[Senate Hearing 108-]
[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

                        [In thousands of dollars]
------------------------------------------------------------------------
                                                Fiscal year
                                  --------------------------------------
                                       2003         2004         2005
------------------------------------------------------------------------
Budget Request...................      797,512      804,653      728,899
------------------------------------------------------------------------

    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


                        [In thousands of dollars]
------------------------------------------------------------------------
                                                Fiscal year
                                  --------------------------------------
                                       2003         2004         2005
------------------------------------------------------------------------
Budget Request...................      880,176      877,984      875,933
------------------------------------------------------------------------

    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

                        [In thousands of dollars]
------------------------------------------------------------------------
                                                Fiscal year
                                  --------------------------------------
                                       2003         2004         2005
------------------------------------------------------------------------
Budget Request...................       80,087       81,100       85,000
------------------------------------------------------------------------

    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.
    IntelliPipeTM, 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. IntelliPipeTM 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 IntelliPipeTM, 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.]
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