be the cleanest fossil
fuel-fired power plant in the world. Virtually every element of
the FutureGen prototype plant will employ cutting edge
technology. Rather than using traditional coal combustion, it
will rely on coal gasification and because of this advanced
process; we envision that FutureGen will be able to produce
large amounts of transportation grade hydrogen fuel as well as
electricity.

CARBON SEQUESTRATION

We are also exploring advanced carbon sequestration
technologies, both as part of FutureGen and beyond. This may
not be a glamorous area to some but I think it is extremely
important and I believe that the demonstrated potential of
carbon sequestration is convincing. It has convinced us to
fully pursue its promise. Last June we brought together
representatives from 13 countries to form the Carbon
Sequestration Leadership Forum and to build on international
interest in this sort of work. That global consortium has
already begun investigating ways to work together to sequester
greenhouse gas emissions from fossil fuels. And so, we are very
excited about and will be focusing heavily on these areas. Of
course, this fossil budget involves a variety of other areas as
well, ranging from oil and gas research to the Strategic
Petroleum Reserve to the Northeast Home Heating Oil Reserve and
other projects as well.

ENERGY CONSERVATION BUDGET

Our Energy Conservation budget funds several top
presidential initiatives. First and foremost is the President's
Hydrogen Fuel initiative, which we announced last year, to
accelerate the transition to a hydrogen economy, to go from a
world where our cars and trucks run on petroleum to one where
they can run on hydrogen-powered fuel cells. President Bush
committed an initial investment of $1.7 billion over 5 years
launching of this program, for hydrogen fuel cell research and
development, and the budget we submit here would fully fund the
program for fiscal year 2005. I believe in the 1 year since the
President unveiled this program we have made tremendous
progress. We have engaged partners in both the automotive and
the energy industries working together really for the first
time, in parallel on this project, which is what is required,
in my judgment, for its success. We have also found a
tremendous amount of enthusiasm and involvement from State and
local governments. We have moved forward with critical hydrogen
fuel cell research and development. And maybe the most
important breakthrough has been that we have been able to
attract a wide array of international interest in and
partnership on the project, meaning that we can spread our
research dollars further and we can begin laying the groundwork
for the kinds of codes and standards and other developments
that need to take place for this broader transition to occur.
Last November we had the inaugural meeting of a group we called
the International Partnership for the Hydrogen Economy. We had
14 countries join the United States; virtually all of the major
auto producing and automotive using countries on the planet to
start working together. And so, we are excited about what that
groundbreaking work will accomplish. We think this partnership
really will help us to accomplish the objectives we have set,
at least on schedule if not sooner.

WEATHERIZATION

Another top presidential initiative in the area of Energy
Conservation is Weatherization. One of the most significant
things which the Department of Energy does is attempting to
reduce the burden of high energy costs for low-income
households that spend a disproportionate share of their total
annual income on energy, as much as 19 percent in the case of
the average of the lower income households as opposed to only
about 4 percent of the income of other households in our
country. The Weatherization Assistance Program works to improve
the energy efficiency of the homes of these low-income
families, effectively slashing their energy bills and freeing
up dollars that can be put to use in better ways. By making
these homes more energy efficient, the program lowers costs for
those who can least afford to either cool or heat their homes
and those who are most vulnerable to very volatile changes in
energy markets. We think the program is an extraordinarily good
one. We hope that this year we will be able to see a level of
funding enacted that is consistent with the request we have
made. In 2001, in our National Energy policy, we called for an
increase for weatherization of $1.4 billion over 10 years in
order to weatherize a total of 1.2 million low-income homes.
That would be about twice as many as would have been otherwise
affected by the program. We continue to submit budgets
consistent with that and we hope this year, working together
with you, we can reach our goal.

ENERGY INFORMATION ADMINISTRATION

Finally, I would just mention that this budget also
supports the Energy Information Administration. We're
requesting nearly a 5 percent increase for EIA in 2005 than our
2004 comparable appropriation which will provide Federal
employee pay raise support and maintain the other ongoing data
and analysis activities which EIA conducts as part of its
responsibility to continue to disseminate accurate and reliable
energy information and analysis to inform energy policymakers.

PREPARED STATEMENT

Again, Mr. Chairman, we could obviously go into detail on
the areas of interest to all of you. I look forward to doing
that and appreciate the chance to be here today.
[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 2005 budget for
the Department of Energy (DOE). The fiscal year 2005 budget includes a
total of $24.3 billion for DOE, $1.7 billion of which is requested for
programs funded in the Interior and Related Agencies Appropriations
under the jurisdiction of this Subcommittee. Those programs are Fossil
Energy, $728.9 million; Energy Conservation, $875.9 million; and the
Energy Information Administration, $85 million. I will provide
highlights of those programs later in my statement.
This fiscal year 2005 budget request builds on a number of
successes we have had over the past 3 years. I'm very proud of what we
have accomplished in terms of fulfilling the President's management
vision for this Department and also what we have achieved for the
energy and economic security of the American people. We are grateful
for the support and guidance that the Members of this Subcommittee have
provided to the Department.
The Office of Management and Budget recently announced that DOE has
made the most progress among cabinet-level agencies in the
implementation of the President's Management Agenda. OMB recognized DOE
as the cabinet-level agency ``leading the pack with regard to
management improvement.''
A large part of that leadership involves defining the mission of
the Department. From our first days in office we stressed that the
overriding mission of this Department is national security.
Another significant part of the Department's mission is to protect
our economic security by promoting a diverse supply and delivery of
reliable, affordable, and environmentally sound energy. The fiscal year
2005 budget includes $2.7 billion to meet energy-related objectives. Of
this amount, approximately $1.6 million is for Fossil Energy and Energy
Conservation programs. The budget request maintains Presidential
commitments to promote energy security and reliability through coal
research and development, hydrogen production, fuel cell powered
vehicles, advanced nuclear energy technologies, and electric
transmission reliability.
Within the jurisdiction of this Subcommittee, this budget provides
for investments in the President's Clean Coal Power Initiative ($287
million)--including the ambitious FutureGen program--and Hydrogen Fuel
Initiative ($93.5 million). These initiatives will serve as the
technological spring board to solve the nation's long-term energy needs
by focusing on energy independence and reliability with a diverse
energy portfolio.
Also included in this budget is funding that continues the
Administration's 10-year commitment to the Weatherization Assistance
program. With a proposed budget of $291 million, approximately 119,000
homes will be weatherized in fiscal year 2005.

INVESTING IN AMERICA'S ENERGY FUTURE

An important element of all our energy programs is making energy
use more secure, more efficient, and more environmentally sound. At the
same time, we are preparing long-term energy solutions that will
eventually make questions of supply and environmental effects obsolete.
The Administration's energy portfolio takes a long-term focus through
investments in hydrogen use and production, electricity reliability,
and advanced coal and nuclear energy power technologies. Investments in
these pivotal areas honor a commitment to strengthen the nation's
energy security for the near-term and for generations to come.
In fiscal year 2005, the Department's Energy Efficiency and
Renewable Energy program is at the forefront of implementing the
President's Hydrogen Fuel Initiative. Hydrogen promises to help meet
our nation's future energy challenges. The Department is requesting
$227 million for hydrogen-related activities. That figure includes $173
million in the Energy Efficiency and Renewable Energy program, $29
million in the Science program, $16 million in the Fossil Energy
program, and $9 million in the Nuclear Energy program.
This budget invests $447 million in the President's Coal Research
Initiative to improve the efficiency and environmental protections
being developed for coal burning power production. Of that figure, $287
million will go to the President's Clean Coal Power Initiative,
including the FutureGen program which was launched in fiscal year 2004.
This cost-shared, $1-billion project will create the world's first near
zero-emissions fossil fuel plant. When operational, the FutureGen plant
will be the cleanest fossil fuel-fired power plant in the world.
Mr. Chairman, I would now like to discuss some highlights of our
fiscal year 2005 Interior and Related Agencies Appropriations budget
request.

[In thousands of dollars]
------------------------------------------------------------------------
Fiscal year
--------------------------------------
2003 2004 2005
------------------------------------------------------------------------
Fossil Energy R&D................ 611,149 672,771 635,799
Naval Petroleum & Oil Shale 17,715 17,995 20,000
Reserves........................
Elk Hills School Lands........... 36,000 36,000 36,000
Energy Conservation.............. 880,176 877,984 875,933
Economic Regulation.............. 1,477 1,034 ...........
Strategic Petroleum Reserve...... 171,732 170,948 172,100
Strategic Petroleum Account...... 1,955 ........... ...........
Northeast Home Heating Oil 5,961 4,939 5,000
Reserve.........................
Energy Information Administration 80,087 81,100 85,000
--------------------------------------
Subtotal Interior Accounts. 1,806,252 1,862,771 1,829,832
Clean Coal Technology............ -47,000 -98,000 -140,000
======================================
Total Interior & Related 1,759,252 1,764,771 1,689,832
Agencies..................
------------------------------------------------------------------------

fossil energy

As part of the effort to lessen the level of our reliance on
imported energy sources, the Fossil Energy program is seeking new
energy technologies and methodologies that promote the efficient and
environmentally sound production and use of fossil fuels, as well as
providing strategic protection against the disruption of oil supplies.
The United States relies on fossil fuels for about 85 percent of
the energy it consumes, and forecasts indicate U.S. reliance on these
fuels could exceed 87 percent in 2025. Accordingly, a key goal of DOE's
fossil energy activities is to ensure that economic benefits from
fossil fuels and a strong domestic industry that creates export-related
jobs are compatible with the public's expectation for exceptional
environmental quality and reduced energy security risks. This includes
promoting the development of energy systems and practices that will
provide energy to current and future generations that is clean,
efficient, reasonably priced, and reliable.
Fossil energy programs focus on supporting the President's top
initiatives for energy security, clean air, climate change, and coal
research. Fiscal year 2005 fossil energy programs:
--Support the development of lower cost, more effective pollution
control technologies embodied in the President's Coal Research
Initiative 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 as
called for by the President's Climate Change Initiative; or
--Measurably add to the nation's energy security by providing a
short-term emergency response, such as the Strategic Petroleum
Reserve, or longer-term alternatives to imported oil, such as
hydrogen and methane hydrates.

PRESIDENT'S COAL RESEARCH INITIATIVE

President Bush has committed $2 billion over 10 years on coal
research through his Clean Coal Research Initiative. This includes two
major programs: the Clean Coal Power Initiative, and the Coal Research
and Development program. The fiscal year 2005 budget continues to meet
the President's commitment by providing $447 million for the Coal
Research Initiative. Under President Bush's leadership, budget requests
for coal R&D have more than doubled over historical amounts and
appropriations.

CLEAN COAL POWER INITIATIVE AND FUTUREGEN

The Clean Coal Power Initiative (CCPI) is a key component of the
National Energy Policy to address the reliability and affordability of
the nation's electricity supply, particularly from coal. The initiative
fulfills the President's commitment to conduct research on clean coal
technologies to meet this challenge.
Included in the fiscal year 2005 budget is $287 million for the
CCPI program. The CCPI program is a cooperative, cost-shared program
between the government and industry to rapidly demonstrate emerging
technologies in coal-based power generation and to accelerate their
commercialization. The nation's power generators, equipment
manufacturers, and coal producers help identify the most critical
barriers to coal's use in the power sector. Technologies are selected
with the goal of accelerating development and deployment of coal
technologies that will economically meet environmental standards, while
increasing the efficiency and reliability of coal power plants. The
FutureGen program is funded within this initiative and was launched in
fiscal year 2004.
The President's Clean Coal Power Initiative is especially
significant because it directly supports the President's Clear Skies
Initiative. The first projects 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.
The ``first round'' 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. In early
2003, we announced the first winners of the competition--eight projects
with a total value of more than $1.3 billion, more than $1 billion of
which would be provided by the private sector. These projects are
expected to help pioneer a new generation of innovative power plant
technologies that could help meet the President's Clear Skies and
Climate Change Initiatives.
Competitive solicitations for the ``second round'' were made just
last month and are open to technologies capable of producing any
combination of heat, fuels, chemicals, or other useful by-products in
conjunction with electricity generation.
FutureGen.--The FutureGen component of the Clean Coal Power
Initiative will establish the capability and feasibility of co-
producing electricity and hydrogen from coal with essentially zero
emissions, including carbon sequestration and gasification combined
cycle, both integral components of the zero emissions plant of the
future.
It is anticipated that the cost-shared FutureGen project will
create a public/private partnership to produce technology ultimately
leading to zero emission plants, including carbon dioxide, that are
fuel-flexible and capable of multi-product output and efficiencies of
up to 60 percent with coal. The project is critical to the continued
and expanded use of coal--our most abundant and lowest cost domestic
energy resource.
Carbon Management.--Several 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 Gross Domestic Product) 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).
Carbon management has 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 of $49 million in fiscal year 2005.
Carbon sequestration, if it can be proven practical, safe, and
affordable, could dramatically enhance our long-term response to
climate change concerns. It could offer the United States and other
nations an approach for reducing greenhouse gases that would not
necessitate changes in the way we produce, deliver, or use energy.
A cornerstone of our carbon sequestration program will be a
national network of regional partnerships. This initiative, which I
announced last year, 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.
Hydrogen.--Another aspect of the President's Clean Coal Research
Initiative is the production of clean fuels from coal. A major priority
for the Administration is hydrogen 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 $16 million for research into new methods for making hydrogen
from coal.
Advanced Research.--To provide fundamental scientific knowledge
that benefits all of our coal technology efforts, our fiscal year 2005
budget includes $30.5 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 $23 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 million budget
request for natural gas research. Even in the absence of new
environmental requirements, natural gas use in the United States is
likely to increase by 40 percent by 2025. The National Petroleum
Council has estimated that 14 percent of our natural gas supply in 2025
will be provided from advances in technology that have not yet been
developed.
Our natural gas research program, therefore, is directed primarily
at providing new tools and technologies that producers can use to
expand and diversify future supplies of gas. The program will focus on
resources in high-priority regions to find and produce gas from non-
conventional and deep gas reservoirs with minimal environmental impact.
Emphasis will be 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 will continue the National Stripper Well Consortium involving
industry and the research community to investigate multiple
technologies to improve stripper well production and prevent continued
abandonment.
Natural gas importation and storage will also assume increasing
significance in the United States as more and more power plants require
consistent, year-round supplies of natural gas. We will continue a
nationwide, industry-led consortium that will examine ways to improve
the reliability and efficiency of our nation's gas storage system, and
we will initiate analyses to facilitate LNG importation and facility
sitting.
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
proven technically and economically feasible, has the potential to
shift the world energy balance away from the Middle East. 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 fiscal year 2005 funding level of $6
million.

OIL TECHNOLOGY DEVELOPMENT

The President's National Energy Policy 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
2005 budget request of $15 million reflects a reorientation of the
program toward those areas where there is clearly a national 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 2005 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. This technology
has the dual benefit of enhancing oil recovery and sequestrating
CO2. In fact, this technology could potentially be a key
method of meeting the President's 18-percent carbon reduction
commitment.
A high priority effort in fiscal year 2005 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. In addition, micro-hole technology has the
potential to greatly increase recovery of the almost 60 percent of oil
that remains in reservoirs after conventional production.
We will also work toward diversification of international sources
of oil supplies through bilateral activities with nations that are
expanding their oil industry, including Venezuela, Canada, Russia,
Mexico, and certain countries in West Africa. Bilateral and multi-
lateral work will include technology exchanges.

OTHER FOSSIL ENERGY R&D

The budget also includes $124.8 million for other activities in the
Fossil Energy program, including $106 million for headquarters and
field office salaries, $6 million for environmental restoration, $3
million for federal matching funds for cooperative research and
development projects at the University of North Dakota and the Western
Research Institute, $1.8 million for natural gas import/export
responsibilities, and $8 million for advanced metallurgical research at
our Albany Research Center.

PETROLEUM RESERVES

The Strategic Petroleum Reserve and Northeast Home Heating Oil
Reserve are key elements of our nation's energy security. Both serve as
resource options 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 (SPR) 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 rate of 130,000 barrels per day.
Because of the President's ``royalty in kind'' initiative, we have
achieved the Reserve's highest inventory level ever, now at 640 million
barrels. Our goal remains to have a full inventory of 700 million
barrels by the end of calendar year 2005.
The fiscal year 2005 budget for the SPR is $172.1 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.
Northeast Home Heating Oil Reserve.--We are requesting $5 million
for the Northeast Home Heating Oil Reserve, the same level as last
year. The two-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 to expedite the
bidding process. Installing and testing the electronic system
(including tests with prospective commercial bidders) have also been
major elements of the Fossil Energy program's role in implementing the
``e-government'' initiatives in the President's Management Agenda.
Naval Petroleum and Oil Shale Reserves.--The fiscal year 2005
budget request of $20 million reflects funds for continued operation.
The Rocky Mountain Oilfield Testing Center (RMOTC), established at the
Naval Petroleum Reserve No. 3 in Wyoming, will be funded at $2.1
million. We are considering transfer of Naval Petroleum Reserve No. 2
in California to the Department of the Interior. We 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 and the fourth (the Shallow Oil Zone) is expected to be
finished in fiscal year 2007.

ENERGY CONSERVATION

Now turning to the Energy Conservation budget, the Department
continues to allocate more funding for energy efficiency and renewable
energy programs than it does for fossil and nuclear energy activities.
Our overall Energy Efficiency and Renewal Energy (EERE) budget request
for fiscal year 2005 is a robust $1.25 billion. Of the $1.25 billion,
we are requesting $875.9 million for Energy Conservation programs
funded in the Interior appropriation. The Interior portion of the EERE
budget request continues to reflect priorities consistent with
Presidential initiatives, the Administration's Research and Development
(R&D) investment criteria and the Office of Management and Budget's
PART recommendations.
As you know, in 2002 we dramatically restructured the EERE program
in response to the President's Management Agenda by streamlining
program management and centralizing administrative functions with a
focus on developing consistent, uniform, and efficient business
practices. This focus is helping to assure that we not only fund the
right mix of R&D, but that we get more work done for every R&D dollar
spent in the lab.
EERE's R&D and technology deployment efforts funded by the fiscal
year 2005 budget support Presidential initiatives for increased energy
security, greater freedom for Americans in their energy choices, and
reduced costs and environmental impacts associated with those choices.
Vehicle Technologies.--America currently imports 55 percent of its
oil--a level projected to rise to 68 percent by 2025, and highway
transportation currently accounts for more than 54 percent of our oil
use. Alternative means of fueling highway transportation from domestic
resources is critical if we are to reverse this trend and improve our
energy security. The Vehicle Technologies program is focused on just
this challenge.
In fiscal year 2005, the Department is requesting $156.7 million
for the Vehicle Technologies program. Activities in this program
contribute to two cooperative government/industry initiatives: the
FreedomCAR Partnership (where CAR stands for Cooperative Automotive
Research) and the 21st Century Truck Partnership. In addition, the
Hydrogen Fuel Initiative builds on the FreedomCAR Partnership. Together
these initiatives comprise a collaborative effort among the three
domestic automobile manufacturers, five major energy companies and DOE
for cooperative, precompetitive research on advanced automotive and
hydrogen infrastructure technologies having significant potential to
reduce oil consumption.
Under the FreedomCAR Partnership, the Vehicle Technologies program
supports advanced, high-efficiency vehicle technologies including
advanced combustion engines, hybrid vehicle systems, high-powered
batteries, materials and power electronics. These critical technologies
can lead to near-term oil savings when used with gasoline or diesel-
fueled hybrid vehicles; they are also the foundation for the hydrogen
fuel cell vehicles of tomorrow. The fiscal year 2005 request fully
supports the FreedomCAR Partnership goals for Electric Propulsion
Systems, Electric Drivetrain Energy Storage, and Material and
Manufacturing Technologies.
The 21st Century Truck Partnership has similar objectives but is
focused on heavy vehicles. The partnership involves key members of the
heavy vehicle industry, truck equipment manufacturers, hybrid
propulsion developers, and engine manufacturers along with other
federal agencies. The effort centers on improving and developing engine
systems, heavy-duty hybrids, parasitic losses, truck safety, and idling
reduction.
Fuel Cell Technology.--In fiscal year 2005, we are requesting $77.5
million for the Fuel Cell Technology program. Fuel Cell Technology
plays an important role in both the FreedomCAR Partnership and the
Hydrogen Fuel Initiative. These initiatives seek to effect an industry
decision by 2015 to commercialize hydrogen-powered fuel cell vehicles.
To the extent that hydrogen is produced from domestic resources in an
environmentally-sound manner, hydrogen fuel cell vehicles will require
no petroleum-based fuels and emit no criteria pollutants or carbon
dioxide. Their development and commercial success would essentially
remove personal transportation as an environmental issue and
substantially reduce our dependence on foreign oil.
The program works to advance both fuel cell vehicle technology and
the hydrogen infrastructure needed to support it. This helps ensure
that hydrogen will be available and affordably priced when fuel cell
vehicles are ready for commercialization.
The major focus of the Fuel Cell Technology program continues be on
high risk research and development to overcome technical barriers,
centered on core research of key fuel cell components, with industry
focused on engineering development of complete systems. DOE provides
funds to major fuel cell suppliers, universities and national
laboratories to develop materials and component technology aimed at
lowering cost and improving durability, which are two major barriers to
commercialization. The fiscal year 2005 Fuel Cell Technology budget
also continues support of our Vehicle Validation effort, a ``learning''
demonstration program that integrates real-world operation of vehicles
provided by major automotive companies with the required refueling
infrastructure provided by major energy suppliers (the refueling
portion of this effort is funded through the Energy and Water
Development appropriation bill). Projects were selected from a major
solicitation in 2004 and this effort will play a significant role in
integrating fuel cell vehicle and hydrogen activities, measuring
progress and determining remaining challenges, leading to the 2015
commercialization decision. This past year we awarded a total of $75
million for 15 new fuel cell projects that support the FreedomCAR
Partnership and the Hydrogen Fuel Initiative. Through open competition,
the program has secured the country's leading scientists and engineers
and strong corporate involvement to implement the President's vision
that the first car driven by a child born today will be powered by
hydrogen.
Weatherization and Intergovernmental Activities.--In fiscal year
2005, we are requesting $364 million for Weatherization and
Intergovernmental Activities. Given increases in natural gas and
heating oil prices, it is especially important to fund programs that
will help reduce the energy costs of low-income Americans who spend a
disproportionately high share of their income on energy. The program
also promotes rapid deployment of clean energy technologies and energy
efficient products. This request supports the President's commitment to
increase funding for the Weatherization Assistance program by $1.4
billion over 10 years.
The fiscal year 2005 Weatherization Assistance program request of
$291.2 million will support the weatherization of approximately 119,000
low-income homes. The fiscal year 2005 request for other activities
includes State Energy Program Grants ($40.8 million), State Energy
Activities ($2.4 million), and Gateway Deployment ($29.7 million).
Building Technologies.--EERE's building 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. Our fiscal year 2005
request for the Building Technologies program is $58.3 million. 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.
The Building Technologies program has expanded work supporting
longer-term, higher-risk activities with a large potential for public
benefits. For example, last year we supported a $5 million investment
to expand our Solid State Lighting research activities, and we request
an increase of that funding to $10.2 million in fiscal year 2005. Solid
State Lighting represents one of the most exciting and promising new
approaches to efficient lighting systems, with potential to more than
double the efficiency of general lighting systems in the coming
decades. Our Solid State Lighting research will create the technical
foundation to revolutionize the energy efficiency, appearance, visual
comfort, and quality of lighting products.
Industrial Technologies.--The mission of the Industrial
Technologies program is to reduce the energy intensity of the U.S.
industrial sector through a coordinated program of research and
development, validation, and dissemination of energy-efficiency
technologies and operating practices. The industrial sector is the most
energy-efficient sector of our economy, due in part to the strong
economic incentives energy-intensive companies have to reduce their
energy consumption and costs.
In fiscal year 2005, we are requesting $58.1 million for the
Industrial Technologies program. As in previous years, the request
reflects the refocus of government R&D to higher priority activities
that align better with the Administration's R&D investment criteria.
Beginning in fiscal year 2005, we will shift a portion of funding to
focus on multi-industry ``Grand Challenges'' for next generation
manufacturing and energy systems technologies. These include efforts
for the steel, aluminum, glass and metal casting, and chemical
industries. These Grand Challenges will require high-risk investment
for high-return gains to achieve much lower energy use than current
processes.
Biomass.--This program receives appropriations from both the Energy
and Water Development (EWD) and the Interior and Related Agencies
Appropriations Subcommittees. Interior-funded activities focus on
developing advanced technologies for more energy efficient industrial
processes and co-production of high-value industrial products. EWD-
funded activities focus primarily on developing advanced technologies
for producing transportation fuels and power from biomass feedstocks.
Our fiscal year 2005 request for the Interior-funded portion of the
biomass program is $8.7 million. The request supports continuing R&D on
processes for the production of chemicals and materials that can be
integrated into biorefineries. Projects with industrial partners will
focus on novel separations technologies; bio-based plastics; novel
products from oils; and lower cost and energy use in biomass
harvesting, preprocessing, and storage. Additional work with industry,
universities, and the national laboratories will focus on improvements
to increase the efficiency of individual process steps; for example,
catalysis and separations.
Distributed Energy Resources.--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. 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 systems. In fiscal year 2005, we are requesting $53.1
million. This funding level reflects relative priority within our
overall energy R&D portfolio and is consistent with our fiscal year
2004 request. The program emphasizes integrated designs for end-use
systems, but also continues support for individual technology
components such as microturbines, reciprocating engines, thermally
activated devices.
Federal Energy Management Program (FEMP).--The federal government
is the nation's single largest energy consumer. It uses approximately
one quadrillion Btu of energy annually, or about 1 percent of the
nation's energy use. Simply by using existing energy efficiency and
renewable energy technologies and techniques, the federal government
can set an example and lead the nation toward becoming a cleaner, more
efficient energy consumer. FEMP alternative financing programs help
federal agencies access private sector financing to fund energy
improvements through Energy Savings Performance Contracts and utility
energy service contracts at no net cost to taxpayers. FEMP also
provides technical assistance to federal energy managers so they can
identify, design, and implement new construction and facility
improvement projects in areas such as energy and water audits for
buildings and industrial facilities, peak load management, and new
technology deployment, including combined heat and power and
distributed energy technologies.
As FEMP's core activities have matured, program efficiencies have
increased. In fiscal year 2005, we are requesting $17.9 million for
FEMP to continue meeting the goals of improving federal energy
efficiency.
Program Management.--Program Management 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 headquarters staff, six regional offices, the
Golden Field Office in Colorado in planning and implementing EERE
activities, as well as facilitating delivery of applied R&D and grant
programs to federal, regional, state, and local customers. In fiscal
year 2005, we are requesting $81.7 million for these activities.
Funding increases will be directed to federalize project management and
contracting activities that have been performed by national
laboratories, which have much higher overhead costs then our federal
staff. This Project Management Center initiative frees our laboratories
to devote more time to real research as opposed to management oversight
functions, and will help more program dollars remain focused on
research, development, and deployment.

ENERGY INFORMATION ADMINISTRATION

For the Energy Information Administration (EIA), we are requesting
$85.0 million, which is $3.9 million more than the fiscal year 2004
comparable appropriation. The fiscal year 2005 funding will provide for
the federal employee pay raise and maintain the other on-going data and
analysis activities, allowing EIA to continue disseminating 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 maintenance of modeling systems for both near and
mid-term energy market analysis and forecasting, and 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.
In fiscal year 2005, EIA plans to discontinue the Annual Electric
Industry Financial Report (EIA-412) that collects financial, plant
cost, and transmission line data from municipal, state, and federal
utilities and generation and transmission cooperatives. Funds provided
to EIA with this budget request and savings from the discontinuation of
the EIA-412 Report will be used to accomplish the following activities:
--Improve the quality and timeliness of natural gas data. As part of
this initiative, a new natural gas production survey will be
developed and fielded;
--Continue the Weekly Underground Natural Gas Storage Survey;
--Update our core electricity surveys to provide improved estimates
of fuel-switching capabilities and other critical parameters,
and enhance data quality;
--Update petroleum product surveys and systems to maintain data
quality and accommodate changes in fuel specifications;
--Provide better regional information in the Short-Term Energy
Outlook;
--Conduct independent reviews of energy data and analytical work to
improve its accuracy and timeliness; and
--Improve the voluntary reporting surveys and databases to collect
and disseminate information on greenhouse gas emission
reductions in accord with updated reporting guidelines that are
being developed as part of the President's Climate Change
Initiative.
EIA continues to aggressively expand the availability of electronic
information and upgrade energy data dissemination, particularly on the
EIA website. 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. Since establishing a fiscal
year 1997 goal to increase the number of users of its website by 20
percent annually, EIA has either met or exceeded this commitment in
each of the succeeding years. In fiscal year 2003, EIA accomplished a
23-percent increase as compared to fiscal year 2002, delivering more
than 2,600 gigabytes of data.
Mr. Chairman, and Members of the Subcommittee, this completes my
prepared statement. I would be happy to answer any questions you may
have at this time.

Senator Burns. Mr. Secretary, thank you very much. We have
been joined on the committee this morning by Senator Byrd and
Senator Bennett.
Senator Byrd, did you have an opening statement that you
would like to provide this committee? And thank you for coming
this morning.

OPENING STATEMENT OF SENATOR ROBERT C. BYRD

Senator Byrd. Thank you, Mr. Chairman. I count myself to be
very privileged to have you as the chairman of this
subcommittee as long as the Republicans have to be in control.
And I thank the witness for being here this morning.
Mr. Chairman, let me start by thanking you and the
subcommittee's distinguished ranking member, Senator Dorgan,
for convening the hearing. Many of the research activities
conducted by the Department of Energy, particularly the coal
research activity that is overseen by the Office of Fossil
Energy, are vital to the Nation's energy security and energy
independence. Having an opportunity to publicly review the
President's budget request is therefore time well spent. I
appreciate Secretary Abraham's being here this morning to
answer our questions; it is always nice to see a former
colleague, although he may not be so happy to see me after he
hears what I have to say about this budget.
Last month, the cover of Time Magazine contained a picture
of President Bush, along with a caption that read, ``Believe
him or not? Does Bush have a credibility gap?'' For several
reasons, I think the answer to that question is a resounding
yes. But as far as today's hearing is concerned, I offer up the
Department's fossil energy budget as exhibit A. Despite coming
to my State and personally promising the people of West
Virginia that he would spend $2 billion over 10 years on the
clean coal technology program, President Bush has, for the
fourth time in a row, simply walked away from that pledge. In
fact, for this budget, the President is now 40 percent behind
on his promise. If that does not constitute a credibility gap
then I do not know what does. Even a cursory review of the
President's fossil energy budget shows it to be an exercise in
arithmetic gymnastics. In an effort to hide the fact that the
President is seeking $50 million instead of $200 million for
the clean coal technology program, the budget request simply
blurs these line items. In an effort to hide the fact that the
President is proposing to cut the fossil energy budget by 32
percent in terms of new budget authority, the request props
itself up by counting $237 million dollars in previously
appropriated funds. And, in an effort to hide the fact that the
President is unable or unwilling to pay for his much-touted
FutureGen project without completely destroying the core
research and development program, the request refuses to tell
us where half the cost of that $1 billion project will come
from.
In short, the Office of Management and Budget has produced
a document that goes beyond the realm of credibility. Indeed,
this budget request is something I would expect to see coming
from the accountants at Enron, not a government agency.
Furthermore, this administration would love to be able to tout
the multiple billions in the now-stalled energy bill for the
promotion of coal. Given this administration's track record on
the No Child Left Behind, homeland security, international AIDS
and the farm bill, it hardly seems that this funding will ever
come close to a reality. I am very aware that this
administration would like to get an energy bill passed, any
energy bill. However, it seems more to fulfill a campaign
promise than anything else and it is time to stop passing bills
for the sake of passing bills.
Now, Mr. Chairman, out of fairness to the Secretary, I will
reserve further comment until he has had an opportunity to make
his opening statement and we can begin our questioning. But I
want him to know that I have no intention of letting this White
House get away with these distortions and half-truths. What
they are doing to the fossil energy program is unconscionable.
And while I understand that the Secretary must support this
charade, I think that in his heart he too knows that this is
not in the best interest of our Nation.
Thank you, Mr. Chairman.
Senator Burns. Thank you, Senator Byrd. Senator Bennett.
Senator Bennett. After that, I probably better be quiet. I
will reserve my comments for the question period, Mr. Chairman.
Senator Burns. Thanks, Senator Bennett. Senator Reid.

OPENING STATEMENT OF SENATOR HARRY REID

Senator Reid. Thank you very much, Mr. Chairman. Secretary
Abraham, you know, as a person, I really like you. But I voted
against your confirmation because I knew you would have no
authority to do anything other than what you were told by this
administration and that has proven to be true. I say to you,
Senator Byrd, you should feel good that you are getting 40
percent of what the President promised, because in Nevada we
are getting nothing that he promised. Zero. He showed up once
during the last campaign, and refused to take any questions
from the press. When he realized the election was getting close
he sent in some of his people, and issued statements, did
little TV things, saying that he would only allow nuclear waste
to come with good science. Then he did not even look at the
reports that were prepared for him. He okayed Yucca Mountain
quicker than Willie Mays covered centerfield. So, you should
feel fortunate that you are even 40 percent of what he said he
would do because in Nevada we got nothing.
Mr. Chairman, I really appreciate your holding this hearing
to discuss funding for the Department of Energy. And Spence, I
appreciate your being here, taking the abuse that you are going
to take.

YUCCA MOUNTAIN

I want to speak about an extremely pressing matter,
potentially affecting thousands of people who worked at Yucca
Mountain. And I am sure members of this committee do not even
realize what is going on out there.
My concern over this project as you know involves many
things. But what we have recently learned of the treatment
shown to workers who are digging the main test tunnel at Yucca
Mountain, they were exposed to silicosis and other substances
that basically are killing them. Hundreds and hundreds of these
people, because the Department of Energy and the contractors
involved, put these men's lives at risk. From 1992 to 1996,
workers were exposed to dust from drilling and mining
operations that were composed primarily of silica, better known
as quartz. Everyone knows that the Department of Energy should
have known, and did know, of these dangers.
One need only look at Tonopah, which is a short distance
away, which was a big mining camp in the early part of the last
century. After the camp was established the operators of those
mines would not hire what they called Americans, only
foreigners, because they knew they would die. Silicosis was so
bad in the mines at Tonopah that they only hired foreigners and
they died by the score of miner's consumption, silicosis.
Silicosis, though, is a 100 percent preventable, 100 percent.
But no precautions were taken at Yucca Mountain. None. Some of
the people wanted to wear respirators but the DOE would not let
them. It took too much time taking them on and off. They would
not let them. The mining industries learned a hard lesson in
Nevada over the years, Tonopah is one example. My father had
silicosis. I thought all dads coughed at night. But all dads
did not cough at night.
Less than 10 years ago, the Department of Energy, it is
hard to believe, would send these workers into Yucca Mountain
with nothing to protect them from the poison of silicosis, this
silica. There are many common safety protocols and equipment
which were ignored because the Department was too concerned
with meeting an unrealistic schedule and the contractors were
too interested in making as much profit as they could. And
there is plenty to be made. You know, that project, if it
continues, will be the most expensive public works project in
the history of the world; estimates now are about $85 billion.
But there is no price that anyone can put on the health of just
one of these sick miners. These men worked hard to dig and
excavate the tunnel under the assumption that the Department of
Energy would protect their health. The failure of the
Department of Energy to do this is a tragedy. We are holding a
hearing in Nevada during the March break. Dr. Chu has been
invited to testify, she is in charge of this program; she was
not there at the time but she has had the opportunity to look
at these records and even she recognizes how terrible it is.
And I think the record of protecting workers from these
foreseeable risks is just horrible and it is time we put a stop
to this blatant disregard for the health and safety. There are
people that are, as I speak, dying as a result of this.
Also, Mr. Secretary, I want to spend just a minute talking
about your railroad that you are planning to build through
Nevada. You have what is called a preferred rail corridor for
possibly transporting nuclear waste in Nevada, and I think you
should check to see what's going on in Europe and see they have
given up on transporting nuclear waste because the widespread
protest and delays. Then they only have to haul it a few
hundred miles and here we are talking about hauling it as many
as 3,000 miles. Germany even scrapped its nuclear waste
repository program following widespread protests of waste
shipments. Each shipment of waste is a potential terrorist
target, especially after September 11; we have learned how
vulnerable our Nation's transportation infrastructure is. But
you have been part of selecting a corridor called the Caliente
route. The Bureau of Land Management have made no evaluation of
possible impacts. This is something, another part of the rush
job, just like having these miners killed as a result of
working in these mines. This tunnel, I should not say mines.
But we in Nevada know what the rail line means. It means that
ranches that have been in operation since the time of the Civil
War will be put out of business. Take, for example, Gracian
Uhalde. Mr. Uhalde operates a ranch near Garden Valley in
northwestern Lincoln County, and the proposed line is going
right through his ranch. He was not considered--talked to, and
what you are proposing will ruin his ranch. This is a family
farm we're talking about.
So, Mr. Secretary, there are many challenges facing our
Nation, ranging from the war on terror to creating jobs to
cutting health care costs. It is time we stopped risking the
health of our citizens and wasting our Nation's dwindling
financial resources in this blind pursuit of the flawed Yucca
Mountain project.
Let me just say this. Everyone who serves on the
Appropriations Committee, wait until you see what the
administration has done with the energy and water subcommittee
budget. A half-a-billion dollars a year was not enough. This
year they are asking for about $900 million for Yucca Mountain.
It is going to take away from Devil's Lake, all the many things
we do in West Virginia, things we do in Montana, things we do
in Utah. There is not enough money when they want $1 billion to
dig in this hole some more. So, good luck on energy and water.
Senator Burns. Strong letter to follow.
Mr. Secretary, thank you very much. I did not know we were
going to get into a little old food fight up here but we try to
work through these things together if we possibly can, then if
we cannot we will try other avenues of approach.

FUTURE GEN

Mr. Secretary, we talked about FutureGen, let us delve into
that a little bit because we look at how it is structured, and
I think we have discussed the project and our shared commitment
to see it move forward. Unfortunately, the Department has not
provided the report demanded by December 31, 2003 in the fiscal
year 2004 conference report. And details remain extremely hazy
on that project. I would ask your Department to expedite that
report because there are a lot of us that are very interested
in this. It is research that is done so that we can use the
largest resource we have in this country to provide power and
energy for the United States. And that is why a lot of us are
very much interested in this. We have been tracking the issue,
but I think upon inquiry we hear three things from industry;
this is people outside the Department. First, they want to
commend you and your staff for doing an excellent job of
sorting through the technical and scientific implications of
the project. I think your sorting process on where we should be
going and stressing those points has been good. But they see it
as a meritorious project and want to lend their financial
support to the project if a productive path can be found. And
they are deeply concerned that OMB and the Department are
heading toward a financing and project management strategy that
brings into question the long-term viability of the project.
And I think we are getting that feeling up here on the Hill,
too. There is one thing that government does very well,
probably better than any other entity in the world, and that is
to throw good money after bad. And I do not think this
committee or this Congress should be doing that. But FutureGen
is very, very important. It is doing research in the right
areas.
So, would you want to comment on that? Can you update us on
the project and outline, give us your successes and also, do
not be afraid to mention the failures. After all that is what
R&D is all about we have more failures than we have successes,
and we should know about those.
Senator Reid. Mr. Chairman, could I have your permission to
have written questions propounded to the Secretary and have him
respond within a reasonable period of time?
Senator Burns. Are they going to be anything like your
opening statement?
Senator Reid. No.
Senator Burns. Okay. You may do that then.
Senator Reid. Thank you.
Senator Burns. Mr. Secretary, go ahead.
Secretary Abraham. Thank you. Thank you, Mr. Chairman, and
Senator Reid, I would be glad to respond to your questions.
Thank you.

FUTURE GEN

First of all, let me just return to a comment on FutureGen
that I made initially and just emphasize that it is, in our
judgment, the highest priority project. We launched the concept
of FutureGen because we recognized, looking into the future,
that it was not good enough to just simply make incremental
gains in terms of clean coal technology but to really try to
have a transformational change that would develop the kind of
power plant of the future that ensured that we transcended all
of this debate about whether or not we can operate coal-fired
generation in a fashion consistent with environmental quality.
We believe we can, we think this project will do more than any
other that we have in mind to accomplish that. I apologize to
the Committee, to the Congress, that the report, which was due
at the end of the year, has not been provided. I am happy to
report it will be provided today and I hope that will help to
address and clarify some of the issues that have been raised
about the path forward. We envision a program that will be
approximately $950 million over the next decade or so with the
Government share being very substantial, in the range of $620
million. We also believe that we will have some international
participation in this project, based on the highly successful
Carbon Sequestration Leadership Forum conference of last June
and the subsequent meetings, which I and others from the
Department have participated in with foreign counterparts who
have a great deal of interest in trying to work together with
the United States to perfect carbon sequestration and coal
gasification technologies. We believe that, of course, there is
an important role for the private sector to play. We would
envision that role being in the range of $250 million for this
project; we think that is a fair allocation of responsibilities
and we see already, that there is a strong industry coalition
that has been developing to participate in the project as well.
And so, I am highly confident it will be successful. You know,
this is going to be tough work. The research involved in
perfecting these technologies is, as you know, going to really
test our capabilities but we think it is well worth the
investment. I also believe that when we combine this work with
the other work we are doing on clean coal technology and carbon
sequestration not included in the FutureGen project, that in
the early part of the next decade we will find ourselves with
results that truly, as I said, transcend the current debate
about the use of coal and the environmental impact of the use
of coal. And that is our goal. I mean, this administration is
deeply committed to maintaining coal as the key component in
our electricity generation mix; it is 50 percent today, we have
250 years of reserves, we cannot afford to not use those
reserves and we are committed to making sure that the coal
industry is successful in staying as strong as it is today.
Senator Burns. Well Mr. Secretary, I agree with everything
that you said. But when we start making decisions up here on
how to allocate money, and where it should go, we have got to
have some kind of an idea of the work that has been done, the
success and the failure of it, if that be the case, and then if
we find a failed procedure or research that has failed to come
up with the right answers, then I have no problem in phasing
that out and using that money in another direction. It seems
like we do not ever hear of the failures, we only hear of the
successes and the failures we keep on funding. I think this
report is very, very important----
Secretary Abraham. Right.
Senator Burns [continuing]. To this committee. And since we
do not have it, it does not let us prepare in asking some
pretty straightforward questions on where does this committee,
working with you, take our research dollars.
Secretary Abraham. Sorry.
Senator Burns. And that is the point I am trying to make
here.
Secretary Abraham. No, and it is a well-taken point. I
appreciate it and, as I said, I apologize that we were delayed
in getting it here. We have been working hard to try to come to
an agreement within the administration on it. As you know, in
the FutureGen program, which was launched just last year, the
initial year's work was primarily a planning phase, a phase in
which----
Senator Burns. That is right.
Secretary Abraham [continuing]. We were focusing on the
environmental impact issues. And so, there has not been a lot
of research conducted to either succeed or fail yet, that comes
later. But certainly, your point is well taken about the timing
of this report's release.
Senator Burns. We have been joined by the chairman of the
full committee on appropriations. Senator Stevens, did you have
a statement?
Senator Stevens. No sir, I will just take my turn when the
time comes. Thank you very much.
Senator Burns. Senator Dorgan.
Senator Dorgan. Mr. Chairman, let me defer to Senator Byrd.
I know he has other things to do, why do not we have Senator
Byrd proceed with his questions, if he would like to, I'll be
here until the end of the hearing in any event. Would you like
to proceed, Senator Byrd?
Senator Byrd. I think, let us see, how many are ahead of me
here?
Senator Dorgan. There is not anybody ahead of you.
Senator Burns. No, I would go to Senator Bennett if you
want to.
Senator Byrd. I would be glad to wait my turn. I think I
have a little time in the budget committee, I will be glad to
take my turn.
Senator Burns. Senator Bennett.
Senator Bennett. Thank you very much, Mr. Chairman. I would
be happy to defer to Senator Byrd if his schedule requires it.
Senator Byrd. Thank you very much. Thank you.
Senator Bennett. Mr. Secretary, I cannot resist just making
a note, having listened to Senator Reid as he talked about the
desperate conditions in the building of Yucca Mountain. And I
made the note, I hope I made it accurately, that he said this
occurred during 1992 to 1996, when Hazel O'Leary was the
Secretary of Energy, rather than you. I think if there are any
in the audience that heard that attack on the actions of the
Department made while you are in the chair they should note the
historic fact that he pointed out that, in fact, neither you
nor anyone else in this administration was in a position of
power with respect to those issues from 1992 to 1996. And I
think, Mr. Chairman, we simply ought to perhaps highlight that,
which Senator Reid mentioned.

NATURAL GAS AS A FUEL OF CHOICE

Mr. Secretary, the fuel of choice is not coal but natural
gas. In the joint economic committee, we have had Chairman
Greenspan raise the various economic issues confronting this
country. I was a little surprised, as he went through the
standard statements of a central banker, talking about all of
the financial implications of interest rates and trade policy
and so on, for him to say that one of the most significant
economic challenges we face in the future is the shortage of
natural gas. He pointed out that natural gas, unless it is
liquefied, is one fossil fuel we cannot import, that the only
way we get natural gas in its natural form into this country if
we run low in our own supply, is through pipelines through
Mexico and Canada. But natural gas that is available anywhere
else in the world has to be liquefied and then brought in to
special ports that have been prepared for that. We are now in
the process of seeing the country build those kinds of ports at
fairly significant expense, to bring in liquefied natural gas,
even while, from a seismological point of view, we have a
tremendous amount of natural gas in the United States, if we
would just build the pipelines to move it around. The first
one, which is on our radar screen up here, perhaps because we
have the presence of the senior Senator from Alaska, is the
pipeline from Alaska. That would be very important to build and
will produce a significant economic impact for the entire
country if we get that natural gas pipeline built.
I know it is not your area, but it is the area of the
Interior Department, which this subcommittee is concerned with,
to open up natural gas supplies in Federal lands to make it
available. And I would be interested if not here, or if in your
other testimony, you could give us any information that you
might have as to what could be done to make natural gas more
available to deal with the problem Chairman Greenspan is
concerned about, and which I am, as the cost of natural gas
keeps going up, as the environmental community continues to
insist that it is the fuel of choice. Do you have any comments
on this situation?

NATURAL GAS

Secretary Abraham. Well, let me make a broad statement and
then touch on a few specific facts. There is no question that
in recent years, as a result of regulations that deal with the
environment, we have moved the power generation development in
this country in the direction of gas and that puts the stress
on the market that you are talking about. We have regulated
ourselves in the direction of gas on the demand side and we
have sort of regulated ourselves in the other direction with
regard to the supply side. That does not mean there is not new
gas being produced but there is not as much as the demand
levels are prompting. I have been encouraged by the recent
developments, the interest that has been shown in the building
of an Alaska pipeline. Last week I was on the West Coast and
heard from the Port Authority of Alaska about their plan to
possibly split the facility, or split the pathway forward to
use LNG, actually, to move some of the gas from Alaska to the
West Coast, California or lower 48, and move the rest to
Chicago through a pipeline. The interest of companies now has,
I think, been growing in terms of building that pipeline, so we
are encouraged by that.
But let me put some facts on the table for the committee
and urge you to think about these as you deliberate on, not
just this budget but on the broader policies the Senate
considers. Last year, actually in March 2002, I asked the
National Petroleum Council to do an updated study of natural
gas prospects and forecasts, for this country. They had done
one in the late 1990s; I felt it probably was out of date just
given what we were seeing in the market. They released the
results of that study in September of last year and it was
quite staggering. Even using very optimistic calculations about
gains and energy efficiency, and contemplating the arrival of
the Alaska gas to the lower 48 over the next 20 years, they
forecast the following: that where America had once been able
to supply all of its natural gas demands domestically and where
in recent years we have seen about a 10 percent import, mostly
from Canada, in 20 to 25 years, their forecasts would have the
United States importing about 25 percent of its natural gas
from beyond North America. And that is with optimistic
proposals.
Senator Bennett. That is even if we build the Alaska
pipeline----
Secretary Abraham. Yes, it is.
Senator Bennett [continuing]. And the two tracks you have
described?
Secretary Abraham. Yes.
Senator Bennett. I see.
Secretary Abraham. And the results of that, I would be
happy to submit for the record to the committee and also to the
joint economic committee, if that would be helpful, what it
calls for is, a continued effort to make sure we have diverse
sources of electricity generation, that we do not simply rely
on gas. That means the coal programs we are talking about here.
It means that nuclear energy has to continue to play a role,
which means we do have to resolve the question of what we do
with nuclear waste. It also means that we have to be capable of
importing larger amounts of natural gas. And that is why one of
the focuses in our Department since that report came out has
been on what groundwork needs to be laid in order for liquefied
natural gas facilities to be built, what do we have to do to
try to partner with other gas producing countries. And one of
the concerns, obviously, that comes from this is that we do not
want to find ourselves moving in terms of foreign dependence on
gas in the direction we have all been concerned about regarding
oil. So in December we convened a summit of all the major gas
producing countries, 20 countries came, talking about what they
could do, what they wanted to do, what their prospects were.
There are immense natural gas reserves around the world;
Australia has huge supplies, they would like to sell those
supplies to the United States. And so, I think we had an
excellent summit. We identified some serious challenges, one of
which, clearly, is the question of safety that comes out of
these kinds of issues. So, our Department is working now to try
to address some of those issues, to try to identify the safety
challenges and hopefully the solutions to them. But we also
need to look at the regulatory approach that will be taken to
make sure that we address the safety issues in a timely fashion
so that facilities can be built. But this is going to be, in
our judgment, a major, long-term strategic challenge for the
country. I do not think that the demand for gas is going to
abate; I think we are going to see this continue and if we are
not able to facilitate the import of LNG it is going to put
tremendous stress on what is already a pretty tight
marketplace.
Senator Bennett. Thank you for that answer and for the
thoughtful analysis that it demonstrates on the part of the
Department.
Mr. Chairman, again, in this committee, subcommittee, we
have to deal with the BLM and the Forest Service. On BLM land
there is a tremendous amount of natural gas that is being
prevented from coming to the market for a series of other
reasons unrelated to the Secretary, and I think we ought to
address that.

MOAB ATLAS TAILINGS

Mr. Secretary, I am taking advantage of the fact that you
are here, very quickly hitting a parochial issue that frankly
is not before the purview of this committee, it is the energy
and water committee. But taking advantage, as I say, of the
fact that you are in front of us, I want to raise the issue of
the Moab Atlas Tailings, to tell you that we are very concerned
about that. We hope that we can work with you. I will not ask
you a bunch of detailed questions about that because it would
intrude on Senator Byrd's time, but I will just trigger that
issue for you and let you know we will be in touch with you and
look forward to your cooperation in trying to help us get that
problem solved.
Secretary Abraham. Well, we look forward to working with
you. As you know, we are trying to move ahead to both produce
the draft environmental impact statement, which I believe will
be taking place in the April-May timeframe.
Senator Bennett. The quicker the better.
Secretary Abraham. We are hoping to have a final
environmental impact statement by November, with a record of
decision in December. And so we understand the importance of
trying to move this process ahead and we will do our best to
accomplish those timetables.
Senator Bennett. Thank you very much for your attention to
that.
Senator Stevens. Senator Byrd, my questions would follow on
the same line. Would you mind if I asked them now?
Senator Byrd. Not at all, Mr. Chairman. Go ahead, please.

ALASKA ARCTIC ENERGY OFFICE

Senator Stevens. Well, Mr. Secretary, the Congress created
an Arctic Energy Office, a branch of your Department's National
Energy Technology Laboratory. It was created to work with
Canada with the knowledge that a substantial portion, an
overwhelming portion of the remaining natural gas to be
produced from this continent under the American flag and the
Canadian flag would be available to us if we could really
conduct the research that is necessary to go ahead. I point out
that we do have some additional supplies in the world. The
Shtokman Deposit of Russia was presumed to be oil but it is
primarily gas now, I understand, and there is gas off our
shores that is going to be available to us. But the cost of
that gas in the long run is going to be overwhelming compared
to our own domestic gas if you compute in, which the
Congressional Budget Office does not, the affect of spending
money in the United States as opposed to buying our energy
overseas as we have done in the oil industry. But your budget
this year eliminates the funding, as we understand it, for the
Arctic Energy Office. We had over $635 million in the Fossil
Energy Research and Development last year. I am told that your
budget indicates that none of it will be spent in the Arctic.
What led to that decision?
Secretary Abraham. Senator, we have not made requests for
this line item either this year or last year, I do not think in
previous years in our submission because it has been a
Congressionally initiated project. That has been kind of the
policy on the submissions. That does not mean we do not feel
that the office has been doing important work. We would
certainly agree to that. And we have talked to Senator Mikulski
about this as well and look forward to further discussion on
how we might be able to maintain the effectiveness of that
office. But it is not in our submission because it has been a
congressionally initiated project.

ALASKAN ENERGY RESOURCES

Senator Stevens. Well, as we look through this budget, for
instance, in terms of the basic research in hydrates, gas
hydrates----
Secretary Abraham. Right.
Senator Stevens [continuing]. 590 trillion cubic feet
estimated in our State. The funding for the Department in terms
of that project has been reduced by $3.35 million. If you look
at the Syngas Ceramic Membrane project, that has been
eliminated in 2005. The President called for the sensitive
development of Alaska's oil and gas reserves but we find that
consistently through the bill, for instance, University of
Alaska in Fairbanks was at the forefront of some of these items
and that research, budget item two, has been eliminated. It
almost looked like someone decided that we did not want
Alaska's gas or other resources to be pursued at this time.
Secretary Abraham. Well, that is obviously not the way we
view it. We certainly see tremendous Alaska potential and look
forward to working together to figure out how to tap it. I
think that, with the hydrates budget, I believe we have
budgeted about $6 million in our submission; we think that is a
valuable area. We think that it has great promise, maybe not
immediate, but we see it as a potentially vast source in the
future, and given the demands that I mentioned earlier we are
going to need to be tapping unusual or new sources for our
future needs.

GAS HYDRATES

Senator Stevens. Well, on the gas hydrates it specifically
takes that money out. But beyond that, we put up $6.5 million
to conduct research for the development of the Syngas Ceramic
Membrane technology to enhance the Fisher-Tropsch gas
conversion concept and that project too was eliminated totally.
I just really do not understand this budget from the point of
view that we are looking to try to develop our own resources on
this continent, I think we should help Canada even more than we
are, as a matter of fact, because some of their areas are so
remote from their really population bases they are not that
interested in moving their gas. But our projects alone would
create 400,000 jobs in 3 years. And yet, we are still dragging
along. Congress has not enacted the bill we need to get it
started, but if there is a jobs bill in the United States, it
is to assist the development of the Alaska natural gas
pipeline. That pipeline, by the way, is to bring to market gas,
which has already been produced, reinjected into the ground;
there is absolutely no question that it is there. When we get
to the Interior Department, we are going to have some questions
about what we are doing there. But clearly Congress has seen
fit to withdraw almost 90 percent of Alaska's arctic that
belongs to the Federal Government; a portion of it belongs to
our State. I see some fine hand here. You have been a good
friend for a lot of years but I do not understand. You go
through this budget and look at the Alaska items, each one of
them has been reduced and that is the one area of great promise
as far as natural gas supplies in the United States.
Secretary Abraham. Senator, on the hydrates, our submission
last year was quite a bit lower than our submission this year.
We are trying to find a level where the Congress and the
Department are in agreement. We submitted a $3.5 million
request last year, this year it is $6 million. I think in that
sense, we certainly demonstrated our keen interest in the
project. There is no question this administration is certainly
firmly on record in support of the development of Alaskan
resources, as you well know.
Senator Stevens. You cannot do that without Federal money
in Alaska when you own most of the land in the area.
Secretary Abraham. Well, we are working within a budget in
which I have constraints and we are doing our best to try to
make sure we address as many priorities as we can. We are
anxious to work with the committee and with you to make sure we
come up with a final resolution that is as positive as it can
be. It is certainly not an attempt to focus on any one State or
one program. We are also, as you well know, committed to trying
to bring Alaska gas to the lower 48. I think the recent
developments, as I said in my answer to Senator Bennett with
regard to the interest expressed by Mid-America Company and
others in moving that project ahead, is a very positive one. As
you know, we are separately working on trying to expedite
permit processes on this. Obviously, some of that falls in
other agencies, but we are all trying to work together to
accomplish it.
Senator Stevens. Well, again, I am belaboring it. Arctic
Research, line item 296, that eliminated the Arctic Energy
Office, gas hydrates, chlorine wells; that eliminated $3.35
million in gas hydrates for Alaska Arctic research; $1.48
million, that eliminated the Arctic Energy Office. The
effective environmental protection concepts, that eliminated
the funds that have been used, $2.71 million, eliminated the
funds for evaluating environmental questions that have limited
production and exploration on the former National Petroleum
Reserve for number four. Those are all in your Department and
all very selective reductions in the Alaskan effort at a time
when we need more money.
My last comment would be, not only to you but to the
committee and Senator Bennett certainly said too many times,
but if we look at China, they build the roads out for the
companies that are drilling for their oil. But our way, we have
to use our State funds to build roads out of the Arctic areas.
If you look at the investments that have been made in Shtokman,
the Russian Government is putting infrastructure totally in
there. We are expected to go ahead of the game and put it in
there before we even get the approval of the Congress for the
gas pipeline. I think we put the cart before the horse. But the
main thing I am disturbed about is this elimination of research
money to find the ways to do it better, as we know we are going
to have oil and gas development at the Arctic. I cannot
understand eliminating the money in the very key areas that I
have mentioned.
Again, you are a good friend, I am not criticizing you
personally but the concept of reducing the budget for needed
infrastructure to assure our future energy supplies is
misguided. Thank you very much, Mr. Chairman.
Senator Burns. I think that is what we are talking about
and I think when I went back to my question on successes and
failures, as far as our R&D is concerned, is trying to set our
priorities.
Senator Byrd.
Senator Byrd. Thank you, Mr. Chairman.

CLEAN COAL TECHNOLOGY PROGRAM

Mr. Secretary, in October 2000, during his campaign for the
presidency, then-Governor Bush came to West Virginia. He told
the voters that if elected he would seek $2 billion over 10
years for the Clean Coal Technology program. The following
night in Boston during a nationally televised debate Governor
Bush repeated his promise. He said, I am going to ask the
Congress for $2 billion. Eight days later on October 11, 2000,
in another presidential debate, the Governor said, I think we
need to have clean coal technologies. I propose $2 billion
worth. Those are the exact words used by Governor Bush during
his campaign, $2 billion over 10 years, or $200 million per
year, for clean coal technology. By any conceivable measure,
that is a strong endorsement. There is absolutely no doubt in
my mind that that promise was key to the winning of West
Virginia's five electoral votes. If those five votes had gone
to Mr. Gore, you would not be sitting there in that chair. Yet,
despite all the promises, the President has not even come close
to proposing $200 million per year for the Clean Coal
Technology program. The first Bush budget contained $150
million. The second Bush budget contained $150 million. The
third Bush budget proposed $130 million. This budget, the
fourth Bush budget, has been cut back to a mere $50 million.
Instead of honoring his commitment and seeking $800 million
over the past 4 years, the President's requests have totaled
only $480 million. That is 40 percent less than what was
pledged. Compounding the problem is the outright deception that
the White House is engaging in with respect to this matter.
According to the fossil energy budget justification, and indeed
your own prepared statement, President Bush never promised $2
billion dollars specifically for the Clean Coal Technology
program. On the contrary, the new revised version of events has
him promising $2 billion for coal research overall. Such a
claim defies logic and, in my opinion, is simply not true. As
the chart that I have distributed, I hope it has been
distributed, clearly shows, when the President made his $200
million per year pledge, the coal research budget was already
$317 million; $95 million for the Clean Coal Technology program
and $222 million for other coal research programs. Therefore,
if the President wants us to believe that he was only promising
$200 million per year for coal research in general, then we
have to believe he went to West Virginia and campaigned on a
promise to cut the coal program by $117 million, or 37 percent.
That is absurd. That is absurd, at best.
Furthermore, when you spoke, Mr. Secretary, to the
employees of the National Energy Technology Laboratory in
Morgantown, West Virginia, on March 1, 2001, you told them that
you were there to: ``announce a down payment on that commitment
with next year's budget providing $150 million, new dollars,
for clean coal technology.'' You did not say that the budget
was providing $150 million for all coal research, which it did
not. You were very clear in specifying the Clean Coal
Technology program.
Now, my question to you, Mr. Secretary, is this. Given
these facts, what does the administration say to those West
Virginians who actually believed the President when he promised
$2 billion for the Clean Coal Technology program?
Secretary Abraham. Thank you, Senator. Let me, Mr.
Chairman? Mr. Chairman? I'm going to just need, if I could, a
little time here to respond in some detail on the numbers here.
Senator Burns. Okay.
Secretary Abraham. Let me give you a sense of how we see
this program evolving; let me give you a sense of what those
numbers look like. As you know, Senator, since taking office we
have now had two solicitations under the President's Clean Coal
Initiative. The first one was for about $313 million, that
would be the Government's share, and it has tracked at, I might
point out, about $1 billion of private investment and
partnership.
The second one, which just went out, was for $280 million;
went out just a few weeks ago. We are doing them on a 2-year
basis, every 2 years is our plan to put out one of these
solicitations. We are very confident that the newest one will
likewise attract a lot of private partnership and requests. We
envision doing these on a 2-year basis throughout the balance
of this 10-year period, which we have identified. And each of
these solicitations is at the $300 million level. Why did we
only ask for $50 million for these programs in this budget?
Because that is all we needed to complete this second
solicitation's $280 million total amount. But, by the end of
the 10-year period, when we have done five $300 million
solicitations, we envision that that will be $1.5 billion in
clean coal technology projects.
In addition, as you know, we have talked here already today
at great length about our proposed FutureGen program. As I
said, we will submit the report today, and I again apologize to
this committee for its delay. We envision the government's
share of this new Bush initiative to be about $620 million for
a combined total of $2.1 billion when you add those five
solicitations that we envision and the FutureGen program. Now,
in addition to that, and, you know, the definition of what is a
clean coal program obviously can be interpreted in different
ways, but as you also know we have significantly increased the
carbon sequestration research programs that the Department has
undertaken in the last couple of years. We strongly feel that
we must address the carbon sequestration issue as part of the
clean coal pathway forward, because we believe that we need to
address not just the issues of the emission of nox or sox or
mercury but also of greenhouse gases and carbon is obviously
the central focus of this initiative. Our budgets for that have
been in the range and the submission here, I think, is in the
$49 million range, in this $40 to $50 million a year range as
well. And I would argue that those dollars are all part of the
clean coal initiative that we have launched. And so, when you
add those up, you do exceed $2 billion over 10 years.
As for our submissions to date, all I would say is this: if
we take all the coal programs, which is what I think is listed
here, and our submissions versus the submissions of the 4 years
before, we have been here 4 years, we can go back the previous
4 years, the previous 4 year submissions for all coal programs
was about $668 million; in our first 4 years our submissions
are $1.5 billion. That is an average of $375 million a year for
all coal programs. If you extrapolate that to 10 years, if you
go out to 10 years, it is obviously a number close to $3.7
billion. And so, I look at this program as a very substantial
investment in clean coal and I think the case for the
submission is a strong one and we hope the committee will
support it.
Senator Byrd. Mr. Chairman, well, I will ask a second
question. First of all, I will say, when the President made
those statements, when he was looking for votes in West
Virginia, you were not onboard at that time, but we did not
talk about previous administrations or previous submissions. He
made an ironclad promise; that is the way we take words like
that in West Virginia. And the moving finger writes; and,
having writ moves on, nor all thy pageant nor wit shall lure it
back to cancel half a line, nor all thy tears wash out a word
of it. We take those promises to be bona fide and that they
come from the heart.
Now, Mr. Secretary, with all due respect to you, this
Senator and the people of West Virginia are not going to forget
those words. And we were not talking about all the other clean
coal programs when that promise was made. Let me read it again.
Let me just for the record read that promise again. The
President said, in October 2000, that if elected he would seek
$2 billion over 10 years for the Clean Coal Technology program.
Now, you are looking at the daddy of the Clean Coal Technology
program. I understand what those words mean. I understand what
the President meant when he said them. He said I am going to
ask the Congress for $2 billion. By the old math and the new
math, it was $2 billion.
Eight days later on October 11, 2000, in another
presidential debate the Governor said: ``I think we need to
have clean coal technologies. I propose $2 billion worth.''
Now, those are the President's words. And what you are saying
is not going to register with great accuracy in the mountains
of West Virginia. You are trying to bring in other coal-related
programs to get to $2 billion but it is still under-funding
clean coal technology.
Now, my second question. How can this administration say
that it is working to reduce our Nation's dependence on foreign
energy resources when it continues to undermine that objective
by cutting, cutting, these vital fossil energy research
programs?
Secretary Abraham. Are we referencing oil and gas programs
in particular?
Senator Byrd. Well, you are cutting this program. You are
cutting vital energy research programs and you are not keeping
the promise that was made. I get back to that, I am going to go
back to that every time.
Secretary Abraham. Senator, you know I have the highest
regard for you and on this one we just see the numbers
differently, I guess. I just want to reemphasize to the
committee, we have done two $300 million solicitations under
the President's new program. We do them on an every 2-year
basis, so there will not be another one for 2 years. We would
envision each of the remaining three to have approximately the
same level of financing of $300 million as the first two. If
you add the five up it is a billion-and-a-half dollars over 10
years. And if you add the FutureGen program, which I think is
inextricably tied to the Clean Coal Technology Initiative of
the President, then you are in the range of $2 billion. So I
believe we are fulfilling that commitment.
As to the other programs, I will acknowledge to this
committee as I did last year that we have offered very
substantial reductions from enacted levels on the oil and gas
programs. It is an interesting challenge we have because
obviously the Senator is exactly correct, as we see growing
dependence on foreign oil. And as I acknowledged to Senator
Bennett, we are seeing the need for increased imports of
natural gas. The reason we have submitted these numbers at this
level is related to the evaluations these programs have gotten
from the Office of Management and Budget. They have been deemed
ineffective and we are trying very hard to improve the
performance of these programs so that we can come both to the
Congress and the American people with programs that do not have
such ratings. I have a hard time making the case, justifying
the request for funds for programs where I am getting low
scores. These are major areas, we are not cutting them out but
we are scaling them back in the hope that we can make them more
cost-effective.
Senator Byrd. Mr. Chairman, I am going to desist now. I
will just shoot one final shot across the bow. A promise made
is a debt unpaid. That promise was made. The words are etched
in stone. The words of now-President Bush. We expect that
promise to be kept. It is not being kept. And, Mr. Secretary, I
feel for you because you have to try to skim over and put a
little new face on the promise after it was made. And you are
doing a good job, you are doing the best you can but that
promise was made by then-Governor Bush; the people of West
Virginia have not forgotten it and it is impinging upon the
credibility of the administration and it will not be forgotten.
We expect the administration to do better in keeping its
promises.
Thank you, Mr. Chairman.
Senator Burns. Thank you, Senator Byrd. And, Senator
Dorgan.

FOSSIL ENERGY BUDGET CUTS

Senator Dorgan. Mr. Secretary, I was interested in hearing
the questions by my colleague, Senator Byrd. As you know there
are reductions in the fossil energy spending and it comes at a
time when you indicate that based on the studies that you had
developed we will, in 20 years, be importing 20, 25 percent of
our natural gas from offshore; 68 percent of our oil will come
from imports. You know, this energy problem has not just
occurred on your watch; it has been the previous administration
and administrations before that. But we are smoking something
strange if we just sit around here and think that we can allow
this to happen. It is okay 20 years from now, 68 percent of the
oil comes from other places, troubled places in the world;
better ramp up now. You know, we are using natural gas, the
chairman and I were just talking about, we are using natural
gas the way we are using it because of policy choices. And now
we discover, well, we are going to have a problem in getting
enough natural gas and so we will have 25 percent coming from
other parts of the world. And I mentioned earlier, our fiscal
policy, that is on this administration's watch; it is
completely out of whack. And, you know, to sit around and
pretend that this adds up suggests none of us has gone to a
school that is worthy of being called a school. And so, I
understand budget cuts in the situation where you have this
kind of fiscal policy where you increase spending for defense,
increase it for homeland security and then cut taxes, cut taxes
and cut taxes again and say, oh, by the way, on domestic
discretionary let us just shrink the devil out of it. I
understand that approach but I think that we are really not
thinking very much as a country, fight terrorism and go to war
and say, oh, by the way, nobody has to pay for any of that, in
fact, you can all enjoy tax cuts. That might be politically
interesting but it is not interesting to me as a policymaker.
And with respect to budget cuts here, the one thing that occurs
to me in response to what Senator Stevens was talking about, I
believe it is the case, maybe you can confirm this for me, I
believe it is the case that the Office of Management and
Budget, which I believe probably ought to be abolished if that
were possible, the Office of Management and Budget, I think, as
a matter of policy, believes that any spending programs that
have been initiated here are by and large unworthy and
therefore should not be included in the budget. Would that be?
Secretary Abraham. No. I think that is an incorrect
statement.
Senator Dorgan. Okay.
Secretary Abraham. I would say this. When we submit a
budget to Congress, it is an effort to reflect the priorities
of the administration.
Senator Dorgan. Right.
Secretary Abraham. We fully appreciate that the Congress
would and does write its own budgets, which reflect its
priorities. And so, what you see in front of you, whether it is
my budget or anybody else's, is what reflects the spending
priorities that we would emphasize. That does not deem any of
the programs that Congress thinks important meaningless or
unimportant or ineffective but what we reflect in our budget
are the programs in the areas that we think are the maximum
benefit to the American people.
Senator Dorgan. It is a different way of saying what I
think I said. Does not OMB have a policy of saying that which
represents earmarks by the Congress will be zeroed out in our
submission?
Secretary Abraham. I do not know if that is a policy on
every single earmark but it definitely affects one-time-only
projects.
Senator Dorgan. Well, I am not even in the administration
and I know this. I believe that is OMB's policy.
Secretary Abraham. One of the frustrating things is that we
have a budget overall for our Department and we have a number
of congressionally-directed projects that are one-time
projects. They are funded in enactment and then we come in with
a budget that does not reflect them and people say, well, you
have cut the budget for this area.
Senator Dorgan. But that is not what Senator Stevens was
talking about. You ought to just blame OMB; if I were you, I
would. Just say well, I do not agree with OMB but I understand
why you cannot do that. But the point of my questions is not to
be critical of you, it is to say they have this goofy policy at
OMB that says anything that somebody wrote here on a continuing
program is marginally unworthy and it will be zeroed out
because we do not recognize that as having worth.
Secretary Abraham. Well, all I can say, Senator, is you and
I.
Senator Dorgan. Just take a shot at OMB just for a moment.
Secretary Abraham. You know, there are some of them here.
Look, the Congress likewise, though, certainly identifies
programs that I bring in here that we think are terrific and I
have noticed a similar outcome with regard to the funding of
them and so it does kind of work both ways. It was certainly my
perspective when I sat on that side of the room; however, that
Congress's ideas should have been given higher emphasis than
maybe is the case today.

ENERGY SAVINGS PERFORMANCE CONTRACTS (ESPC)

Senator Dorgan. All right. ESPC, the Energy Savings
Performance Contracts. The authority for that expired at the
end of September.
Secretary Abraham. Right.
Senator Dorgan. We know that saves energy, we know it is a
good investment. It has been widely supported by Republicans
and Democrats and yet we do not have an ESPC program in place.
So, how do we get there?
Secretary Abraham. Well, we need to; obviously, we would
like to pass an Energy bill. We would like to have the ESPC
program reauthorized. I share your view, as you know, on its
value. Obviously, I have spent a great deal of time over the
last several years working with you and Senator Byrd and
Senator Bennett and others to try to get an energy bill passed.
We need to do this. There are many components that are included
in this bill that do not receive all the headlines. This is one
of them. Our key ingredients in terms of meeting our Nation's
energy challenges that have been put on a slow track or in this
case been stopped dead in their tracks because we cannot get
the overall bill passed. So, I look forward to working with you
to accomplish that.
Senator Dorgan. But Mr. Secretary, the energy bill that has
been reintroduced in the Senate now does not any longer include
ESPC. So even if we pass that energy bill this afternoon----
Secretary Abraham. Right.
Senator Dorgan [continuing]. We would still be in the
situation where we do not have.
Secretary Abraham. We support ESPCs.
Senator Dorgan. But the question is, how will you help us
get there? Will the administration recommend this? It is not in
the budget, it is not in the energy bill, so how do we get
there?
Secretary Abraham. Well, I guess we will have to confer and
consider what the right approach is. I do not have a strategic
proposal today. Senator, I would be glad to continue the
discussion with you to see if there is a way to address this
issue.

ENERGY AND ENVIRONMENTAL RESEARCH CENTER

Senator Dorgan. All right. The Energy and Environmental
Research Center, obviously I have a parochial concern there,
but I think it is one of the crown jewels in energy research in
this country and, as you know, the funding for that has been
cut roughly 60, 65 percent. Give me your assessment of the
value of that center and is that cut, is that a kind of an OMB
push?
Secretary Abraham. Well, first of all, as you know we have
talked about this project for several years. There will be some
who might consider it an earmarked investment but I made the
decision some years ago that we would not treat it in that
fashion. I think it had established its credibility to justify
that broad program support as well as the work done both in
Wyoming and North Dakota. It has played a great role in terms
of development of advanced transport gassifer. Working with us
now in a U.S.-Australian climate partnership project that
involves lignites and other, which I think are useful things.
We have had a year in which we have had to be tough about
funding levels in our submission. And we also believe, frankly,
that these folks do very good work and will be able to attract
and be successful in being grant recipients to significantly
augment the direct support that we propose here. But obviously,
I am sure this is one we will work together on in the weeks
ahead.
Senator Dorgan. Well, I hope Mr. Garman and others have
visited EERC. I think by all accounts it leverages a great deal
of private investment and by all accounts, it is a terrific
institution and I certainly want to work to deal with that.

HYDROGEN FUEL CELLS

One final point. You and I have talked about hydrogen fuel
cells. First of all, I commend the President. I think it is
exactly right. Those in the environmental community who last
year said, well, the President is talking about the by-and-by
because they do not want to deal with the here-and-now. I will
not comment on the here-and-now except to say that if you do
not worry about trying to find a way not to run gasoline
through carburetors for the next 100 years, then you are not
really concerned about our energy future.
Secretary Abraham. Right.

HYDROGEN FUEL CELL VEHICLE PROGRAM

Senator Dorgan. And I think hydrogen fuel cells can be and
will be our future and so I support this program. I said last
year that I think it is probably more timid than I would like;
I would like a more robust Apollo-type program.
But the one point I wanted to make is with respect to
targets and timetables. If you do not know where you are going
you are never lost, as they say, and so I think with all of
these things you should try to aspire to have some targets and
timetables. And we in the Senate passed that with a pretty good
vote, an amendment that I offered setting up targets and
timetables, 100,000 vehicles by 2010 and 2\1/2\ million
vehicles by 2020. And I would like you to rethink the
opposition to that. Why on earth should the administration be
opposed to that? These are not hard targets; they are just
setting up goals. So, rethink that if you would. I do not
understand where the opposition comes from.
Secretary Abraham. Well, I will continue to talk to you
about this. I will make one comment about our concern. First of
all, we are trying to perfect a technology at this stage, not a
particular vehicle, and so our focus in terms of a roadmap, in
terms of milestones in that has been on the development of the
fuel cell technology, the hydrogen storage capacity, the
production of hydrogen and the sort of infrastructure support.
And I think we have a very aggressive timetable for all of
those. One of the concerns I would have about an early date in
terms of the deployment of vehicles is the fear that we would
actually move, and again, I recognize these are not mandatory
targets, but if you are pushing hard to deploy large numbers of
vehicles you may force the development of the wrong technology.
You may end up with not the ideal operating system but the one
that is the easiest to get to in that timeframe. We have tried
to resist that because we fear that it might be pushing us in
the wrong direction. There was a problem with diesels. I think
it was back in the 80s where there was a premature introduction
of technology that just did not fly. And now, as we look at
clean diesel, I see this previous experience as having had some
relevance.
So, those are some of the considerations that have gone
into our views. Let me just say this. We appreciate your
support and that of many other Members who have joined you and
other co-sponsors in pushing this program. When we talk about
these long-term issues of oil dependence, this program is, in
my judgment, and I think most who have looked at it outside of
the United States, it is increasingly the view of people that
hydrogen-operating vehicles are the way to transcend this issue
of dependence and at the same time address these environmental
concerns that make internal combustion engine usage problematic
in terms of meeting environmental standards. So, we certainly
appreciate the support the committee has given this and hope we
can work together to get further support in the future.

FUTURE GEN

Senator Dorgan. Mr. Secretary, the chairman has to go to
the budget committee and I have to go elsewhere as well. Let me
mention two points in just a second.
You spoke about FutureGen; you suggested $80 million would
come from foreign countries. I would like, if you could, to
submit to the committee where you think that is coming from,
number one. And number two; I would hope you agree that the
additional Federal funds will not come from core research and
development programs in the Department of Energy. We will talk
more about that at some point.
[The information follows:]

Foreign Investment in FutureGen

We have found great interest in FutureGen participation from
several countries including those who are members of the United States-
led Carbon Sequestration Leadership Forum (CSLF), representing at least
14 countries (Australia, Brazil, Canada, China, Colombia, Germany,
India, Italy, Japan, Mexico, Norway, the Russian Federation, South
Africa, and the United Kingdom) and the European Union. We have also
provided the CSLF countries with a general prospectus for international
participation that outlines the benefits of participation. We plan to
continue to engage interested countries in serious discussions with
respect to their cost-shared participation.

Senator Dorgan. I do want to just come back to the point of
OMB. I have not come recently to this question of asking
whether OMB is a valuable contribution to our government. In
the previous administration, I asked the same questions and I
hope perhaps you and I together could start a new discussion
about the value of this Federal agency, through which
apparently every single piece of paper now moves and from which
almost every policy emanates.
Mr. Secretary, thank you very much.
Secretary Abraham. Thank you, sir.
Senator Burns. We could move OMB up here on the Hill so we
would have greater access to them.
As I have heard the questions here, and sometimes--we were
doing some adding up here--our figures are a little bit
different than Senator Byrd's and I think they say, you have
got to look out for generation gaps. Working on an old pickup
one time, I had a young son as you well know, and I needed a
screwdriver. I said run in the garage, or the shop, and get me
a screwdriver. And he came out with a glass of orange juice,
and said: ``I found the orange juice, cannot find the vodka.''
Now, that is not a generation gap, that is a communications
gap. And on some of these things that are contentious I think
it would help both us and the Congress to seek ways to
communicate with you as we start down this road. If we want to
change policies, why do we have to do it in a formal hearing,
where you get a lot of dialogue but I think we are going to
have to work much closer with the bureaucracy. And whenever you
want to veer and change directions call us up and we will meet
with you and then we will figure out a way that we can do it
and the merits of the suggestion. I think we would only meet
about once a year and that is not very often.

OFF-HIGHWAY ENGINE PROGRAM

You have, once again, proposed to terminate the off-highway
engine, such as heavy equipment, railroad engine, research
offices. While off-road fuel consumption is far less than on-
road consumption, it does seem that there is significant
emission reduction potential, and in our part of the country
much of these emission reductions could be obtained by off-road
applications. It seems like you view these programs as low-
hanging fruit whenever we start examining them. I have examined
them and found otherwise. Can you elaborate, for the record,
the reasons you are proposing to terminate these programs?
Secretary Abraham. I would be glad to. Take it for the
record, if I could?
Senator Burns. Oh, for the record?
Secretary Abraham. I thought, yes.
[The information follows:]
Reasons for Proposed Termination of Off-Highway Engine Programs
Because the fuel savings potential from off-highway vehicles
research is an order of magnitude lower than the potential for on-road
vehicles, our R&D priorities emphasize on-road vehicle R&D. Since the
top priority of EERE is to reduce our Nation's dependence on foreign
oil, the FreedomCAR and Vehicle Technologies Program decided to focus
its R&D efforts on those technologies that offer the opportunities to
save the greatest amount of petroleum. This decision is supported by a
recent peer review of transportation R&D plans. In fiscal year 2004,
approximately one-half of the funds are going directly to makers of
off-highway equipment (construction, agriculture, mining, road
construction, and rail) for competitively awarded cooperative
agreements, while the other half goes to our National Laboratories to
conduct cooperative, cost-shared research with industry. Our R&D on
heavy-duty on-road vehicle engines does address many of the same
technical issues present in engines of off-road vehicles.

Senator Burns. Okay. I have some other questions on things
that have recently happened down there. I will tell you, Mr.
Secretary, I am very much interested in the fuel cell and fuel
cell technology in the areas of both carbon and hydrogen
because I think it is the way of the future. I think we are
closer to a hydrogen society than most people think. But people
do not know about it, and the results of it and what works and
what does not work. We need to phase out what does not work;
and let us go with what does work and what is practical. We up
here sometimes forget that there is still a market out there,
amd it still has to be market-driven. Can people afford it? I
do not see hydrogen stations popping up like gasoline stations.
Is the infrastructure there to support it? There are a lot of
things out there to think about whenever we start talking about
uses of alternative fuels.
Secretary Abraham. Senator, can I just?
Senator Burns. I am sorry, yes?
Secretary Abraham. Quick comment on the last point you
made, it is an excellent one, about the infrastructure and
without belaboring it I would just say one of the real
challenges that we foresaw when we began the hydrogen program
was that we for years in this country have been talking about
the idea of hydrogen, and others have too. There has always
been this challenge that on the one hand, you need the
infrastructure and on the other hand, you need the vehicles.
And the one, I think, most promising development of this past
year has been our capacity to bring together in one strategic
organizing oversight group both sets, the energy and the
automotive industries, which I think will allow us to move down
both of the pathways successfully. The problem we had, the
standoff, where people said, well, we will build the fueling
stations when they have the cars and the people who said, we
will build the cars when they have the fueling station.
Senator Burns. It is an interesting chicken and the egg. By
the way, the numbers that Senator Byrd was alluding to a little
while ago, we came up with the President's commitment this year
around $470 million. Now, you want to multiply that times 10
and you are going to go way over what he was talking about. The
use of prior year funds is around $140 million, so if you
subtract that it is still around $330 million, which is a
little bit more than what we have been told in some figures. So
I do not think there has been any breach of commitment here.

CLEAN COAL POWER TECHNOLOGY PROGRAM

Secretary Abraham. I would just ask, I know that a chart, I
got one, was handed out. I would like to submit some charts
that I think would put this in perspective as well and I think
demonstrate clearly that we are on a pathway to meeting the $2
billion commitment for the very specific programs I have
mentioned and that we are on a pathway over the 10-year period
to vastly exceed the kind of levels that I think.
Senator Burns. I would suggest that you do that to clarify
that.
[The information follows:]

CLEAN COAL POWER TECHNOLOGY FUNDING--COAL BUDGET (FISCAL YEARS 1997-FISCAL YEAR 2011)
[In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Fiscal year
-------------------------------------------------------------------------------------------------------------- Total
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006-2011
--------------------------------------------------------------------------------------------------------------------------------------------------------
Historical request............. 149.2 148.2 172.3 160.1 178.1 161.6 161.6 161.6 161.6 969.6 1,616.0
Historical enacted............. 152.7 147.6 167.3 168.3 295.3 186.2 186.2 186.2 186.2 1,117.2 1,862.0
Old CCPI Request............... ......... ......... ......... ......... ......... 150.0 150.0 130.0 50.0 ......... 480.0
FutureGen Request.............. ......... ......... ......... ......... ......... ......... ......... ......... 237.0 263.0 500.0
All Other Request/Total Coal ......... ......... ......... ......... ......... 159.8 225.1 237.5 183.0 2,008.0 2,813.4
Undistributed OMB Out years...
------------------------------------------------------------------------------------------------------------------------
Total DOE Coal........... ......... ......... ......... ......... ......... 309.8 375.1 367.5 470.0 2,271.0 3,793.4
========================================================================================================================
Old CCPI Enacted............... ......... ......... ......... ......... ......... 150.0 150.0 170.0 50.0 ......... 520.0
FutureGen Enacted.............. ......... ......... ......... ......... ......... ......... ......... 9.0 237.0 254.0 500.0
All Other Enacted/Total Coal ......... ......... ......... ......... ......... 246.5 263.0 271.5 183.0 2,017.0 2,981.0
Undistributed OMB Out years...
------------------------------------------------------------------------------------------------------------------------
Total DOE Coal........... ......... ......... ......... ......... ......... 396.5 413.0 450.5 470.0 2,271.0 4,001.0
========================================================================================================================
Old CCT Remaining Balances..... ......... ......... ......... ......... ......... 400.0 385.0 237.0 ......... ......... .........
--------------------------------------------------------------------------------------------------------------------------------------------------------

Senator Burns. Senator Leahy.
Senator Leahy. Thank you very much, Mr. Chairman and
Secretary Abraham, welcome back. I do not know which is better,
on that side of the dais or this side.
Secretary Abraham. I know which is better, but----

CLEAN AIR ACT--NEW SOURCE REVIEW

Senator Leahy. We had a certain scheduling problem. We had
a matter of some interest in judiciary committee and I was over
there. I wanted to come because of one issue. The past year-
and-a-half, your Agency and the administration have argued the
rollback of the new source review provisions of the Clean Air
Act would lead to increased efficiency, increased electric
reliability; something of interest to us especially in the
Northeast after blackouts, and would not lead to increased
emissions. Sort of the alchemist's best result; you would have
increased reliability, not increased emissions. But then the
Natural Resource Defense Council has some e-mails obtained
through the Freedom of Information Act. They are between your
senior staff and industry officials; industry officials
apparently helping them put together what the Department of
Energy would report, they showed just the opposite. They showed
no real affect on reliability and, worse yet, increased
emissions. What bothers me, certainly in my part of the
country, you have a real problem, the administration does, on
the Clean Air Act. People are worried their children are
drinking water that has mercury in it; they are not enthused by
hearing about more arsenic in water, all these kind of things.
And then it appears that your agency has made clearly
misleading arguments when, as these e-mails show, you knew they
were misleading, you knew there was not going to be increased
reliability and there would be increased emissions; apparently
nobody benefits but some of the industry people who helped
write them. What do you say about that?
Secretary Abraham. Well, I would be happy to answer for the
record in detail on the e-mails; I do not have them fresh in my
mind at this point. I would say that the----
Senator Leahy. We could give you a copy if you would like.
Secretary Abraham. Well, I will be happy, as I said, Mr.
Chairman, to answer that for the record. I think that our view
has been, and at least the recommendation of our Department has
been that as we consider this issue that the concern that
prompted--well, let us start back. A review of new source
review did not just begin on the day we took office. There has
been, as you know, a longstanding and somewhat frustrating
pathway of trying to resolve what the proper way to determine
what constituted appropriate repairs and replacements and whole
changes in facilities. We had concluded, and we have
consistently recommended, that we clarify this so that the
people who were withholding decisions on whether or not to
improve their facilities, whether or not to repair their
facilities and so on would know what the entire extent of the
work they would have to do would be. And, at least our
recommendations, in terms of the interagency discussions have
been consistent with trying to clarify the rules in a fashion
that would----
Senator Leahy. But the rules, you know, new source review
started back, as I recall, in 1977. I was brand new here in the
Senate at the time and I must admit, not being all that
familiar with it, Senator Stafford from Vermont had been one of
the architects of this. And then subsequent administrations
followed up and at the end of the Clinton administration there
were some fairly tough rules on that because all of these
plants had been grandfathered, saying, come on guys, we
grandfathered you at first but now it is time to do what
everybody expected you to do, that is, get less-polluting
plants. And we understand when the special review that Vice
President Cheney did, they said, well, why do not we just make
this open enough that, if it did not cost less than 20 percent
of the cost of overhauling the entire plant that would be
considered routine maintenance. Now that lets these power
plants off the hook pretty well; they do not really have to put
any pollution controls and maybe find some of the areas where
they are but most of these pollutants go up in the air and come
back down in my part of the country. You have 13 different
places in the proposed and the final NSR rule that you speak
about reliability and yet your own internal documents say it is
not a reliability issue. And these e-mails your staff has sent,
I do not expect you to see everything that goes through there;
lord knows you have got enough other things to do. But these e-
mails go back to 2002 and they say that your staff and your
Department knew that what they were saying was not true. Now, a
lot of industry officials wanted you to say it but even they
acknowledge were not true. And when you have people who are
concerned about the water they drink and the air they breathe,
as they should be, especially if they have young children or
grandchildren, they worry a lot about this. I mean, why not set
the record straight.
Secretary Abraham. Well, I will be happy to answer, as I
said, I will be happy to look at the e-mails and provide the
committee with a response. It has been our view, as I said in
the discussions we have had, in the intraagency discussions
which we have had that leaving facilities unrepaired, operating
at minimal efficiency in some cases, being unwilling to invest
in any kind of replacements and repairs because of fear that it
would trigger a much more expensive process and not knowing
whether it would or would not, was actually, in a very broad
sense, a negative impact, having a very negative impact but
people were not taking actions that would in fact improve the
efficiency as well as the emissions of their facilities.
Senator Leahy. But Mr. Secretary, a quarter of a century
ago the argument made by some of these companies was well, we
cannot go ahead and upgrade, we cannot do that overnight, we
need time; of course, we could make them less polluting, of
course we could do a lot to go along with the Clean Air Act but
we cannot do this overnight, we need time. Now, they have had
25 years. I mean, when is time enough? I am 63 years old and I
would love to still be alive when they finally get around to
doing what they were told to do in 1977. You, of course, are
much younger; it is conceivable you may live long enough to see
it but not at the rate they are going.
Secretary Abraham. Well, again, and I think it is not
surprising to me that if the process of moving forward is one
that is based on litigation enforcement proceedings versus the
passage of or the clarification of these rules that it does
produce this uncertainty. I mean, that is the issue we
attempted to and are attempting to address. How this process
plays out, obviously with the lawsuits that are going on and so
on it remains to be seen. I would say that between the
courthouses and the slowness of the process we probably are
going to continue to get older before anything changes here.
Senator Leahy. Well, you know, I realize this is a major
policy issue and you know me well enough to know that I do not
play ``gotcha'' at these hearings; I actually do want answers
and I realize this is something you want to answer for the
record. You and I have been friends for a long time and I have
a great deal of respect for you but I do not have respect for
this policy. And I would like you to respond for the record.
Secretary Abraham. Glad to.
[The information follows:]

Clean Air Act--New Source Review

The e-mail in question is a response from an employee of American
Electric Power (AEP) to a DOE employee who had posed questions to the
AEP employee concerning computer modeling of power plant maintenance
practices. DOE was interested in understanding the emission and energy
impacts of such practices because of regulatory changes under
consideration that might encourage greater efficiency, reliability, and
safety at U.S. power plants. The DOE employee sought the views of the
AEP official because of that official's current responsibilities for
strategic planning at a large utility, and because of his extensive
experience performing similar modeling in his previous capacities at
firms that performed such analytical services for the government and
for industry.
The view expressed by the AEP employee, who had included the views
of another AEP employee as well as a legal consultant to AEP, was
technical in nature, as one would expect for a discussion of modeling
assumptions. The AEP employees stated that they believed possible
regulatory changes concerning the maintenance of industrial facilities
would not result in power plants increasing their availability by 5
percent, and that plant changes resulting in 10-15 percent increases in
efficiency may include some measures that are not economic in current
markets. For pollutants with an emissions cap, like SO2,
they foresaw no change in emissions from changes in availability,
capacity, or efficiency, but for other pollutants ``improved
efficiencies will REDUCE emissions'' [their emphasis], and ``NSR
revisions should not have a negative impact [i.e., an increase] on
emissions at all.''
It is important to note that the NSR revisions related to ``routine
maintenance, repair, and replacement'' apply only to replacing
``identical or functionally equivalent'' equipment that does not change
the basic design parameters of the affected process unit. As stated in
the rulemaking, EPA believes that such changes ``are necessary for the
safe, efficient and reliable operations of virtually all industrial
operations.''
DOE believes that there is a large body of information supporting
the conclusion that there are current and emerging technologies that
could substantially increase the efficiency of existing coal-fired
power plants. In simple terms, efficiency is the ratio of useful energy
produced by a power plant to the energy input to the power plant. When
efficiency increases, we obtain more power for a given amount of fuel,
and a given level of emissions. So improved power plant efficiency is a
very desirable goal. Although we anticipate modest improvements in
power plant availability from NSR revisions, these changes are not
insignificant and could be crucial in a power shortage (blackout)
situation. Moreover, the NSR revisions could prevent a loss in current
levels of availability, which is also valuable. The Administration
received substantial input from industry in response to EPA's June 27,
2001, request for public comment on an EPA paper discussing NSR (the
NSR 90-day Review Background Paper). Comments by utilities and
consulting firms identified major losses in capacity and availability
that could result from a NSR policy that impeded the ability of power
plant owners to repair or replace equipment that had broken or was
about to break. For example, Southern Company predicted a loss in
capacity of 38 percent over 13 years; TVA estimated 32 percent over 20
years. These comments were echoed by those of WEST Associates, and the
National Rural Electric Cooperative Association, both of which cited
degraded generating capabilities resulting from the current
interpretation of NSR regulations. Public comments supporting the need
for regulatory change to support improved efficiency and reliability
were received by EPA from a host of organizations, including the
Tennessee Valley Authority, the American Public Power Association, the
Utility Air Regulatory Group, and the Electricity Reliability
Coordination Council
DOE has conducted its own analyses of how current and emerging
technologies could improve the efficiency of existing coal-fired power
plants. Improvements of up to 15 percent appear feasible. For
perspective, an efficiency increase of only 10 percent in the coal-
fired power plant fleet would provide as much electric power as 60
large new power plants, without an increase in emissions. DOE has
modeled a range of possible improvements in efficiency, availability
and capacity and determined that the energy, economic, and
environmental outcomes of such changes are almost universally positive.
EPA has conducted similar analyses and reached similar conclusions.
These energy and environmental analyses are discussed in the preamble
of the rulemaking, and their details are fully documented in the
publicly available regulatory docket for the NSR rule.
It is both necessary and appropriate for DOE to seek out and
consider the views of experts in these matters, just as it is
appropriate for EPA to do so. Decisions on these regulatory matters
have consequences that go beyond their direct cost and environmental
impact, and encompass energy policy and energy security issues.
Moreover, it would be simplistic to assume that all the information on
a complex issue would point in a single direction. With respect to the
e-mail from AEP, it expressed some views that differ from those
expressed by others and with our own views. There is nothing
extraordinary about that. It is the responsibility of government to
examine data and to weigh different opinions in the light of the
government's own analyses and determine the best approach to achieve
public policy objectives consistent with applicable law. That is what
was done in the case of this rulemaking.
DOE is confident that the changes in NSR will allow utilities to
make repairs and replacements that improve plant efficiencies and
benefit consumers. The old regulations discouraged utilities from
making these repairs and replacements. The new regulations, and the
flexibility they will bring about, will result in lower national
emissions, lower power costs, and greater efficiency from fossil-fueled
power plants.
Senator Leahy also remarked that many power plants are
grandfathered from putting on emission controls. Most power plants are
subject to State regulations to achieve federal ambient air quality
standards, and all coal-fired power plants larger than 25 megawatts are
subject to the stringent SO2 and NOX requirements
of Title IV (acid rain) of the Clean Air Act. Those facts
notwithstanding, the Administration has introduced legislation to
achieve an additional 70 percent reduction in emission of those
pollutants, as well as reductions in mercury emissions. That bill is
still pending in Congress, so EPA is proceeding under existing Clean
Air Act authority to obtain similar levels of emission reductions. It
is clear to me that these power plants are not ``uncontrolled'', and
that they will be further controlled in the near future.

Senator Leahy. And then, Mr. Chairman, depending upon that
answer I may have follow-up questions, if I might, based on
what he answers.
Senator Burns. Follow with anything you like.
Senator Leahy. You are such a fine man. I just want the air
to be as clean along the East Coast as it is in the beautiful
State, the Big Sky State of Montana.
Senator Burns. I will tell you what. The folks in New York,
I was just saying a little while ago, if you do not like those
plants shut them down.
Senator Leahy. But actually if that is what the Clean Air
Act was supposed to do is supposed to shut them down and
replace them with something else, now, as we found out in the
blackout a lot of this stuff has not replaced that should have
been and we do not seem to have the money. I wish that what we
had said was a lot of these plants were really going to supply
energy to Iraq because we voted enormous amounts of money to
replace their power plants, it would be kind of nice just to
replace a couple here in the United States. But thank you very
much.
Senator Burns. Well, the structure is a bit different, as
you well know. You can change that structure if you like.
I have a couple of other questions. I have got to go to
Budget, and I guess we are underway with a great deal of debate
on the sixth floor and we had better get to be a part of that.
Mr. Secretary, we have some other questions, if you could
respond please.
Let me emphasize, we really need that report. The
communication between us and the Department gets rid of a lot
of misunderstandings and figures, and we all need to use the
same calculator in order to get on the same page, if we can.
Secretary Abraham. I agree.
Senator Burns. I know there are some misunderstanding and
misinterpretation of what figures mean but the way we have it
figured out up here, and like I said, it is a matter of phasing
out some programs that are not working. There is no use
throwing good money after bad. And then redesigning and
retooling ourselves to pursue those things that are working,
never limiting our ability to change and to be flexible enough
to take advantage of the situations that we have in front of us
to better serve the energy needs of this country.
So, thank you very much for coming this morning.
Secretary Abraham. Could I, Mr. Chairman?
Senator Burns. Yes?

YUCCA MOUNTAIN--SILICOSIS ISSUE

Secretary Abraham. Just make one comment, please. Earlier
today, Senator Reid made some comments with respect to the
Yucca Mountain project that really did not take the form of a
question and then he had to depart. I do not want to leave open
any question in the minds of the committee as to the actions
which our Department has been taking. The issues that, as
Senator Bennett pointed out, that took place in the period of
the mid-1990s came to our attention, to our inspector general's
attention, in 2003. This is the silicosis issue, and we are
trying to move very aggressively to provide a program for
workers, for screening to determine the nature of any illnesses
that may have emanated from that exposure. We have brought the
University of Cincinnati in to be a partner in this effort to
do the screening programs for us and we take this very
seriously, as we do all safety issues that are involved in any
of our programs, whether it is in Nevada or elsewhere.

YUCCA MOUNTAIN--RAIL CORRIDOR

It was also commented on that the transportation, the rail
corridor in Nevada would go through the properties of
individuals. That is sort of inevitable. There is no route;
there is no rail line in Nevada to this very remote site for
obvious reasons. We had, of course, options of moving it
through densely populated areas and the preferred route which
we have designated is the one, which in our judgment has the
least potential impact on the populace of the State. And I
would just point out again to this committee, as I have to
others where I have testified on Yucca Mountain, that we have
an enormously successful track record, both in America and
throughout the world, on the transportation of radiological
materials. It's totally safe. There has been more nuclear
material of this sort transported in the United States and
Europe than all the transport that will ultimately take place
to Yucca Mountain without a harmful exposure. We intend to
maintain that safety record.

YUCCA MOUNTAIN--FUNDING

Last, I just want to say, the issue of financing. Yes, we
are asking for more money. This is a project that is many, many
years delayed. The Department itself is now the recipient of
numerous lawsuits from utility companies who have been told
that we would take responsibility for the waste that we have
not. And yes, we are ramping up the cost because Congress made
the decision to move forward with the project and now the costs
of doing that will begin to grow. But the good news is this: we
have been collecting money from utilities from the very
inception of this project for exactly these purposes. The
amounts of money we are seeking are consistent with the revenue
to the Federal Government that is being secured as a result of
the polluter pays kind of approach in which the utility
collects the money, sends the money to us and it is our job now
to use it. So, the amount is substantial but we are asking for
an amount consistent with the revenue that comes to the
government from the utilities for precisely this work.
So, I look forward to answering his questions but I did
want to make sure on the record that we did respond to some of
the issues raised.
Senator Burns. You can raise a lot of questions where
Congress, through legislation, promised to do something and
have not carried through. So, thank you very much Mr.
Secretary.
Secretary Abraham. 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

RECENT R&D ACCOMPLISHMENTS--FOSSIL ENERGY

Question. Obviously this Committee is generally familiar with the
Fossil Energy R&D work your programs support. Can you elaborate on a
few specific examples of successes that were achieved in the last
fiscal year? If you can, choose some examples in different Fossil
Energy program areas, and tell us what breakthroughs were achieved and
what the Federal role was in achieving those breakthroughs.
Answer. Fossil Energy has been actively supporting the development
of advanced technologies for the separation of hydrogen and carbon
dioxide from a gasification-based synthesis gas stream for carbon
sequestration and the hydrogen economy. Two such projects have had
major successes within the past year, one in the CO2 hydrate
and one in the advanced membrane area.
CO2 Hydrates
The CO2 hydrate project, jointly sponsored by FE's
gasification and sequestration programs, has been under development for
the past few years by a team consisting of Nexant, Simteche, and Los
Alamos National Laboratory (LANL). Over the past few years, fundamental
studies were performed by LANL in a batch and semi-continuous
laboratory-scale flow reactor system to confirm the concept and to
identify specific technological hurdles to scale-up. Recently, Nexant
successfully translated this information into a continuous-flow reactor
unit that will permit longer duration runs, demonstrate taking the
hydrate-forming reactions to completion through novel heat removal
design, and provide for better data collection. The unit was
successfully commissioned in the 2nd quarter of fiscal year 2004 and
has demonstrated sustained production of CO2 hydrates for
several hours. The data to be generated with this unit over the next
year will provide the basis for scale-up to a 2.5 MWe equivalent unit
for testing at a commercial gasification site. Negotiations are in
progress with Tampa Electric for testing this unit at its Polk Power
Station. This novel technology has potential for reducing carbon
capture cost to $8-9/ton of CO2 compared to today's cost of
about $40/ton.
Advanced Membranes
The advanced membrane project, sponsored by FE's gasification
program, is focused on the development of membranes that separate
hydrogen from a shifted synthesis gas stream. This past year, Eltron
Research, together with Noram Engineering, CoorsTek, and Sud Chemie,
have been successful at developing a membrane composition that has
achieved more than 100-fold increase in hydrogen flux over where they
were one year ago at process temperatures as low as 400 C compared to
900 C previously. These new results have tremendous implications on
the cost of coal-based hydrogen and have sparked considerable interest
within the team to further develop and scale-up the technology over the
next five years. These ``leap-frog'' improvements in membrane
performance have caused Praxair, an industrial gas company and hydrogen
supplier, to join the development team. Also, because of its interest
in hydrogen for chemicals production, Eastman Chemicals has committed
to participation in the latter phases of the project and has offered
its Kingsport, TN chemical complex as a site for field demonstration of
a unit producing almost 9,000 lb/day of hydrogen from a coal feedstock.
Incorporating this technology in a gasification plant will reduce the
cost of coal-derived hydrogen to an amount comparable to hydrogen
produced from natural gas when natural gas is priced at approximately
$4.00/MMBtu.

Oil & Natural Gas
A new lightweight, flexible drill pipe engineered from space-age
composites rather than steel was developed and commercialized. The
composite drill pipe is much lighter than steel pipe, it is more
flexible and can remain bent for extended periods of time, and can be
used in multiple drilling operations. These advantages significantly
reduce drilling costs. The improved economics and technological
advances could bring new life to thousands of idle wells. This drill
pipe was developed by ACPT a small firm in California that previously
built lightweight composite parts for race cars. The first commercial
order for this pipe came from a small independent oil and gas company
that is going into old wells, drilling horizontally, and giving new
life to their existing fields.
IntelliPipe^TM, a revolutionary new drill pipe with
built-in high speed two-way data transfer, has changed the state-of-
the-art in downhole communication speed. IntelliPipe^TM is
the key to establishing high-speed communication links throughout the
drill string to provide drillers with the industry's highest resolution
data feedback and control of downhole tools real-time. This advanced
telemetry transmission revolutionizes the way drilling is done now and
into the future. With IntelliPipe^TM, drillers gain access to
real-time critical information when they need it at volumes impossible
by today's standards. Drilling engineers receive an unprecedented one
million bits per second (similar to a Local Area Network) of real-time
streaming information that improves monitoring and measurement of all
vital aspects during downhole operations. It also allows data to be
sent the other direction, giving oil and gas drillers the capability to
direct the drill bit more precisely toward oil and gas bearing sweet
spots and away from less productive areas almost instantaneously. This
invention will greatly improve the speed of drilling operations, reduce
environmental impact of drilling, and significantly improve safety.
This will enhance the efficiency of oil and gas wells and reduce the
number of wells needed to produce a reservoir.
Tinkering with a device to jumpstart compression in a gas well, a
pair of West Texas dropouts-turned-wildcatters invented a four chamber
pump they say can be used as a replacement heart just as easily as an
oil well pump. Their invention caught the attention of doctors at the
Texas Heart Institute in Houston, who asked for a prototype for
preliminary tests as a blood pump. The pump is designed to operate much
like a heart. It is simple to operate, lightweight, can be made of
virtually any material, and does a nearly complete intake and sweep of
fluids in one 360-degree motion. The pump eliminates valves, cuts
overheating by reducing revolutions per minute, simplifies power
requirements, overcomes clotting problems, does not destroy as many red
blood cells, and eases lung pressure complications. Another advantage
to the versatile pump is that it will allow for a revolutionary
reduction in the size of devices that would use their invention--
enabling, for example, air conditioning systems now available only in
huge airplanes to be comfortably fitted in a small car. In developing
countries without ready sources of electricity, this simple pump could
result in major improvements to the quality of life.
In partnership with the Department of Energy, Venoco Inc. and the
University of Southern California developed a suite of new technologies
enabling them to find and tap into 80 million barrels of previously
overlooked oil deposits in the Santa Barbara Channel, simultaneously
improving the environmental impact of production operations. The new
non-invasive technologies improved the sub-surface understanding of the
Monterey formation and allowed Venoco Inc., an independent operator, to
overcome a two-decade old ban on new seismic surveys in California's
offshore region. Applying state of the art technology, production in
five old wells has increased by an additional 600 barrels of oil per
day. ``Seep tents'' positioned on the ocean floor capture naturally
occurring oil and gas seeps. This additional effort has eliminated the
oil sheen on the ocean, reduced pollution of the seawater, made the
Santa Barbara Channel healthier for marine mammals, and eliminated new
tar on the beaches. Both Venoco and the University of Southern
California have very aggressive technology transfer and outreach
efforts to other U.S. producers and researchers.
Bluff Exploration developed user-friendly software for neural
network solving of complex seismic and reservoir characterization
problems. Intelligent Computing System (ICS) uses clustering,
artificial neural networks and classical regression methods to combine
seismic, geologic and engineering data for predicting reservoir
potential. The integrated software modules are designed to be used by
small teams consisting of an engineer, geologist and geophysicist. They
are flexible and robust, working in many environments. The tools are
used to transform seismic attribute data to reservoir characteristics
such as storage, permeability, probable oil/water contacts, structural
depth, and structural growth history. When these reservoir
characteristics are combined with neural network solvers, they can
provide a more complete description of the reservoir. This leads to
better estimates of hydrocarbons in place, a real limits, potential for
infill or step-out drilling, and ultimate producible reserves. The ICS
software was used extensively in the Red River formation of the
Williston Basin in North Dakota. Proved oil reserves were increase by
3.25 million barrels and daily production increased by over 2,600
barrels. Horizontal wells in this formation are expected to produce
over 1 million barrels of incremental oil by 2005. The ICS software is
not specific to any particular region or depositional types. Users can
apply their down databases to populate the programs and generate
predictions. Luff Exploration has presented the results of this effort
at many national conferences and regional technology transfer
workshops. Their software and instructional manual is free to the
public.
The Spraberry Field has earned the dubious title of being ``the
largest uneconomic field in the world,'' because it holds more than 8
billion barrels of oil under six Texas counties, but has produced 750
million barrels of oil, or less than 10 percent of the original oil in
place. Department of Energy funding allowed the risk-taking needed to
challenge ``conventional wisdom.'' Pioneer Natural Resources Co. and
Texas A&M teamed up to identify the most effective recovery technique
for Spraberry. New imaging and horizontal coring techniques were
applied to the formation, revealing three major fracture networks, the
spacing of the fractures and the direction in which they ran. The
information was surprising and important. They redesigned an effective
water flood approach that has increased the reservoir pressure,
increasing oil production from 15 barrels of oil per day to 80 barrels
of oil per day. Cumulative incremental production after 2.5 years is
estimated to be over 150,000 barrels of oil. Effective technology
transfer efforts resulted in other operators in this field applying the
same process. Estimates indicate recovery of an additional 15 percent
of Original Oil In Place over the next 20 years, or 1.5 billion barrels
of incremental oil. Following the water-flooding period, Spraberry will
still hold the potential for successful CO2 flooding as
demonstrated by the pilot study.
Question. Since R&D is as much about failure as it is about
success, can you offer any examples from the last year of Fossil Energy
research that has failed to produce the desired result?
Answer. Examples of research that did not produce desired results
are:

Coal & Power Systems
One example deals with the development of effective means for
storing enough hydrogen on board fuel cell powered cars to provide an
acceptable range without taking up an excessive amount of room. This is
a critical goal of FE research. Carbon nanotubes were proposed as a
likely answer to this problem and initial results from different
laboratories were highly encouraging. More recently, closer examination
by both experimental and computational science provides a more sobering
assessment--at their present state of development carbon nanotubes fall
considerably short of DOE goals. Reaching the desired result along this
line of attack still requires a major breakthrough that has so far
eluded the talent of the best in nanotube research.

Oil & Natural Gas
The ``Hot Ice No. 1'' well recently drilled in Alaska did not
encounter methane hydrate as expected, but it did produce information
that should help to overcome the substantial technical obstacles to the
eventual commercial production of this abundant energy resource. The
well also provided an opportunity to showcase several unique and
previously untested Arctic drilling technologies that can be expected
to play a role in future Alaskan drilling operations. The absence of
hydrate at the site is in itself a significant scientific finding.
Based on detailed evaluation of log data from adjacent offset wells,
the Hot Ice No. 1 well was expected to encounter a significant
thickness of reservoir quality sands in the Upper West Sak unit. The
sands were there just as expected but we found free gas and water
rather than hydrate in the hydrate stability zone. Figuring out why
will require a thorough post-mortem analysis of the core, log, and
seismic data from the well. Although disappointed by the missed
opportunity to evaluate a hydrate-filled formation, the researchers
believe that a tremendous amount of knowledge will be gained for future
hydrate exploration through analysis of the unique suite of collected
data. Clearly, the model for distribution of methane hydrate on the
North Slope may be more complex than previously thought. Although the
hydrates expected were not found, a suite of technologies were advanced
that could ultimately make exploration for and production of the Arctic
methane hydrate resource economically feasible. These new technologies
can be taken to future hydrate research sites where they will
ultimately aid in building a better characterization of this
potentially important frontier resource. In addition, the geologic
knowledge gained from an ongoing comprehensive analysis of the core,
log, and seismic data from the well will improve models for the genesis
and distribution of hydrate accumulations on the North Slope
Another example is in the area of seismic wave stimulation
technology. This has the potential for being a relatively low-cost
procedure for enhancing oil recovery in depleted fields, or returning
some shut-in wells to production. A project to develop a novel downhole
sonic stimulation tool to increase production resulted in a design
error indicated by 2 bench-scale test failures, and finally failure in
a field test where the tool became stuck in the well bore. This project
focused on a very underdeveloped technology that has a high potential
to improve oil recovery.
Question. What did we learn from these failures?
Answer. Based on the knowledge and experience gained in nanotube
research, we learned that a better route to achieving DOE goals might
be seen by exploiting a new class of materials, the so-called metal
organic frameworks. Higher storage capacities have already been found
with one example of this material than the best yet achieved with
nanotubes. Following this lead is a more productive use of available
resources. In addition, we have found that we can apply the expertise
and experience that we obtained in our investigations of nanotubes for
hydrogen storage to more rapidly assess and evaluate the potential of
metal organic frameworks. The ability to apply the expertise and
experience from previous efforts will result in much more cost-
effective research in the development of hydrogen storage materials
capable of achieving the DOE goals.

RECENT R&D ACCOMPLISHMENTS-ENERGY CONSERVATION

Question. Obviously this Committee is generally familiar with the
Energy Conservation R&D work your programs support. Can you elaborate
on a few specific examples of successes that were achieved in the last
fiscal year? If you can, choose some examples in different Energy
Conservation program areas, and tell us what breakthroughs were
achieved and what the Federal role was in achieving those
breakthroughs.
Answer. Several success examples are provided below:

Buildings Success
--With support from EERE, Cree Lighting, an American company based in
Research Triangle, North Carolina developed a 74 lumen per watt
white-light LED--that's higher than a compact fluorescent lamp
(CFL) and five times better than incandescent;
--In this project, two critical R&D advances were made--
--it is the first high-power LED built on a silicon-carbide
substrate and
--it incorporates an innovative packaging design to manage heat.
--This laboratory prototype was tested in 2003. It is estimated that
products incorporating this technology could be in the consumer
market by 2006 or 2007.

Distributed Energy Success
--The Solar Turbines Mercury 50 turbine was developed under the
Advanced Turbine Systems Program (ATS).
--One goal of the ATS Program was developing turbines with less than
9 parts per million (ppm) NOX.
--The commercially available Mercury 50 is available with a guarantee
of 5 ppm NOX.
--The Mercury 50 has over 40,000 hours of operating experience at 6
field sites.
--It is noteworthy that this success does not represent a single
technological advance achieved with fiscal year 2003 funds. (In
fact, no funds were provided in fiscal year 2003.) Instead, it
represents the culmination of more than a decade of Federal
investment, totaling more than $200 million, which came to
commercial fruition on fiscal year 2003.

FreedomCAR and Vehicle Technologies Success
--The program's research reduced the cost estimate for a high-power
25kW battery system from the 1999 estimate of $3,000/system to
$1,180/system.
--This work forms the basis for one of the nine FreedomCAR
Partnership 2010 goals, to reduce to $500 the production cost
of a high power 25kW battery for use in light vehicles,
enabling cost competitive market entry of hybrid vehicles.

Fuel Cell Success
--DOE sponsored fuel cell research achieved a modeled cost of $225/kW
for a hydrogen-fueled, 50 kW fuel cell power system, down from
$275/kW in 2002.
--$225/kW includes the fuel cell stack, hydrogen storage, and all
ancillary components for air, thermal, and water management.
(Does not include vehicle drive components such as the electric
motor)
--The cost estimate is derived from analysis of best current
technology across the industry and assumes high volume
manufacturing (500,000 units/year). The estimate does not
correlate to any one manufacturer.
--Cost improvement has primarily occurred through research that led
to reductions in platinum loading, and the introduction of
composite bipolar plates

Industry Success
--Working with industry through activities like Best Practices, EERE
helps the country's most energy-intensive industries improve
their energy efficiency, environmental performance, and
productivity.
--Many BestPractices technological advances and practices have helped
companies reduce their natural gas consumption, per unit of
output.
--For example, EERE's Industrial Technologies Program provided
technical assistance to Progressive Powder Coating, a company
based in Mentor, Ohio, to install an infrared (IR) oven in
between the powder coating booth and the convection oven on its
production line. The IR oven allowed the plant to increase its
conveyor line speed and increase production by 50 percent. In
addition, the plant was able to reduce its natural gas
consumption by 10,500 MMBtu, yielding annual energy cost
savings to the company of approximately $54,000.
Question. Since R&D is as much about failure as it is about
success, can you offer any examples from the last year of Energy
Conservation research that has failed to produce the desired result?
Answer. Research and development in EERE is a process of testing
and developing ways to overcome barriers to technology performance and
market adoption. Each program within the EERE portfolio has developed a
multi-year program technology plan that presents multiple pathways and
performance gateways essential for selecting the most cost-effective
and technologically-feasible solution and reducing planned performance
risk. In every program, failure accompanies success as a necessary
component of conducting high-risk research.
Examples of EERE research that failed to produce the desired result
and were closed out include:
--In the FreedomCAR and Vehicle Technologies Program, two separate
projects aimed at producing very small holes (50 microns) for
diesel fuel injector orifices were developed in recent years.
These projects were conducted: (1) at Argonne National
Laboratory (ANL) using a deposition approach and (2) at Oak
Ridge National Laboratory (ORNL) using a sintering approach.
Both projects were conducted for three years. At the end of
fiscal year 2003, because of the superior performance results,
favorable feedback from industry stakeholders, and the
Department's engineering judgment, the project at ANL received
continued funding while the ORNL project was discontinued.
--Another example of an R&D project not meeting its goals is the work
on matrix materials cost-reduction of the wheel substrate
material for enthalpy wheels in our Buildings Technology
Program. This project was terminated after the Department
determined that the biggest impact of reducing the cost of an
enthalpy wheel lies in the cassette design, rather than the
matrix materials that had been the focus of this project.
--In 2001 and 2002, research on Advanced Materials for Industrial Gas
Turbines was being performed. The research involved the use of
Titanium Silicon Carbide in rotors, inlet nozzles, and inlet
scrolls. In late 2002 it was jointly decided by both the
contractor and the Department that sufficient technical
progress had not been made to continue the research and no
further funding was provided in fiscal year 2003.
--A project was terminated in the mining area of the Industrial
Technologies Program that involved microwaves. It was
determined that the research could not prove that this
technology could be economic in the mining industry, so the
project was terminated and other avenues will be explored.
Question. What did we learn from these failures?
Answer. Albert Einstein once said, ``If we knew what it was we were
doing, it would not be called research, would it?'' All of EERE's
research programs gain valuable information from both successes and
failures, and many research failures by their very nature redirect
technology pathways towards success and increase the likelihood of
achieving program goals and objectives.
In nearly all instances, EERE's past ``research failures'' provided
important information that significantly impacted the projects' multi-
year technical plans. In some cases, such as the vehicle technologies
example, the differing results of two research projects helped the
project manager decide which technology pathway to pursue in the years
ahead. In other cases, such as the mining project in the industrial
program, the research findings convinced the project managers that the
costs of continued research were not warranted given the limited
economic potential for the technology and the project was terminated.
EERE conducted a rigorous Strategic Program Review in 2002 that
analyzed the entire EERE portfolio and pointed out that redirections
and project terminations are a necessary part of any research plan.
Some failures resulted in lessons that could be applied across the
entire office, rather than just one project or program.
EERE has learned a number of lessons from its experiences over the
years, including:
--Open, competitive solicitations can often, depending on the
technology and its stage of deployment, be an effective way to
identify promising research avenues. EERE has increased its
emphasis on competitive solicitations in recent years.
--Multiple research pathways are important to pursue to increase the
likelihood of success and to broaden the range of learning.
--Realistic, clear, quantifiable goals, metrics, and milestones are
necessary components of successful RD&D pathways.
--Carefully developed go/no-go decision points focus efforts and
provide for the opportunity for termination or graduation of
research projects.
--Public-private partnerships are critical for effective technology
transfer.

MOUNTAIN STATES ENERGY (MSE) CONTRACT EXTENSION

Question. As a follow-up to Monday's [March 1, 2004] conversation,
it will be helpful to get the Department on record regarding MSE's
contract. Mr. Secretary, we have previously discussed extending the DOE
contract for the Western Environmental Technology Office (WETO) housed
at the Mike Mansfield Advanced Technology Center. I want to thank you
for your attention to this matter and ask that you have your staff work
with mine to ensure the great work performed by WETO continues. Can you
please provide an update?
Answer. MSE has submitted a contract extension to the Department of
Energy. The Office of Environmental Management has conducted a
preliminary review of the request for extension and determined further
evaluation needs to be made.

FOSSIL ENERGY--FUTURE GEN

Question. FutureGen continues its march toward possible demise.
Last year you (and you alone, I might add) worked to add $9m to get the
FutureGen program started. This year the budget allocates $237 million
to the project, however, this amount cannot be spent in fiscal year
2005. Industry is concerned that the Government must make a substantial
investment to get the program moving along. Unfortunately, the
Department used $140 million of prior year Clean Coal Technology (CCT)
funding, and an approximately $120 million of reduction in other clean
coal research to fund FutureGen. This rob-Peter-to-pay-Paul solution
has not been met with industry support. Considering industry is
expected to bring hundreds of millions in investment to the table, they
are noticeably concerned that the federal government is not stepping up
to the table with ``new'' money to fund FutureGen.
Mr. Secretary, on numerous occasions we have discussed the
FutureGen project and our shared commitment to see it move forward.
Unfortunately, the Department has yet to provide the report demanded by
December 31, 2003 in the fiscal year 2004 Conference Report, and
details remain extremely hazy on the project. The Committee is anxious
to see your plan.
We have been tracking this issue closely, and upon inquiry, we hear
three things from industry: (1) they commend you and your staff for
doing an excellent job sorting through the technical and scientific
implications of the project; (2) they see it as a meritorious project
and want to lend their financial support to the project if a productive
path forward can be found; and (3) they are deeply concerned that OMB
and the Department are heading toward a financing and project
management strategy that brings into question the long-term viability
of the venture. Can you update us on the progress of the plan and
outline what you have done to date to move FutureGen forward?
Answer. The FutureGen Report to Congress was submitted by the
Department of Energy on March 4, 2004. The Department is currently
completing internal management review requirements that should be
finished in about a month. Once the internal management review is
complete, and once the fiscal year 2004 funding for FutureGen is
released by Congress, the Department can begin negotiations with an
industry partner. We forecast awarding the cooperative agreement in the
late calendar year 2004 time frame. After release of funds in fiscal
year 2004, the Department will begin its NEPA process for FutureGen.
Once the negotiations are complete, the first priority is to develop a
set of technical siting criteria that will be used in an open, fair,
and transparent competitive process. After release of funds in fiscal
year 2004, the Department will begin its NEPA process for FutureGen.
Question. The Conferees of the Interior Appropriations Bill, as
well as the Industry Stakeholder Group, have been very clear that
FutureGen cannot come at the expense of critical fossil R&D research.
However, the coal R&D budget is $470M in your budget with $140M of this
funding coming from previously appropriated funding that is earmarked
for FutureGen. In reality, this means that your request is $330M of new
funds for other coal R&D programs including the Clean Coal Power
Initiative.
This $330M compares very unfavorably to the $450M that was spent on
the very same programs last year. It is a significant cut in programs
like fuel cell research, coal gasification, advanced materials
research, and other important programs. FutureGen is not a substitute
for these base R&D programs. How does the Department justify such a cut
in the base fossil energy R&D programs?
Answer. The Department considers FutureGen as the highest priority
coal research effort. The fiscal year 2005 budget request reflects a
research focus, of which FutureGen is a key part, towards achieving the
goal of affordable zero emissions energy from coal. In the fiscal year
2005 budget request, a rescission of $237 million (including prior year
deferrals) is proposed as a total offset to fund FutureGen from prior
year available funds from projects that were terminated in the original
Clean Coal Technology Demonstration program, thus providing for a total
request of $470 million. The budget request reflects a combination of
several actions to rebalance our research portfolio to accelerate the
zero emission goal for coal. Funding requests in several areas such as
fuel cells are reduced because the work on near term fuel cells has
reached a point of maturity where it is appropriate for the industry to
take it to commercialization. In Solid Energy Conversion Alliance
(SECA) fuel cells the work can be stretched out by one year and still
accommodate the FutureGen schedule where SECA fuel cells can be used in
the power module. Coal gasification research is also stretched out by
one year without a schedule impact on the delivery of potential
technology for FutureGen. In addition, the gas separation membrane
research funded in fiscal year 2004 under gasification is being
proposed in fiscal year 2005 as part of the increased request ($16
million) for the hydrogen fuels research to maximize the synergy
between these areas. Advanced research was streamlined to emphasize
novel concepts that could have potential for zero emission
applications. The fiscal year 2005 budget request therefore reflects
the priority of achieving a zero emission option for coal given budget
realities.

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

Question. The majority of interest in DOE--Fossil's fuel cell
programs is centered on the SECA program. This program is based upon a
number of vertical teams working on competing fuel cell technologies.
Also funded are horizontal, or crosscutting, teams that are focused on
addressing technological hurdles the vertical teams are facing. This
year, DOE has reduced funding for the core fuel cell program from $71
million to $23 million. This cut comes after DOE has added two new
vertical teams to the SECA program (increasing from 4 to 6 teams) at
the reduced funding level.
Mr. Secretary, I am extremely interested in the fossil fuel cell
programs. I know that DOE now has six industry teams working on the
SECA program, yet has proposed a reduction from $71 million to $23
million Distributed Generation with $25 million coming from SECA
related activities. I am concerned that reducing the funding for
stationary fuel cells will cause the program to slow, when it is poised
to make great strides.
Additionally, it is my understanding some teams may be
underperforming, 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 2005 to ensure we are providing sufficient
resources to the teams showing the most promise?
Answer. In fiscal year 2005, our highest priority is adequate
funding for FutureGen. Within the Fuel Cells Program, our highest
priority is SECA, which is expected to contribute to distributed
generation applications, and larger-scale FutureGen applications.
Funding for SECA is at the same level as the fiscal year 2004
Request. Proposed funding for SECA is about two-thirds of the fiscal
year 2004 appropriation ($35,063,000). Our fiscal year 2005 funding
request of $23 million will fund the continuation of work by the SECA
teams, given current fiscal constraints. At the proposed funding level
we expect identical impacts on each of the participating teams, namely,
stretching out the SECA development schedule by one year.
Currently, six Industrial Teams are aggressively pursuing different
promising approaches to meet the SECA goal of $400/kW. Each team's
progress will be assessed against our rigorous contract requirements in
2005, 2008, and 2010.
Over 40 research and development projects that support the SECA
industry teams are in place. The SECA Core Technology Program, SBIR,
University Coal Research and the FE Distributed Generation Advanced
Research budget lines fund these projects. Each Industrial Team has
successfully demonstrated full size cells that promise to meet the SECA
2005 criteria in full prototypes. Half of the Industrial Teams have
already operated full prototypes, including balance-of-plant, that
demonstrate the basic system operation. One Industrial Team, in
partnership with a major electric utility (Southern Company), has
demonstrated SECA technology in a coal power plant using coal gas as
the fuel. Significant progress has been made in solving the two most
challenging SECA technology issues, interconnects and seals: New
materials for SECA metallic interconnects and seals are under
development at two national laboratories and several small businesses
and universities. Long-lived metallic interconnects with significantly
reduced degradation and seals that exhibit significantly reduced leak
rate have been demonstrated in the SECA Core Technology Program.

FOSSIL ENERGY--DOMESTIC OIL PRODUCTION/IMPORTS

Question. Current Domestic Production continues to decrease in the
face of rising demand. Last year you expressed concern that oil prices
remained around $28 a barrel following the initial stabilization of
Iraq. Currently, the price remains at approximately the same level and,
just like last year, domestic crude storage is fairly low heading into
the summer months. There continues to be a lag in exports. Most price
forecasts continue to highlight that the volatility of fuel costs will
be determined on our ability to access crude stocks, but almost all
forecasters highlight our ongoing dependence as the reason for
continued price swings in the oil markets. Can you comment on this?
Answer. As with any commodity, inventories provide an immediate
source of supply should demand surge or shortfalls in other supply
sources occur. Should OPEC reduce its production, and consequently its
exports, at the same time demand for crude oil is increasing as
refiners come out of their maintenance programs to increase refinery
throughput to maximize gasoline production, crude oil inventories can
be the bridge to fill this possible gap in supply. However, with crude
oil inventories well below the average range, pressure will likely
build on prices should these low inventories be required to be drawn
down further. Simply put, without more crude oil available to world
markets, it will be difficult for refiners to maximize gasoline
production without drawing crude oil inventories to even lower levels.
It appears that more crude oil is needed to supply refiners and help to
rebuild crude oil stocks to more normal levels.

OIL RESEARCH BUDGET FIGURES

Question. Obviously, I do not agree with the Department's budget
request reducing Oil Technology R&D from $35 million to $15 million.
However, your budget request proposes collapsing the traditional
functions under the Oil Technology Program. For example, under
Exploration and Production, the enacted program includes 8 program
areas with specific funding levels. This year you simply propose 3
program areas, with one focused on Global Oil Supply. Given we are
overly reliant on imported oil as is, why are you proposing to cease
the oil programs that help domestic production and shift those funds to
increasing our dependence on foreign oil production?
Answer. The Oil Technology Program includes policy, science and
technology development to help resolve oil supply, environmental, and
reliability constraints. In addition to activities focused on
increasing domestic production, bilateral technology exchange and joint
research, in areas including enhanced oil recovery, between the United
States and non-OPEC countries will also increase secure supplies of
oil. In fiscal year 2005, the program includes a modest effort to
diversify oil supplies through bilateral activities with nations that
are expanding their oil industry, including Venezuela, Canada, Russia,
Mexico, and certain countries in West Africa. Bilateral and multi-
lateral work will include technology exchanges and joint research,
development, and demonstration under the Administration's North
American Initiative and other international agreements.

UPDATE ON WORLD OIL MARKETS

Question. During the early stages of the operations in Iraq, crude
prices rose to over $38 a barrel and stabilized back in the mid to high
$20s. However, crude prices are rising again and stocks are low. Can
you update us on the current state of the highly fluctuating oil
markets?
Answer. Crude oil prices have increased by about $7 per barrel
since early December. Converted into cents per gallon, this would
explain about 17 cents of the 26-cent increase seen in retail gasoline
prices since December. OPEC has kept production, and consequently
global exports, at levels that have prevented crude oil inventories
worldwide, and especially here in the United States, from returning to
more normal levels. This OPEC restraint has been followed by a call to
decrease production further beginning in April. Additionally, global
oil demand continues to increase, particularly in China and the United
States. While supply and demand factors explain most of the increase in
crude oil prices, other factors, including the large net long position
by non-commercial participants in the near-month NYMEX contract and
even a demand pull from higher gasoline prices, have also put pressure
on oil prices. Nevertheless, crude oil prices have increased in recent
months primarily due to a tightening global crude oil market. With
crude oil prices at these levels, it is uneconomical for stockholders
to hold excess inventories, thus crude oil inventories remain
relatively low, and will likely not increase without more global supply
being made available.

CURRENT CRUDE IMPORT LEVELS

Question. Can give us a sense of how current crude imports compare
to prior years as a percentage of domestic consumption?
Answer. Net crude oil imports were 63 percent of U.S. crude oil
inputs to refineries for the month of December 2003, up from December
2002, when net crude imports comprised 61.2 percent of U.S. crude oil
inputs to refineries. The current figure is also up compared to the
five-year average, as crude oil net imports were responsible for an
average of 58.2 percent of U.S. crude oil inputs to refineries during
the month of December in each of the years 1998 through 2002. While
crude oil imports do seem to be increasing, it is clearly not enough to
keep crude oil inventories from reaching very low levels this past
winter.

IRAQI PRODUCTION

Question. There is still obvious concern regarding the timeline to
return Iraq's oil production to the world market, and we have recently
heard rumblings that the Saudi fields may have a shorter lifespan than
previously thought. Can you update the Subcommittee on the actions the
Department has been taking to help the Iraqi peoples' attempts to bring
production online?
Answer. The Coalition Provisional Authority (CPA) is responsible
for Iraqi reconstruction, including restoration of their oil industry.
The CPA has recruited support for their activities from several Federal
agencies, including the Department of Energy. Some of our employees
volunteered to serve and have completed rotations; some are still in
Iraq. They were chosen based on their backgrounds in oil production,
oil logistics, and electrical engineering. While each employee has made
meaningful contributions to reconstruction, the Department of Energy is
not responsible for planning or executing plans for reconstruction in
Iraq and is not best positioned to respond to this question.

CENTRAL ASIAN PRODUCTION

Question. Secretary, you and I have recently discussed the need to
work with nations in Central Asia to support both natural gas and oil
production. Could you give us your outlook on the region and the
potential to work with ex-Soviet states to help stabilize global energy
markets?
Answer. The Caspian Sea region is important to world energy markets
because of its potential to become a major oil and natural gas exporter
over the next decade. Progress has been made in improving export
capacity as the Baku-Tblisi-Ceyhan oil pipeline is now under
construction and plans for the Shah Deniz gas pipeline are proceeding.
Estimates of the Caspian Sea Region's proved crude oil reserves vary
widely by source. The Energy Information Administration (EIA) has
estimated proven oil reserves as a range between 17 and 33 billion
barrels, which is comparable to OPEC member Qatar on the low end, and
larger than the United States on the high end. The Caspian Sea region's
natural gas potential is, by some measures, more significant than its
oil potential. Regional proven natural gas reserves are estimated by
EIA at 232 trillion cubic feet (Tcf), comparable to those in Saudi
Arabia. The Shah Deniz offshore natural gas and condensate field in
Azerbaijan, which is thought to be one of the world's largest natural
gas field discoveries of the last 20 years, contains ``potential
recoverable resources'' of roughly 14 to 35 Tcf.

IMPORT/EXPORT AUTHORIZATION FUNDS

Question. I notice you have decreased the Import/Export
Authorization line item, which raised a few eyebrows. However, I am
told this decrease is the result of shifting functions out of the
Fossil Account to align them with a more appropriate area within the
Department. Can you elaborate on this change?
Answer. The budget request for fiscal year 2005 reflects the
reorganization plan to move the cross border electricity regulation
function out of Fossil Energy to the Office of Electric Transmission &
Distribution, which was established August 10, 2003, and funded in the
Energy and Water Development Appropriations, and combines DOE's
electricity transmission and distribution (T&D) programs and research
in a single, focused office. The requested funds for Fossil Energy in
fiscal year 2005 are appropriate for the remaining Fossil Energy
natural gas regulatory functions.

GASOLINE STOCKS

Question. Last year we discussed the alarming dependency on foreign
refined product. My hope was that the dependency on foreign gasoline
was an anomaly rather than a trend, however, with recent disruptions
due to an accident on the Mississippi and regional price spikes, I am
hearing more concern from my constituents. Can you update us on imports
of refined product and give us an outlook for gasoline prices this
summer?
Answer. The average retail price for regular gasoline in the United
States has been about $1.72-1.73 per gallon over the last couple of
weeks, just a couple of pennies shy of the all-time high of $1.747
(unadjusted for inflation) set on August 25, 2003. While the average
retail price declined slightly from March 1 to March 8, EIA expects
this to be temporary, and continues to forecast prices averaging $1.83
per gallon later this spring.
Gasoline prices have risen because of two primary factors: (1) a
rise in global crude oil prices, and (2) tight gasoline markets
nationwide.
--Crude oil prices have increased by about $7 per barrel since early
December. Converted into cents per gallon, this would explain
about 17 cents of the 26-cent increase seen in retail gasoline
prices since December. OPEC has kept production, and
consequently global exports, at levels that have prevented
crude oil inventories worldwide, and especially here in the
United States, from returning to more normal levels. This OPEC
restraint has been followed by a call to decrease production
further beginning in April. Additionally, global oil demand
continues to increase, particularly in China and the United
States. While supply and demand factors explain most of the
increase in crude oil prices, other factors, including the
large net long position by non-commercial participants in the
near-month NYMEX contract and even a demand pull from higher
gasoline prices, have also put pressure on oil prices.
Nevertheless, crude oil prices have increased in recent months
primarily due to a tightening global crude oil market.
--Gasoline supply and demand factors have also played an important
role in explaining higher gasoline prices. Despite relatively
high nominal prices, U.S. gasoline demand has been very strong,
averaging 4.5 percent above year-ago levels over the last four
weeks, and supply has simply not increased enough to keep up.
On the supply side, with the refining system globally showing
much less excess capacity than last year, the lack of ability
to further increase gasoline production substantially,
including here in the United States, may make it difficult for
refiners to supply enough gasoline this spring. Gasoline
imports have averaged significantly below year-ago levels,
particularly in January and February, despite the fact that
product imports in January and February 2003 were adversely
affected by the disruption in Venezuela that had resulted from
the oil workers strike in December 2002. Gasoline imports have
been lower so far this year for a number of factors: relatively
high freight rates, low supplies available for export from
Europe, and, possibly, from lower-than-normal exports from
Venezuela.
With supply unable to keep up with demand growth this year, U.S.
inventories have been drawn down much more than normal this year.
January, which would typically be expected to see an increase of more
than 12 million barrels, actually saw total gasoline inventories fall
by nearly 1 million barrels, and there wasn't any significant
improvement in February, relative to normal changes. As a result, there
is little, if any, flexibility in the gasoline market to respond to any
imbalances, should they occur in specific regions of the country, or
across the country.
Question. Does the Department have any short-term solutions to
combat the trend?
Answer. We all understand that the current oil market conditions
have evolved over many years and will require patience and resolve to
be addressed adequately. The Administration continues to work towards
assuring that American consumers have adequate supplies of petroleum
products at reasonable prices. I urge the Congress to do its part to
complete comprehensive energy legislation and send it to the President.
The trend in imported petroleum products is simple economics: the
foreign refiners have excess capacity to produce gasoline; we have
strong demand for gasoline, primarily on the East Coast. As long as the
U.S. price is attractive to foreign refiners, they will provide our
markets with needed petroleum products.
With the FreedomCAR and Hydrogen Fuels initiatives, we are working
aggressively to fundamentally change the way we look at transportation,
oil use and the environment over the long term, by developing an
integrated system using hydrogen from domestic sources that produces no
emissions of greenhouse gases or criteria pollutants.

SOLID STATE LIGHTING

Question. The fiscal year 2005 request includes $10.2 million for
Solid State Lighting, up from $7.7 million in fiscal year 2004.
Industry is pleased by this show of support, but is concerned by the
split between core research projects (national labs, universities) and
industry-led research. They feel the industry portion provides a bridge
to product development, which will allow the U.S. industry to keep pace
with foreign competitors. DOE would say that product development should
be largely the responsibility of industry. I was pleased to see the
Department's formal launch in November 2003 of a dedicated Solid State
Lighting research and development program. The energy savings and
environmental benefits of this technology could be enormous.
You've asked for just over $10 million for solid state lighting in
your fiscal year 2005 budget. I am interested in how the Department is
allocating funds in this program between core research and research
more geared toward product development and commercialization. From
reports that I've heard--including a recent visit to the Far East by
our colleague Sen. Bingaman--Korea, China, and Japan are very active,
with government support, in developing solid state lighting
technologies. Is enough being done to support product development
research?
Answer. The Department is funding core research, or ``Core
Technologies'' as well as ``Product Development'' activities. The
November 2003 Solid State Lighting (SSL) Workshop provided a formal
launch of the program and a discussion of the research and development
(R&D) plan for SSL. Much emphasis and priority was placed on the Core
Technologies tasks, as many fundamental activities still need to be
completed and capitalized into products before the performance and
price of SSL will be market competitive. Product Development tasks were
also prioritized, but for light emitting diodes (LEDs) only. The top
priorities for both Core Technology and Product Development will be
addressed with competitive solicitations in fiscal year 2004.
Given that Core Technology projects will (a) achieve the technology
breakthroughs for large jumps in efficiency (among other attributes),
and (b) are longer term with results further out, EERE will emphasize
the Core Technology agenda during the early years of its SSL
activities. However, it should be noted that less risky projects
(generally those in Product Development) require more industry cost
sharing than riskier projects (generally those in Core Technology), as
required by the Energy Policy Act of 1992 and in alignment with
guidelines developed as part of the Administration's R&D investment
criteria. Thus, total project funding--including participant cost
sharing--is approximately equal between the two categories.
Question. Are you confident we are applying adequate resources to
secure the intellectual property, manufacturing capability and
infrastructure to lead the world in solid state lighting?
Answer. Yes. The Department is carefully applying the resources
available within solid state lighting (SSL) to high-priority tasks
selected by the November 2003 Solid State Lighting Workshop and is
seeking a balance between long-term Core Technology and near-term
Product Development activities. The Department recognizes that foreign-
government-funded SSL consortiums are targeting the same white-light
markets and applications. However, the U.S. industry base presently
holds an edge in technology knowledge and expertise. Given the
potential for large profits in the lighting industry, we are confident
that the U.S. industry investment, combined with the Department's
funding, will allow the United States to continue to lead.
Question. How specifically are fiscal year 2004 funds for this
program being allocated?
Answer. For fiscal year 2004, EERE's Building Technologies Program
is focusing on placing available funding on competitive solicitations
or competitive National Laboratory research and development
solicitations. Of the $7.75 million appropriation for solid state
lighting (SSL) in fiscal year 2004, $1.5 million is being used to pay
mortgages for projects from past solicitations, $6.0 million is being
used for competitive solicitations and the balance of $250,000 is being
used for analyses and other activities. The competitive solicitation
will be split between Core Technology ($4.0 million) and Product
Development ($2.0 million) in an approximate two-to-one ratio. Research
and development activities ($7.5 million) have been given a higher
priority than workshop ($100,000), analysis ($100,000), and
communication ($50,000) activities.
Question. How will fiscal year 2005 funds be allocated if funded at
the President's request?
Answer. In fiscal year 2005, SSL funding will be allocated using
the funding logic emanating from the November 2003 Solid State Lighting
(SSL) Workshop, which provided a formal launch of the program and a
discussion of the research and development (R&D) plan for SSL. The
Department is funding both core research, or ``Core Technologies,'' as
well as ``Product Development'' activities. From this SSL Workshop,
many tasks were identified as priority tasks, but only a subset will be
placed in the fiscal year 2004 solicitations for either Core Technology
or Product Development. The funding split in fiscal year 2005 between
Core Technology and Product Development solicitations will be
approximately two-to-one.

HYDROGEN--NATIONAL RESEARCH COUNCIL REPORT

Question. The National Research Council recently released a study
that identified some pretty tall hurdles that need to be cleared before
hydrogen can make a significant impact this country. Big improvements
are needed in the cost and reliability of fuel cell systems; advances
are needed in transportation infrastructure for hydrogen; and we must
determine whether it is feasible to sequester carbon that would be
produced if we were to produce hydrogen from coal. Some have
interpreted this report as saying that hydrogen is a pipe dream, and
that funding anything but the most basic research at this time would be
folly. What is your take on the NRC report?
Answer. Conclusions that only the ``most basic research' should be
funded are gross mischaracterizations of the NRC report. The NRC
recommended that the program shift away from ``some'' development areas
and toward more ``exploratory'' work--as has been done in the area of
hydrogen storage. ``Exploratory'' research is not synonymous with
``basic'' research.
Exploratory research involves the application of novel ideas and
new approaches to ``established'' research topics, and is likely to
catalyze more rapid advances than basic research and more innovative
advances than applied research. The Department is doing this through
the Hydrogen Storage Grand Challenge, for example, which includes the
establishment of three ``Centers of Excellence'' led by National
Laboratories along with multiple university and industry partners. This
is the model that the NRC is recommending that the Department use in
addressing fuel cell cost, durability, and other areas. The NRC is not
recommending a shift away from development in general; the NRC is
specifically limiting the areas that it recommends we shift away from
to: compressed gas/liquid storage, centralized natural gas production,
stationary polymer fuel cells, and biomass gasification.
We agree that significant hurdles exist to realization of the
hydrogen economy. These barriers had been previously identified by the
Department (see the National Hydrogen Energy Roadmap, released by
Secretary Abraham on November 12, 2002); barriers specifically
mentioned in your question are each addressed as part of the
President's Hydrogen Fuel Initiative:
--Fuel cell cost and reliability.--Over the last several years, the
program has increasingly shifted emphasis away from systems
development activities because industry is taking on this work
with private funding. Instead, the Department is focusing on
research at the component level addressing cost and durability
issues. This trend is expected to continue, is supported by the
fiscal year 2005 budget request, and is in agreement with NRC
recommendations.
--Transportation infrastructure for hydrogen.--NRC recommendation ES-
5 indicates that distributed hydrogen production systems
deserve increased research and development (R&D). The
Department agrees with this recommendation, and believes an
increased focus on relevant technologies (distributed reforming
and electrolysis) will help eliminate large infrastructure
investments in the transition. Figure 6-1 of the report shows
the transition beginning in 2015. The NRC gave a clear strategy
that the transition can occur by focusing on distributed
production of hydrogen that eliminates the need for full
hydrogen production and delivery infrastructure in the near
term. The Department will place much more emphasis on
exploratory research on electrolysis in fiscal year 2005 and
beyond. Decreasing electrolyzer cost and increasing efficiency
are critical to producing hydrogen from renewable electricity.
We will also continue our work in hydrogen production through
distributed natural gas reforming, another key technology in
the transition to a full hydrogen economy.
--The feasibility of carbon sequestration.--Coal is a potential
abundant and domestic source for hydrogen. It is considered a
long-term hydrogen source because the technical, economic and
environmental feasibility of carbon capture and sequestration
technology must be evaluated. Over the next 10 years,
FutureGen, a project to employ carbon capture and sequestration
technologies will demonstrate emissions-free electricity and
hydrogen from coal. Although funding for this demonstration is
not part of the President's Hydrogen Fuel Initiative, the
FutureGen project is critical to addressing greenhouse gas
reductions and evaluating the long-term potential for coal-
based hydrogen and electricity.
Finally, basic research is critical to understanding the underlying
science that will lead to hydrogen and fuel cell technology
improvements in the near-term and potentially ``breakthroughs'' in the
long-term. The Department has now included the Office of Science as a
direct participant in the President's Hydrogen Fuel Initiative and has
requested $29.2 million in the fiscal year 2005 budget for basic
science. However, if we shift too many resources away from applied
research and technology development, we will not meet the technology
milestones needed to enable the industry commercialization decision in
2015. As pointed out by Dr. Michael Ramage, Chairman of the NRC
committee on hydrogen, when he testified before the House Science
Committee, a continuum of basic science, applied research, development,
and learning demonstrations is necessary for the hydrogen initiative to
be successful. The Department believes that fiscal year 2005 funding
represents a balanced program in terms of the mix of research and
development.
Question. Does anything in that report cause you to rethink the
allocation of funds in your budget for hydrogen research?
Answer. The Department initiated the request to have the National
Research Council (NRC) evaluate its hydrogen program planning in
December 2002. In April 2003, we received the interim NRC report with
recommendations that we incorporated into the President's fiscal year
2005 budget request. The fiscal year 2005 request reflects funding
increases in fundamental research ($29.2 million for the Office of
Science), safety ($18 million represents a 3-fold increase over fiscal
year 2004), and systems analysis (to help prioritize research
activities).
The Department fully concurs with 35 of the 43 recommendations in
the final report. The remaining eight will be implemented to some
degree after careful consideration and consultation with our
stakeholders, including the Congress. One of the major reasons the
Department asked the NRC to examine the program was to obtain
independent advice on our priorities and resource allocation. The
recommendations are now being considered and funding allocations in
future years will be made consistent with our understanding of the
proper role of the Federal government and emphasize technology areas
that can most greatly impact U.S. oil consumption and carbon emissions.
We will continuously re-evaluate technology status, and reallocate
funds appropriately.

HYDROGEN--TECHNOLOGY VALIDATION PROGRAM

Question. Last year this subcommittee funded a new activity within
the fuel cell program that was designed to support full scale
demonstrations of hydrogen vehicles, fueling systems and storage.
You're seeking a further increase in funding in fiscal year 2005. Can
you update us on how the fiscal year 2004 funds are being spent?
Answer. A solicitation was issued in fiscal year 2004 for a fuel
cell vehicle and hydrogen infrastructure ``learning'' demonstration.
The ``learning'' demonstration is an extension of the research program
and is not a commercialization demonstration intended to accelerate
market introduction. The planned project is a 50/50 cost-shared effort
between government and industry and will provide important performance,
durability, and safety data, under real-world operating conditions,
necessary to continuously refocus the research program.
Funding from the Interior and Related Agencies appropriations will
be used to manufacture and test hydrogen fuel cell vehicles in fiscal
year 2004 and fiscal year 2005. Funding from the Energy and Water
Development appropriations will be used to develop and test hydrogen
infrastructure components. It is expected that award selections will be
announced in the near future.
This activity will provide a critical assessment of hydrogen fuel
cell technology and the information necessary to validate whether we
are on track to meet our interim milestones for a 2015
commercialization decision by industry. It will involve automotive
manufacturers and energy companies, with multiple suppliers and
university partners, and is critical to understanding the systems
integration and interface issues involved with a major transformation
in our transportation energy system.
Question. How many demonstrations will be funded, where will they
be and what kind of projects will they be?
Answer. The Department anticipates selecting approximately three to
five demonstration applications for negotiation for award. Although the
applicants were asked to propose specific geographic locations, they
cannot be disclosed at this time because selections have not been
publicly announced. The solicitation required that vehicles operate in
cold and hot climates, dry environments, and in humid conditions. This
will provide valuable fuel cell performance data related to water
management and heat management that feed back into the applied research
program to fully address these issues.
As stated earlier, the vehicle/infrastructure learning
demonstration will involve the automotive and energy industries to seek
national system solutions, and possible synergies between hydrogen fuel
electricity generation and transportation applications.
The demonstration data will include very controlled testing on
chassis dynamometers so that fuel cell technology readiness can be
reported to Congress with extremely high confidence. We will also be
able to focus on safety and work with industry to develop uniform codes
and standards necessary for eventual commercialization and safe use of
hydrogen as an automotive fuel. The project will specifically validate
fuel cell durability, vehicle range, and hydrogen production costs
under real-world operating conditions by 2008. The data produced will
help focus our R&D to accelerate technological advances. The goal is a
2015 commercialization decision by industry.
Question. In light of the NRC report, are you at all concerned that
we're getting ahead of ourselves in committing substantial resources to
a demonstration program like this, rather than investing those funds in
additional basic research?
Answer. As pointed out by Dr. Michael Ramage, Chairman of the NRC
committee on hydrogen, when he testified before the House Science
Committee, a continuum of basic science, applied research, development,
and learning demonstrations is necessary for the hydrogen initiative to
be successful. Furthermore, the NRC report does not recommend that
funding be shifted from this ``learning'' demonstration to ``basic''
research. The Department's mix of funding according to OMB circular A-
11 for the fiscal year 2005 Hydrogen Fuel Initiative budget request is
as follows:

------------------------------------------------------------------------
Percent
------------------------------------------------------------------------
Basic Research............................................... 12.9
Applied Research............................................. 42.5
Development.................................................. 29.2
Demonstration................................................ \1\ 13.4
Deployment (Education)....................................... \1\ 2.0
------------------------------------------------------------------------
\1\ OMB Circular A-11 does not provide a definition for this category.

The Department believes that fiscal year 2005 funding represents a
balanced program in terms of the mix of research and development. As
you can see, 85 percent of the program is research and development.
Basic research is critical to understanding the underlying science
that will lead to hydrogen and fuel cell technology improvements in the
near-term and potentially ``breakthroughs'' in the long-term. However,
if we shift too many resources away from applied research and
technology development, we will not meet the technology milestones
needed to enable the industry commercialization decision in 2015.
These learning demonstrations are critical to assessing how well
the research is progressing in meeting customer targets and in
establishing the business case. A major transition to a hydrogen-based
transportation energy system could not occur without the involvement of
the automotive and energy industries in this type of project.

FOSSIL ENERGY--DOMESTIC GAS PRODUCTION/IMPORTS

Question. While oil reliance is especially concerning right now,
natural gas prices and availability are at the heart of an ongoing
domestic energy crisis. Spikes in natural gas prices on the spot market
rival the cost spikes for electricity that lead to public outrage in
recent years. Mr. Secretary, we have recently discussed our mutual
concern over natural gas prices and increasing dependence on foreign
natural gas. Could you share some of the statistics you shared with me
on Monday, March 1, regarding our need for imported natural gas?
Answer. Total natural gas consumption is projected to increase from
2002 to 2025 in all Energy Information Administration (EIA) AEO2004
cases. The 2005 projections for domestic natural gas consumption are in
the range from 29.1 trillion cubic feet per year in the low economic
growth case to 34.2 trillion cubic feet in the rapid technology case,
as compared with 22.6 trillion cubic feet in 2002.
The North American resource base has matured, making it much more
difficult to increase supply levels faster than the rate of production
decline. Net imports of natural gas make up the difference between U.S.
production and consumption. Imports are expected to be priced
competitively with domestic sources. Imports of foreign LNG account for
most of the projected increase in net imports. When planned expansions
at the four existing LNG terminals are completed and projected new LNG
terminals start coming into operation in 2007, net LNG imports are
expected to increase from 0.2 trillion cubic feet in 2002, to 2.2 and
4.8 trillion cubic feet in 2010 and 2025, respectively.
Net annual imports of natural gas from Canada are projected to peak
at 3.7 trillion cubic feet in 2010, then decline gradually to 2.6
trillion cubic feet in 2025. The depletion of conventional resources in
the Western Sedimentary Basin is expected to reduce Canada's future
production and export potential, and prospects for significant
production increases in eastern offshore Canada have diminished over
the past few years.
Question. I notice the Department is focusing on Liquefied Natural
Gas (LNG) to help meet these import needs. Have you worked with the
Department of Homeland Security to assess the risk and viability of a
large LNG infrastructure?
Answer. DOE's Office of Fossil Energy, working with the Office of
Intelligence, is leading interagency cooperation on assessing the risk
of LNG infrastructure. The lead agencies for LNG infrastructure
permitting are the Federal Energy Regulatory Commission and the U.S.
Coast Guard, the latter of which is now part of the Department of
Homeland Security (DHS). In addition, discussions have been held in an
interagency context with the DHS Office of Science and Technology to
coordinate efforts.
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 $43 million to $26 million, down from
nearly $46 million just a few years ago. 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 Administration's fiscal year 2005 budget request for
oil and gas research is at the same level as the fiscal year 2004
request. The Department believes that this is the appropriate level
based on the priority placed on addressing the growing demand for clean
energy with a portfolio of research in clean coal, LNG, renewables,
conservation and more.
The oil and natural gas program budgets reflect the PART scores
(``ineffective'' for the past two years, although the scores improved
from fiscal year 2004 to fiscal year 2005), which were lower than other
Department of Energy research programs, and budget allocation is based
in part, on this evaluation process. However, the Department is
committed to improving performance and is taking active steps to
improve project planning and the agency's ability to measure its
effectiveness. We are in the process of an oil and gas strategic
planning initiative and are working with external groups to improve our
benefits measures.

GRID RELIABILITY AND FEDERAL LANDS

Question. As you well know, maintaining and improving the
reliability of the electric grid is dependent on our ability to
maintain transmission lines across Federal lands--particularly in the
West. From time to time we hear complaints that maintaining this
infrastructure on Federal lands is a cumbersome and expensive process,
whether it's vegetation management, line maintenance, or other
necessary tasks.
I know DOE has worked closely with the White House to coordinate
the designation of corridors across federal lands in 11 Western states
for transmission and other utility rights-of-way. My understanding is
that the next step in this process is the completion of a region-wide
Environmental Impact Statement, and that the Argonne National
Laboratory has been designated to prepare the programmatic EIS, funded
by the Department of Energy.
I believe it is very important that these corridors be designated
if we are going to have adequate transmission capacity in the West to
deliver power from renewable and other energy sources. My understanding
is that the DOE funding commitment for fiscal year 2004 has not yet
been fulfilled.
Can you advise this Committee as to the status of the fiscal year
2004 funding commitment for the region-wide EIS, and whether you are
requesting the requisite funds to complete the EIS in fiscal year 2005?
Answer. It must be recognized that the Bureau of Land Management
(BLM) and the Forest Service (FS) have made progress in the past 2
years to streamline the management of existing right-of-way grants
(ROW) for BLM administered lands or special use permits (SUP) for FS
administered lands, and to reduce the burden and expense of
infrastructure maintenance, whether vegetation management, line
maintenance, or other necessary tasks. It is anticipated that
additional administrative practices will be implemented by the BLM and
the FS in the next couple of years that continue to streamline many
aspects of ROW and SUP management while maintaining safety, public
health, and environmental protections. Improvements in transmission
policy, such as better practices for siting of transmission lines, is
one of the activities supported by the Office of Electric Transmission
and Distribution's Electricity Restructuring program. However,
completion of the EIS in fiscal year 2005 depends on the availability
of funds.
Question. From what program would such funding most logically be
derived?
Answer. The electric transmission system would benefit from
designated corridors across Federal lands; the expedited review process
itself would save both time and money during siting evaluation. Thus,
the Office of Electric Transmission and Distribution sees value in this
effort. However, other programs outside the electric transmission and
distribution area would also benefit. For instance, these corridors
would enable better access to renewables and other energy sources,
including natural gas and hydrogen.
Question. Are there other steps you're taking administratively on
an inter-agency level to address these issues?
Answer. DOE is working closely with the Task Force on Energy
Projects established under Executive Order 13212 in addressing these
issues. The Bureau of Land Management (BLM) and the Forest Service (FS)
are pursuing an effort to modernize their land use plans throughout the
West. Both agencies have directed their field offices to identify
management issues associated with right-of-way (ROW) grants and special
use permits. The agencies will identify ROW corridors, analyze the
corridors for their present and future ROW uses, and where appropriate,
officially designate the lands as ROW corridors. In accordance with BLM
and FS management practices, a designated ROW corridor is a preferred
location for the placement of future ROW facilities. Proposals to place
future ROW facilities across BLM and FS administered designated as ROW
corridors may be able to benefit from an expedited National
Environmental Policy Act (NEPA) review process. The DOE is coordinating
with the BLM and the FS to ensure that concerns of DOE are addressed in
the BLM and FS land use planning efforts/NEPA reviews. DOE will support
the designation of appropriate ROW and work with the agencies to help
ensure that unwarranted restrictions to the placement of ROW on other
public lands do not occur.
Question. Are you getting an appropriate level of response and
cooperation from Interior and the Forest Service?
Answer. The Bureau of Land Management and the Forest Service have
provided outstanding support to DOE with respect to identification,
analysis and resolving of rights-of-way issues on lands the agencies
administer. DOE has every expectation that this outstanding level of
cooperation will continue.

FOSSIL ENERGY--FUELS

Question. The request reduces the Fuels account under Fossil Energy
Research and Development from $31 million to $16 million. This research
has focused on producing cleaner fuels using a number of technologies
including using carbon feed stocks (coal, petroleum, gas) and
separating it into various components, notably isolating the carbon
from other elements. The budget proposes stopping all ultra clean fuels
research and syngas research that creates clean fuels and hydrogen from
coal.
Mr. Secretary, I am interested in your decision to essentially stop
all advanced fuels research in the Fossil program. For fiscal year
2004, 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 we can produce and utilize
much cleaner burning fossil fuels in the near term. Can you explain why
you believe we should abandon research that is arguable on the verge of
creating marketable solutions to near-term environmental concerns?
Answer. The Coal to Hydrogen program is an important part of the
President's Hydrogen Initiative and supports the FutureGen project by
providing advanced, less costly technology for producing more hydrogen
and hydrogen separation technology for evaluation. In fiscal year 2005,
$16,000,000 has been requested for the program. This funding is a
significant increase over the fiscal year 2004 appropriated funding of
$5,000,000 for hydrogen from coal research and is consistent with the
programmatic need as defined in the Hydrogen Posture Plan and FE
Hydrogen Program Plan.
No fiscal year 2005 funding is requested for ultraclean
transportation fuels and syngas membrane technology because these
activities are related to the production of compliant liquid fuels
required to meet EPA Tier-2 Standards which industry itself can support
without DOE R&D assistance.
The Administration's request does include funding for an alternate
route for producing hydrogen via clean, zero sulfur liquid fuel
hydrogen carriers that would utilize the existing infrastructure and
can be converted to hydrogen near the end-use site.
Question. Your budget proposes numerous projects to produce
hydrogen from fossil energy sources. I believe we both realize our
natural gas infrastructure is spread too thinly. Can you give us an
indication of the potential success of production of hydrogen from coal
and other resources?
Answer. In a recent comprehensive study, the National Academies
concluded that ``a transition to hydrogen as a major fuel in the next
50 years could fundamentally transform the U.S. energy system, creating
opportunities to increase energy security through a variety of domestic
energy resources for hydrogen production, while reducing environmental
impacts, including atmospheric CO2 emissions and criteria
pollutants.'' The Committee did point out that ``breakthroughs'' in
production, storage, delivery and fuel cells are required.
The mission of the hydrogen from coal program is to develop through
public/private RD&D advanced and novel technologies that will enable
the use of the Nation's abundant coal reserves to produce, store,
deliver and utilize affordable hydrogen in an environmentally
responsive manner. The potential for the economic production of
hydrogen from coal is considered to be very high. However, in addition
to developing new innovative processing technology, studies must be
conducted to show the integration of these technologies in producing
hydrogen, while successfully sequestering the carbon dioxide. These
advanced technologies being developed by the Hydrogen from Coal Program
offer the potential of reducing overall cost of hydrogen production by
25 percent, making the cost of the hydrogen fuel very competitive with
alternatives.
The integration of processes and the advanced technology studies
would be significantly advanced by the design and construction of the
FutureGen facility.
In fiscal year 2005, $16,000,000 has been requested for the
Hydrogen from Coal Program. This funding is a significant increase over
the fiscal year 2004 appropriated funding of $5,000,000 for hydrogen
from coal research and is consistent with the programmatic need as
defined in the Hydrogen Posture Plan and the FE Hydrogen Program Plan.

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

Question. The Naval Petroleum request and proposed DOE
Reorganization propose moving the Rocky Mountain Oil Technology Center
(RMOTC) (pronounced Re-mot-C) under the auspices of the Natural Gas R&D
portfolio. This facility allows industry to partner with DOE and place
facilities on NPR-3 (Teapot Dome) to explore advanced oil recovery
techniques. The budget and DOE reorganization proposes moving the Rocky
Mountain Oil Technology Center into the Natural Gas R&D portfolio. It
is my understanding industry partnerships to promote advanced oil
recovery utilize this center with great success. Can you assure the
Subcommittee that joint efforts at the center will continue at or above
the current level in the upcoming fiscal year?
Answer. The RMOTC program is not being placed under the auspices of
the Natural Gas R&D portfolio as you have noted; rather it will be
managed as part of the overall oil and gas R&D program within the
Office of Natural Gas and Petroleum Technologies. RMOTC offers a place
to perform hands-on testing and demonstration of upstream petroleum and
environmental products that is tailored to the small, independent
domestic oil producers. Government participation accelerates technology
transfer by helping speed new technology to the market place. RMOTC
also supports the Administration's goal to develop new/alternative
energy sources and energy efficiency technologies for use in the
petroleum industry. However, we cannot make assurances that funding
will remain level or increase.
The type of work done at the RMOTC--field demonstrations of oil
exploration and production technology--is something that the petroleum
industry primarily should lead. The RMOTC appropriation for fiscal year
2004 was for $2.96 million and the fiscal year 2005 request is $2.17
million, which will primarily be utilized to continue the work
commenced in fiscal year 2004. RMOTC will concentrate these resources
on primary and applied research and development that does not overlap
with industry. It will use the fiscal year 2005 appropriation to
complete work on already signed cooperative agreements and judiciously
select new projects to fund.

OFF-HIGHWAY ENGINE R&D

Question. You have once again proposed to terminate research on
off-highway engines such as heavy equipment, railroad engines, etc. I
gather this is because the potential energy savings are not nearly as
high as for on-road vehicles research. While off-road fuel consumption
is far less than on-road consumption, it does seem that very
significant emission reductions could be attained in the off-road area
by picking some of the ``low hanging fruit''. Can you give us an idea
about how you weigh such things in your budget development process?
Answer. Our budget development process weighs multiple factors such
as program performance, relative priority, alignment with the
Administration's R&D investment criteria, and other factors. The R&D
investment criteria include considerations such as the Federal role,
the quality of the research planning, and the potential for public
benefits. While we continue to refine our methods for quantifying and
comparing potential benefits of our activities, it is clear that
advances in on-road vehicles offer greater benefits than in off-road
vehicles. In fact, we estimate that the fuel savings potential from
off-highway vehicles research is an order of magnitude lower than the
potential for on-road vehicles. Accordingly, our R&D priorities
emphasize on-road vehicle R&D, consistent with our fiscal year 2004
request. Also, in a recent peer review of our multi-year R&D plans the
review committee recommended that the Department follow this course of
action. Our R&D on heavy-duty on-road vehicle engines, however, does
address many of the same technical issues present in engines of off-
road vehicles.
With regard to emissions from off-highway vehicles, although the
Department is deeply concerned about emissions, the Environmental
Protection Agency has primary jurisdiction over this area. Recent EPA
regulations mandate that the manufacturers of off-highway vehicles
reduce future emissions and industry is working to meet these
regulations on their own. Our cooperative R&D efforts emphasize
research areas that industry would not choose to undertake on its own,
especially in the absence of regulation.
Question. Are fuel savings and energy efficiency your only true
goals in these programs, with things such as emissions reductions being
secondary benefits?
Answer. The Environmental Protection Agency has primary
jurisdiction over emission issues. Recent EPA regulations mandate that
the manufacturers of off-highway vehicles reduce future emissions, and
industry is working to meet these regulations on its own. Our
cooperative R&D efforts emphasize research areas that industry would
not choose to undertake on its own, especially in the absence of
regulation.
The Department of Energy's Office of Energy Efficiency and
Renewable Energy certainly considers environmental factors such as
emissions in its decision-making and evaluations, but its primary goal
is to achieve greater energy efficiency in the United States. In the
area of transportation, this translates to decreasing our dependence on
foreign oil through fuel savings and fuel switching opportunities.
Question. Can you elaborate for the record your reasons for
proposing to terminate this program? Could you describe specifically
how the funds appropriated in fiscal year 2004 are being spent?
Answer. Our budget development process weighs multiple factors such
as program performance, relative priority, alignment with the
Administration's R&D investment criteria, and other factors. The R&D
investment criteria include considerations such as the Federal role,
the quality of the research planning, and the potential for public
benefits. While we continue to refine our methods for quantifying and
comparing potential benefits of our activities, it is clear that
advances in on-road vehicles offer greater benefits than in off-road
vehicles. In fact, we estimate that the fuel savings potential from
off-highway vehicles research is an order of magnitude lower than the
potential for on-road vehicles. Since the top priority of EERE is to
reduce our Nation's dependence on foreign oil, the FreedomCAR and
Vehicle Technologies Program decided to focus its R&D efforts on those
technologies that offer the opportunities to save the greatest amount
of petroleum. Also, in a recent peer review of our multi-year R&D plans
the review committee recommended that the Department follow this course
of action.
In fiscal year 2004, approximately one-half of the funds go
directly to makers of off-highway equipment (construction, agriculture,
mining, road construction and rail) for competitively-awarded
cooperative agreements, while the other half goes to our National
Laboratories to conduct cooperative, cost-shared research with
industry.

______

Questions Submitted by Senator Ted Stevens

ALASKAN ENERGY RESOURCES

Question. Increasing domestic energy supplies to ensure our energy
security is a major element of President Bush's National Energy Policy.
Alaska's vast energy resources are a key component in meeting the
President's goal. Alaska's North Slope provides almost 20 percent of
U.S. oil production. Additionally, Alaska's large natural gas reserves
are estimated at over 130 trillion cubic feet and our coal reserves are
estimated at 5,500 billion short tons. Developing and enhancing these
energy resources will ensure stability in domestic energy supplies.
Despite Alaska's enormous resource potential, its energy reserves
are largely untapped. Part of the problem has been a lack of research
focusing on how to develop the resources given the Arctic's harsh
climate, remoteness, and unique geology and environment. Recognizing
that such research was important, Congress created the Arctic Energy
Office, a branch of the Department of Energy's National Energy
Technology Laboratory. The Arctic Energy Office was tasked with
conducting Arctic energy research in fossil energy and remote
electrical power generation in order to advance the economic and energy
security of the United States.
With the federal funding it has received, the Arctic Energy Office
has engaged in various energy related research, including tundra
studies, enhanced oil recovery (which has the potential to generate an
additional 20-25 billion barrels of oil), gas hydrates, gas to liquids
technology, and natural gas production and transportation related to
the Alaska Natural Gas Pipeline.
In fiscal year 2005, the Department of Energy is requesting over
$635 million for fossil energy research and development. It appears
from the Department's budget request, none of these funds will be used
to support the important research of the Arctic Energy Office.
It is my understanding that your department eliminated funding used
to identify and study ways to make the gas pipeline more economical.
Alaska gas will meet approximately 10 percent of our nation's natural
gas needs, decrease our dependency on foreign sources of LNG, generate
over $40 billion in federal revenues, and create 400,000 jobs. At a
time when high natural gas prices are severely impacting our industries
and consumers and hindering our economic recovery, why would the
Department eliminate funding for this project?
Answer. At the requested budget level for oil and gas, DOE decided
it would not identify a specific line for Arctic research. This does
not preclude competitively funding Arctic projects consistent with
program priorities. However, any funding for Arctic research would be
at a significantly lower level than the previous appropriations as a
result of the overall decrease in funding for oil and gas. Specific gas
pipeline funding to conduct testing of an innovative membrane
technology for reducing the cost of gas processing prior to its
delivery for pipeline transport was appropriated in prior years and
remains available to conduct this project.
Question. The mean estimate of gas hydrates on Alaska's North Slope
is 590 trillion cubic feet. As the Department of Energy has stated,
development of 1 percent of this resource would triple the United
States' resource base. Despite this vast potential gas resource, why
did the Department decrease funding for the Alaska project by $3.35
million?
Answer. The Department is actually emphasizing hydrate research by
increasing its fiscal year 2005 budget request by $2.5 million over the
fiscal year 2004 budget request. The requested increase reflects the
natural gas program's efforts to focus on areas where there is a clear
government role: long-term, high risk research with potentially high
payoffs. In fiscal year 2004 and fiscal year 2005, this program will
focus on ongoing joint projects in assessing the potential hydrate
resource in the Gulf of Mexico and in Alaska.
Question. In fiscal year 2004, over $6.5 million was appropriated
to conduct research into the development of syngas ceramic membrane
technology used to enhance Fischer-Tropsch (F-T) gas conversion to
create environmentally friendly liquid fuels and hydrogen. Why was
funding for this project eliminated in fiscal year 2005?
Answer. While the development of syngas ceramic membrane technology
would enhance the economic production of Fischer-Tropsch liquids and /
or hydrogen from natural gas, this advance could be supported by the
private sector and we believe it has the economic incentives to do so.
This funding request is consistent with the Administration's budget
request for fiscal year 2004.
Question. The President's National Energy Policy called for
environmentally sensitive development of Alaska's oil reserves and gas
reserves, including those in the National Petroleum Reserve-Alaska.
Consistent with that mandate, the Arctic Energy Office engaged in
research into tundra travel to extend the exploration window on the
North Slope. Why did the Department of Energy eliminate funding for
this Arctic research?
Answer. The Tundra Travel Model was fully funded in fiscal year
2003 and the project has been successfully completed. To our knowledge,
the Alaska Department of Natural Resources is not seeking additional
funds from the Department of Energy to continue the project.
Question. The University of Alaska-Fairbanks and the Arctic Energy
Office have been at the forefront of climate change research. Changes
in climate are severely impacting Alaska's coastal communities. Why was
funding eliminated for this research in the budget for fiscal year
2005?
Answer. Although the Arctic Energy Office has a close working
relationship with the University of Alaska-Fairbanks, it does not fund
climate change research.

______

Questions Submitted by Senator Byron L. Dorgan

FUTURE GEN

Question. The Department's FutureGen plan, which is dated March 3,
2004, refers to the congressional directive that the plan be
``closely'' coordinated with the private sector. The plan does not,
however, provide any detail on how the Department went about
accomplishing that task. Please tell the Committee how the FutureGen
plan was coordinated, including the organizations consulted, the number
of meetings convened, and when the Department expects comments back
from the industry regarding its plan.
Answer. DOE staff communicated on several occasions with a point of
contact designated by the FutureGen industry alliance. The point of
contact coordinated industry views and inputs that were discussed.
Communications took the form of informal meetings and telephone
conversations between Departmental staff and the industry coordinator
as the drafting of the plan progressed. The industry alliance also
provided input through a letter to the Department from the designated
coordinator. The Department considered this input in the drafting of
the plan. However, as stated in the FutureGen plan, industry has not
had sufficient time to review or comment on the final plan that was
submitted. Comments from the industry alliance are being requested on
the FutureGen plan.
Question. As the FutureGen plan rightly points out, community
acceptance will be one of the keys to the success of the project. What
is the Department planning with respect to community outreach, both
before and after a specific site is selected? And does the Department
have a plan or strategy for addressing environmental legal challenges?
Answer. The Department is planning to include early planning
activities for NEPA compliance in its community outreach prior to site
selection. Early in the process, we will conduct early community
outreach activities including an announcement of an Advance Notice of
Intent to prepare an Environmental Impact Statement (EIS) for the
FutureGen project. This announcement will include outreach to those
state and tribal nation entities that initially submitted letters of
interest in hosting the plant, including potentially interested
communities within offering states. Every reasonable effort will be
made to provide early information to keep the public and potential
stakeholders apprised.
Following an open competition to select a host site, the Department
will issue a final Notice of Intent regarding the EIS and will announce
that intent to all communities, states, and tribal nations responding
to the Consortium's competition. The Department will plan and conduct
public meetings in communities within all regions offered as reasonable
(i.e., potentially qualified) candidate sites for the plant. An
extensive state and community outreach program will continue after a
site has been selected.
As with any sizeable project, there is always the potential for
environmental legal challenges. With respect to addressing these
potential challenges, the Department plans to adhere to and comply with
all relevant NEPA regulations, meticulously adhere to established
procedures, document such procedures, and implement a full and open
process that would engage the public and stakeholders throughout. It
will also incorporates alternatives (site and technology alternatives)
that are as broad as reasonably possible to ensure the reasonable range
of alternatives were evaluated in the EIS documentation and serve to
embody the actual conditions the project plans to move forward in at
the time the site is selected.
Question. Obviously, funding sources for the $950 million cost of
the FutureGen project are an important factor that must be carefully
considered by the Congress before committing substantial funds to this
endeavor. The plan states that $80 million will come from state and
foreign governments. Which governments have pledged funds, how much
have they pledged, and what mechanism is in place to ensure that these
funds will actually end up ``in the bank''?
Answer. At this time, several state and foreign governments have
expressed a keen interest in participating in the FutureGen initiative.
However, at this early stage in the FutureGen process, pledging of
funds from any governmental entity would be premature and thus, is not
yet expected since such commitments would be subject to further
discussions and negotiations. The Department is encouraging broad
international participation and will be actively pursuing cost sharing
partnerships in FutureGen. Several mechanisms such as existing
protocols and agreements, modification of exiting agreements, and new
agreements could provide the avenues for addressing cost-share
contributions, extent of participation, rights and other quid pro quo
issues.
Question. The FutureGen plan also envisions $250 million coming
from a private-sector consortium. Please provide the Committee with a
list of consortium members and the amount of funding each member has
agreed to contribute. In addition, specify whether or not the funds are
legally committed to FutureGen.
Answer. As reported by the industry consortium that refers to
itself as the FutureGen Industrial Alliance, the members are: American
Electric Power, Cinergy Corporation, CONSOL Energy Inc., Kennecott
Energy Company, The North American Coal Corporation, PacifiCorp,
Peabody Energy, RAG American Coal Holding, Inc., Southern Company, and
TXU. It is not known by the Department what arrangements, if any, have
been made among the membership regarding the funding contributions of
each member. The Department has no knowledge at this time as to whether
industry funds are or have been legally committed to FutureGen. It is
anticipated these and other questions and issues will be addressed
prior to or at the time of negotiations with the industry partner.
Question. There is a real concern that the administration intends
to pay for its $620 million share by supplanting current coal research
programs. Even assuming Congress agrees to the administration''s
proposal to transfer the remaining Clean Coal Technology balances to
the FutureGen program, approximately $375 million remains unaccounted
for. Does the administration intend to fund the FutureGen program with
budget requests above and beyond the base coal R&D program, or will
some of the base funds be used for FutureGen?
Answer. On page 8 in the FutureGen plan report, a profile is
provided of the estimated governmental expenditures. As shown in the
report, the administration's plan calls for a total of $500 million in
new direct funding for the project and $120 million from the
sequestration program, with $80 million being sought from international
partners. The Department considers FutureGen the highest priority coal
research effort, and as such, adequate supporting base coal research
for FutureGen will most likely continue to be needed. Certain research
in some areas such as that in emissions controls will wind up in the
out years. In addition, the sequestration research program calls for
large scale field tests that would be conducted with or without
FutureGen. Therefore, that portion of the large scale sequestration
research which can be conducted in an integrated mode with FutureGen
could be funded as part of the project.
Question. The FutureGen plan states that the Department will
provide $100 million toward the project in fiscal year 2008; $11
million for plant design, and $89 million for procurement and
construction. Are these funds in addition to the base coal R&D program,
or will they be included in the basic coal research budget?
Answer. On page 8 in the FutureGen plan report, a profile is
provided of the estimated governmental expenditures. It is the
administration's intent to request a total of $500 million in new
direct funding for the project and $120 million from the sequestration
program, with $80 million being sought from international partners. The
Department considers FutureGen the highest priority coal research
effort, and as such, adequate supporting base coal research for
FutureGen will most likely continue to be needed.
Question. Please also answer this question with respect to the $113
million the Department proposes to spend in fiscal year 2009.
Answer. On page 8 in the FutureGen plan report, a profile is
provided of the estimated governmental expenditures. It is the
administration's intent to request a total of $500 million in new
direct funding for the project and $120 million from the sequestration
program, with $80 million being sought from international partners. The
Department considers FutureGen the highest priority coal research
effort, and as such, adequate supporting base coal research for
FutureGen will most likely continue to be needed.
Question. The Department states that $120 million will be subsumed
from the Sequestration research budget and put into the FutureGen
project. According to the plan, for fiscal years 2009, 2010, and 2011,
this amounts to $52 million. Yet, in looking at the plan's expenditures
for those three fiscal years, no research activities are noted. On the
contrary, design and construction account for virtually all of the
funds proposed to be spent. How does the Department justify using much-
needed sequestration research dollars for basic building construction,
particularly in light of the fact that the plan makes abundantly clear
that much more needs to be done in the sequestration area if FutureGen
is to be a success?
Answer. The carbon sequestration aspect of FutureGen will integrate
carbon capture in the above-ground facility with geologic carbon
sequestration. During fiscal year 2009, fiscal year 2010, and fiscal
year 2011, funding from the sequestration R&D program will be used in
conjunction with direct project funding for the design, procurement,
and construction of carbon sequestration sub-system components for
FutureGen, which are required for FutureGen carbon sequestration
research and testing. Thus, funds from the sequestration R&D program
will be used to enable sequestration research at the integrated
FutureGen facility. Funding from the sequestration R&D program for
fiscal year 2011 will also support shake-down and start-up testing of
the carbon sequestration sub-system components. In addition, the
sequestration research program calls for large scale field tests that
would be conducted with or without FutureGen. Therefore, that portion
of the large scale sequestration research which can be conducted in an
integrated mode with FutureGen would be appropriately funded as part of
the project.

______

Questions Submitted by Senator Robert C. Byrd

FOSSIL ENERGY BUDGET REQUEST VS. THE ENERGY BILL

Question. I am aware that this administration did not take into
account the now stalled Energy bill when releasing its fiscal year 2005
budget for DOE's Fossil Energy programs. However, one does not have to
look far to see a clear disparity between what the administration is
proposing this fiscal year and what is needed for many important energy
programs. For example, the administration has cut the basic research
and development funding for the Fossil Energy program by 32 percent for
the fiscal year 2005 request. That is just an average cut, as specific
oil, gas, coal, fuel cell, and other fossil energy programs have been
cut even more severely. Based on the authorization levels in the Energy
bill, the fossil energy program would require a 22 percent increase for
fiscal year 2005 above and beyond the fiscal year 2004 appropriated
funds. I am sure that similar examples exist for other important energy
programs. We have seen this disparity in so many other bills. After the
Congress passes a bill, the administration promotes it but then
underfunds it.
The Secretary recently traveled to West Virginia touting the
administration's work for coal. This administration has suggested that
it stands behind the multiple billions for clean coal in the Energy
bill, including the President's campaign promise for Clean Coal
Technology. However, given this administration's track record, it
hardly seems likely this funding will ever fully blossom.
Can the Department provide the Committee a copy of the Department's
request to OMB for the Fossil Energy program for fiscal year 2005?
Answer. 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-markup activities
of any Congressional Committee, the initial views and positions within
the Executive Branch vary widely relative to the final 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 working documents. Therefore, the Department's OMB
budget is not releasable outside of the Executive Branch.
Question. If an energy bill were to somehow pass, would the
administration actually support an increase in its funding requests to
be in line with new authorizing levels for critical energy programs, or
would it simply follow the same deceptive patterns that it has pursued
after signing other authorizing bills?
Answer. The fiscal year 2005 budget request represents the
Administration's view of where the Department of Energy's budget should
be given the totality of demands placed on the Federal budget. The
Administration has indicated concern with the potential costs of both
H.R. 6 and S. 14, including their cumulative appropriation
authorization levels, which in many cases significantly exceed the
President's Budget and set unrealistic targets for future programmatic
funding decisions.

NATIONAL ENERGY TECHNOLOGY LABORATORY (NETL)/DOE OFFICE OF ENERGY
ASSURANCE

Question. As the Department is aware, the National Energy
Technology Laboratory (NETL) is currently providing unique expertise
and resources to assist the Office of Energy Assurance. NETL has a
broad knowledge of how to effectively work with energy infrastructure
owners and operators and forge effective partnerships with government
and the private sector. I believe that NETL is a good fit for the
Office of Energy Assurance, and I hope that the Department will do all
in its power to ensure that NETL has the opportunity to excel under
this important program.
NETL began providing assistance for the Office of Energy Assurance
in fiscal year 2003 at a level of $16 million, with my support. In
fiscal year 2004, I added an additional $16 million to the Energy and
Water Appropriations bill for NETL to continue its activities under
this program, as well as an additional $4 million for NETL to begin
construction of a DOE facility dedicated to training first responders
and industry on ways in which to prepare for, and respond to, a variety
of energy-related emergency scenarios. I understand that this facility
is a high priority for the Department.
While I realize that the Department may not have this information
readily available today, for the record, would the Department provide a
detailed report on the activities for which the $16 million for NETL
was expended in fiscal year 2003?
Answer. In fiscal year 2003, the Office of Energy Assurance worked
with NETL to direct and allocate the following initiatives:

[In thousands of dollars]
----------------------------------------------------------------------------------------------------------------
Performer Description of Work
----------------------------------------------------------------------------------------------------------------
NETL....................................... Requirement definition and support of the Energy 3,980
Infrastructure Training and Analysis Center (EITAC).
Nat'l Labs................................. EITAC modeling support................................ 1,700
IUOE....................................... Training first responders............................. 1,265
ISAC, SNL.................................. Energy Information Sharing and Analysis Center (ISAC) 689
support and technology exposition.
NASEO...................................... State emergency planning and response enhancements.... 707
Nat'l Labs................................. Technology development from a National Laboratory 2,200
competition.
Nat'l Labs................................. Visualization and analysis systems.................... 601
GTI........................................ Natural gas disruption study.......................... 305
SNL........................................ Supervisory Control and Data Acquisition system 300
technical support.
BCS........................................ Emergency response protocol support................... 250
Energetics................................. Facilitate stakeholder meetings....................... 310
NETL....................................... Develop metrics for energy assurance.................. 761
NETL....................................... Program direction for Federal/contractor salaries, 2,575
travel, and materials.
Budget rescission..................................... 357
------------
Total................................ ...................................................... 16,000
----------------------------------------------------------------------------------------------------------------

Question. For the record, how much of the $20 million that I have
added for NETL in fiscal year 2004 has been released and for what
purpose?
Answer. NETL has received $14,070,000 of the $20,000,000 that was
enacted by Congress in fiscal year 2004. In March 2004, the Office of
Energy Assurance (OEA) issued Work Authorizations to NETL describing
scope, cost, and schedule for work to be performed.
OEA has requested the fiscal year 2004 funds to be allocated as
shown below:

[In thousands of dollars]
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
Energy Disruptions and Preparedness........................ 2,645
Coordination with the Private Sector....................... 650
State and Local Government Support......................... 1,075
Criticality of Assets...................................... 2,190
Policy and Analysis........................................ 875
Technology Development..................................... 3,885
Management Support......................................... 250
Program Direction.......................................... 2,500
------------
Total................................................ 14,070
------------------------------------------------------------------------

By site, OEA funding would be distributed as :

[In thousands of dollars]
------------------------------------------------------------------------
Amount
------------------------------------------------------------------------
ANL........................................................ 550
INEEL...................................................... 1,080
LANL....................................................... 400
NETL....................................................... 5,495
ORNL....................................................... 375
PNNL....................................................... 770
SNL........................................................ 1,455
National Lab Council....................................... 200
National Labs (TBD)........................................ 470
Private Sectors/Universities............................... 3,275
------------
Total................................................ 14,070
------------------------------------------------------------------------

Question. Further, I would appreciate a detailed report on how the
fiscal year 2004 funds yet to be released will be utilized by NETL to
assist the Office of Energy Assurance.
Answer. The Office of Energy Assurance has retained $5,930,000 of
fiscal year 2004 funding. Of these funds, $4,000,000 is for
construction and furnishing of facilities to support the analytical,
training, and emergency response needs of the energy sector; $1,000,000
for NETL Program Direction; and $930,000 for program activities yet to
be defined by OEA.
Question. I would also like to know how many NETL jobs are
supported by the Office of Energy Assurance.
Answer. In fiscal year 2004, approximately 14 Federal and
contractor NETL employees will support the Office of Energy Assurance.
Question. What is the Department's vision for NETL's role in the
Office of Energy Assurance in the future? For example, will the
Department incorporate funding to support NETL's work under this
program into future budget requests and will the Department encourage
NETL to work with the Department of Homeland Security in complementary
activities?
Answer. Funding for NETL was not identified in the fiscal year 2005
budget request for the Office of Energy Assurance. However, the
Department of Energy has encouraged NETL to work with the Department of
Homeland Security (DHS) in complementary activities. For example, in
fiscal year 2004, NETL is prepared to assist DHS in procuring up to
$100 million in national security R&D. NETL would allocate this funding
to projects selected by DHS that focus on security and reliability of
energy infrastructure. Examples include development of an electric grid
monitoring system, development and demonstration of mobile transformers
to recover from electricity outages, and implementation of protective
measures to monitor buffer zones near key energy infrastructures. NETL
is coordinating this work with DOE's Offices of Electric Transmission
and Distribution and Energy Assurance.

CLEAN ENERGY TECHNOLOGY EXPORT (CETE) INITIATIVE

Question. In October 2002, the administration, through the
Department, released the Clean Energy Technology Exports (CETE)
strategy. This action plan outlined a five-year, nine-agency initiative
to increase U.S. clean energy technology exports to international
markets through increased coordination among federal agency programs
and between these programs and the private sector. As I indicated in my
September 16, 2003, statement in the Congressional Record, this funding
is to be specifically provided to the Office of International Energy
Market Development (OIEMD) within the Department to more concretely
grow this multi-agency, congressionally initiated effort. The CETE
funding in fiscal year 2004 should be made available to the OIEMD to
embark on the establishment of an interagency administrative center and
to carry out related, near-term outreach efforts in support of CETE's
long-term goals.
Answer. Funds have not yet been made available to the Office of
International Energy Market Development (OIEMD). The department is
working closely with OIEMD to make these funds available from those
offices that are funded by the Energy Supply line as specified in the
Energy and Water Development Appropriations Conference Report 108-357.

NATIONAL ENERGY TECHNOLOGY LABORATORY (NETL) REORGANIZATION PLAN

Question. On Thursday, March 4, 2004, the Department submitted the
follow-up reorganization plan for the National Energy Technology
Laboratory (NETL). I have noted that this long overdue reorganization
plan follows the nearly three-year, top-to-bottom review of Fossil
Energy and the May 2003, reorganization plan that was submitted for the
Office of Fossil Energy. As a strong proponent of NETL, I will pay
careful attention to the continuation of its mission and strongly
support the work of its employees who conduct that mission. As a member
of the Interior and Related Agencies Subcommittee, I will also continue
to review the reorganization plan and make my views known to the
Subcommittee Chairman and Ranking Member prior to its being brought up
for approval by the Committee. How can you assure me that the NETL will
continue to have the appropriate and necessary flexibility to carry out
its important mission?
Answer. The top-to-bottom review and resultant reorganization plan
will not adversely impact NETL's flexibility to carry out its mission.
Rather, it will strengthen the programmatic relationship between NETL
and Fossil Energy Headquarters by better aligning resource management
with strategic direction. This will improve program accountability.
Question. Do you foresee disruptions in any ongoing NETL research
and development and other programs as a consequence of this
reorganization plan?
Answer. No disruptions are expected to occur in any ongoing NETL
research and development and other programs as a result of the
reorganization plan.
Question. Given NETL's unique role as a government-owned,
government-operated laboratory, how can you assure me that federal
employees will be equitably treated--treated in a manner that is
comparable to that afforded to the private-sector employees of the
Department's government-owned, contractor-operated laboratories? What
assurances can you make that contact, communications, and decision-
making processes will continue to flow both ways--from the Department
to the lab and from the lab to the Department?
Answer. NETL's expertise and capabilities have and will continue to
be valued by the Department. Their technical contributions are vital to
decision-making, communications, and contacts with the public and
private sectors, state and local governments, industry, and academia.
Question. Will job losses, immediately or in the future, occur as a
result of the laboratory reorganization plan?
Answer. NETL will not sustain any job losses, immediately or in the
future, as a result of the reorganization plan.
Question. Does the Department plan further outsourcing or
contracting efforts that would, in any way, threaten the jobs of NETL's
employees?
Answer. NETL supports the President's Management Agenda by
providing documentation to conduct the fiscal year 2004 Feasibility
Studies approved by the Competitive Sourcing Executive Steering Group
in DOE. The Feasibility Studies may result in determinations that
specific functions are appropriate for formal A-76 studies, therefore
it is too early to determine any potential impact.
Question. My review of the NETL reorganization plan indicates that
the Department is proposing changing the reporting relationship of the
employees in the Natural Gas Program to the National Petroleum
Technology Office in Tulsa, Oklahoma. Is this a first step in a chain
of actions to physically relocate those employees from Morgantown, West
Virginia to Tulsa, Oklahoma?
Answer. We do not anticipate, now or in the future, physically
relocating employees in the Natural Gas Program to the National
Petroleum Technology Office in Tulsa, Oklahoma.
Question. What assurances can you give me that these employees will
not be transferred in subsequent years to the National Petroleum
Technology Office?
Answer. We do not anticipate, now or in the future, physically
relocating employees in the Natural Gas Program to the National
Petroleum Technology Office in Tulsa, Oklahoma.
Question. If no plans are anticipated, then how is it in the best
interest of the lab's structure that these employees report to distant
managers in such an unwieldy fashion?
Answer. As a result of the top-to-bottom review, it was determined
that the Department needed a clear strategic focus for the entirety of
the natural gas and petroleum programs. The future direction of these
programs will provide a significant economic benefit to the American
people by aiding the efficient production of domestic resources and
diversifying global resource supplies. The reporting relationship is
not expected to be unwieldy since the National Petroleum Technology
Office is an integral part of the NETL. The manager of the Tulsa office
holds weekly face-to-face and/or telephone conference meetings with the
NETL Director.

______

Questions Submitted by Senator Patrick J. Leahy

ENERGY EFFICIENCY BUDGET CUTS

Question. Secretary Abraham has repeatedly stressed the importance
of energy efficiency in addressing high natural gas prices. For example
in a June 6, 2003 letter to a number of senators, he said, ``we concur
with the conclusion advanced in your letter that over the next 12 to 18
months there are only limited opportunities to increase supply; and
that, therefore, the emphasis must be on conservation, energy
efficiency, and fuel switching.'' Given the importance of energy
efficiency to addressing this critical problem (and other energy
problems), why does DOE propose to cut funding for Energy Efficiency
programs for the third year in a row?
Answer. Our overall budget request for the Office of Energy
Efficiency and Renewable Energy (EERE) across both our funding accounts
is up 1.2 percent above last year's appropriation. You are correct that
we are seeking an amount for the energy efficiency activities in the
Interior Appropriations account that is two-tenths of one percent less
than the amount of funding provided last year, or roughly $2 million
out of an $876 million budget request. Through increased efficiencies,
redirections, down-selects, project terminations, and significant
shifts across its portfolio of programs, EERE determined that is able
to meet its program goals at a funding level that is basically
unchanged from fiscal year 2004. Most notable among its internal
funding shifts, EERE is seeking a $64 million increase over fiscal year
2004 appropriated levels in the Weatherization Assistance Program. In
alignment with the President's commitment, the Department is increasing
its assistance to low-income Americans who spend a disproportionately
high share of their income on energy. This program not only reduces
energy costs for low-income families, but also saves energy for the
Nation. The main tradeoff for this increase is a decrease in funding
for the Industrial Technologies Program, which generally benefits
larger corporations with both the means and the incentive to save
energy.

NATURAL GAS SAVINGS

Question. Do you have estimates of potential natural gas savings
from the various buildings, industry and other efficiency programs?
Answer. Projected natural gas savings from energy efficiency
programs are presented in the table below. We recognize that our point
estimates rely heavily on key assumptions. For the appropriate context
to interpret these figures, we urge you to consult the description of
our modeling procedures and assumptions, which will be available on
line at www.eere.energy.gov/office--eere/ba/gpra.html by May 31, 2004.

POTENTIAL NATURAL GAS SAVINGS
[Quads]
------------------------------------------------------------------------
2010 2015 2020 2025
------------------------------------------------------------------------
Buildings Technologies.................. 0.15 0.33 0.54 0.78
FEMP.................................... 0.02 0.03 0.03 0.04
FreedomCAR and Vehicle Technologies..... ...... ...... ...... ......
Industrial Technologies................. 0.19 0.39 0.71 0.63
Weatherization and Intergovernmental.... 0.19 0.29 0.29 0.23
------------------------------------------------------------------------
Benefits reported are annual, not cumulative, for the year given.
Estimates reflect the benefits associated with program activities from
fiscal year 2005 to the benefit year or to program completion
(whichever is nearer), and are based on program goals developed in
alignment with assumptions in the President's Budget. Mid-term program
benefits were estimated utilizing the GPRA05-NEMS model, based on the
Energy Information Administration's (EIA) National Energy Modeling
System (NEMS) and utilizing the EIA's Annual Energy Outlook (AEO) 2003
Reference Case.

FEDERAL ENERGY MANAGEMENT PROGRAM

Question. The Federal Energy Management Program is unique in that
the money saved through efficiency improvements returns directly to the
federal government, and thus to the taxpayers. Nonetheless, you propose
to cut the FEMP program by 9 percent. How much money does the federal
government save due to DOE's FEMP program each year?
Answer. The nine percent cut in Federal Energy Management Program's
(FEMP) fiscal year 2005 budget request will not impact the program's
alternative financing programs, the primary driver for generating
energy cost savings for the Federal government. Instead, programmatic
efficiency improvements within these activities will allow FEMP to help
Federal agencies achieve the same amount of savings in fiscal year 2005
as is expected in fiscal year 2004. Unfortunately, the authority for
the Energy Savings Performance Contracts (ESPCs) expired October 1,
2003, and we are awaiting legislative extension of ESPC authority
providing temporary or permanent ESPC authority.
FEMP estimates that its Super ESPC activity ``saved'' the Federal
government approximately $48 million in fiscal year 2003 (assuming
energy usage in the form of electricity). Note that, due to the nature
of ESPCs, most of the ``savings'' realized by government agencies
during the ESPC contract term are paid to the ESPC contractor to offset
the original capital and installation cost of the energy efficiency
equipment. Thus, Federal energy cost savings really don't begin to
accrue until the contractor's investment (including interest) is fully
paid (the average duration of the ESPC term since inception of the
program is 17 years, which has decreased to 15 years on average over
the past five years). However, the Federal government realizes real
energy consumption savings as soon as the contractor implements the
energy efficiency measures (typically, the first or second year of the
contract). Because the Federal government is the largest single
consumer of energy in the United States, the use of ESPCs to reduce
Federal energy consumption can contribute to the Department's energy
security strategic goal.
Question. Since this program saves federal tax dollars, why are you
proposing to cut it?
Answer. As the Federal Energy Management Program's (FEMP) core
activities have matured, the efficiencies in those activities have
increased, enabling the program to reduce its funding request in fiscal
year 2005.
In fiscal year 2005, FEMP will continue to streamline program
activities. For example, FEMP has determined that it is no longer
necessary, because of activity maturation, to create any new Technology
Specific Energy Savings Performance Contracts (ESPCs). We have found
that we can achieve the same benefits through a fuller utilization of
our baseline ESPCs in a way that is less complicated for our agency
customers. Through more efficient use of its resources, FEMP will
continue to conduct its other activities, such as partnership meetings,
annual awards, outreach publications and technical assistance projects.

CLIMATE CHANGE INITIATIVE AND ENERGY CONSERVATION BUDGET CUTS

Question. The President's Climate Change Initiative sets a target
for reduction of greenhouse gas emission intensity. Energy efficiency
measures are typically the cheapest and quickest means of reducing
greenhouse gas emissions. With the energy conservation budget cuts, are
we taking advantage of the full potential of these programs to reduce
global warming?
Answer. The cuts to our energy efficiency budget from the fiscal
year 2004 appropriation amount to only two-tenths of one percent, or
roughly $2 million out of an $876 million budget request. At this
requested funding level, our internal analyses indicate that EERE
energy efficiency programs will reduce about 30 million metric tons
(mmt) of carbon emissions in 2010 and 100 mmt in 2020 if they achieve
the goals contained in the fiscal year 2005 budget request The size of
the benefits depends not only on the success of the EERE program
activities, but also on the evolution of future energy markets and
policies. The EERE estimate of carbon emissions assumes a continuation
of current policies and business-as-usual development of energy
markets. It does not include the improvements in energy efficiency that
would be expected in the absence of continued funding of EERE's
programs.
We recognize that our point estimates rely heavily on key
assumptions. For the appropriate context to interpret these figures, we
urge you to consult the description of our modeling procedures and
assumptions, which will be available on line at www.eere.energy.gov/
office_eere/ba/gpra.html by May 31, 2004.
Question. Which DOE efficiency programs show the greatest potential
for reducing greenhouse gas emissions over the next 10 or 20 years.
Answer. Our modeling suggests that the Industrial Technologies
Program (ITP) has the greatest potential to help reduce greenhouse gas
emissions by 2020. However, because many ITP activities may contribute
directly to the bottom line of some companies, industry has a financial
incentive to pursue many of these activities without Federal support.
Moreover, the modeling results reflect the fact that many ITP projects
are near term in nature, allowing for early market penetration and
significant reduction of emission in the year 2020. The Department has
generally tried to shift its portfolio to more long-term activities
where a stronger case can be made for Federal involvement. Also, like
most models, our modeling relies heavily on a few key assumptions, and
we have not run the model under multiple scenarios where key
assumptions may be different.
Finally, the category of environmental benefits, such as greenhouse
gas emissions reductions, is only one of several categories of public
benefits that the Department considers in managing its portfolio.
Reduced use of oil and consumer energy expenditure savings are also
considered, as are benefits that we do not quantify, such as the
ability to reduce peak power demand. Given these considerations, the
Department does not believe there is a ``silver bullet'' energy
efficiency technology that has the greatest potential for reducing
greenhouse gas emissions over the next 10 to 20 years. Instead, DOE has
decided to invest in a portfolio of energy efficiency research and
development (R&D) programs, each of which has the potential to reduce
greenhouse gas emissions and/or provide other public benefits over the
next 10 to 20 years.

WATER HEATER STANDARDS--ENERGY STAR

Question. Water heaters are the second largest user of energy in
the American home. Thus, DOE should be promoting ways to improve the
efficiency of these systems and promote consumer use of the most
efficient products available on the market. In an effort to address
these issues, DOE recently undertook a substantial effort to establish
ENERGY STAR criteria for water heaters, taking it to the point of
writing draft standards and convening a stakeholder meeting in April
2003. However, on January 6, 2004, DOE sent a letter to all water
heater stakeholders announcing they had ``decided not to establish
ENERGY STAR criteria for domestic water heaters at this time.'' Even
small gains in efficiency that save energy are worthwhile. Why did DOE
decide not to move forward with a water heater ENERGY STAR program?
Answer. This decision rests on several market and technical
considerations that made it impractical to consider ENERGY STAR
labeling for water heaters at this time, along with the realization
that labeling this product category prematurely could undermine some of
the fundamental tenets of ENERGY STAR. The key reasons are as follows:
--One of the ENERGY STAR program's basic tenets is that products must
provide sufficient market differentiation and savings to
consumers. The Department decided, based on its analyses and
stakeholder comments, that labeling conventional technologies
such as water heaters would not offer sufficient market
differentiation or savings to consumers. ``Conventional''
technologies are established, widespread, commercialized
technologies used by homeowners in common applications; in the
case of water heating, a ``conventional water heating system''
consists of a storage tank in the utility room (or basement)
with a gas or electric heat source heating the water initially
and keeping it hot for distribution throughout the house on
demand.
--With stricter Federal energy conservation standards for water
heaters already having gone into effect in January 2004, the
incremental savings offered by the best performing conventional
gas and electric products would not be large enough to justify
the awarding of an ENERGY STAR designation.
--ENERGY STAR is an appropriate differentiator of energy efficient
products only for product groupings offering a broad range of
energy performance levels within the given category. The
margins between the top-performing gas and electric storage
water heater models and the Federal standards are smaller than
for other ENERGY STAR product categories.
--For non-conventional products, the credibility of ENERGY STAR in
the market place depends on the label being placed only on
those products that save energy without sacrificing performance
or customer enjoyment of the product. While many of the non-
conventional products offer significant energy savings, there
are insufficient numbers of models and manufacturers offering
such products for sale to support a viable ENERGY STAR program
for these products at this time.

TANKLESS WATER HEATERS

Question. DOE's January 2004 letter recognizes the benefits of
tankless water heaters, saying ``In order to achieve significant energy
efficiency gains, manufacturers will have to pursue tankless
technologies, and ``tankless water heaters have significant energy
savings potential compare to conventional products,' tremendous gains
in energy savings and associated pollution prevention could be
achieved.'' Given that DOE recognizes the benefits of tankless water
heaters, why did DOE categorize it as a ``non-conventional product''
and not support using the ENERGY STAR program to promote its use?
Answer. A key tenet of the ENERGY STAR Program is that a broad
range of manufacturers and distribution channels exist for products
designated as ENERGY STAR. The infrastructure to sell and service
``non-conventional'' products is not fully developed in most parts of
the country, either because the product is new and not widely
distributed (as in the case of heat pump water heaters), or because
there is low demand for the product in much of the country due to
economic considerations (as in the case of solar water heaters).
Although the energy savings potential is great, the challenges
associated with bringing these products into the mainstream are also
great. The Department hopes that over the next several years the market
for these products will develop, leading to a more mature delivery
infrastructure, increased reliability, and improved performance and
reduced prices. This would create the type of conditions in which the
Department would consider creating an ENERGY STAR label for heat pumps
and tankless, solar, and other newly developed water heaters.

SPINNING RESERVE DEMONSTRATION PROJECTS

Question. What is the status of DOE's research by the Oak Ridge
National Laboratory's (ORNL) Building Technology Program on spinning
reserve demonstration projects?
Answer. ORNL has conducted research concerning the technical
feasibility of obtaining spinning reserve from aggregations of both
large and small responsive loads for enhancing bulk power system
reliability and reducing costs. Spinning reserve is the fastest
responding and most expensive bulk power system contingency reserve.
This concept requires both a paradigm change and a rule change. As a
result of ORNL and other's efforts, NERC rules have been modified to no
longer prohibit loads from providing spinning reserve. FERC has also
stated that it will allow load to provide spinning reserve. A next step
is to change the rules in the Regional NERC Reliability Councils. In
addition, market rules, ISO rules, and utility rules all have to be
addressed.
ORNL has worked with large aggregations of residential and small
commercial heating and cooling loads to develop the concept of spinning
reserve from responsive load. Several technologies exist that could
support this reliability application, and ORNL has issued two reports
on its work with Digi-log and Carrier on the aggregation of small
responsive loads.
ORNL has also worked with large water pumping loads and found that
they also offer significant potential for spinning reserve. ORNL has
worked with the California Department of Water Resources (CDWR) to
analyze pumping operations and the results of the analysis are quite
encouraging. Based on the aggregated CDWR pumping load, it was found
that the CDWR could theoretically supply more spin capacity than the
CAISO needs for over 3,000 hours per year, and realize potential total
annual revenues for CDWR of over $11 million are possible. Results are
documented in the report: B. Kirby, J. Kueck, 2003, Spinning Reserve
from Pump Load: A Technical Findings Report to the California
Department of Water Resources, ORNL/TM 2003/99, Oak Ridge National
Laboratory, November.
As a result of the favorable findings of this report, ORNL is
working with the Western Electricity Coordinating Council (WECC) to
support a request for a WECC rule change to supply spin from load.
Question. Has DOE considered testing the Digi-log technology in a
cold weather climate as well?
Answer. ORNL successfully tested the Digi-log technology for
supplying spinning reserve for enhancing bulk power system reliability
and reducing costs during the summer of 2003 on eighty room heating and
air-conditioning units equipped with Digi-log controllers at a motel in
New York. Testing confirmed that load could respond fast enough to
perform as spinning reserve. Similar response speeds would be expected
when using the Digi-log technology in cold weather applications. DOE
has not tested Digi-log technology for cold-weather loads.

SUBCOMMITTEE RECESS

Senator Burns. Thank you all very much. The subcommittee
will stand in recess to reconvene at 9:30 a.m., Thursday, March
11, in room SD-124. At that time we will hear testimony from
the Honorable Mark Rey, Under Secretary for Natural Resources
and Environment, Department of Agriculture and Dale Bosworth,
Chief, Forest Service.
[Whereupon, at 11:22 a.m., Thursday, March 4, the
subcommittee was recessed, to reconvene at 9:30 a.m., Thursday,
March 11.]