[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
    H.R. 1071, TO DIRECT THE SECRETARY OF ENERGY TO MAKE INCENTIVE 
    PAYMENTS TO THE OWNERS OR OPERATORS OF QUALIFIED DESALINATION 
 FACILITIES; AND OVERSIGHT ON ``REDUCING POWER AND OTHER COSTS OF THE 
                        DESALINATION PROCESS.''

=======================================================================

                   LEGISLATIVE AND OVERSIGHT HEARING

                               before the

                    SUBCOMMITTEE ON WATER AND POWER

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             FIRST SESSION

                               __________

                         Tuesday, May 24, 2005

                               __________

                           Serial No. 109-14

                               __________

           Printed for the use of the Committee on Resources


 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
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                         COMMITTEE ON RESOURCES

                 RICHARD W. POMBO, California, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska                    Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Eni F.H. Faleomavaega, American 
Elton Gallegly, California               Samoa
John J. Duncan, Jr., Tennessee       Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Barbara Cubin, Wyoming               Donna M. Christensen, Virgin 
  Vice Chair                             Islands
George P. Radanovich, California     Ron Kind, Wisconsin
Walter B. Jones, Jr., North          Grace F. Napolitano, California
    Carolina                         Tom Udall, New Mexico
Chris Cannon, Utah                   Raul M. Grijalva, Arizona
John E. Peterson, Pennsylvania       Madeleine Z. Bordallo, Guam
Jim Gibbons, Nevada                  Jim Costa, California
Greg Walden, Oregon                  Charlie Melancon, Louisiana
Thomas G. Tancredo, Colorado         Dan Boren, Oklahoma
J.D. Hayworth, Arizona               George Miller, California
Jeff Flake, Arizona                  Edward J. Markey, Massachusetts
Rick Renzi, Arizona                  Peter A. DeFazio, Oregon
Stevan Pearce, New Mexico            Jay Inslee, Washington
Henry Brown, Jr., South Carolina     Mark Udall, Colorado
Thelma Drake, Virginia               Dennis Cardoza, California
Luis G. Fortuno, Puerto Rico         Stephanie Herseth, South Dakota
Cathy McMorris, Washington
Bobby Jindal, Louisiana
Louie Gohmert, Texas
Marilyn N. Musgrave, Colorado
Vacancy

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                

                    SUBCOMMITTEE ON WATER AND POWER

               GEORGE P. RADANOVICH, California, Chairman
        GRACE F. NAPOLITANO, California, Ranking Democrat Member

Ken Calvert, California              Raul M. Grijalva, Arizona
Barbara Cubin, Wyoming               Jim Costa, California
Greg Walden, Oregon                  George Miller, California
Thomas G. Tancredo, Colorado         Mark Udall, Colorado
J.D. Hayworth, Arizona               Dennis A. Cardoza, California
Stevan Pearce, New Mexico            Vacancy
Cathy McMorris, Washington           Vacancy
Louie Gohmert, Texas                 Nick J. Rahall II, West Virginia, 
Vacancy                                  ex officio
Richard W. Pombo, California, ex 
    officio

                                 ------                                
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on Tuesday, May 24, 2005............................     1

Statement of Members:
    Davis, Hon. Jim, a Representative in Congress from the State 
      of Florida.................................................    26
        Prepared statement of....................................    28
    Radanovich, Hon. George P., a Representative in Congress from 
      the State of California....................................     1
        Prepared statement of....................................     2

Statement of Witnesses:
    Bach, Maryanne, Director, Research and Development, Bureau of 
      Reclamation, U.S. Department of the Interior...............     9
        Prepared statement of....................................    10
    Garman, David, Assistant Secretary for Energy Efficiency and 
      Renewable Energy, U.S. Department of Energy................     5
        Prepared statement of....................................     6
    Holtz-Eakin, Dr. Douglas, Director, Congressional Budget 
      Office.....................................................    14
        Prepared statement of....................................    15
    Max, Dr. Michael D., Chief Executive Officer, Marine 
      Desalination Systems, L.L.C., St. Petersburg, Florida......    58
        Prepared statement of....................................    60
    McCourt, Pat, City Manager, City of Alamogordo, New Mexico...    54
        Prepared statement of....................................    55
    Rhinerson, Bernie, Board Member, San Diego County Water 
      Authority, on behalf of the U.S. Desalination Coalition, 
      San Diego, California......................................    36
        Prepared statement of....................................    37
    Sabol, Colin R., Chief Marketing Officer, GE Infrastructure, 
      Trevose, Pennsylvania......................................    47
        Prepared statement of....................................    49
    Wattier, Kevin L., General Manager, Long Beach Water, Long 
      Beach, California..........................................    39
        Prepared statement of....................................    41
    .............................................................


  LEGISLATIVE HEARING ON H.R. 1071, A BILL TO DIRECT THE SECRETARY OF 
    ENERGY TO MAKE INCENTIVE PAYMENTS TO THE OWNERS OR OPERATORS OF 
   QUALIFIED DESALINATION FACILITIES TO PARTIALLY OFFSET THE COST OF 
 ELECTRICAL ENERGY REQUIRED TO OPERATE SUCH FACILITIES, AND FOR OTHER 
PURPOSES; AND AN OVERSIGHT HEARING ON ``REDUCING POWER AND OTHER COSTS 
                     OF THE DESALINATION PROCESS.''

                              ----------                              


                         Tuesday, May 24, 2005

                     U.S. House of Representatives

                    Subcommittee on Water and Power

                         Committee on Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:05 a.m., in 
Room 1334, Longworth House Office Building, Hon. George 
Radanovich [Chairman of the Subcommittee] presiding.
    Present: Representatives Radanovich, Walden, Tancredo, 
Hayworth, Pearce and Napolitano.
    Also Present: Representatives Gibbons and Davis.

STATEMENT OF THE HON. GEORGE P. RADANOVICH, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Radanovich. Good morning. Welcome to the Subcommittee 
on Water and Power, Committee on Resources hearing on H.R. 
1071, a bill to direct the Secretary of Energy to make 
incentive payments to the owners or operators of qualified 
desalination facilities to partially offset the cost of 
electrical energy required to operate such facilities, and for 
other purposes; and a hearing on ``Reducing Power and Other 
Costs of the Desalination Process.'' The hearing by the 
Subcommittee is now in order.
    Today, we will examine ways to create new water through the 
promise of desalting. This growing alternative water supply 
should be a major piece of our water toolbox.
    So far this Congress, we have looked at ways to improve our 
water supplies, to increase water storage, water recycling, and 
other mechanisms. We still need all these tools to meet growing 
population environmental demands, and we will continue to 
pursue them.
    For years, desalting water has been a major focus in the 
Middle East, where cheap oil subsidizes the high power cost. 
The U.S. Navy extensively uses this process for its water 
needs. Just recently, however, desalting is now being 
considered on a large scale in our coastal and inland 
communities. Our Nation has come a long way in reducing 
desalting costs, but when the water is still two or three times 
more expensive than traditional sources, we can do better.
    The purpose of today's hearing is to figure out the 
appropriate Federal role of this arena of ``water world.'' H.R. 
1071, authored by our distinguished colleagues, Jim Davis and 
Jim Gibbons, is one proposed way to reduce power costs. This 
bill is well-intentioned and has merit, but we should also look 
at what role the Federal agencies can play in limited research 
and development as well.
    We should do something about permitting requirements, too. 
When almost a third of the construction costs of a proposed 
southern California desalting facility are related to Federal 
and State permits, it begs the question of the need to reduce 
this part of the cost equation. We ought to think about a one-
stop-shop permitting provision--like Nancy Pelosi envisioned 
for Hetch Hetchy--to reduce these costs.
    I welcome my colleagues and today's witnesses for their 
dedication in desalting and reducing costs, and I look forward 
to working with everybody on this important topic.
    [The prepared statement of Mr. Radanovich follows:]

        Statement of The Honorable George Radanovich, Chairman, 
                    Subcommittee on Water and Power

    Today, we will examine ways to create new water through the promise 
of desalting. This growing, alternative water supply should be a major 
piece of our water toolbox.
    So far this Congress, we have looked at ways to improve our water 
supplies through increased water storage, water recycling and other 
mechanisms. We still need all of these tools to meet growing population 
and environmental demands and we will continue to pursue them.
    For years, desalting water has been a major focus in the Middle 
East, where cheap oil can subsidize the high costs of this process. The 
U.S. Navy extensively uses this process for its water needs. Just 
recently, however, desalting is now being considered on large scale in 
our coastal and inland communities. Our Nation has come a long way in 
reducing desalting costs, but when the water is still two or three 
times more expensive than traditional sources, we can do better.
    The purpose of today's hearing is to figure out the appropriate 
federal role in this arena of ``water world.'' H.R. 1071, authored by 
our distinguished colleagues, Jim Davis and Jim Gibbons, is one 
proposed way to directly reduce power costs. This bill is well-
intentioned and has merit, but we should also look at what the role the 
federal agencies can play in limited research and development as well.
    We should do something about permitting requirements too. When 
almost of third of the construction costs of a proposed southern 
California desalting facility are related to federal and state permits, 
it begs the question of the need to reduce this part of the cost 
equation. We ought to think about a one-stop-shop permitting 
provision--like Nancy Pelosi envisioned for Hetch Hetchy--to reduce 
these costs.
    I welcome my colleagues and today's witnesses for their dedication 
to promoting desalting and reducing its costs. I look forward to 
working with everyone on this important topic.
                                 ______
                                 
    Mr. Radanovich. I now recognize Mrs. Napolitano, as the 
Ranking Democrat, for any statement she may have.
    Mrs. Napolitano. Thank you, Mr. Chair. It is a pleasure to 
be here this morning to look at what role desalination plays 
and to hear from the witnesses, the experts on the various 
aspects of desalination.
    You are very well aware that I strongly support and 
advocate the use of technologies to solve some of our water 
problems. As we are all well aware, putting technology to work 
on the water shortages can be expensive, but it can also 
provide new and less expensive ways as they fine-tune some of 
these technologies.
    Some of the communities will find it impossible to build 
desalination plants or water recycling projects because they 
lack either the tax base or the seed money to construct and 
carry through some of their plans, or because the revenues from 
water sales are not enough to cover all those costs. Can or 
should we, Federal Government, step in to help committees and 
communities finance or operate desalination plants?
    A strong case for the Federal assistance can be made in 
many cases, but we first must carefully consider exactly what 
the Federal role should be. We need to find out what the 
communities need, where they need it, how they need it, have a 
more clearly defined role in the Federal Government as a 
partner in these communities who wish to build these 
facilities, and is it in the areas of greater need where they 
are facing drought, continuing drought conditions that affect 
their economy and their ability to have growth potential.
    I want to thank my Chair, a good friend, Mr. Radanovich for 
scheduling the hearing, and I look forward to Congressman Jim 
Davis' desalination bill explanation, H.R. 1071, and for 
working with us to line up the two excellent panels of 
witnesses of whom I have a ton of questions. Thank you, Mr. 
Chairman.
    Mr. Radanovich. Thank you, Grace.
    I now recognize the gentleman from Nevada, the co-sponsor, 
co-author of the bill, Jim Gibbons.
    Mr. Gibbons. Thank you, Mr. Chairman; and thank you for 
giving me an opportunity to testify here today and to discuss 
H.R. 1071, the Desalination Drought Protection Act of 2005.
    I want to also welcome all our witnesses here today. I look 
forward to your testimony. I think it is going to be very 
insightful in helping us make a better informed decision.
    I am actually a lead sponsor and quite proud to be a lead 
sponsor of this important bill; and, Mr. Chairman, while I do 
not serve on this Subcommittee as a member, our Nation's water 
supply is an issue of great interest to me and my constituents, 
especially in Nevada. I am pleased to be here today to discuss 
this bill which would give great hope for those of us out West 
where water is short. Mark Twain, a one-time Nevada silver 
prospector, once observed: Whiskey is for drinking, water is 
for fighting over. And that holds true today.
    Seven States currently are competing for their share of the 
Colorado River. With potentially fierce battles over the 
distribution of the Colorado River looming, Nevada and the 
entire West must consider alternative sources of water to 
continue our growth and prosperity.
    The West, home to the fastest-growing communities in the 
Nation, continues to face a prolonged drought. Now entering our 
sixth consecutive year of drought, Nevada must look for other 
sources of water. Desalination, the process through which 
seawater and brackish groundwater are converted into pure 
drinking water, is one such source. Desalination plants produce 
dependable supplies of fresh water at increasingly lower cost 
every year.
    Given further advances in technology, desalination holds 
the promise of becoming a key component of a long-term solution 
to America's water shortage crisis. The development of a robust 
desalination industry in California, the largest user of the 
Colorado River water, could result in a more efficient 
allocation of that river water for Nevada and its neighbors.
    It is my hope that through the passage of this legislation 
the Federal Government can help propel an industry that can 
become a vital part of our Nation's long-term solution to water 
shortage.
    With that, Mr. Chairman, I thank you for the opportunity to 
be present here today and yield back the balance of my time.
    Mr. Radanovich. Thank you, Mr. Gibbons.
    Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman. I would also like to 
say thanks for having this hearing.
    New Mexico just struggles continuously for water resources. 
Many parts of the State typically only get nine inches per year 
and in the last 3 and 4 years only two inches per year. So we 
are facing a water shortage that is unprecedented.
    On the second panel, I would like to introduce a person 
from my district. I will be in and out of this Committee 
hearing, going to another one, but I would like to introduce 
Mr. Pat McCourt, who is the City Manager from the City of 
Alamogordo. The City of Alamogordo has estimates of about a 
billion acre feet underneath it, but it is pretty salty water. 
So in that area we have plenty of water, just not plenty of 
cheap water, and this bill should help us move a long way to 
beginning to have the alternative sources of water available 
where we do have the actual water there. So we are appreciative 
of his work and his testimony here today, and we look forward 
to the discussion on what we can do on this Committee to ensure 
the communities have the resource available that creates all 
life.
    Thank you again, Mr. Chairman, for this hearing.
    Mr. Radanovich. Thank you, Mr. Pearce.
    Now if there is nobody else having an opening statement, we 
will introduce our first panel.
    We have two panels here today. The first is Mr. David 
Garman, who is the Assistant Secretary For Energy Efficiency 
and Renewable Energy in the Department of Energy; Ms. Maryanne 
Bach, who is the Director of Research and Development at the 
Bureau of Reclamation; and Dr. Douglas Holtz-Eakin, Director of 
the Congressional Budget Office.
    Ladies and gentlemen, welcome to the Subcommittee. What we 
will do in the course of the hearing is allow each one to 
testify for about 5 minutes. The clocks will guide you. If you 
keep in mind that your written testimony is included in the 
public record--and feel free to be extemporaneous in your 
remarks, if you would like. We will go down for comments from 
each of the three panelists and then open it up for questions 
from the dais here.
    Mr. Radanovich. Mr. Garman, welcome. You may begin.

   STATEMENT OF DAVID GARMAN, ASSISTANT SECRETARY FOR ENERGY 
   EFFICIENCY AND RENEWABLE ENERGY, U.S. DEPARTMENT OF ENERGY

    Mr. Garman. Thank you, Mr. Chairman. We appreciate this 
opportunity to testify on the bill H.R. 1071, legislation 
directing the Department of Energy to help offset the cost of 
electrical energy required to operate desalination facilities.
    To the narrow question as to whether or not the Department 
of Energy should directly subsidize electricity cost at desal 
facilities, we believe the answer is no, and therefore 
regrettably cannot support this legislation. It is our view 
that incentive payments are not the best means to remove the 
energy cost barriers to desalination. Instead, we feel that 
continued Federal support for desalination research and 
development as well as our ongoing efforts to reduce energy 
demand and increase supply through the adoption of 
comprehensive energy legislation will have a large impact in 
the long run on reducing desalination costs, perhaps a bigger 
impact than making incentive payments in the short run to 
owners and operators of individual facilities.
    But, having said that, let me express the view that we 
share this view that members of this Subcommittee have that we 
have to develop innovative new approaches to dealing with the 
regional, national, and global challenges related to water 
availability and quality. This is an issue that is commanding 
significant attention at the highest levels of the 
Administration. The White House Office of Science and 
Technology Policy and the Office of Management and Budget have 
identified water as a top Administration research and 
development priority and called upon the National Science and 
Technology Council to develop a coordinated, multi-year plan to 
improve research and to understand the processes that control 
water availability and quality and to collect and make 
available the data needed to ensure an adequate water supply 
for the Nation's future.
    Of course, the Water Desalinization Act of 1996 gave lead 
responsibility to the Department of the Interior to conduct, 
encourage, and assist in the financing of research to develop 
cost-effective and efficient means for converting saline water 
into potable water suitable for beneficial uses. We are looking 
at ways to better coordinate our efforts with those of the 
Department of the Interior and other agencies through the 
process under way in the STSC Subcommittee on Water 
Availability and Quality.
    At the Department of Energy, we have also been engaging our 
national labs in serious discussions on what we call the 
``water-energy nexus.'' the relationship between energy and 
water is not well understood by the public. It is surprising to 
many, for instance, that the amount of fresh water withdrawn 
nationally for electricity production is more than twice the 
amount of water used for residential, commercial, and 
industrial purposes and is comparable to the amount used for 
agricultural irrigation. Meanwhile, pumping, storing, and 
treating water also consumes huge amounts of electricity. An 
estimated 7 percent of California's electricity consumption is 
used just to pump water.
    So we understand that both our energy and our water 
supplies are interconnected, and my written statement goes into 
much greater detail into the work we have under way at the 
national labs and universities and in conjunction with the 
private sector.
    So allow me to conclude my testimony by saying that, while 
we might oppose this specific legislation, the Department of 
Energy supports the overarching goal to make desalinated water 
more affordable for communities that need it. We will continue 
to work in support of the Department of the Interior and other 
Federal agencies in relevant research toward those ends, and we 
will look forward to working with this Committee and other 
committees of the Congress in that effort.
    So that completes my prepared statements, and I am happy to 
answer any questions the Subcommittee might have either today 
or in the future.
    Mr. Radanovich. Thank you, Mr. Garman.
    [The prepared statement of Mr. Garman follows:]

Statement of The Honorable David Garman, Assistant Secretary for Energy 
       Efficiency and Renewable Energy, U.S. Department of Energy

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to testify today on H.R. 1071, the Desalination Drought 
Protection Act of 2005. This legislation would direct the Secretary of 
Energy to make payments to partially offset the cost of electrical 
energy required to operate desalination facilities, presumably in an 
effort to alleviate water supply issues now and in the future.
    We share the view that we must develop innovative new approaches to 
dealing with the regional, national, and global challenges related to 
water availability and quality, and this is an issue that is commanding 
significant attention at the highest levels of the Administration.
    For example, in August 2004 the White House Office of Science and 
Technology Policy (OSTP) and Office of Management and Budget (OMB) 
identified water as a top Administration research and development 
priority and called upon the National Science and Technology Council 
(NSTC) to ``develop a coordinated, multi-year plan to improve research 
to understand the processes that control water availability and 
quality, and to collect and make available the data needed to ensure an 
adequate water supply for the Nation's future.'' The NSTC Committee on 
Environment and Natural Resources has formed a Subcommittee on Water 
Availability and Quality (SWAQ) comprised of 15 Federal Departments and 
Agencies who are now in the process of developing a comprehensive 
research plan. Their first report, ``Science and Technology to Support 
Fresh Water Availability in the United States,'' was released in 
November, 2004. Among the points highlighted by this report are the 
following:
      We do not have an adequate understanding of water 
availability at national, regional, or local levels.
      Water, once considered a ubiquitous resource, is now 
scarce in some parts of the country--and not just in the West as one 
might assume.
      The amounts of water needed to maintain our natural 
environmental resources are not well known.
      We need to evaluate alternatives to use water more 
efficiently, including technologies for conservation and supply 
enhancement such as water reuse and recycling as a way to make more 
water available.
      We need improved tools to predict the future of our water 
resources to enable us to better plan for the more efficient operation 
of our water infrastructure.
    The Water Desalination Act of 1996 (Public Law 104-298) gave lead 
responsibility to the Department of Interior to conduct, encourage, and 
assist in the financing of research to develop cost-effective and 
efficient means for converting saline water into potable water suitable 
for beneficial uses. We are looking at ways to better coordinate our 
efforts with those of the Department of the Interior and other agencies 
through the process underway in the NTSC's Subcommittee on Water 
Availability and Quality.
    At the Department of Energy, we have been in serious discussions 
with some of our labs on what we call the ``energy-water nexus.'' The 
relationship between energy and water is not well understood by the 
public, and it is surprising to many, for instance, that the amount of 
fresh water withdrawn nationally for electricity production is more 
than twice as much as the water used for residential, commercial, and 
industrial purposes, and is comparable to the amount of water used for 
agricultural irrigation. Meanwhile, pumping, storing, and treating 
water consumes huge amounts of electricity--an estimated 7 percent of 
California's electricity consumption is used just to pump water.
    We understand that our energy and water supplies are 
interconnected. In fact, as much energy is used for water and 
wastewater purposes as for other major industrial sectors of the U.S. 
economy such as paper and pulp and petroleum refining.
    Although supplying and distributing water is largely a local 
responsibility, we believe there is a Federal role in providing 
appropriate scientific and technological support for these efforts. The 
legislation before the subcommittee this morning, however, poses a 
narrower question: Should the Department of Energy subsidize 
electricity costs at desalination facilities? We believe the answer is 
no.
    While well intended, H.R. 1071 is not a comprehensive approach to 
the challenge we face. It would subsidize a narrow group of electricity 
users engaged in water desalination efforts, and could divert limited 
Federal funding from efforts to engage in a more comprehensive 
approach.
    It is our view that incentive payments are not the best means to 
remove the energy cost barriers to desalinating water. Instead, we feel 
continued targeted Federal support for desalination research and 
development consistent with the Administration's Research and 
Development Investment Criteria, as well as our ongoing efforts to 
reduce energy demand and increase supply through the adoption of 
comprehensive energy legislation, will have a larger impact in the 
long-run on reducing desalination costs than will making incentive 
payments to the owners or operators of individual facilities.
    Although the hearing today focuses on producing drinkable water 
through a technological process, the equally important aspect of the 
larger issue is finding ways to reduce water consumption and remove 
some of the demand pressure from regional water supplies. A prime place 
to start is the water intensive process of thermoelectric generation 
from fossil fuels such as coal, oil, and natural gas. For these 
systems, an average of 25 gallons of water is withdrawn to produce a 
kilowatt hour (kWh) of electricity of which nearly one-half gallon is 
consumed by evaporation. Overall, fossil-fuel-fired power plants 
require withdrawals of more than 97 billion gallons of fresh water each 
day, of which 2-3% is lost to evaporation.
    The Department's Office of Fossil Energy is supporting numerous 
research projects aimed at reducing the amount of fresh water needed by 
power plants and to minimize potential impacts of plant operations on 
water quality. One project at West Virginia University is assessing the 
feasibility of using underground coal mine water as a source of cooling 
water for power plants. A North Dakota project is attempting to reduce 
the water consumption of power plants by recovering a large fraction of 
the water present in the plant flue gas. A project in New Mexico is 
exploring whether produced waters, the by-product of natural gas and 
oil extraction which often present a disposal issue, can be used to 
meet up to 25 percent of the cooling water needed at the San Juan 
Generating Station, as well as investigating an advanced wet-dry hybrid 
cooling system. In addition, the Department currently has a competitive 
solicitation on the street seeking additional innovative technologies 
and concepts for reducing the amount of fresh water needed to operate 
fossil-based thermoelectric power stations, including advanced cooling 
and water recovery technologies. The Department is also investigating 
whether a suite of specially selected, salt-tolerant agricultural crops 
or other plants can be used to remove sodium and other salts from 
coalbed methane produced water so that it can be safely discharged or 
used in agriculture.
    One promising new approach to electricity generation, Integrated 
Gasification Combined Cycle (IGCC) technology that converts coal and 
other hydrocarbons into synthetic gas, offers significant environmental 
and water benefits compared to traditional pulverized coal power 
plants. Because the steam cycle of IGCC plants typically produces less 
than 50 percent of the power output, IGCC plants require 30 to 60 
percent less water than conventional coal-fired power plants. The 
Department is supporting research, development, and demonstration on a 
number of advancements that will significantly drive down the costs of 
IGCC plants.
    The Fossil Energy office is also supporting work at the University 
of Florida investigating an innovative diffusion-driven desalination 
process that would allow a power plant that uses saline water for 
cooling to become a net producer of fresh water. Hot water from the 
condenser provides the thermal energy to drive the desalination 
process. Using a diffusion tower, saline water cools and condenses the 
low pressure steam and fresh water is then stripped from the humidified 
air exiting the tower. This process is more advantageous than 
conventional desalination technology in that it may be driven by waste 
heat with very low thermodynamic availability. In addition, cool air, a 
by-product of this process, can be used to cool nearby buildings.
    The Department's Office of Energy Efficiency and Renewable Energy 
(EERE) is supporting R&D for innovative wind and solar electricity 
supply technologies that have attributes that may prove to be very 
beneficial to the desalination industry.
    For example, wind power is now becoming a competitive, clean, bulk 
electric power supply option in many areas of the Nation, and places no 
further demand on water supplies for its operation. In addition, 
excellent offshore wind resources are available near many coastal areas 
facing water supply challenges. The role that wind could play in 
powering desalination could take a range of forms, from stand alone 
systems exclusively powered by wind, to desalination plants that 
receive the majority of their energy requirements from wind power 
delivered via electricity grid systems. In either case, the relative 
ease and low cost of storing desalinated water, in comparison with 
storing electricity, will allow operating flexibilities that will 
facilitate using inherently variable wind power as a primary energy 
source for desalination.
    We are currently funding a concept design study which will set up 
engineering and economic models to examine viability of wind-powered 
reverse osmosis systems, looking at applications for coastal seawater, 
inland brackish water, and water produced during oil or gas recovery. A 
second project will model solar and wind resources for a desalination 
unit to determine the effects of variable loads on desalination, and 
perform pilot-scale testing to determine how renewable energy could 
reduce desalination costs.
    We are also undertaking a mapping project to overlay data such as 
fresh and brackish water resources, wind resources, water consumption, 
estimated growth, and electricity supply. Two maps will be developed, 
one of the United States, and one for the four-state region of 
Colorado, Utah, Arizona, and New Mexico, identifying locations that 
have the best economic and technical potential for using wind to power 
desalination
    Even as we proceed with these activities, we are mindful that the 
energy intensive technique of reverse osmosis we use for desalination 
today may not be the membrane technology of tomorrow. But whether that 
breakthrough comes from a lab working specifically on desalination, or 
through an area of broader scientific research remains to be seen. The 
Department's Office of Science, for example, is studying microbes and 
smart membranes that may ultimately have relevance to desalination in 
the future.
    Having said that, it seems certain that desalination will play an 
important role in maintaining and expanding our Nation's, and indeed 
the world's, water supply. Where fresh water aquifers are under 
pressure in many regions, over-drafted and subject to salt-water 
intrusion, brackish aquifers can be found throughout the country and 
the world, a ready source of new water. More than 120 countries are now 
using desalination technologies to provide potable water, most commonly 
in the Persian Gulf where energy costs are low. The desalination plants 
of the future must come in a range of sizes so that they can be 
installed where demand exists--smaller footprint facilities which can 
make use of smaller deposits of impaired water, at a price the 
community can afford. For American companies, the growing need for 
desalination will open new global markets.
    While we oppose this specific legislation, the Department of Energy 
supports the overarching goal to make desalinated water more affordable 
for communities that need it. We will continue to work in support of 
the Department of the Interior and other Federal agencies in relevant 
research toward those ends.
    This completes my prepared statement, and I am happy to answer any 
questions the Subcommittee may have.
                                 ______
                                 
    Mr. Radanovich. Next is Ms. Maryanne Bach, the Director of 
Research, R&D, at the Bureau. Welcome, Maryanne. You may begin 
your testimony.

     STATEMENT OF MARYANNE BACH, DIRECTOR OF RESEARCH AND 
  DEVELOPMENT, BUREAU OF RECLAMATION, U.S. DEPARTMENT OF THE 
                            INTERIOR

    Ms. Bach. Thank you, Mr. Chairman. I am Maryanne Bach. I am 
the Reclamations Director of Research and Development. Given 
that the testimony is submitted for the record, I will just 
highlight a few points.
    You are familiar with the Bureau's mission. I would say, in 
order to manage, develop, and protect waters in a way that make 
them economically and environmentally available for use, our 
tools are storage, transfer, conservation, and technology. 
Those are the means by which western water is managed.
    We have spent nearly a half a century advancing desal 
technology. That began in the Department of the Interior back 
in 1952. The Office of Saline Water was created. It came from 
the Saline Water Conversion Act. Until about 1982, the 
Department was spending on the order of $30 million a year in 
research. This was concurrent with the timeframe in which 
Reclamation was constructing storage facilities across the 
West. So the Department was focusing on desal technology; the 
Bureau was completing construction of many authorized projects.
    The Office of Saline Water morphed into an office called 
the Office of Water Research and Technology, and it was about 
in 1982 that determination was made that the research 
facilities, the research institutes that were part of the Water 
Research and Technology Office would be then managed by USGS, 
and the desalinization research activity would be transferred 
to the Bureau of Reclamation.
    There are some 1,200 Federal documents, sponsored 
documents, that were created, much of which has formed the 
basis for the technology that has been applied worldwide. I 
have noted in my testimony that there is an extensive set of 
CDs that relate to all of that technical work, plus the 
additional publications. I have one example, and I would be 
happy to submit the full set for the record. But they are known 
worldwide, and they are used extensively throughout the world 
as reference documents.
    In the late 1970s and early 1980s, Reclamation developed 
the Yuma Desalting Plant. The Committee is familiar with the 
background on Yuma. With a 73 million gallon per day capacity 
of desalted water, the Yuma Desalting Plant was larger than the 
overseas desal plants then running.
    What did the Yuma Desalting Plant have that those plants 
did not? It is an exhibit of the evolution of technology. It 
had large reverse osmosis elements, practical energy recovery 
and other technology applications that are still being in use 
today.
    In 1992, the agency moved into an area of improved 
reliability and cutting costs for the water treatment 
technology research program and in certain cases or 
opportunities to test that internal on reclamation projects.
    In 1996, Congress passed the Desal Act authorizing the 
agency to have a renewed effort at cutting desal costs through 
cooperative R&D, and the written testimony expands on that. 
Through that 1996 reauthorization, the desal and water 
purification research and development program is the line item 
in our budget that Reclamation has used to fund desal. We have 
developed membrane bioreactors and other important advanced 
technologies. DWPR has widespread support outside of 
government, and I would note that that authority for that 
particular piece of legislation does expire at the end of 2005.
    Technology transfer is another extremely important 
component of the desal work Reclamation does. We lead a Federal 
consortium and a task force with professional research 
organizations. Working with the American Waterworks 
Association, we have gathered desal literature that ties 
together a wealth of desal information.
    Another product of our tech transfer effort is the desal 
roadmap. That was produced in partnership with--assisted with 
the national lab from Department of Energy of Sandia National 
Lab. We are now in our second edition of the desal roadmapping. 
We have convened an even larger set of interested parties and 
additional national lab perspectives. It is also worth noting 
that the desal roadmap was critiqued by the National Academy of 
Sciences, and their recommendations are also being considered.
    The importance of the desal roadmap is that it is broad 
based. It is not specific about what research should be 
conducted in the Federal Government. It is much more 
comprehensive than that. It speaks to the full array of 
opportunities for research and how to make use of perspectives 
from State and local government, from industry and from the 
Federal Government.
    I would want to also note that Congress has authorized the 
construction of the Tularosa Basin National Desal Research 
Facility. In fact, this is one of two research facilities that 
the Bureau of Reclamation has available to it to focus on desal 
activities. For Tularosa, its particular emphasis is on 
brackish water. It is going to be completed in construction in 
2006. However, the first demonstration project is under way.
    In closing, I would just like to say that our aim in water 
technology research is to accelerate new technologies, to 
reduce costs, and implement solutions to meet water supply 
challenges. This takes communication and coordination of 
existing efforts, pushing technology development and transfer, 
recognizing research gaps and pursuing those, and assessing new 
technologies. We do this through laboratory scale, through 
pilot and demonstration on a competitive process.
    I am happy to answer any questions that you might have. 
Thank you.
    Mr. Radanovich. Thank you, Ms. Bach, for your testimony.
    [The prepared statement of Ms. Bach follows:]

    Statement of Maryanne Bach, Director, Research and Development, 
         Bureau of Reclamation, U.S. Department of the Interior

    Mr. Chairman, my name is Maryanne Bach, Director of Research and 
Development (R&D) for the Bureau of Reclamation. I am pleased to 
provide information regarding the Department of the Interior and the 
Bureau of Reclamation's past and present involvement in activities 
related to desalination research and development that may be of use to 
the Committee in its consideration of H.R. 1071.
Introduction
    The Bureau of Reclamation's mission is to manage, develop, and 
protect water and related resources in an environmentally and 
economically sound manner in the interest of the American public. 
Historically, this has been accomplished in four major ways: 1) storing 
water for use in times of greater need; 2) transferring water to places 
of greater need; 3) conserving water to reduce demand; and 4) applying 
technology to increase useable water supplies. In this latter area, 
over the course of half a century the Department of the Interior, and 
now the Bureau of Reclamation in particular, has developed a great deal 
of research data and technical expertise with regard to water 
desalination.
Implementation of the 1996 Desalination Act as amended
    Desalination research by the Department of the Interior and 
Reclamation began in 1952 as a result of the Saline Water Conversion 
Act (P.L. 82-448). From that time until 1982, Department of the 
Interior funding for desalination research averaged approximately $30 
million per year. Interior's Office of Saline Water (later, the Office 
of Water Research and Technology) subsequently coordinated much of this 
research and development. Some 1,200 federal government desalination 
reports were written during this time period, and are believed by many 
experts worldwide to have formed the basis of today's technologies. 
Membrane advances made by this program were responsible for some of the 
most significant reductions in the cost of desalination.
    During the late 1970s and early 1980s, emphasis on research shifted 
to application with the design and construction of the Yuma Desalting 
Plant, as directed in the Colorado River Basin Salinity Control Act of 
1974 (P.L. 93-320). This plant, with a design capacity of 73 million 
gallons per day of desalted water, was larger than the overseas 
demonstration-type plants that had been built previously. Technological 
advancements achieved during the construction of the Yuma plant 
included development of large reverse osmosis elements, electro 
dialysis stacks, a practical demonstration of energy recovery, and a 
number of other technology applications still being used today. The 
unit costs of desalination, however, remained high relative to other 
water supply alternatives.
    In 1992, recognizing the need for more reliable and less costly 
technology for treating impaired waters, particularly in the West, the 
Bureau of Reclamation began a water treatment technology research 
program, supported by internal research funds. This research included 
both contracted work as well as research and development by staff at 
Reclamation's Technical Services Center in Denver, Colorado. The 
Reclamation-wide program has been focusing on water supply and quality 
issues in the 17 western states served by Reclamation. Research 
projects are mission oriented and related to Reclamation's project 
needs, such as membrane process development, chemical treatment 
processes, and other innovative treatment concepts. Through these 
research studies, pilot projects and other efforts, a number of 
localized, site-specific problems and needs in the areas of Native 
American and rural water supply have been addressed.
Current Reclamation Desalination Efforts
The Desalination Act
    Public Law 104-298, the Water Desalination Act of 1996 
(Desalination Act), authorized Reclamation to begin a renewed effort 
from 1997-2002, to lower desalination costs through cooperative 
research and development. The objective has been to determine and 
develop technologically efficient and cost-effective means by which 
useable water can be produced from saline or otherwise impaired or 
contaminated water sources. The program has developed advanced 
technologies to treat previously unusable sources of water, e.g. 
brackish groundwater, coastal waters, irrigation drainage, municipal 
wastewater, and other impaired waters, in order to increase usable 
water supplies. The program has focused on two primary efforts. The 
first has been to support cooperative research on desalination 
technologies and related issues to push the state-of-the-art forward. 
The second has been to conduct development and demonstration activities 
to field-test technological advancements, confirm economic feasibility, 
and gain public acceptance. Authority for these activities has been 
renewed through Fiscal Year 2005, and the program is funded in the FY 
2005 Omnibus Bill.
    Under the authority of the Desalination Act, Reclamation has been 
conducting the Desalination and Water Purification Research and 
Development Program (DWPR). It has produced important technical 
results, such as, membrane bioreactors, and has widespread support 
outside the Government.
    Recent DWPR Program activities/accomplishments include: 1) 
demonstration of the effectiveness of membrane bioreactors in treatment 
of secondary sewage, 2) various advancements in membrane materials and 
technology, 3) new methods of membrane element cleaning, 4) improved 
means of energy recovery, 5) use of beach wells or river banks to pre-
treat water prior to reverse osmosis desalination, 6) demonstration of 
the relative benefits of membrane filtration as a pre-treatment method, 
7) selection of a standard diameter element size for use in large 
capacity reverse osmosis and nano-filtration facilities, 8) an 
innovative, low-cost evaporation system, and 9) demonstrated 
application of the natural freeze-thaw process, which has considerable 
promise for industrial applications. On August 14, 2001, consistent 
with the Water Desalination Act of 1996, the Commissioner of 
Reclamation forwarded a report to Congress on the implementation of the 
Act.
Technology Transfer
    Technology transfer has been an important part of the DWPR program 
as well. Reclamation currently leads a federal consortium and a task 
force with professional research organizations. In coordination with 
the American Water Works Association, Reclamation produced a collection 
of desalination literature that ties together the wealth of 
desalination and advanced water treatment technology developed since 
1952. This collection, called Desalted, is a series of searchable CD 
ROMs containing full text reports of the Interior and Reclamation's 
desalination studies and projects and various desalination conference 
proceedings. I am submitting a copy of this collection to the Committee 
for the record.
    Another result of Reclamation's technology transfer efforts is the 
Desalination and Water Purification Technology Roadmap, developed from 
funding provided in the FY 2004 Energy and Water Development 
Appropriations Bill. The Roadmap was produced through Reclamation's 
partnership with Sandia National Laboratories and an executive 
committee composed of multidisciplinary experts from across the 
country. Subsequent to its publication, Reclamation requested a 
National Academy of Science (NAS) review of the document. The intent of 
the Roadmap was to establish long-term goals for research and 
development in desalination and water purification to meet the nation's 
needs, research that could be undertaken by state, private, non-
governmental, or federal entities; it is not a prospectus for federal 
desalination research. Other technology transfer efforts include a 
computerized desalination cost model, the Desalination Handbook for 
Planners, a manual on concentrate disposal, and over 100 final reports 
from the DWPR.
Tularosa Research Facility
    Authorized initially in the Fiscal Year 2002 Energy and Water 
Development Appropriations Act, the Tularosa Basin National 
Desalination Research Facility is under construction and scheduled for 
completion in 2006. This facility has been designed to conduct research 
and development relating to: the desalination of brackish groundwater; 
the problems of concentrate treatment and disposal; renewable energy/
desalination hybrids; and small desalination systems for rural and 
Native American applications. Development of the facility is the 
product of a partnership between Reclamation and an Executive Committee 
comprised of multidisciplinary experts from across the country. The 
facility is located on a 40-acre site in Alamogordo, New Mexico. The 
facility plan consists of a 16,000-square-foot research building, three 
external large pilot plant pads, evaporation ponds, an agricultural 
research area, a renewable energy applications research area, and a 
future expansion area.
Yuma Water Quality Improvement Center (WQIC)
    The WQIC is a desalination R&D laboratory facility located on the 
site of the Yuma Desalting Plant (YDP). The WQIC implements the 
authority provided under Public Law 96-336 for the Colorado River Basin 
Salinity Control Project (Title I). Public Law 96-336, Sec 108 states: 
``In order to provide for the utilization of significant improvements 
in desalinization technologies which may have been developed since the 
Bureau's evaluation, the Secretary is directed to evaluate such cost 
effective improvements and implement such improved designs into the 
plant operations when the evaluation indicates that cost savings will 
result.'' The desalination research pursued at the WQIC is focused on 
technologies that can be applied to the YDP to improve and lower the 
cost of long term operations and maintenance of the plant. The WQIC 
uses a competitive, merit reviewed process to ensure that quality, 
performance, and relevance are integrated into the research investment 
decisions.
    The WQIC also effectively implements Federal Technology Transfer 
Legislation in two important ways. First, the Technology Transfer Act 
of 1986 requires federal agencies to make their R&D facilities and 
expertise available to the private sector through Cooperative Research 
and Development Agreements (CRADAs). The WQIC is well utilized by 
municipalities and the private sector, through cost reimbursable 
CRADAs, for the conduct of desalination R&D. Second, the technology 
advancements achieved at the WQIC are made available and transferred to 
the industry for commercialization and applications by others.
Water 2025
    In 2004, Secretary Norton announced the Water 2025 Initiative. In 
some areas of the West existing water supplies are, or will be, 
inadequate to meet the demands for water for people, cities, farms and 
the environment, even under normal water supply conditions. Water 2025 
sets forth a framework to focus on meeting water supply challenges in 
the future, which includes six principles, five realities and four key 
tools (www.doi.gov/water2025/Water2025-Exec.htm)
    One principle is to improve water treatment technology, such as 
desalination, to help increase water supply. The four key tools are: 
conservation, efficiency and markets; collaboration; improved 
technology; and removal of institutional barriers and increased 
interagency cooperation.
Desalination Funding
    To date, Congress has appropriated $4.2 million under Water 2025 
for focus on desalination research. Beginning in FY 2004, the 
Administration has redirected its efforts under Title XVI (P.L.102-
575), the Reclamation Wastewater and Groundwater Study and Facilities 
Act, to complement the DWPR authority and Water 2025.
    Under Title XVI of PL 102-575, Congress has authorized (PL 104-266) 
and appropriated funds for the Las Vegas Area Shallow Aquifer 
Desalination Research and Development Project and the Long Beach 
Desalination Research and Development Project. Total funding to date is 
$3.9 million.
    Since passage of the original 1996 Desalination Act, $28.025 
million has been appropriated to the Reclamation's Desalination and 
Water Purification program. Total appropriations to date for the Water 
Quality Improvement Center in Yuma for research and development is 
approximately $4.7 million.
    In FY 2005, $12.6 million was appropriated for Reclamation 
desalination research and development, including $3.5 million to 
continue construction of the Tularosa Desalination R&D Facility. The FY 
2006 budget proposes $4.85 million for desalination R&D.
Reclamation's Future Role in Desalination and Appropriate Federal 
        Involvement
    The Administration is currently evaluating federal research and 
development efforts in desalination, to clearly establish long-term 
goals and ensure that our efforts are carried out in accordance with 
the Administration's Research and Development Investment Criteria, and 
that these efforts represent the best investment of federal resources.
    There are three broad standards against which R&D investment 
decisions are judged: 1) Relevance--Programs must be able to articulate 
why they are important, relevant, and appropriate for Federal 
investment. Research and Development efforts should focus on activities 
that enable high pay-activities that require a federal presence, 
support technological innovation to enhance economic competitiveness 
and new job growth. The Department's efforts in desalination, as with 
other Federal research, must have complete plans with clear goals and 
priorities, relevance to the needs of the nation, clearly articulated 
public benefits, and periodic prospective and retrospective reviews of 
relevance to program ``customers''. The program must also meet specific 
standards of, 2) Quality--Programs must justify how funds will be 
allocated to ensure quality; and 3) Performance--Programs must be able 
to monitor and document how well the investments are performing.
    Reclamation's future role in water technology research may include 
activities that accelerate the development of new technologies to 
reduce costs and speed the implementation of solutions in order to meet 
the water supply challenges of the future, consistent with the broader 
Research and Development Investment Criteria framework. It may also 
include improving communication within the desalination research 
community, and coordination of research activities.
    Mr. Chairman, this concludes my remarks, and I would be pleased to 
answer any questions at this time.
                                 ______
                                 
    Mr. Radanovich. Next is Mr. Douglas Holtz-Eakin, who is the 
Director of the Congressional Budget Office.
    Dr. Holtz-Eakin, welcome to the Subcommittee.

               STATEMENT OF DOUGLAS HOLTZ-EAKIN, 
                  CONGRESSIONAL BUDGET OFFICE

    Dr. Holtz-Eakin. Mr. Chairman, members of the Committee, 
thank you for the chance for the CBO to be here today to talk 
about H.R. 1071.
    Our written testimony falls into two broad areas. The first 
is a look at the bill itself in which $200 million are 
authorized over the window to provide incentive payments at a 
rate of 62 cents per thousand gallons of water produced, and 
the key features of this that we highlight in our testimony are 
the structure of this in terms of targeting. In contrast to a 
tradition of targeting subsidies on capital costs, this is an 
operating subsidy. That is a difference that is more in form 
than substance because it is targeted at new plants and, in the 
end, subsidizes all entrants in that form. However, the overall 
subsidy, which comes to a rate of about 30 percent for 
desalination plant, $200 per acre foot, is not targeted on 
energy despite the stated intent of the bill. It is tied only 
to the output of the water itself.
    The second piece of the bill is an authorization of $10 
million for R&D, and that leads directly to the broader part of 
our written testimony, which is to look at opportunities for 
improvements in the efficiency of water markets more generally. 
There is a natural role for the Federal Government in 
supporting research and development in those circumstances 
where the shared knowledge of R&D may not provide adequate 
incentives for the market to produce sufficient R&D, and the 
bill is consistent with that role by authorizing the R&D money.
    More generally, water markets are characterized by the fact 
that users typically do not pay the full cost of the delivery 
and production of the water, and instead cost recovery gets 
shifted in large part to taxpayers to make up that difference. 
They are also characterized by the fact that water users pay 
quite disparate prices for the same water, and those prices may 
not be reflective of the underlying economic value of water in 
different uses.
    Improving the efficiency of water markets and acknowledging 
at the outset that efficiency isn't the only criteria in public 
policy but improving the efficiency in water markets really has 
three prongs to the approach. The first would be to improve the 
legal infrastructure that characterizes water rights and water 
trades in the United States so as to produce improved pricing. 
This is a very difficult task in part because so much of the 
law that governs this is at the State level and not directly 
controlled by the Federal Government.
    The second would be to reduce Federal subsidies both in the 
capital and operating costs areas, because these subsidies 
distort choices in the construction area, distort tradeoffs in 
types of technologies and preventive maintenance versus initial 
construction and in operating costs do not reflect the full 
cost of delivering water to the public.
    Then the third piece would be to support R&D in a 
sufficient fashion that new technologies would be brought on 
line and supported by the market incentives, so a more 
efficient water, where users were charged more closely to the 
cost of the water that they consume and suppliers were able to 
recover costs more closely by using market incentives alone.
    We are pleased to have a chance to talk both about the 
water market more generally and the bill in particular and look 
forward to your questions.
    Mr. Radanovich. Thank you very much for your testimony.
    [The prepared statement of Dr. Holtz-Eakin follows:]

              Statement of Douglas Holtz-Eakin, Director, 
                      Congressional Budget Office

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to be here today to discuss H.R. 1071. H.R. 1071 directs 
the Secretary of Energy to make payments to the public or private 
owners or operators of new desalination facilities providing municipal 
water service to domestic customers. Those payments, for which $200 
million is authorized for appropriation from Fiscal Year 2006 to Fiscal 
Year 2016, are intended to partially offset the energy costs of 
facility operations. The bill specifies that no more than 60 percent of 
the funds can be disbursed to facilities that obtain source water from 
the sea; the remainder must go to those using brackish groundwater or 
surface water. H.R. 1071 also authorizes for appropriation $10 million 
over the 10-year period to support research and development of novel 
technologies for desalination.
Specific Effect of H.R. 1071
    As it is currently written, H.R. 1071 serves to subsidize facility 
operating costs in general, rather than energy costs specifically. 
Under the bill, eligible facilities would receive a payment of $0.62 
(adjusted for inflation) for every 1,000 gallons of water produced and 
sold, regardless of the energy costs associated with their operations. 
Generally speaking, energy costs for desalination--which rise in 
conjunction with the salinity of feedwater--can account for more than 
one-third of operating costs, but the ratio is not fixed among 
facilities.
    The proposed subsidy amounts to approximately $200 per acre-foot of 
water produced, which corresponds to about 30 percent of a new 
desalination facility's total costs of production. In 2002, new 
desalination plants were reportedly producing freshwater at a cost of 
about $655 per acre-foot. By comparison, in 2002, the average price for 
irrigation water from California's Central Valley Project was $17.14 
per acre-foot, while Los Angeles residents paid $925 per acre-foot.
    In the absence of federal support, the demand for water has already 
led to the establishment of new desalination facilities, including 
sites in Tampa, Florida, and Brownsville, Texas (drawing brackish 
groundwater from the Gulf Coast aquifer). In Texas alone, there are 
more than 100 desalination units using either brackish surface water or 
groundwater as their source. Municipal facilities account for roughly 
60 percent of the state's desalination production, and the remainder is 
produced by industrial facilities. At the end of the 1990s, nearly 800 
desalination plants in 46 states (many of which were inland and for 
industrial use) were in operation and provided desalinated water 
amounting to about 1.4 percent of domestic and industrial water 
consumption.
    Traditionally, federal subsidies for water supply have primarily 
been designed to address capital costs--for example, federally financed 
Western water supply projects initiated by the Reclamation Act of 1902, 
financial assistance for construction of water reclamation and reuse 
facilities under title XVI of the Reclamation Projects Authorization 
and Adjustment Act of 1992, and the Drinking Water State Revolving Fund 
that finances infrastructure improvements. H.R. 1071 adopts the less-
common approach of subsidizing operating costs. From an economic-
efficiency perspective, however, the distinction between a capital- or 
operating-cost subsidy makes little difference in this case, because 
the only facilities eligible for the subsidy are those that begin 
operations during the 10-year period following the bill's enactment. 
Either approach reduces the overall costs of building and operating a 
new facility and improves the relative attractiveness of the 
subsidized-water-supply option compared with others.
Subsidizing Desalination: Implications for Economic Efficiency
    In the area of desalination, past federal support has primarily 
been directed toward research and development. That funding began with 
the Saline Water Act of 1952; by 1982, when most federal funding for 
desalination research and development was discontinued, the United 
States had spent cumulatively more than $1 billion (in today's 
dollars). Under the Water Resources Research Act of 1984, desalination 
research was conducted by the U.S. Geological Survey as part of general 
research, rather than as a separate program. In 1996, the Congress 
passed the Water Desalination Act, renewing support for research and 
development with the aim of determining the most technologically 
efficient and cost-effective means of purifying saline water. The Act 
created the Bureau of Reclamation's Desalination and Water Purification 
Research and Development Program, authorizing $5 million annually from 
Fiscal Year 1997 through Fiscal Year 2002 for research and $25 million 
per year for desalination demonstration and development projects. The 
Congress appropriated $28.1 million under that (extended) authority 
from 1998 through 2005 (see Table 1).
    In addition to those instances of support, the 2004 Energy and 
Water Development Appropriations bill contained $3 million for 
desalination research at the Sandia National Laboratory in New Mexico 
and authorized the design, construction, testing, and operation of the 
$5 million Tularosa Basin National Desalination Research Facility in 
Almogorda, New Mexico. That facility, which is currently under 
construction, will focus on inland brackish groundwater from sources 
that have widely varying degrees of salinity.
    An economic-efficiency argument can be made for federal investment 
in research and development, because when multiple states and private-
sector entities face a similar problem, each balances the potential 
cost of research against only its own expected benefits, rather than 
the benefits that could accrue to all parties. Federal support 
counteracts the resulting tendency for nonfederal entities to invest 
too little in research and development.
[GRAPHIC] [TIFF OMITTED] T1447.001


    H.R. 1071's proposal to subsidize new facilities that provide local 
water supplies would be similarly appropriate from an economic-
efficiency perspective if it targeted a market failure. The underlying 
market issue connected with desalination technologies, however, is that 
in many U.S. water markets in general, the prices charged do not 
reflect the full cost of providing water. Allowing the prices charged 
and received to more fully reflect the cost of supply is an alternative 
approach to enhancing the viability of desalination.
    Because water users tend not to pay prices that reflect the full 
cost of provision, their demand is higher--in some cases, much higher--
than it would be otherwise. Water supply problems in the United States 
are typically driven by high demand associated with underpricing rather 
than by physical shortages. In agriculture, for example, Bureau of 
Reclamation facilities provide about 32 percent of surface water 
withdrawals used for irrigation, but the water supply charges recover 
for the government only a fraction of the cost of providing the water. 
Since the beginning of the reclamation program in 1902, irrigators' 
interest-free payments--due over a 40- or 50-year horizon--have been 
based only on recovering the associated nominal costs for capital and 
operations and maintenance, neglecting the opportunity costs of federal 
expenditures. At a federal borrowing cost of 4 percent annually, over a 
40-year repayment period, the government recovers only 49 percent of 
its total cost. The problem is not unique to agriculture: municipal and 
industrial users served by public water systems (those that furnish 
water to at least 25 people or have a minimum of 15 connections) are 
responsible for about 13 percent of freshwater withdrawals from surface 
and groundwater sources, and they also generally obtain water at less-
than-full-cost prices. Over time, providers have failed to take in 
revenues adequate for procuring and treating supplies as well as for 
operating, maintaining, and replacing their water infrastructure. 
1
---------------------------------------------------------------------------
    \1\ Congressional Budget Office, Future Investment in Drinking 
Water and Wastewater Infrastructure (November 2002).
---------------------------------------------------------------------------
    On the demand side of the market, consumers respond to the 
incentives they face. The lower the marginal price (the price for the 
next unit of water consumed) that water users face, the weaker their 
incentive for efficient water use. Rate structures with fixed charges 
for an initial volume and higher charges for use above that volume can 
provide for basic water use while encouraging efficient water-use 
choices.
    Such structures are rare among Bureau of Reclamation-supplied 
irrigation districts. In a 1986 survey of 196 of those districts, which 
account for more than 70 percent of total irrigated acreage in Bureau-
supplied districts, 48 percent of the districts assessed their members 
a fixed charge per acre that was independent of the amount of water 
delivered. Fourteen percent of the districts used a purely quantity-
based rate structure, and almost all (96 percent) had a constant per-
unit price. Thirty-eight percent coupled a fixed charge for an initial 
volume with a quantity-based rate for water use in excess of the 
initial volume that was typically not triggered in normal years (and 
for 86 percent of those districts, the quantity-based rate was constant 
or decreasing). When the districts were revisited in 1997, the 
situation was largely the same.
    Most municipal water rate structures are made up of a service 
charge--a fixed fee per billing period--and a unit consumption charge 
for set quantities of water (or ``blocks''). Under decreasing block 
rates, the per-unit charge for water declines as the consumption volume 
increases. Under a uniform structure, the unit rate for water is 
constant, or flat, regardless of the amount of water consumed. Under 
increasing block rates, the unit rate for water rises as the 
consumption volume increases. Although the proportion may be somewhat 
higher now, only about 20 percent of the systems surveyed a decade ago 
were using increasing block-rate structures.
Conclusion
    Appropriate pricing would reflect the marginal cost of water 
supply, maximizing economic efficiency in allocating water among 
competing uses by ensuring that the marginal value per unit of water 
was equal for all uses. Encouraging the efficient production and use of 
freshwater would imply a greater reliance on its marginal value than is 
currently seen in the United States. Subsidies for new desalination 
facilities would most likely not improve the overall economic 
efficiency of water supply and use because such subsidies would 
compound the distortion of price signals. An alternative means of 
improving the viability of desalination would be to allow prices 
charged to water users and received by water producers in general to 
more fully reflect the cost of supply.
    One could argue that the pace of the evolution of water treatment 
technologies, and thus their suitability for more widespread use, has 
probably been impeded by the historically low price of water in the 
United States. Nevertheless, the need for such technologies has already 
attracted private as well as federal interest, and the level of 
interest seems to be growing. At the end of the 1990s, industry was 
adding an estimated $5 million to $10 million annually to the federally 
supported research and development efforts for water purification 
technologies. Recently, global demand for freshwater has prompted 
increased interest in research and development of more efficient means 
of desalination by companies such as General Electric, ITT Industries, 
Siemens, and Tyco International. Sandia National Laboratory's 
Desalination and Water Purification Technology Roadmap, issued in 
January 2003, asserts that exploration of alternative technologies will 
yield the greatest advances in desalination.
    With that combined support for research and development of new, 
more energy- efficient desalination technologies as well as efforts to 
improve price signals in water markets so that users face charges that 
more accurately reflect the marginal costs of water supply, 
desalination may become an important source of freshwater in some 
markets.
                                 ______
                                 
    Mr. Radanovich. I will start off in questioning, just by a 
general question for all three witnesses regarding the one-
stop-shop permitting. It kind of pauses me or concerns me that 
one-third of the cost of some of these desal projects are 
through the permitting. Would anybody care to enlighten me 
about what type of--how is it the Federal Government might be 
getting in the way of streamlining this process? What kind of 
restrictions are these? Are these ESA requirements? Are they 
just general paperwork requirements of filing? You know, where 
is it? Where is the source of the delay? Or is it local and 
State that are generally the ones that are getting in the way 
or assuming such a large part of establishment costs for these 
desal facilities?
    If anybody would be interested in commenting.
    Mr. Garman. I would be hesitant to offer a blanket comment, 
not being an expert myself on permitting. It is certainly--you 
know, to the extent that there is a major Federal role, that 
would trigger some NEPA requirements that might not necessarily 
be triggered if it was solely a local community affair. But I 
cannot offer the Committee much input on that and would be 
happy to comment for the record, if that is appropriate.
    Mr. Radanovich. You would be happy to comment for the 
record?
    Mr. Garman. Yes, sir.
    Mr. Radanovich. Please do so, if you would like.
    Mr. Radanovich. Maryanne?
    Ms. Bach. Yes. Mr. Chairman, our experiment, to the extent 
that it is of value to the community we--when we were building 
Tularosa, we did have to go through a State permitting process. 
But being that mostly our involvement is in the R&D area, we 
have less experience in terms of the intricacies of the 
permitting process.
    Mr. Radanovich. Generally, these are State projects, desal 
projects, or are they local water agency projects? I can't 
imagine them being Federal projects.
    Ms. Bach. In the case of if something is a pilot or 
demonstration project, that is frequently federally sponsored, 
and the funds are matched, that is, to test to be sure that the 
technology has efficacy, that it has a high potential. When 
plants are actually constructed, that is of a different nature 
when that goes into operations. That is generally operated 
under a State permitting processes.
    Mr. Radanovich. Very good. Thank you.
    Dr. Holtz-Eakin?
    Dr. Holtz-Eakin. We would also prefer to get back to you on 
the record with better details. I mean, this is the 
intersection of State and local permitting and often 
environmental considerations, and I am not sure a single answer 
is appropriate but would be happy to work with you on that.
    Mr. Radanovich. But I suspect if there is Federal funding 
involved, too, that that is the hook that brings in the Federal 
Government on some of this stuff, I gather. Thank you.
    Mr. Radanovich. Mrs. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chairman.
    First of all, Mr. Chairman, may I request that we remind 
and impress upon the panelists the need to have those reports 
to us 48 hours as requested by the Committee? I got one of my 
reports this morning. I have not read it, so I cannot ask 
intelligent or semi-intelligent questions to follow up on what 
the testimony is given. So I would really appreciate if you 
would follow that procedure, please.
    Mr. Garman, the reports that are going to be generated by 
the White House Office of Science and Technology Policy with 
the 15 agencies that are forming the Committee on Environmental 
and Natural Resources, the Subcommittee on Water Availability 
and Quantity, where are those reports going to go? Are they 
going to go to the Energy Department or are they going to come 
here also for us to review?
    Mr. Garman. These will be public reports. They have 
generated one report thus far in November, which I will be 
happy to--we will be happy to share with the Committee and make 
sure the Committee has a copy. It acknowledges I think the 
problem and the challenge that we face. Please understand that 
we differ from the proponents of this bill not in the goal but 
in the method of getting to that goal.
    Mrs. Napolitano. Understood. But I don't know if this 
Committee has seen that report or if we have any idea what it 
contains as relates to the job that we are doing on 
specifically desalination and recycling water and those areas. 
I certainly would like to have the Committee have a copy of 
that report, Mr. Chairman.
    Mr. Radanovich. Without objection.
    Mrs. Napolitano. The second one is, in your testimony you 
are referring to: The Department is also investigating whether 
a suite of specially selected, salt-tolerant ag--that is in 
your page 3. How will that affect aquifers? In other words, do 
salt-tolerant ag crops or other plants used to remove sodium 
and other salts from the coalbed methane-produced water, how 
will that affect the aquifers of the nearby residents or the 
rivers or whatever is available in those areas? I have a 
concern in how that might ecologically affect other areas.
    Mr. Garman. Correct. The development of coalbed methane is 
a concern to many communities because, in addition to the 
methane produced, water is also produced with the methane, co-
produced. So as you are pulling the methane out of the coal 
seams, you are also pulling out water; and sometimes the water 
is of very poor quality. So the challenge is, what do you do 
with that water that you have co-produced with the methane? You 
need the methane for energy, but what do you do with the water?
    The opportunities include putting the water back in the 
ground where it came from, or trying to clean it up and put it 
to a beneficial use. So we are looking at a variety of methods 
of using that co-produced water to see how it might be cleaned 
up and put into beneficial use.
    One of the ideas that we have been thinking about is using 
wind power. Wind has some real advantages and some 
disadvantages. One of the disadvantages is you can't 
necessarily predict when the wind is going to blow and thus 
produce dispatchable power. But, on the other hand, if the 
purpose is to generate electricity that you are going to use on 
an intermittent basis to clean up water, you really don't mind. 
So wind can--there may be a terrific opportunity to employ wind 
technology to clean up water that takes care of or allows you 
to sidestep one of the disadvantages of wind-generated 
electricity.
    Mrs. Napolitano. But that would only be used in limited 
areas where you have the ability to have wind.
    Mr. Garman. Correct. You have to have a situation where you 
have a good wind resource close to the point of cleanup to help 
the economics work.
    Let me also say that one of the primary R&D activities of 
the Department of Energy is, of course, to lower the cost of 
some of these alternative methods of generating electricity so 
that you can make projects such as this more affordable and 
financeable.
    Mrs. Napolitano. Well, the other question I have is your 
mapping project. You limited it to an overall United States map 
and then one covering the regions of Colorado, Utah, Arizona 
and New Mexico. Would you explain why it is limited to those?
    Mr. Garman. It is partially as a method of putting the 
resources where we think the greatest need is. However, we are 
happy to take comments from the public and the Subcommittee. If 
there is an activity that we are not mapping that you believe 
we should be mapping, we will be happy to take that back and 
consider getting that in the queue.
    Mrs. Napolitano. I would certainly like that advantage.
    Thank you very much, Mr. Chairman. I would like to have a 
second round when we are done.
    Mr. Radanovich. Not a problem.
    I ask unanimous consent that our colleague from Florida, 
Mr. Davis, be allowed to sit on the dais today and participate 
in today's hearing.
    Hearing no objection, I welcome the gentleman from Florida; 
and we will be with you on questions in just a minute.
    Welcome, Jim. Mr. Gibbons.
    Mr. Gibbons. Thank you very much, Mr. Chairman; and again, 
to our witnesses, thank you for your testimony.
    In Nevada, of course, listening to my colleagues talk about 
water rainfall in New Mexico, we have an average of about six 
inches a year, and when it is in a drought stage it is down to 
two. So we do have similar problems in Nevada.
    There are limitations on what we in Nevada get from the 
Colorado River for our highest-growth area in Nevada, which is 
Las Vegas, the fastest-growing city, I believe, in the United 
States. Our limitation, of course, is an original decree of the 
amount of water we get out of the Colorado River. There are 
some restrictions within the law of the river--of the law of 
the Colorado River which prohibit wheeling, which is the 
transfer of water rights from an upState user to a lower State 
user.
    My question is, do you feel--and maybe I should just leave 
this as an open question. Do you feel that a proposal to 
acquire water rights of downstream users by the creation of 
desalination is an affordable alternative for the acquisition 
of their water rights before they have to be wheeled 
downstream?
    In other words, California. If Las Vegas, Nevada, decided 
to assist Los Angeles or some southern California community 
with the desalination plant in exchange for a water right off 
the Colorado River, do you feel that that is a reasonable 
alternative to other means of acquiring water that are in even 
more short supply and going against the legal status?
    Ms. Bach. Mr. Gibbons, I will be happy to answer that 
question from the Bureau of Reclamation.
    The heightened interest in desal in California and also 
from inland States that are associated and receive their supply 
from the Colorado River has certainly grown, and the interest 
in technology and technology breakthroughs is to get desal into 
a more affordable range. So that, in fact, does become another 
tool to be used in water supplies.
    Mr. Gibbons. May I ask what your assessment is on the cost 
of per acre foot of water from a desalination plant today?
    Ms. Bach. The discussion of today's cost is between $600 
and $650 per acre foot. If desal can be brought down to the 
$400 to $450 ranges, that is considered to be more of a 
competitive tool, more of an opportunity and an option to be 
put into the portfolio of water managers in the West.
    Mr. Gibbons. Mr. Chairman, I don't want to take up much 
more of your time. I would like to submit written questions for 
this panel to be answered and submitted back to us. And I 
appreciate the time. I have another obligation.
    Mr. Radanovich. Very good. Thank you, Mr. Gibbons.
    Mr. Radanovich. Mr. Davis, any questions?
    Mr. Davis. Mr. Chairman, again, I really appreciate your 
hospitality to be here as part of the bill that Congressman 
Gibbons and I were doing.
    I just wanted to comment, and perhaps there may be a 
comment from the panel, that something was brought up just 
before I got here. I remember you start on time, Mr. Chairman. 
We don't do that over in the Energy and Commerce Committee.
    The question was raised whether there were problems with 
the permitting process; and I just wanted to say that, as far 
as the desal facility is concerned in the Tampa area, there was 
not a problem with permitting; it was mostly State permitting. 
I am not aware there are representatives here today from that 
entity, but I think they would be happy to answer any further 
questions that members of the Committee might have about 
whether there is some lessons learned about the Florida 
permitting process. Maybe the Florida permitting process could 
offer some good examples other States could be following as 
well.
    Mr. Radanovich. Thank you, sir.
    Mr. Walden.
    Mr. Walden. Mr. Chairman, I really don't have any questions 
at this point.
    Mr. Radanovich. Mr. Tancredo?
    Mr. Tancredo. Mr. Chairman, I have a question, although I 
apologize for not having been here earlier and perhaps much of 
this has already been determined. But I just wonder if you 
could help me understand, what are those new--or what are the 
ideas that are being bandied about so that we may look forward 
to some time in the near future when desalination becomes 
economically viable in terms of the technologies? What are we 
thinking about? What is happening in that area that we can be 
excited about?
    Ms. Bach. Mr. Tancredo, I will address some of those. The 
disposal cost is one that needs addressing.
    There are different--first of all, let me distinguish there 
are different issues if you are dealing with seawater and if 
you are dealing with brackish water. When it comes to brackish, 
the disposal issue is a significant one and how perhaps to 
address reuse of that material.
    The reason why the Department of Energy and, in fact, our 
Tularosa facility in New Mexico will be able to bring people 
onsite, the reason why people are looking at whether plants can 
uptake salt or brine matter or whether that byproduct is 
capable of being used in construction or what have you is 
associated with the cost of disposal.
    There is continued effort in membrane technology and 
testing going on in terms of both cleaning of membrane and the 
use of membrane and the types of membrane and the efficiency of 
membrane. A membrane that is merely to remove salt is different 
than a membrane that is dealing with water that has been once 
used in a community and now is looking to be reused.
    So those are just some examples, and we can certainly 
submit others for the record.
    Mr. Tancredo. And what are the implications for returning 
it, the salt, to the ocean?
    Ms. Bach. In fact, that is one approach presently used with 
some of the smaller plants that exist. How that is released is 
being explored, because there is nuances and some sensitivities 
environmentally about how it is released in terms of also 
ensuring that the material breaks up.
    Hopefully, that answers your question.
    Mr. Tancredo. Anybody else want to?
    Mr. Garman. I would just add that--because you answered 
specifically in the short term, and the Department of Energy 
does not have a great deal to offer in the short term. In the 
longer term, we are working on some very basic technologies, 
for instance, in the area of biological membranes, as one 
example of something that might produce a breakthrough 
technology for the more distant future, particularly as this 
problem becomes more pronounced and aware.
    Our national labs tend to be involved in more basic 
fundamental science of a kind where we don't often understand--
it is serendipitous at times. We may be working on one problem 
and simultaneously solve another. And I think that is the 
importance. That speaks to the importance of interagency 
cooperation and coordination in these areas, so that the 
Department of the Interior, which has the lead responsibility 
for this activity, is aware and knowledgeable of some of the 
things we have under way at the national labs, at the 
Department of Energy; and that is what we hope to build upon 
and improve as we go ahead.
    Mr. Tancredo. Is it the case that there really is little 
progress being made anywhere else in the world simply because 
where desalination is an ongoing project it is usually in an 
area where there is a plentiful supply of oil and therefore the 
costs are offset? It is cheap enough to do it, I suppose is 
what I am trying to say, to use the oil to create the energy to 
desalinate?
    Mr. Garman. Clearly, that is where--my understanding--large 
desalination efforts, folks find it affordable or possible to 
do it because of energy subsidies. But let me say that there 
has been reverse osmosis membrane technology and other 
technologies that have come perhaps in pursuit of other 
markets. I mean, even very small-scale markets such as so-
called water makers aboard sailboats and some of these 
technologies where small-scale water, these kinds of prices are 
very affordable for smaller scale applications. There are some 
things that we are learning in the smaller scale applications 
that may have utility in larger scale, newer plants, but I 
would defer to the Department of the Interior.
    Ms. Bach. Congressman, the U.S. would be seen 
internationally as having led the way on a number of 
technologies that really resulted in construction overseas; and 
the reason why construction occurred overseas is because, in 
fact, there were limited alternatives available. So, for 
seawater communities in the Middle East, for instance, there 
were not the kind of alternatives as the United States had.
    Where we do presently have more to demonstrate to help 
overseas with is in brackish, which--inland water. The 
technology that we have gone on to develop inland is not as 
readily advanced overseas, and so that is a further opportunity 
for the United States.
    Mr. Tancredo. Thank you, Mr. Chairman.
    Mr. Radanovich. Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman.
    Ms. Bach, how many people do you have working in your 
research department, and what is the budget annually?
    Ms. Bach. The water treatment and engineering research 
group is our focus on desal.
    Mr. Pearce. How many people do you have working in the 
research? You are the head of the research.
    Ms. Bach. I am the head of research, and I just immediately 
have five people working for me. But I use the technical 
service center, which is approximately 600 individuals.
    Mr. Pearce. And your budget?
    Ms. Bach. They are not appropriated. They have, I believe, 
a $3 million operating budget. But that is paid-off budget, not 
through appropriations.
    Mr. Pearce. So 600 people that are available cost $3 
million? How many--in other words----
    Ms. Bach. If I could verify that for the record, sir. But 
what occurs is those research engineers--they are scientists 
and engineers.
    Mr. Pearce. So you have 600 available?
    Ms. Bach. Yes.
    Mr. Pearce. And how much do they cost? Just more or less. 
What kind of budget figure are we looking at? I just want to 
know how much we are spending per year in the Bureau of 
Reclamation to research water issues.
    Ms. Bach. I am sorry. Off the top of my head, I can't pull 
the number. But I will be happy to provide it for you.
    Mr. Pearce. OK. You mentioned in your testimony that you 
have been working for a half century to understand desalination 
or the expertise that would be required to treat water. Now you 
are saying currently the costs are about $650 per acre foot. 
What does that amount to per gallon of water? Most of us don't 
consume acre feet, we consume gallons. So what is $650 per acre 
foot?
    Ms. Bach. It is about $2 per thousand gallons.
    Mr. Pearce. OK. And at what point does water get economic?
    Ms. Bach. If you can bring it closer to a dollar.
    Mr. Pearce. A dollar?
    Ms. Bach. Break that in half.
    Mr. Pearce. So when you all started your research, how much 
was the--if we were to equate it to current costs, how much was 
the cost of water when we first started our research and how 
much have we lowered that cost?
    Ms. Bach. In the 1950s, that would have been about $16.
    Mr. Pearce. The equivalent of today's $16?
    Ms. Bach. That is correct.
    Mr. Pearce. In today's dollars. And so what has been the 
great reduction from $16 to $2?
    Ms. Bach. Much of that has been in membrane technology, 
breakthrough in membrane technology.
    Mr. Pearce. The membrane technology is probably going to--
is that going to--if we are considering brackish water from 
zero parts per million and the Tularosa basin is about 1,700 
parts per million----
    Ms. Bach. That is about right.
    Mr. Pearce.--something in that range. We will put it 
wherever we want to put it, but then seawater is at 25,000 
parts per million. Are membranes effective at 25,000 parts per 
million?
    Ms. Bach. To some extent, and----
    Mr. Pearce. We can take 25,000 parts per million down to 
about what level?
    Ms. Bach. I think maybe to 100 parts----
    Mr. Pearce. About 200 parts per million.
    Ms. Bach. About 100.
    Mr. Pearce. And at that level are those membranes effective 
or do they have to be discarded so often that the process bogs 
down?
    Ms. Bach. Well, there are certainly important costs 
associated with membranes and their longevity as well as the 
type of water you are passing through, if you just take 
seawater that is several miles out versus if you were closer 
inland where you may have it mixed with other pollutants.
    Mr. Pearce. Dr. Eakin, on page 3, you talk about the water 
market and you point out that agriculture users don't really 
repay the costs of providing water to them. Is your 
recommendation that--is it your observation that all Federal 
projects have an opportunity cost replacement, and that water 
is--to irrigators somehow deficient, that it is handled 
differently than other programs? So the near estimation--when 
you give us this evaluation on page 3, is it your estimation 
that water to irrigators is somehow unusual?
    Dr. Holtz-Eakin. The observation is simply that the cost is 
subsidized to irrigators, and that----
    Mr. Pearce. And your findings then would be that we should 
be--that we should correct that? I think you mentioned then 
that opportunities cost should be recovered by the user.
    Mr. Holtz-Eakin. For water markets to operate more 
efficiently, you would want a price closer to those full costs.
    Mr. Pearce. And is the same calculation used for highways? 
Do we have some way to recapture the cost of highways, for 
instance? In other words, is there a public good?
    Dr. Holtz-Eakin. In highways, there are also many potential 
improvements in efficiency which would come from better pricing 
congestion, for example, and where the roads----
    Mr. Pearce. So there are Federal functions that go beyond 
the recapture of the dollars that are used?
    Dr. Holtz-Eakin. There are functions which go beyond pure 
market efficiency, certainly; and the testimony is targeted on 
efficiency. There are often other objections for public policy, 
which are to promote a particular activity for either fairness 
or other----
    Mr. Pearce. When you analyzed the use of water, did you 
calculate the potential security risk for the Nation of giving 
up our agriculture base and also then the cost of--the 
increasing cost to the consumer in higher food costs? In other 
words, there is a national public benefit to lower food prices. 
Were those calculations added into your equations?
    Dr. Holtz-Eakin. We don't have a specific calculation. The 
cost will be borne one way or the other whether they come in 
the form of higher food prices or whether they come in the form 
of a subsidy via the Tax Code or whether they are costs to be 
borne by the Nation of a whole. The question is whether--what 
is the most efficient way to allocate those costs and to 
minimize them where possible. That is the focus of the 
testimony.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Radanovich. Thank you, Mr. Pearce.
    As you know, we have one vote--I think a vote on the 
previous question now. I would like to go to Ranking Member 
Napolitano and then to Mr. Hayworth for questions. So perhaps, 
if that is agreeable----
    Mrs. Napolitano. Do you want to defer? You can go vote and 
come back. Because I am going to take some time.
    Mr. Radanovich. Well, we can keep this hearing going.
    Mr. Hayworth. Well, Mr. Chairman, I thank you, and I thank 
the Ranking Member, and I will make this very quick. It is a 
very specific area of concern that I have.
    Welcome to all our witnesses.
    Specifically, Ms. Bach, what is the status of the Bureau of 
Reclamation report on operating the Yuma Desalting Plant?
    Ms. Bach. The status is that it is anticipated that the 
report will be delivered to Congress next month.
    Mr. Hayworth. We are happy to hear that news, Ms. Bach. 
That report was due last summer, and we are getting it a year 
late. That is your government in action. What is the status on 
starting the Yuma Desalting Plant?
    Ms. Bach. There are no immediate plans for starting the 
desalting plant. What I envision you will see, Congressman, is 
that with the Sid Wilson report that was recently available, it 
does offer a number of options for consideration and that those 
options are being taken into account in the report that the 
Department is completing. So at this point there are no 
immediate plans for starting up the Yuma Desalting Plant.
    Mr. Hayworth. Could a revamped Yuma desalter help provide a 
solution to the challenges internationally confronting water 
problems between the United States and Mexico?
    Ms. Bach. The Yuma Desalting Plant has, in fact, been 
maintained in City/State status so that there is an opportunity 
to exercise it under the right circumstances if it is 
appropriate under certain policy considerations.
    Mr. Hayworth. Ms. Bach, you mentioned the Sid Wilson 
report----
    Ms. Bach. Yes.
    Mr. Hayworth.--and I am not sure it is the same report as 
the Yuma Desalting Plant work group released last month.
    Ms. Bach. Yes, it is.
    Mr. Hayworth. OK, good. Well, I understand it describes 
options for utilizing the Yuma Desalting Plant and meeting 
water delivery obligations to Mexico while helping to preserve 
wetlands in that nation. Among the recommended options, I think 
it is important to voice and to make part of the record, 
included using Yuma area groundwater for Mexican deliveries, 
using the desalting plant to treat Yuma area groundwater for 
municipal and industrial water uses, and developing a voluntary 
forbearance program. Will Reclamation use the work group's 
recommendations in their final decision? And, as you mentioned 
it I think in the affirmative in your previous answer, will you 
undertake a public process in doing so?
    Ms. Bach. In fact, the Commissioner did respond to a letter 
from Senator Kyl just last month, and we can provide that for 
the record, in which the Commissioner did commit to a public 
process for an opportunity for public comment on the report 
that the Bureau will be sending up next month.
    Mr. Hayworth. Well, Ms. Bach, that is very encouraging 
news. We look forward to the public process. We look forward to 
that report and reviewing what those perhaps closest to the 
situation have evaluated. I thank you for your answers.
    Again, my thanks to the other panelists; and, Mr. Chairman, 
I yield back the balance of my time.
    Mr. Pearce. [presiding.] Thank you, Mr. Hayworth.
    Mr. Davis.
    Mr. Davis. I would like to ask unanimous consent to submit 
my statement for the record, if I could, in support of the bill 
Congressman Gibbons and I have introduced which is the subject 
of the hearing.
    Mr. Pearce. Without objection, it would be submitted.

 STATEMENT OF THE HON. JIM DAVIS, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF FLORIDA

    Mr. Davis. Mr. Chairman, I would like to take a minute or 
two just to put the bill in context. It is not in the form of 
questions to the witnesses, but I just want to start by saying, 
first of all, in the next panel Dr. Michael Max from St. 
Petersburg, who is one of my constituents, will be here, who is 
probably one of the more knowledgeable people in the room, if 
not the country, on the whole desalination technology.
    I wanted to say that one of the reasons I introduced this 
bill with Congressman Gibbons is based on the experience and 
lessons that my community has had. The State of Florida, like 
many States that we represent, is experiencing explosive 
growth, about 900 residents per day. No matter how much it 
rains in Florida, and it rains a lot in the summertime, our 
water level is about the same or has slightly decreased over 
the last 10 to 15 years. In Florida, as in many States in the 
West coast and increasingly in between, we are looking at ways 
through conservation, recycling, reclamation and reuse to deal 
on the front end as opposed to the back end with this problem, 
and potentially a crisis at some point, in terms of the 
availability of potable and nonpotable water. Just in Florida 
alone we estimate over the next 20 years potentially $500 
billion to a trillion dollars in expense to keep up with our 
shortage of water.
    Mr. Davis. H.R. 1071, which is the subject of this hearing, 
which I have introduced with Congressman Gibbons and others, is 
an attempt to stimulate further development as well as research 
for environmentally sound and economically feasible 
desalination prosecution throughout the country by 
subsidizing--which has been discussed, and I think very 
prudently analyzed by many of the witnesses today--the 
operating cost of desal facilities that have proven on a 
performance basis to achieve the desired result.
    There is also an appropriation of $10 million for research 
and development. The ultimate goal behind the legislation is to 
stimulate the market to move more quickly than it might 
otherwise move to make this technology more available and 
encourage inventors like Dr. Max to work more closely with the 
private sector to explore various forms of technology.
    I want to point out that the facility in Tampa that is 
currently operating has had some problems. They are still 
working through those problems. Even when the problems are 
resolved, the estimates right now still call for producing 
water at a level that will not exceed what was originally 
expected, which was $2.50 to $3 per 1,000 gallons.
    So even with the glitches that have occurred in one of 
these earlier facilities, which is bound to occur, the ultimate 
result is still expected to be a very positive one for my area. 
I also want to point out that in Florida, as in many States, we 
are very environmentally conscious, and there are a lot of 
legitimate concerns raised about the impact of disposal in 
terms of the salinity content of Tampa Bay, which is an estuary 
and a very fragile ecosystem.
    I am pleased to report, with respect to this particular 
facility, we have had success. There have been some questions, 
and there have been some adjustments made along the way. But at 
the end of the day, the salinity levels have been acceptable to 
the vast majority of stakeholders who have been concerned about 
the environmental impact.
    So I think, on balance, the experience in Tampa has been a 
positive one. There are some lessons to be learned for Florida 
and other States. I certainly commend you, Mr. Chairman, and 
the witnesses and the staff to help us identify what we can be 
doing on more of a short-term basis to encourage more effective 
and rapid development of desalination facilities and further 
research and development.
    Again, I would like to submit a more detailed statement for 
the record and appreciate your consent to that, Mr. Chairman.
    [The prepared statement of Mr. Davis follows:]

Statement of The Honorable Jim Davis, a Representative in Congress from 
                          the State of Florida

    Mr. Chairman and Members of the Subcommittee,
    Thank you for holding this hearing on H.R. 1071, the Desalination 
Drought Protection Act of 2005. Although I am not a member of this 
Committee, I appreciate the opportunity to participate and join you at 
the dais. I am very pleased to welcome Dr. Michael Max, from St 
Petersburg, Florida, which I have the pleasure of representing. Dr. Max 
is here today to share with us his recent advances in the area of 
desalination through the use of hydrates--a cutting edge technology 
that I will let him explain at the appropriate time.
    As all of you are aware, communities all over the country are 
struggling to meet the demands of exploding populations. My home state 
of Florida greets 900 new residents per day. We are witnessing the 
continuing trend of population growth despite the fact that water 
supplies have remained at the same level or even decreased over the 
last ten to fifteen years.
    Water conservation and the emergence of water recycling as a tool 
for meeting non-potable demands have stretched available supplies 
farther and farther. The South West Florida Water Management District 
(Swiftmud) has already laid more than 900 miles of pipelines for 
delivery of reclaimed and reusable water. Estimates for meeting our 
municipal water and wastewater needs over the next 20 years range 
anywhere from $500 billion to $1 trillion. Investments in water and 
wastewater systems pay substantial dividends to public health, the 
environment, and the economy.
    Citizens in the Tampa Bay area have been leaders in finding 
comprehensive solutions to the problems facing our state's water supply 
issues. Tampa Bay Water is a regional agency responsible for supplying 
the needs of a population of approximately 1.8 million. With the demand 
on the area's aquifers steadily increasing, Tampa Bay Water decided to 
investigate alternative water sources, including desalination.
    Because of my work with constituents like Tampa Bay Water, I have 
begun to look for opportunities to share the successes found in some of 
our solutions with other communities around the country and have 
introduced H.R. 1071. The Desalination Drought Protection Act of 2005 
will encourage the development of environmentally sound and 
economically feasible desalination projects by providing energy 
assistance grants to qualified entities, such as local water agencies 
and public utilities, in the amount of 62 cents per thousand gallons 
for the initial ten years of a projects operation. This bill encourages 
innovation and does not favor any particular technology to be used for 
desalination--basing incentives on performance. By focusing on how much 
water is produced rather than providing incentives for the construction 
of these new facilities, we have created a competitive system of 
incentives.
    Recognizing the vast importance of developing new technologies and 
lowering the cost for future endeavors in desalination, a new section 
was added to H.R. 1071. This provision authorizes $10 million over the 
same period for the Secretary of Energy to support research and 
development of novel technology approaches for cost-effective 
desalination.
    Tampa Bay's Big Bend desalination plant was designed to produce an 
initial 25 million U.S. gallons of water per day into the water system, 
with planned expansion that will add capacity, enabling the plant to 
reach 34 million gallons a day as needs continue to grow. Located 
adjacent to Tampa Electric's Big Bend 2,000MW Power Station, it is 
currently the largest of its kind in the United States. Construction 
began in August 2001 and the first water was produced in March 2003. 
The Tampa Bay Seawater Desalination plant will provide the Tampa Bay 
region with 10 percent of its drinking water.
    Tampa Bay has faced unique obstacles--it's tough to be first, and 
because of the high salinity and unusual water temperatures in the Golf 
of Mexico they had to make some design adaptations that later led to 
other learning curves. Knowing what we know today, our community would 
have still built the facility that we see today. When planning the cost 
allocations in 1996, expected water costs were estimated to be between 
$3.50 and $4.50 per 1,000 gallons of water ``with all of the design 
alterations water coming out of the Big Bend facility will not exceed 
$2.50 to $3.00 per 1,000 gallons of water produced, still lower in cost 
than the original expectations.
    Organizations and citizens concerned with protecting Tampa Bay, 
including the Agency on Bay Management, the Hillsborough County Water 
Team, the Audubon Society, the Tampa Baywatch and Tampa Estuary 
Program, also reviewed and commented on submitted materials throughout 
the permitting and planning process. None of the groups is opposed to 
the Big Bend seawater desalination facility.
    Although the plant's discharge is roughly twice as salty as Tampa 
Bay, it does not increase the bay's salinity because it is diluted in 
the cooling water from Tampa Electric's Big Bend Power Station before 
being discharged back into the bay. Salinity in the plant's discharge 
is, on average, only 1.0 to 1.5 percent higher than Tampa Bay's. This 
slight increase in salinity falls well within the natural, yearly 
salinity fluctuations of Tampa Bay, which vary from 16 to 32 parts per 
thousand, or by up to 100 percent, depending on the weather and the 
season.
    I urge the Subcommittee to complete consideration of this bill and 
proceed with a mark-up of the Drought Protection Act of 2005. This 
grant system and the Research and Development section will add another 
tool for states and local governments to use for providing affordable 
and drinkable water to their communities. Mr Chairman, again, I thank 
you and the Members of this Subcommittee for the opportunity to address 
you today and look forward to working with you on this and many other 
issues in the future.
                                 ______
                                 
    Mr. Pearce. [presiding.] Thank you, Mr. Davis.
    The Chair would recognize himself to ask a couple more 
questions.
    Mr. Garman, we pursued the same line of questions that we 
did with Ms. Bach, how many people do you estimate in DOE are 
working on water cleanup?
    Mr. Garman. Exclusively very few. Our budget, as allocated 
toward water, will vary greatly. I believe the GAO report did 
an analysis looking back at expenditures of the Federal 
Government.
    Mr. Pearce. If you gave me an estimate, how much would that 
be?
    Mr. Garman. It would vary from $300,000 to $7.7 million a 
year, depending on the work----
    Mr. Pearce. That is all the facilities nationwide, $7.7 
million total.
    Mr. Garman. That is correct, sir.
    Mr. Pearce. Ms. Bach, if I took your figure of 600 people, 
would a scientist working on researching be making $100,000, 
more or less, $50,000, $60-something? If we took $100,000, it 
would be about $60 million annually. If we took $50,000, we 
could just go to $30 million annually.
    So, then, Dr. Holtz-Eakin, we come back at some point to 
your analysis of what things are being paid for and not being 
paid for--if you were to look at the $30 million a year and the 
decrease from $15 to around $2 per gallon. If we had $30 
million that, since the 1950s, I think Ms. Bach said, is that 
the sort of return on capital that you all would consider is 
sufficient? Or is that something that would concern you that we 
are spending upwards of $30 million a year from just one 
agency, and maybe there are more agencies? Would you like to 
comment on that?
    Dr. Holtz-Eakin. I don't have a comment on the particular 
number, which we would be happy to analyze and get back to you 
on the rates of return. But I think you are on the mark in 
trying to identify whether there are social rates of return 
which merit R&D investment. That is exactly the right way to 
do----
    Mr. Pearce. If you would scoot closer to the mike, please.
    Dr. Holtz-Eakin. I don't know specifically on numbers 
whether that particular rate of return is satisfactory or not, 
although we would be happy to work with you on that. I think 
that your question is right on the mark, which is, this a rate 
of return which broadly accrues to the Nation as a whole, which 
is satisfactory for the kinds of investments we are making. 
These are the broad R&D investments that are the appropriate 
role for the government. We would be happy to work with you on 
the number itself.
    Mr. Pearce. Ms. Bach, if we were to pursue that line of 
questioning then with you, if you were to estimate the total 
operating cost--now we are not talking about research, we are 
going to estimate that at about $30 million or maybe a little 
bit more. But if you are looking at that time total operating 
cost of all of your different research facilities, what would 
those costs per year--and, again, the end result of what I am 
trying to get at is the actual benefit that we are getting from 
your research?
    Ms. Bach. The operating budgets for the two research 
facilities that we presently have, I would estimate that to be 
about $3 million a year, for the two facilities. We estimate 
Tularosa will be an O&M budget of about $2 million. And the 
facility at Yuma, the research facility there, is under $1 
million.
    Mr. Pearce. Do you have any estimate? You were saying that 
you think the cost of $1 is when you get to be economic. So do 
you have any estimates of when you are requesting that your 
research staff--do you have goals set out there when you would 
like that cost estimate of $1 to be reached?
    Ms. Bach. Well, in fact, the research agenda is even more 
comprehensive than the Reclamation or even the Federal 
Government. There is a consensus amongst those in the research 
community that is what the roadmap is about, is how to tackle 
the--where the costs are, so the research opportunities are and 
then to distinguish what industry should do versus what the 
Federal Government should do.
    Mr. Pearce. So we are spending $30 million a year to find 
out where the costs are and not to find out how to solve the 
costs. I mean, at some point--I will just tell you, when I look 
closely at the operating structure, particularly the facility 
in Tularosa, I get concerned that it is nondirectional and that 
I really--I don't see where the real intent is to get the cost 
down to where it is economic, that instead we are more 
concerned with the research.
    Even in DOE, I read in your report, Mr. Garman, it just 
doesn't feel like we are really aggressively attacking the cost 
structure of water with an outcome that we can be proud of at 
the end of the day.
    Ms. Bach. Mr. Chairman, if I may just comment. I certainly 
didn't want to leave the Committee with a misunderstanding. The 
600 scientists and engineers that Reclamation have, I think you 
realize that those are on a whole variety of water issues, not 
just on desal.
    Mr. Pearce. I understand that, but the whole purpose of 
water research should be how to keep it cleaner and how to use 
it and have it available when it is not available.
    Ms. Bach. Absolutely.
    Mr. Pearce. Having said that, we are being passed a memo 
that there is just 3 minutes to vote, and I am still the only 
one here. We can either--OK. They say that I probably should go 
on to recess and go cast my vote on the Floor. So with 
everyone's consensus, we will stand in recess till the Chairman 
comes back.
    [Recess.]
    Mr. Radanovich [presiding]. The Subcommittee is back in 
order, and I recognize Grace Napolitano for some further 
questioning of the first panel.
    Mrs. Napolitano. Thank you, Mr. Chairman.
    Starting off with Ms. Bach, Bureau of Reclamation. You 
state, in 2004, Bureau of Reclamation redirected efforts under 
Title XVI, the Reclamation Wastewater and Groundwater study, et 
cetera, et cetera, to complement the DWPR 40 Water 2025 number 
1, what does it mean under what direction--what Congressional 
authority was this, does a redirection of the efforts of Title 
XVI occur? Was Congress notified?
    Finally, I understand that the eligibility on the Floor 
today will zero out 2025 water funding. So would you please 
answer those.
    Ms. Bach. Yes, Congresswoman, a couple of questions that 
you had with respect to Title XVI, the authority to invest in 
desal activities is included in Title XVI. In fact, Title XVI 
is quite broad in what it considers to be impaired waters. In 
fact, essentially, if the water cannot be used for consumptive 
uses, then under Title XVI, it would be considered impaired.
    With respect to the redirection of Title XVI activities 
toward desal, that would have been described to Congress in the 
justification of the budget.
    And then your third question is, yes, with respect to the 
markup from the House Appropriations Committee, it is my 
understanding--I have reviewed the bill that is going to the 
Floor, and that, in fact, does zero out the Water 2025 funding. 
That is correct. So for desal activities, that is a reduction 
that would be a cut of $1.8, almost $2 million from their 
request.
    Mrs. Napolitano. As you probably have heard in the past, I 
have been very vocally opposed to the Bureau of Reclamation 
reducing the funding to recycle water, because it has helped 
California, specifically, and other States, from what I am 
learning to be able to deal with the issues of whether it is 
drought or contaminated water or water that they can recycle.
    Yet we continue to forge forward and based on the fact that 
it is part of the original Act. There was a demonstration 
project, I was told by Commissioner Keys, a while back.
    I just do not understand why there is such a reluctance to 
include recycling along with desal and other objectives, 
because this is what has helped California. In answer, I 
believe, to Mr. Gibbons is that California has now met the 2016 
objective of reducing the Colorado River take, which means then 
that they are already going to have that additional water 
coming from the Colorado River, because California has managed, 
through recycling water projects and other programs, been able 
to cut their take. So I am very concerned about the continued 
effort to cut the recycling funding.
    The other question that I have for you, and it was partly 
addressed, oh, Mr. Gibbons answered the question about the cost 
of the acre-foot of water. If you could bring it down to the 
range of 400 to 500, the research, what about recycling. What 
is the cost of recycling versus the desal?
    Ms. Bach. You know, I am sorry, I apologize for not having 
that information readily available. But I think what you are 
asking me is, what is the distinction between the reuse process 
and desal?
    Mrs. Napolitano. The cost of the reuse process and the 
desal process.
    Ms. Bach. If you might allow me to submit that for the 
record. Let me verify that, because I don't have it available 
to me.
    Mrs. Napolitano. Can your staff probably give you a 
ballpark figure?
    Ms. Bach. Well, let me--I don't know that this is going to 
be a complete answer, but the technology--technologies that are 
available for desal and technologies that are available for 
reuse sometimes can, in fact, be similar to it, is the ability 
to have one technology breakthrough with two different 
applications.
    Mrs. Napolitano. That still doesn't answer my question.
    Ms. Bach. I will get to your question. I believe it can be 
demonstrated that the reuse costs would be less than the desal. 
But I will be happy to get more information.
    Mrs. Napolitano. Would you explain that in writing, please?
    Ms. Bach. Yes.
    Mrs. Napolitano. Also, the fact that there needs to be an 
infrastructure for the recycled water that may have more 
extended use to communities that actually can cut down the use 
of pure water. That is my point.
    Ms. Bach. Yes, I am aware that there is a difference of 
philosophy within the Administration and the views that you 
have pressed about what role Reclamation should be playing with 
respect to----
    Mrs. Napolitano. You might add to that report, if you will, 
whether or not communities have voiced their concern about 
their ability to obtain assistance in expansion of the recycled 
water projects to use for economic reasons, whether it is for 
commercial--actually, industrial use, as well as agricultural 
use.
    Ms. Bach. I can expand upon that. I can also indicate that 
the type of proposals that we are seeing coming in for 
competitive funding in the research arena would include those 
that are looking for industrial applications.
    Mrs. Napolitano. Great.
    Ms. Bach. I will expand.
    Mrs. Napolitano. You have already answered the questions 
why the Administration favors. But I would certainly want to 
make clear that the Title XVI has been very favorably received 
by communities throughout the United States, has helped 
immeasurably in some areas. And why the continued reluctance to 
include or work with this Committee on continuing to see how 
that can continue to help bring potable water to the 
communities or increase the water by utilization of recycled 
water?
    Ms. Bach. Well, again, I understand that it comes down to a 
distinction of maybe a difference of philosophy in that the 
Administration recognizes that there are broad authorities in 
Title XVI, and as I pointed out, in fact, does allow for us to 
conduct research, including desal, because of that broad 
understanding of how it defines impaired water. But when it 
comes to the actual funding of the construction of the 
facilities, that is where you see a differentiation in policy.
    Mrs. Napolitano. OK. Well, I visited the sanitation 
district where millions of gallon per minute are dumped into 
the ocean. And that is a concern if it can be recycled and put 
back into good use whether it is for ag or industrial uses, and 
that is why I am pursuing that, one of the reasons.
    Dr. Holtz-Eakin, I have a question in regard to your report 
on page 1 where you are referring to the third paragraph on the 
California Central Valley Project, being $70.14 per acre-foot 
versus LA residents, $925. Where did you obtain the $925 
figure? How did that come about? Is it current figure?
    Dr. Holtz-Eakin. It is a 1992 figure, ma'am.
    Mrs. Napolitano. 1992. Do we have any better update than 
that?
    Dr. Holtz-Eakin. We will certainly work on getting one for 
you.
    Mrs. Napolitano. Would you submit that to this Committee?
    Dr. Holtz-Eakin. Happily.
    Mrs. Napolitano. For the record, please. Then I can look at 
page 2 of your report, paragraph one. In discussing the H.R. 
1071, adopting a less commonsense approach of subsidizing 
operating costs, and you go into the facilities eligible for 
subsidy. Are those to begin operation, during, now? I would 
like to get this clear. Is it newly built operations?
    Dr. Holtz-Eakin. Yes, ma'am.
    Mrs. Napolitano. Not existing desalination operations that 
you are hoping to help with this bill.
    Dr. Holtz-Eakin. The bill is targeting new facilities being 
built.
    Mrs. Napolitano. Isn't that discriminating against those 
that are already in operation and have been doing work?
    Dr. Holtz-Eakin. It is a targeted subsidy on new facilities 
and, by definition, discriminates against those who don't 
qualify.
    Mrs. Napolitano. So it is just for new. Does that take into 
consideration the amount of time that those facilities would 
have to be up and running, operating?
    Dr. Holtz-Eakin. It takes about three years to construct 
one, if that is your question. But the funding is not 
conditional upon a period operation.
    Mrs. Napolitano. Is it during the 10-year period following 
the bill's enactment, the subsidy? They are eligible only 
during that 10-year period, so you lost three years, for 
instance, if it took three years to build.
    Dr. Holtz-Eakin. The authorization is for a 10-year window 
and not beyond that, but that is true.
    Mrs. Napolitano. But the enactment of this bill----
    Dr. Holtz-Eakin. The authorization is for a 10-year period 
and then expires at the end of that. That is the nature of the 
bill, not the nature of the operation of the plant. Not that a 
plant is by definition only going to get 10 years of funding 
and lose 3 during the startup. It is simply the bill itself 
only has that period, and that is the nature of the budgeting 
process.
    Mrs. Napolitano. So that would affect the ability of plants 
to be able to have an extended period time of return?
    Dr. Holtz-Eakin. It certainly would affect the calculations 
that go into thinking about startup construction and the 
planning process involved in a facility, yes.
    Mrs. Napolitano. So, in essence, it probably would affect 
their cost?
    Dr. Holtz-Eakin. Most certainly.
    Mrs. Napolitano. OK. Then, I think you did answer the one 
referring to Sandia National Lab in New Mexico in the third 
paragraph of the same page. The one under construction--I 
believe somebody had a question on that. I didn't quite get the 
answer because I was walking out. When will it be finished and 
what technology does it use?
    Ms. Bach. I think this is about Tularosa with respect to 
New Mexico.
    Mrs. Napolitano. Tularosa, yes.
    Ms. Bach. Right. The facility will be finished in 2006, and 
it will focus on brackish, brackish inland.
    Mrs. Napolitano. What new technology? Is this the membrane?
    Ms. Bach. It is actually a research facility set up to test 
technologies of all kinds, not just water but also energy.
    Mrs. Napolitano. OK. Going back to the statement about R&D 
dollars appropriated from 1998 to 2005, a 7-year span, there 
have been $28.1 million for R&D. Is that small, large?
    Ms. Bach. That is specific just to one authority. That is 
for the DWPR program, and then there would have been another $5 
million under Title XVI for the two demonstration projects that 
Congress authorized, one in Las Vegas and one Long Beach, which 
you will be hearing on the next panel.
    Mrs. Napolitano. I still want to bring up the fact that 
agricultural water is subsidized for municipal water, and the 
assistance water is not--yes, all you want is true.
    OK. I think--I have a couple of questions, but I will defer 
and come back and rethink what I have.
    Thank you, Mr. Chair.
    Mr. Radanovich. Mr. Davis.
    Mr. Davis. Thank you, Mr. Chairman. I think you have raised 
a legitimate point about the quality incentive. It could be, in 
fact, 7 years, and I think it is a legitimate point for 
discussion, whether it is sufficient incentive for someone to 
factor into the subsidy the operating costs as opposed to the 
feasibility of the entire project. So I am sure that is 
something we can discuss. Thank you for raising the point.
    Mrs. Napolitano. Yes, Dr. Holtz-Eakin, the Chair has been 
kind enough to allow me to continue because he has more 
questions. How would the private sector react if we reallocated 
more money for private research and development? And would 
private industry be encouraged or discouraged from doing 
research with their own money? Any one of you.
    Dr. Holtz-Eakin. The broad lesson of history, not just in 
water but elsewhere, is, to the extent that the Federal 
Government devotes funds to R&D, it does reduce the incentives 
for both the private sector and for both State and local 
governments to do the same activity. And there is, on net, some 
crowding out of the total funding.
    Mr. Garman. As a general proposition, we at the Department 
of Energy like to engage in public/private partnerships where 
we require cost share from our private partners, or nonFederal 
partners, I should say. That cost share depends on the nature 
of the research. If it is of a very fundamental nature, we 
require smaller cost share. If it is demonstrating technology, 
closer to commercialization, we would require a larger cost 
share. That approach is codified in the Energy Policy Act of 
1992.
    Ms. Bach. Along similar lines, what I would say as a 
general philosophy is that high-risk, long-term basic research 
has been long recognized as being an important function of the 
Federal Government. That which is more applied is generally 
subjected to a cost share. And in fact, Reclamation, similar to 
the Department of Energy, we have a 50/50 cost share, and we 
generally see that cost share increasing on outside partners as 
we go from pilot to demonstration.
    Mrs. Napolitano. Thank you for those answers.
    Dr. Holtz-Eakin, your testimony emphasizes the importance 
of pricing and the effects of how water is used. What do we 
know about the use of water in response to changes in pricing?
    Dr. Holtz-Eakin. From the limited research evidence that we 
have, it is evident that residential users will respond to 
higher prices with more judicious use of water. A 10 percent 
price increase could decrease their consumption by 2 to 4 
percent. Commercial and industrial users are a bit more 
responsive. The same kind of price increase might move their 
consumption down from 5 to 8 percent.
    That builds off a survey that really operates on a limited 
range of prices. We don't know how much people respond to a 
greater range of price variation.
    Mrs. Napolitano. Thank you. I was interested in your 
statement or your testimony about, there is a disincentive for 
people to save water, conserve water, because of the pricing 
structure?
    Dr. Holtz-Eakin. It is certainly the case that the pricing 
structure affects all aspects of water use. The price 
sensitivity is about choices in using water. The price has the 
same incentives on sources of water. Whether it would be 
recycled, whether it would be desalination, whether it would be 
some other source, those prices that provide incentives for new 
technologies, those which are deemed to be meeting the market 
test, depend ultimately on the prices that are in place. So 
things which are not meeting the market test now might very 
well meet a private market test if prices were closer to the 
full cost of production.
    Mrs. Napolitano. Thank you.
    Mr. Chair, I probably have a ton of others. I would like to 
have the ability to submit them to the panel for answers to 
this Committee.
    Mr. Radanovich. Absolutely. We will be making that 
statement at the close of the hearing.
    I want to thank the members of the panel for being here. 
You provide valuable information to the Committee, and we do 
appreciate it.
    With that, I will call up the next panel, which is Mr. 
Bernie Rhinerson of the San Diego Water Authority on behalf of 
the U.S. Desalination Coalition; Mr. Kevin Wattier, who is the 
General Manager of the Long Beach Water Department; Mr. Colin 
Sabol, Chief Marketing Officer at General Electric 
Infrastructure; Mr. Pat McCourt, City Manager for Alamogordo, 
New Mexico; Dr. Michael Max, Marine Desalination Systems, 
L.L.C.
    Mr. Radanovich. Ladies and gentlemen, welcome to the 
Subcommittee. As in the last panel, we will allow each member 
to speak. Please keep in mind that your written testimony is 
included in the full record. Feel free to be extemporaneous in 
your comments. We will start with each and then open up to the 
dais for questions.
    Mr. Rhinerson, welcome to the Subcommittee, you may begin.

 STATEMENT OF BERNIE RHINERSON, BOARD MEMBER, SAN DIEGO COUNTY 
WATER AUTHORITY, ON BEHALF OF THE U.S. DESALINATION COALITION, 
                     SAN DIEGO, CALIFORNIA

    Mr. Rhinerson. Thank you, Chairman Radanovich and members 
of the Subcommittee. My name is Bernie Rhinerson, I am here 
this morning representing the United States Desalination 
Coalition where I serve as a member of The Board of Directors 
and as the past chairman of that organization. I am also 
immediate past chairman of the San Diego Water Authority, and I 
serve as a member of the Board representing the City of San 
Diego on that agency.
    I very much appreciate the opportunity this morning to be 
here to testify in support of H.R. 1071, the Desalination 
Drought Prevention Act of 2005.
    A few comments about my agency and some clarifications 
about previous testimony. Our agency provides wholesale water 
service to 3 million people in San Diego County. The 
authority's charge is to deliver a safe and reliable water 
supply to businesses and residents that we serve providing 
water that fuels a $1.6 billion economy.
    We are planning a desalination plant in Carlsbad that will 
produce 50 million gallons a day which represents about 5 
percent of San Diego County's water supply. We are currently 
doing an EIR. We are hope to have that plant in operation in 
2008 and 2009 expandable up to 100 million gallons a day.
    To correct a comment made in earlier testimony, we 
anticipate that the cost of water from that facility will be in 
the $800 to $900 range, based on a power cost of about $0.06 
per kilowatt. The $600 range mentioned earlier is a cost that 
we wish we could achieve, but we are more in the $800 range.
    My agency, like water agencies throughout the country, is 
continually struggling to identify long-term water supplies 
because of drought, increasing population, competing demands 
from business and agriculture. So it is these challenges that 
brought us here today and led us to lead the U.S. Desalination 
Coalition which brought together agencies and utilities in 
Florida, Texas, California, New Mexico and Hawaii, all agencies 
that are struggling with the same problem, finding long-term 
water supplies. So we are very encouraged to be here to 
hopefully have the Federal Government create a program that can 
help us with financial assistance to bring these desalination 
plants into reality.
    I want to thank the sponsors of the bill, Congressman 
Gibbons, Congressman Davis, for their support and leadership, 
and you, Mr. Chairman, for having this hearing.
    Mr. Rhinerson. H.R. 1071 is a bill that is a little bit 
different in that it provides energy assistance grants based on 
performance, and that is a very important difference by design.
    In our opinion, we cannot afford to continue to wait for 
more research. We need to get these plants on line and built 
and producing water. It takes a long time to plan them, get 
through the environmental permit process, as you have talked 
about earlier, and to get these plants built. So the approach 
in H.R. 1071 is, rather than providing construction grant 
funds, it is to focus on plants that are built by local 
agencies that are the best plants that are actually producing 
water.
    I would like to encourage the Committee to consider a 
couple of changes that have been mentioned before to this bill. 
One is the one-stop-shopping environmental permitting process 
that is similar to what is used in highway construction. That 
would help us with the major challenge that we face. It is the 
cost of permitting and the delays and the processing that we 
have, and a one-stop-shop process could help speed up the 
approval process and therefore save money on building these 
plants.
    Second, we would like to ask that you consider adding 
language to the bill where the Secretary of Energy would 
evaluate applications that are based on the best available 
technology. Those are the plants that have designed into them 
energy-efficiency units and things that are as advanced as 
possible. With those two changes, we are very much in support 
of this bill.
    Once again, I want to reiterate that we very much 
appreciate the Federal Government's support for research from 
Reclamation and the Department of Energy. But we need to think 
beyond research and actually building plants that will produce 
water for the people of my region and in other areas of the 
country where water supply is something that we have to start 
working on now, because it takes a long time to build these 
plants.
    I would be happy to answer any questions during your 
question-and-answer period, and I appreciate your support for 
this bill.
    Mr. Radanovich. Thank you, Mr. Rhinerson.
    [The prepared statement of Mr. Rhinerson follows:]

 Statement of Bernie Rhinerson, Member of the Board of Directors, San 
    Diego County Water Authority on behalf of the U.S. Desalination 
                               Coalition

    Chairman Radanovich and Members of the Subcommittee, my name is 
Bernie Rhinerson. I am before the Committee this morning representing 
the U.S. Desalination Coalition, where I serve as a member of the Board 
of Directors and am the immediate past Chairman. I also serve as a 
member of the Board of Directors of the San Diego County Water 
Authority as a representative of the City of San Diego. I very much 
appreciate having the opportunity to testify today in support of H.R. 
1071, the Desalination Drought Prevention Act of 2005.
    The San Diego County Water Authority serves as the wholesale water 
supplier to more than 2.95 million people and 23 member agencies in San 
Diego County. The Authority's charge is to provide a safe and adequate 
supply of high quality water to the communities, businesses, and 
residents that we serve.
    Like water resource managers throughout the United States, we are 
struggling to address the long-term challenges posed by drought, 
increasing population, and competing demands from business, 
agriculture, and the environment. These challenges led us to join 
together with water agencies and utilities from other States including 
Florida, Texas, Hawaii, and New Mexico to form the U.S. Desalination 
Coalition, a group dedicated to advocating an increased Federal role in 
advancing desalination, both seawater and brackish groundwater, as a 
viable long term tool for meeting our Nation's water supply needs.
    The goal of the U.S. Desalination Coalition is to encourage the 
Federal government to create a new program to provide financial 
assistance to water agencies and utilities that successfully develop 
desalination projects that treat both seawater and brackish water for 
municipal and industrial use. The Desalination Drought Prevention Act 
of 2005, introduced by Representative Jim Davis and Representative Jim 
Gibbons, will achieve this goal in a fiscally responsible way. Similar 
legislation has been introduced in the United States Senate by Senator 
Mel Martinez of Florida. I am delighted to be here today in support of 
this legislation and tell you how it will positively affect the San 
Diego County Water Authority.
    Despite the tremendous advances in desalination technology that 
have reduced the costs of desalinating water, energy costs remain quite 
high and are responsible for more than 30% of the overall cost of 
desalinated water. H.R. 1071 directs the Secretary of Energy to provide 
incentive payments to water agencies or utilities that successfully 
develop desalination projects. This would be a competitive, 
performance-based program that will help to offset the costs of 
treating seawater and brackish water. Under the proposed program, 
qualified desalination facilities would be eligible to receive payments 
of $0.62 for every thousand gallons of fresh water produced for the 
initial ten years of a project's operation. The legislation would also 
insure that there is a balance in the amount of money going to seawater 
and brackish water projects in any one year.
    The rationale for this approach is that while the cost of 
desalinating water has dropped dramatically over the last decade, the 
energy costs associated with desalination are still quite high. Most 
experts believe that these costs will continue to come down over time 
and that desalination will eventually be widespread. But waiting for 
this to occur is a luxury that, in my opinion, we cannot afford. A 
modest investment to jump-start the development of these projects today 
is the smart thing to do.
    It is true that the approach suggested in H.R. 1071 to encourage 
the development of seawater and brackish groundwater desalination 
projects is different from the traditional approach of providing 
construction grant funds. That difference is by design. First, while 
the availability of energy assistance grants will encourage the 
development of desalination projects, these grants will be performance 
based. In other words, the Federal government will not be betting ``on 
the come'' that these projects will be technically and economically 
sound and will actually get built. Only the very best projects will get 
built by local sponsors and only those will receive financial support.
    San Diego County is literally at the end of the pipeline. In order 
to ensure water supply reliability for our region, we have instituted a 
multi-faceted water supply diversification strategy that includes 
imported water, increased conservation, water recycling, agriculture to 
urban water transfers and the development of a new, drought-proof, 
local water supply--the Pacific Ocean. Toward that goal, the Water 
Authority has instituted one of the most ambitious seawater 
desalination programs in the country. Our water supply diversification 
plan calls for the development of up to 125 million gallons per day of 
seawater desalination capacity over the next 20 years. We expect that 
by 2020, six to fifteen percent of our water supply will come from the 
ocean. Environmental review is expected to be completed this year for a 
50 million gallon per day seawater desalination plant in Carlsbad, 
California.
    Development of this high quality reliable water supply will address 
two vital federal interests; it will ensure that the economic health of 
a $142 Billion a year economy is maintained, and it will offset the 
need to provide water to a growing population by seeking additional 
imported supplies from environmentally sensitive sources in Northern 
California such as the San Francisco- San Joaquin Bay Delta.
    Mr. Chairman, as you and the Subcommittee consider this 
legislation, I would respectfully suggest two modifications to improve 
the legislation.
    First, we would encourage the Committee to consider establishing a 
``one stop shop'' to coordinate the environmental review process 
required for these projects similar to the process used in highway 
construction and embodied in statute at 23 U.S.C. 109. This would help 
public water agencies address one of the biggest problems we face in 
developing desalination facilities, navigating through an overly 
complex, time consuming and expensive permitting process involving 
numerous Federal and State agencies.
    Second, we would encourage the Subcommittee to include language 
that would require the Secretary of Energy in the evaluation of 
applications for assistance under the Act to give priority to projects 
that utilize the best available technologies to conserve energy or 
utilize renewable energy in the desalination process.
    In conclusion, thank you again for holding this hearing on this 
important legislation. We very much appreciate your leadership on this 
important issue.
                                 ______
                                 
    Mr. Radanovich. Mr. Wattier.

 STATEMENT OF KEVIN WATTIER, GENERAL MANAGER, LONG BEACH WATER 
               DEPARTMENT, LONG BEACH, CALIFORNIA

    Mr. Wattier. Good morning, Mr. Chairman, members of the 
Committee. Thank you for the opportunity to speak before this 
distinguished Subcommittee today.
    My name is Kevin Wattier. I am the General Manager of the 
Long Beach, California, Water Department. My verbal testimony 
today will summarize the development and current status of the 
Long Beach Seawater Desalination Project, currently the largest 
federally authorized project of its kind in the United States.
    The Long Beach Desalination Project represents the Federal 
Government's current investment in seawater desalination 
research and development. In full partnership with the U.S. 
Bureau of Reclamation, through work at a 300,000 gallon-per-day 
prototype desalination facility, we are attempting to optimize 
a unique and extremely innovative membrane technology, which 
was developed by engineers at our agency, that has indicated 
several advantages over traditional reverse osmosis methods on 
a small scale.
    Development of this research facility is also being made 
possible by the generous assistance from the Los Angeles 
Department of Water and Power.
    Additionally, together with the United States Bureau of 
Reclamation, we will construct an Under Ocean Floor Intake and 
Discharge Demonstration System, a project we believe is among 
the first of its kind in the world, that will effectively 
demonstrate an alternative to traditional ocean intake and 
discharge practices.
    The two parts of this large research and development 
program are aimed at fulfilling the intent of the U.S. Congress 
put forth by this Committee in its 1996 funding authorization 
for the Long Beach Desalination Project, which is to drive down 
the cost of seawater desalination through advancements in 
technology.
    The work being done in Long Beach is consistent with the 
recommendations on pursuing seawater desalination contained in 
the Department of Interior's recent publication entitled, Water 
2025: Preventing Crisis and Conflict in the West.
    In Long Beach, the reliability of our future water supply 
rests on four pillars of critical investment: conservation, 
reclamation, conjunctive use and seawater desalination. 
Increased implementation of aggressive conservation programs, 
expansion of our recycled water distribution system, innovative 
and increased utilization of our groundwater basin and seawater 
desalination, as a package, for the foreseeable future, will 
mitigate variable constraints on imported and groundwater 
supplies, significantly restrengthen our water supply 
reliability, and keep water rates low.
    Seawater desalination has indeed emerged as one of several 
alternatives for stronger water supply reliability. In fact, we 
believe that early in the next decade seawater desalination 
could help meet 10 percent of our customers' annual water 
demands. However, we believe significant opportunities to 
further reduce the operating costs of seawater desalination 
exists, making it an even more affordable option for water 
reliability. Long Beach has chosen to pursue these 
opportunities prior to moving forward on construction of a 
full-scale production facility.
    Using a small 9,000 gallon-per-day pilot scale desalter 
since 2001, Long Beach water has significantly reduced the 
overall energy requirement of seawater desalination using a 
relatively low-pressure, two-pass nanofiltration process, which 
has come to be known as the Long Beach method. Testing at this 
scale has estimated this new technology to be 20 to 30 percent 
more energy efficient than traditional reverse osmosis.
    This technology, among other critical processes, will now 
be tested on a larger scale. A Federal funding agreement with 
the U.S. Bureau of Reclamation was signed in September of 2002 
to design and construct a 300,000 gallon-per-day prototype 
seawater desalination research and development facility. This 
funding agreement provides for 50 percent, or up to $20 
million, of the total cost of the Long Beach project. Total 
cost of design, construction and operations for this 300,000 
gallon-per-day prototype facility is $8 million. To date, 
approximately $4 million have been appropriated by the Federal 
Government starting in 2002.
    The Long Beach prototype seawater desalination facility 
will be operational in August of this year. Once operational, 
Long Beach Water and Bureau of Reclamation officials will 
conduct 18 months of research. The research conducted at this 
facility will be among the most advanced seawater desalination 
research being undertaken anywhere at this time. With the data 
we gather, we will verify energy savings of the two-pass 
nanofiltration method and optimize the process so that it can 
be easily duplicated.
    Among the research being conducted in Long Beach will be a 
full-scale, side-by-side comparison of the two-pass 
nanofiltration and single-pass reverse osmosis methods, the 
only full-size energy use comparison of these two processes 
being conducted at this time. The Long Beach project will also 
test many of the newest energy recovery devices being made 
available on the market.
    We will extend our efforts beyond optimization of the two-
pass nanofiltration process and seek out other innovative and 
affordable ways to develop other components of a full-scale 
desalination facility, while looking ahead at some of the 
common operational challenges faced by other desalination 
facilities around the world. Issues such as seawater intake, 
pretreatment and brine disposal affect both the two-pass 
nanofiltration and the reverse osmosis processes.
    In partnership with the Bureau of Reclamation, we are 
currently planning the design, construction and subsequent 
research activity of an Under Ocean Floor Intake and 
Demonstration System, among the first of its kind in the world. 
We believe this research will demonstrate an alternative and an 
environmentally responsive method of seawater intake and brine 
discharge using slow sand filtration and that existing beach 
sand under the ocean floor can be a viable pretreatment method 
for seawater desalination.
    Mr. Chairman, I would like to thank this Committee, the 
Congress and the Bureau of Reclamation for your continued 
support and confidence in the partnership between the Federal 
Government and the City of Long Beach. We continue to strive to 
provide you with a tangible return on your investment in 
seawater desalination research and development. We look forward 
to sharing our research with this Committee and other 
stakeholders in the months ahead.
    Along with my written testimony, I have submitted recent 
photographs of the Long Beach prototype desal facility and 
graphic renderings of the Under Ocean Intake Project.
    I would be happy to answer any questions you might have.
    Thank you, Mr. Chairman.
    Mr. Radanovich. Thank you, Mr. Wattier.
    [The prepared statement of Mr. Wattier follows:]

    Statement of Kevin Wattier, General Manager, Long Beach Water, 
                         Long Beach, California

    Mr. Chairman, thank you for the invitation to speak before this 
distinguished Subcommittee today.
    My name is Kevin Wattier and I am General Manager of Long Beach 
Water, an urban municipal water supply agency located in Long Beach, 
California. I am a licensed Professional Engineer and Grade 5 Water 
Treatment Operator.
    My verbal testimony today will summarize the development and 
current status of the Long Beach Seawater Desalination Project; 
currently the largest Federally authorized project of its kind in the 
United States.
    The Long Beach Desalination Project represents the Federal 
government's current investment in seawater desalination research and 
development. In full partnership with the United States Bureau of 
Reclamation, through work at a 300,000 gallon-per-day prototype 
desalination facility, we are attempting to optimize a unique and 
extremely innovative membrane technology, which was developed by 
engineers at our agency, that has indicated several advantages over 
traditional reverse osmosis methods when tested on a small scale.
    Development of this research facility is also being made possible 
by generous assistance from the Los Angeles Department of Water & 
Power.
    Additionally, together with the Bureau of Reclamation, we will 
construct an Under Ocean Floor Intake and Discharge Demonstration 
System, a project we believe is among the first of its kind in the 
world, that will effectively demonstrate an alternative to traditional 
open ocean intake and discharge practices.
    The two parts of this large research and development project are 
aimed at fulfilling the Intent of The Congress, put forth by this 
Committee in its 1996 funding authorization for the Long Beach 
Desalination Project, which is to drive the cost of seawater 
desalination down through advancements in technology.
    The work being done in Long Beach is consistent with the 
recommendations on pursuing seawater desalination contained in the 
Department of Interior's recent publication entitled, ``Water 2025: 
Preventing Crises and Conflict in the West.''
    Today, I will give you a progress report on this project, in which 
you all are a partner.
    By way of background, Long Beach Water currently meets the annual 
water demand for the 500,000 people living in and around the City of 
Long Beach through a broad resource portfolio, 42 percent of which is 
water imported into Southern California by the Metropolitan Water 
District via the State Water Project and the Colorado River Aqueduct; 
38 percent is groundwater which is pumped and treated locally; and the 
final 20 percent of demand is met through conservation and use of 
recycled water.
    Long Beach believes implementation and management of a diverse 
water supply portfolio is the most effective way to mitigate variable 
constraints inherent with imported and groundwater supplies.
    By the beginning of the next decade, Long Beach Water's supply 
portfolio will resemble that of an experienced and successful 
investor's: smart, balanced and most importantly productive, while 
maximizing flexibility.
    In Long Beach, the reliability of our future water supply rests on 
four pillars of critical investment: Conservation, Reclamation, 
Conjunctive Use and Seawater Desalination. Increased implementation of 
aggressive conservation programs, expansion of recycled water 
distribution systems, innovative and increased utilization of our 
groundwater basin and seawater desalination, as a package, for the 
foreseeable future, will mitigate variable constraints on imported and 
groundwater supplies, significantly strengthen water supply reliability 
and keep water rates low.
    We recognize conservation as a top priority in our water resource 
management strategy. As a City, we are using the same amount of water 
that we did in 1987, even though our population has increased by over 
100,000 people.
    Major components of Long Beach's water conservation program 
include: aggressive system maintenance; participation in the 
Metropolitan Water District's Regional Conservation Credits Programs; 
implementation of Conservation Best Management Practices; use of 
economic and financial incentives to encourage efficient water use; 
implementation of water use regulations through local ordinances; and 
extensive public relations and community education programs to teach 
and encourage the community how to use water wisely.
    Long Beach is aggressively expanding its reclaimed water system 
with the construction of 84,000 feet of new reclaimed water pipeline, 
new pump stations, and the conversion of two existing water reservoirs 
into reclaimed water storage. The expanded reclaimed water system will 
provide 4,000 to 9,000 acre-feet a year of reclaimed water to the 
populations living in and around the City of Long Beach.
    In addition, Long Beach Water has partnered with the Water 
Replenishment District of Southern California in constructing a water 
treatment facility capable of producing 3,000 acre-feet per year of 
treated reclaimed water. This water replaces potable water that is 
currently being injected into the existing Alamitos Seawater Intrusion 
Barrier to prevent seawater from contaminating the groundwater supply. 
Again, through rigorous conservation and water reclamation, Long Beach 
Water has been able to reduce approximately 20 percent of its total 
water demand from ground and imported water sources.
    Long Beach Water has a conjunctive use program in place for drought 
years. The Long Beach conjunctive use program allows us to capture 
excess water during wet years and store up to 13,000 acre-feet or 4.2 
billion gallons in the Central Groundwater Basin for use during dry 
years.
    Seawater desalination has indeed emerged as one of several 
alternatives for stronger water supply reliability. In fact, we believe 
that early in the next decade, seawater desalination could help meet 10 
percent of our customer's annual water demand. However, we believe 
significant opportunities to further reduce the operating costs of 
seawater desalination exist, making it an even more affordable option 
for water reliability. Long Beach has chosen to pursue these 
opportunities prior to moving forward on construction of a full-scale 
production facility.
    Using a small 9,000 gallon-per-day pilot scale desalter since 2001, 
Long Beach Water has significantly reduced the overall energy 
requirement of seawater desalination using a relatively low-pressure, 
two-pass nanofiltration process, which has come to be known as the Long 
Beach Method. Testing at this scale has estimated this new technology 
to be 20 to 30 percent more energy efficient than reverse osmosis.
    This technology, among other critical processes, will now be tested 
on a larger scale. A Federal funding agreement with the U.S. Bureau of 
Reclamation was signed in September of 2002, to design and construct a 
300,000 gallon-per-day prototype seawater desalination research and 
development facility. This funding agreement provides 50 percent, or up 
to $20 million, of the total cost of the Long Beach Seawater 
Desalination Project. Total cost of design, construction and operations 
for this 300,000 gallon-per-day prototype facility is $8 million. To 
date, total Federal appropriations of $4 million have been received 
since FY'02.
    The Long Beach Prototype Seawater Desalination Facility will be 
operational in August of this year. Once operational, Long Beach Water 
and Bureau of Reclamation officials will conduct 18-months of research. 
The research conducted at this facility will be among the most advanced 
seawater desalination research being undertaken anywhere at this time. 
With the data we gather, we will verify energy savings of the two-pass 
nanofiltration method, and optimize the process so that it can be 
easily duplicated.
    Among the research being conducted in Long Beach will be a full-
scale, side-by-side comparison of the two-pass nanofiltration and 
single-pass reverse osmosis methods of desalination, the only full-
size, energy-use comparison of these two processes being conducted at 
this time. The Long Beach project will also test many of the newest 
Energy Recovery Devices being made available.
    We will extend our efforts beyond optimization of the two-pass 
nanofiltration process and seek out innovative and affordable ways to 
develop other components of a full-scale desalination facility, while 
looking ahead at some of the common operational challenges faced by 
other desalination facilities around the world. Issues such as seawater 
intake, pre-treatment, and brine disposal affect both the two-pass 
nanofiltration and reverse osmosis processes.
    In partnership with the Bureau of Reclamation, we are currently 
planning the design, construction and subsequent research activity of 
an Under Ocean Floor Intake and Discharge Demonstration System, among 
the first of its kind in the world. We believe this research will 
demonstrate an alternative and environmentally responsive method of 
seawater intake and brine discharge using slow sand filtration, and 
that existing beach sand under the ocean floor can be a viable pre-
treatment method for seawater desalination.
    Mr. Chairman, I would like to thank this Committee, The Congress 
and the Bureau of Reclamation for your continued confidence in the 
partnership that the Federal government has with Long Beach. We 
continue to strive to provide you with a tangible return on your 
investment in seawater desalination research and development. We look 
forward to sharing our research with this Committee and other 
stakeholders in the months ahead.
    I will be happy to answer any questions you might have.
    Thank you.

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                                 ______
                                 
    Mr. Radanovich. Mr. Sabol, welcome to the Subcommittee. You 
may begin.

   STATEMENT OF COLIN R. SABOL, CHIEF MARKETING OFFICER, GE 
             INFRASTRUCTURE, TREVOSE, PENNSYLVANIA

    Mr. Sabol. Thank you, Mr. Chairman and members of the 
Committee, for allowing me to appear before you today.
    GE invests $3 billion in research and development annually, 
and our Water and Process Technologies business is a leading 
global supplier of water treatment systems and services.
    Water is the lifeblood of industry, and our products and 
services conserve billions of water gallons per year for our 
industrial customers. Our water scarcity solutions create safe, 
affordable water for millions of people living in water-scarce 
regions throughout the world.
    A picture is worth a thousand words, and I have a few 
slides on the easel over here that will help. They are also 
part of my written statement.
    Global water stress is spreading throughout the world----
    Mr. Radanovich. If I can interrupt you--we won't hold you 
on the time--but if you could bring those slides a little 
closer that would be helpful for us. Is there more than one 
slide, or is that it, sir?
    Mr. Sabol. There are several. They are in the written 
testimony, if you happen to have it in front of you. If not, we 
will bring them forward.
    Mr. Radanovich. It is in our testimony. Maybe during the 
questioning we can go through the slides.
    Mr. Sabol. Great.
    Global water stress is spreading throughout the world. 
Today, there are about 4 billion people in the world that are 
living in a water stress area. That number is going to increase 
to 6 billion people by 2025. These water scarcity issues are 
also occurring here in the United States on the west coast, on 
the east coast, as well as here in Washington, D.C. Where we 
have lead in the drinking water.
    Many regions in high-stress situations have abundant water 
supplies nearby, but they are not in a usable form. Water in 
the form of seawater, brackish water, and wastewater can be 
sources of new water to relieve water scarcity. There is a 
slide that is in your written testimony that also shows the 
various sources of new water. These various sources include 
seawater desalination, but they also include brackish water 
desalination and the recovery of wastewater for reuse in 
industrial and agricultural purposes.
    It is important to note that desalination of seawater is 
much more expensive than it is to reuse water from wastewater 
sources or from brackish water sources, on the order of 
magnitude of two times more expensive to desalinate seawater.
    The technologies that are developed to desalinate seawater 
are translatable into brackish water desalination and into 
reuse, so it is important to invest in technology, but I hope 
this Committee focuses not just on seawater desalination but 
also creating new sources of water from reuse and brackish 
water.
    Desalination costs are driven by a couple of things: one, 
the lifetime of plants, the capital costs of these plants, 
contributes greatly to the overall cost of running a plant; 
and, second, energy, as we have talked about today.
    This chart depicts--the two bars on the left are thermal 
desalination, the technology of choice in the Middle East. The 
chart on the bar on the right is reverse osmosis, or membrane-
based, desalination. You can see reverse osmosis or membrane-
based desalination is the least expensive alternative for 
desalinating seawater and brackish water today.
    Technology advances have driven the cost of desalinating 
seawater down dramatically over the past couple of decades. Our 
figures show that the cost of desalinating seawater back in 
1980 was as high as $20 per 1,000 gallons. The industry is 
manufacturing seawater desalination at a cost of $3 to $4 per 
1,000 gallons reliably today. We think this number can be 
driven even lower.
    The technologies that we are focused on at GE in driving 
this cost even further down are as follows: number one, high-
rejection energy efficient membranes; number two, chlorine-
resistant, long-life membranes; number three, energy recovery 
devices; number four, the combination of energy and water 
systems and designing them in a way such that the total system 
is optimized; and high-efficiency pretreatment systems to 
enable longer life of plants.
    In conclusion, subsidies can create a means to encourage 
investment in desalination technologies. They can help build 
and install a base today. So, for that purpose, they can be 
very valuable. We can learn from that installed base.
    But we believe that long-term solutions lie in advanced 
technologies that create economical water scarcity solutions. A 
broad research and development program that is focused on 
membrane advancements and improved energy efficiency could lead 
to a 30 percent reduction in operating cost and a 25 percent 
reduction in capital cost, encouraging industry and potable 
water providers to reduce their reliance on surface water.
    As a leader in the industry, GE looks forward to working 
with policymakers, users, and the technical community to 
continue to improve technologies that address water scarcity 
solutions.
    I thank you for the time, and I look forward to answering 
your questions.
    Mr. Radanovich. Thank you, Mr. Sabol.
    [The prepared statement of Mr. Sabol follows:]

          Statement of Colin Sabol, Chief Marketing Officer, 
                           GE Infrastructure

Introduction
    Chairman Radanovich, respected members of the Committee, thank you 
for inviting me to appear before you today. It is my honor to address 
the topic of clean water scarcity and to share our views on how 
advanced technologies can reduce the cost of providing clean water and 
increase long-term water availability in an economically sustainable 
way.

Background
    GE is a global leader in diverse technologies and one of the 
world's most recognized brands. We invest over $3 billion on R&D 
annually and provide our customers with advanced technologies that 
reduce emissions, increase energy efficiency, enhance safety and 
security, and improve health care. GE Water & Process Technologies is a 
leading global provider of water treatment systems and services. Water 
is the lifeblood of industry, and our products and services conserve 
billions of gallons of water annually for our industrial customers. Our 
treatment systems also create safe, affordable water for millions of 
people living in water-scarce regions of the world from many sources, 
including brackish water, sea water and recovered water. GE does this 
using multiple technologies, including reverse osmosis, 
electrodialysis, and treatment systems that remove impurities and 
improve water quality.

Water Scarcity is Spreading
    As population increases and industrial development expands, the 
stress on water resources will continue to increase. According to the 
World Meteorological Organization, the number of people living in 
regions defined as ``stressed'': and ``high stress'' will increase from 
4 billion in 1995 to nearly 6 billion in 2025 B an increase of 50% in 
30 years. (Figure 1).

[GRAPHIC] [TIFF OMITTED] T1447.007


    This is a global trend that can also be felt in the U.S. due to 
shifts in population and impairment of existing water resources. For 
example:
      Increasing populations and high demand are depleting 
freshwater aquifers in the southwest US;
      Groundwater contamination is a growing problem in New 
England;
      Competition for water access in the Colorado river basin 
have created far-reaching economic and political tensions in that 
region;
      Lead and bacteria contamination have affected drinking 
water supplies in areas, including here in Washington DC.
    Paradoxically, many regions of high stress have abundant water 
supplies nearby. The problem is one of access to clean, usable water. 
There are technology solutions to this problem. GE and other companies 
are able to provide technologies to convert seawater, brackish water 
and recovered water into useful water supplies. As demand increases, it 
will become increasingly important to reduce the cost of water by 
reducing capital cost, energy cost, and operating maintenance cost.

Economics of Water Treatment and Desalination
    Water treatment costs vary by the amount of salt removal, type of 
technology, cost of energy, and size of plant. As shown in Figure 2, 
different water resources require different treatment technologies, and 
higher salinities have higher costs.
    Desalination costs are dominated by capital investment, energy and 
maintenance costs. (Figure 3) Reverse osmosis systems, which utilize 
membrane technology for water treatment, have the lowest cost of 
operations, especially in areas with high power cost.

[GRAPHIC] [TIFF OMITTED] T1447.008

[GRAPHIC] [TIFF OMITTED] T1447.009


Technology Advances Have Reduced Cost of Clean Water
    GE and others have made great strides in reducing the cost of 
desalinating seawater using membranes, from over $20/K-gal in 1980 to 
under $4/K-gal today (Figure 4).

[GRAPHIC] [TIFF OMITTED] T1447.010


    While membrane technology advances have resulted in significant 
cost reductions, energy still accounts for up to 60% of the operating 
cost (Figure 5). Further improvements in energy efficiency will deliver 
sustainable reductions in operating cost. Along with improvements in 
energy efficiency, improvements in membrane performance and membrane 
life through integrated treatment systems can reduce capital cost and 
life cycle cost.

[GRAPHIC] [TIFF OMITTED] T1447.011


Roadmap for Sustainable Reduction in Clean Water Costs
    Membrane-based treatment solutions are essential to creating new 
water sources such as brackish water aquifers, seawater, and even 
wastewater. Membrane based desalination is a proven solution, but a 
broader application of these technologies to create meaningful new 
water sources requires investment to further reduce the energy 
consumption associated with the operation of membrane systems.
    Significant improvements in clean water cost can be achieved by 
investing in the development of:
      New membrane systems with improved energy efficiency;
      Higher flux membranes with increased capacity and lower 
capital costs;
      Higher efficiency of energy recovery systems to reduce 
energy costs;
      Integrated treatment systems and longer life membranes 
with higher resistance to chlorine that increase efficiency and reduce 
maintenance costs.
    In addition, innovative financing models and tax incentives can 
reduce first cost and help accelerate the deployment of these new 
technologies.
    GE is already investing in research to develop membranes that have 
lower energy consumption, improved life, and innovative integrated 
treatment systems. Furthermore, through government support, GE is 
looking at new systems such as the integration of membrane-based 
desalination and energy generated from wind turbines. We are committed 
to continuing our efforts in these areas, but government support will 
facilitate and accelerate these developments.

[GRAPHIC] [TIFF OMITTED] T1447.012


Recommendations
    We recognize the value of subsidies as effective means to encourage 
early adoption and deployment of solutions. Technologies exist today 
that are effective at removing salts and contaminants from water. 
Short-term assistance with energy cost will help communities in need 
put solutions in place faster.
    However, we think that the long-term solution lies in advanced 
technologies that make clean water economical and sustainable. A broad 
research and development program focused on membrane advancements and 
improved energy efficiency could lead to a 30% reduction in operating 
costs, and a 25% reduction of capital costs. Additional efforts to 
develop integrated treatment programs and innovative financing can 
further reduce the cost of clean water. This would encourage industry 
and potable water providers to reduce their reliance on surface water 
sources by fulfilling their demand with new water sources.
    As a leader in the industry, GE looks forward to working with 
policymakers, users, and the technical community to continue to improve 
desalination technologies and increase the availability of clean water. 
Thank you Mr. Chairman and members of this Committee for your time.

[GRAPHIC] [TIFF OMITTED] T1447.013


    Mr. Radanovich. Mr. McCourt, welcome to the Subcommittee; 
and you may begin your testimony.

 STATEMENT OF PAT McCOURT, CITY MANAGER, ALAMOGORDO, NEW MEXICO

    Mr. McCourt. Mr. Chairman, members of the Committee, thank 
you for this opportunity to appear before you today.
    I am City Manager for the City of Alamogordo, New Mexico.
    Mr. Radanovich. Mr. McCourt, would you mind pulling your 
microphone a little bit closer there? Make sure it is on. That 
is better.
    Mrs. Napolitano. Would you repeat that statement? 
    Mr. McCourt. It is not empirical, we didn't do a scientific 
study, but what we have found out was that people use a certain 
amount of water for their basic needs; therefore, pricing did 
not have a large effect on the lower quantities. As we moved 
into larger users of water, we found it to be very sensitive 
with consumers, and so that worked out. We do have a tiered 
system, as I mentioned in my written testimony. It has 
significant impact on water conservation.
    We have done quite a bit of research. We have been working 
on developing a new water source approximately 10 years in our 
Tularosa basin area. The potable water is essentially used up. 
We are now looking at nonpotable water. That water will require 
some type of treatment. Unlike seawater, ours is a variable 
quality. It goes all the way from about 2,000 parts to, as you 
heard mentioned by Representative Pearce, about 17,000 parts 
per million. So our goal is to tap into the best of the bad 
water at this particular point in time to supply our needs.
    The energy cost is a significant factor in any type of 
desalination project that you do. It has risen very rapidly in 
recent years. Our initial incremental costs over our other 
water was at 65 cents per thousand. It has now jumped to 90 
cents per 1,000 in the last couple years. So we feel that that 
is a very important area.
    This really sticks in my throat, but I have to say that I 
don't support the subsidy for operating cost. We think a long-
range energy policy which would stabilize energy prices would 
be more beneficial. Now, having said that, I want you to know 
if you do choose to pass this bill we will be happy to get in 
line to help you demonstrate its usefulness.
    We do try to keep our costs of operation down as much as 
possible. We, again, use conservation, as has been mentioned, a 
very important part. We see desalination not only for our own 
community but throughout the United States and the world. 
Inland desalination we see is an extreme area, an area of very 
large growth coming up in recent years. We face some somewhat 
unique problems in that. In the brine disposal in the coastal 
cities, they tend to have an easier concern with that. In the 
inland cities, we find that to be a much more difficult 
environmental concern to address.
    We--in the case of the major metropolitan areas in Phoenix, 
they would literally be generating tons of waste products, 
solid waste product, from desalination projects. We are a 
little smaller than them, so we don't generate quite that much. 
But we still do it, generate it.
    The Tularosa desalination facility we would strongly 
encourage. One of the prime functions of that is to look for 
ways to use the waste product from desalination in an 
economical manner and, therefore, reduce the overall cost of 
disposal and protect the environment.
    We strongly support the continued funding for research 
activities.
    I will be happy to answer any additional questions you may 
have. Thank you for this opportunity.
    Mr. Radanovich. Thank you very much, Mr. McCourt.
    [The prepared statement of Mr. McCourt follows:]

       Statement of Pat McCourt, City Manager, City of Alamogordo

    Honorable Members of Congress, I appreciate the opportunity to 
address the Subcommittee on Water and Power regarding this important 
issue of desalination research and water resource management. As you 
know, this topic is highly relevant in the southwest. I am Pat McCourt, 
City Manager in Alamogordo, New Mexico, a city of approximately 37,000 
citizens. Cultivating reliable and long-term water availability has 
been one of my most important and challenging tasks since I arrived in 
Alamogordo.
    In the late 1990s, The City of Alamogordo recognized the need for a 
new long-term, reliable, and cost efficient water source for current 
and future residents. Our region has a dwindling supply of readily-
potable water for a growing population. This problem is exacerbated by 
a severe, prolonged drought. We have sought many avenues to protect our 
most elusive resource. We have taken two approaches for addressing the 
challenge of providing an adequate water supply. The first step has 
been to conserve our existing supply, and the second step was to seek a 
new long-term and dependable water source.
    To conserve water, the City of Alamogordo has undertaken proactive, 
innovative, costly, and some difficult techniques. We have covered and 
lined all of our potable water reservoirs and treated waste-water 
reservoirs to prevent leakage and evaporation. To our knowledge, we are 
the only community in New Mexico and one of very few nationally to have 
completed such a task. The cost to our City was almost $2,000,000. The 
combined effect of this program has been a loss prevention of up to 
1.44 million gallons a day during the summer months, and up to 600 
acre-feet per year. The City has instituted an ongoing repair and 
replacement program that is designed to keep the delivery system in a 
good state of repair. This is essential to minimizing unnecessary 
losses from the system and to assuring that the maximum amount of water 
is delivered to the users. The City has adopted a very extensive 
reclaimed water program to reuse available water and maintain a quality 
of life in the community beyond bare subsistence. The City has routed 
reclaimed water to all major city green space, the high school athletic 
fields, one junior high athletic field, city ball fields, two 
cemeteries, the landscaping on city buildings, and the zoo. 
Additionally, the City requires the construction industry to use 
reclaimed water for construction purposes (dust control and 
settlement). Reclaimed water is sold to contractors. They must sign up 
for a meter with the Utility Billing Department. The City uses 
reclaimed water in the Public Works yard for cleaning of equipment and 
for any City repair work on streets. The net result has been to shift 
from potable water to reclaimed water--approximately 499 million 
gallons of reclaimed water were used in 2004. Recent updates to the 
reclaimed water system include the addition of a one million gallon 
storage tank. This will increase our storage capacities to 2.5 million 
gallons. This extensive reclaimed system has been highlighted in a 
water conservation documentary regarding the drought situation in New 
Mexico. The City has spent over $4 million constructing 16.2 miles of 
pipeline, two booster stations, and storage for this reclaimed system.
    In 2004, the Department of Public Safety/ Fire Services implemented 
innovative methods to conduct required equipment testing. They built a 
pump test facility and installed an in-ground tank to re-circulate fire 
truck testing water. A modified surplus tanker is used for hydrant 
flushing. Water is captured by the tanker, released into the sewer 
system, and used in our reclaimed water program. The Department 
contracted a consultant to conduct a computer analysis of hydrant flow 
capabilities throughout the City, which provided an accurate gallons-
per-minute measurement of each hydrant's capacity. These testing 
methods save tens of thousands of gallons per year.
    The City Commission has adopted a Water Conservation and Rationing 
Ordinance, which has been updated several times, to establish community 
values for appropriate uses of water and to allocate the available 
resources when they are in short supply. The City uses a tier rate 
structure, reviewed yearly, to encourage the prudent use of water by 
each customer. Our average daily use has declined steadily, and reached 
a low measure of 4.82 million gallons per day (MGD) in 2003. This 
amount is down from as much as 7.73 MGD in 1992. The City has provided 
education and incentives to assist citizens in reducing usage of water 
while maintaining a reasonable lifestyle. We use a broad-based program 
that incorporates the customer's freedom of choice, economics, and good 
stewardship of the water resource to provide a high quality water 
delivery system in Alamogordo. Our water conservation success has 
gained Alamogordo national attention from entities such as the National 
Municipal League and the Ash Institute for Democratic Governance and 
Innovation.
    Unfortunately, water conservation alone is not enough to ensure a 
future supply for even our current residents, or to provide the water 
necessary for the continued growth of our community. During periods of 
low storage, we have had to enact emergency stages of rationing. In our 
approach towards securing a new, long-term, reliable potable water 
source, several options were researched in great detail. Consulting 
engineers looked at current and future feasible sources for the City. 
Current water sources include Bonito Lake, canyon flows, and well 
fields. In March 2003, at the time of the development of the 40-Year 
Water Plan, our water rights totaled to a consistent, firm supply of 
4,500 acre-feet/ year, but we were using over 6,000 acre-feet/ year. 
Research, and the resulting 40-Year Water Plan, provided suggestions 
for making the current supply last as long as possible. These 
suggestions were agreed to and accomplished; such as expansion of the 
reclaimed water system and restoring two dilapidated wells in a well 
field southwest of the community. The following alternatives for a 
future supply were investigated and considered not feasible: a 
Sacramento River pipeline, flood control recharge, fresh ground water 
south of Alamogordo, Salt Basin water pipeline, Three Rivers water 
pipeline, and agricultural water conversion.
    After considering all available alternatives, the study concluded 
that desalination of brackish water was the most feasible way to 
produce a quality and quantity of ``wet'' water to cover future 
demands. The Tularosa Basin sits atop a vast aquifer of brackish water. 
The City is also involved in an associated national desalination 
project. The Tularosa Basin Desalination Research Facility is a joint 
project managed by the U.S. Bureau of Reclamation. A Naval Research 
Unit is currently conducting the research at the facility. The City of 
Alamogordo has provided the land for the facility. This is a research 
facility designed to look at the growing shortage of potable water at 
inland sites. Desalination research which has been conducted in the 
past has focused on the techniques needed to operate desalination 
facilities on ocean front areas. Inland sites face unique problems in 
operation that are not faced by ocean-site facilities. These problems 
include how to dispose of the brine waste product in an environmentally 
acceptable manner. Ideally, solutions will be developed to use the 
brine waste product in not only an environmentally acceptable manner 
but also in an economically advantageous manner. The City of Alamogordo 
will integrate the results of this facility's studies into our 
desalination project.
    The City of Alamogordo's plan is to utilize desalination to provide 
potable water to residents in Alamogordo and the surrounding area. This 
method will allow other potential users, such as Holloman Air Force 
Base, the Villages of Tularosa and possibly La Luz, to utilize the 
expanded water supply. Alamogordo is currently in a legal process to 
obtain water rights necessary for the project at the most appropriate 
location, north of Tularosa. Alamogordo is also undergoing a NEPA study 
to determine if there will be any significant impact to the environment 
and if so, how to best avoid potential impacts. Mineral by-product 
disposal management is just one of the issues that this in-depth 
environmental study is considering.
    Research has brought down the cost of desalination by providing 
standardized equipment. There are several methods of desalination, all 
of which were considered during our feasibility phase. Two such methods 
are ion exchange and reverse osmosis membrane filtering. The City of 
Alamogordo has chosen to use a membrane to treat brackish water because 
it is the most cost effective for our use, as we are utilizing gravity 
pressure to save on electricity costs. In 2001, during our water plan 
development and the desalination feasibility study, it was estimated 
that the costs associated with the desalination method would be 
approximately $34 million to construct the plant and delivery system, 
and $0.65 per 1000 gallons in operating and maintenance costs. The May 
2005 estimate is $0.90 per 1000 gallons. This increase is due mainly to 
power and chemical costs, which have risen since the 2001 estimate. Our 
production, or operating and maintenance expenses, will also vary 
depending upon the method chosen for disposal of concentrate. These 
figures will be above and beyond our current system's delivery costs. 
Currently, the cost to deliver water to a residential customer averages 
about $2.93 per 1000 gallons.
    Alamogordo submits our rates to the State of New Mexico every year 
by survey for a community comparison. The State compares communities by 
looking at a consumption rate of 6,000 gallons per month. We are right 
in the middle of the State's average range, which for 2003 was between 
$17 and $20 billed for 6,000 gallons consumed. Our current water rates 
for 6,000 gallons run $18.05. Desalination will raise customer rates, 
and the capital costs for completing the project are still being 
acquired as each phase is initiated. However, research and a careful 
review of our available resources makes us confident in the decision 
that desalination is the only method which can provide the quality and 
quantity of water that Alamogordo will need in the very near future.
    The permitting process in New Mexico is a lengthy and sometimes 
difficult process. The State of New Mexico along with 18 other western 
states have water laws based upon the doctrine of ``prior 
appropriation'' with beneficial use being the basis, the measure, and 
the limit of the right to use water. The water in New Mexico does not 
belong to the surface owners, but to the people of the State of New 
Mexico. To appropriate these waters, an application must be filed that 
states the intended points of diversion, place, and purpose of use. 
This application must be advertised, per statute, and is subject to 
protest. If no protests are filed the application is reviewed by the 
New Mexico State Engineer's Office Water Rights Division to assure that 
there is water available for appropriation that the appropriation will 
not impair existing rights, and that granting of the application will 
not be contrary to conservation or public welfare in the State. If the 
application is protested, as was the case for the City of Alamogordo, 
the application goes to an administrative hearing process where the 
Protestants are provided an opportunity to present evidence that the 
application should be denied based upon the aforementioned criteria. 
The Water Rights Division is also a party and presents their evidence. 
The applicant is faced with the burden of proof and presents its case 
in favor of the application. This process involves hydrologic analysis, 
engineering assumptions, supply and demand analysis, and the legal 
presentation of those tasks and results. All evidence is presented to a 
hearing officer representing the State Engineer. After weighing the 
evidence, a determination on the application is made. Based upon the 
outcome of the hearing process, the State Engineer either approves the 
application to appropriate water and issues permits to drill at pre-
described locations and depths, or he denies the application. 
Alamogordo's application was approved at less than the amount 
requested, and this allocation has been appealed to the judicial 
system. We are still in a legal battle to be able to utilize the rights 
approved by the Office of the State Engineer in 2004.
    What Congress can do to further bolster our efforts is to recognize 
the urgent need for alternative, non-traditional water supplies, to 
continue funding support through sources such as the Environmental 
Protection Agency, the Corps of Engineers, and the Department of 
Interior--Bureau of Reclamation, and to assist entities with 
identification of potential sources by supporting research and 
development. Alamogordo truly appreciates the funding and technical 
assistance we have received on this project. We have utilized Federal, 
State, and local dollars to come this far. We have completed a pilot 
project, a feasibility study, infrastructure improvements, planning 
stages, and are in the middle of our NEPA study and water rights 
allocation process. I look forward to the opportunity of updating you 
with the good news that we have begun construction within the next two 
years. Thank you again distinguished Members of Congress for your 
interest in this important issue of affordable, clean water, and for 
the opportunity to share my community's story with you.
                                 ______
                                 
    Mr. Radanovich. Mr. Max, welcome to the Subcommittee; and 
you may begin, as well.

STATEMENT OF MICHAEL D. MAX, CEO, MARINE DESALINATION SYSTEMS, 
                L.L.C., ST. PETERSBURG, FLORIDA

    Mr. Max. Thank you, Mr. Chairman. Thank you for this 
opportunity to testify.
    I request that my written statement be included in the 
record.
    In your letter of invitation to me to present testimony on 
the issue of desalination, you noted that ensuring a continual 
supply of affordable, clean water is vital, and the process of 
desalination is one direction policymakers can pursue. I 
strongly agree with the identification of clean water supply as 
a national issue and with desalination as being a principal 
solution to the emerging problem.
    There is a national as well as an international shortage of 
water now, and the problem is getting worse daily. The problem 
is national because States share water resources. In fact, the 
water problem is international because we share water with our 
continental neighbors.
    The combination of increasing demands and degrading natural 
fresh water supplies is moving us toward the tipping point 
where, without new sources of clean, fresh water, severe water 
restrictions and steeply elevating water costs will become 
inevitable.
    New fresh water sources are required. More efficient water 
distribution of the national water might be done by building a 
national water grid but at a huge expense; and, even then, the 
natural water supplies would not be sufficient, even with 
conservation. The only long-term solution to new water sources 
is large-scale desalination of seawater.
    Provision of water from the sea makes sense, because over 
70 percent of our population lives within 100 miles of the sea. 
The fresh water produced from the sea could be delivered at 
relatively low transport costs. This would reduce the demand on 
water resources further inland, which now have to share water 
with the thirsty and more heavily populated coastal areas.
    I talk about seawater desalination from the viewpoint of a 
scientist who felt that the impending worldwide water crisis 
was important enough to try to make a difference by developing 
a promising new technology. I left my post at the Naval 
Research Laboratory and established a small company. My 
intention is to try and perfect a chemical engineering method 
of seawater desalination that will be large-scale, inexpensive, 
and more environmentally friendly than any other technology.
    I have over 250 scientific publications. My company, Marine 
Desalination Systems, has initiated and carried out sustained 
research and development of industrial crystallization in the 
field of chemical engineering, and we presently have over 12 
patents. We have identified two different approaches and are 
pushing toward development of practical industrial processes. 
We have designed, fabricated and carried out experiments in 
unique apparatus; and we believe that we are in the last stages 
of perfecting a new desalination technology.
    The water crisis in the United States presents us with two 
distinct problems: first, desalination needs to be encouraged 
to meet existing and immediately looming water shortfalls; and, 
second, research needs to be carried out that has the 
possibility of dramatically lowering the cost of seawater 
desalination.
    The United States needs to initiate a two-pronged attack on 
the problem of water shortage. Immediately, it is necessary to 
encourage existing desalination production. This can be 
achieved by providing incentive payments to producers of any 
desalination technology that would have the effect of reducing 
the cost of energy consumed for desalination. Incentivization 
of the cost of energy should be regarded as a temporary 
measure, required only to bridge the transition to more 
efficient desalination. In other words, the incentivization 
should be fixed on the energy component of desalination and not 
on the cost of desalinated water as a whole.
    The overall aim, however, should be to develop new 
desalination technologies that will achieve sufficient 
improvement in energy cost of desalination so that the energy 
incentive payments no longer become necessary and in as short a 
time as possible.
    Investing in research will broaden the technological base 
in a way that mitigating current production costs cannot. The 
promotion of innovative research into new and more efficient 
technologies should be embedded in the bill.
    Innovative research is required, rather than incremental 
improvements to existing technology that only constitutes 
improvement of mature technologies. That, I am afraid, 
constitutes the majority of present desalination funding. Only 
increased-risk research and development can produce the great 
result of a downward step-function in the energy cost of 
desalination and to a new fresh water provision paradigm for 
all of us.
    Currently, seawater desalination is targeted at what I 
would call make-up water. That is, desalinated water now 
bridges the gap between the amount of water that can be 
produced between existing fresh water sources and actual 
demand. Our intention should be to carry out seawater 
desalination at costs that make the new methods of seawater 
desalination the new major supply of fresh water. We need 
rivers from the sea.
    In closing, I would like to add that government sponsorship 
of new desalination technologies and combinations of new and 
conventional technologies is the one critical factor that may 
result in the establishment of a new seawater desalination 
paradigm that has the potential to radically alter the present 
situation of an intensifying shortage of water situation.
    I look forward to answering questions.
    Mr. Radanovich. Thank you very much, Mr. Max.
    [The prepared statement of Mr. Max follows:]

         Statement of Michael D. Max, Chief Executive Officer, 
                  Marine Desalination Systems, L.L.C.

    Mr. Chairman, in your letter of invitation to me to present 
testimony on desalination, you noted that, ``Ensuring a continual 
supply of affordable clean water is vital, and the process of 
desalination is one direction policy makers can pursue''. I agree 
strongly with the identification of clean water supply as a national 
issue and with desalination as being a principal solution to the 
emerging problem. The situation in the United States is a reflection of 
an impending world water crisis, as the combination of increasing 
demands and degrading natural fresh water supplies move us toward the 
tipping point where without new sources of fresh water, severe water 
restrictions and steeply elevating water costs will become inevitable. 
The impending water crisis is a national issue now because States share 
water resources. When large scale desalination becomes a reality, more 
than one state is likely to use the water produced by any coastal 
state. This sharing of resources will continue to be important as some 
current net water importing states may assume the role of water 
exporters. Thus, water supply is and will continue to be a national 
issue.
    My background is extensive in a number of areas of scientific 
investigation and in the development and execution of basic and applied 
research. I talk about desalination not from the viewpoint of an 
established technology or company but from the viewpoint of a scientist 
who felt that the impending worldwide water crisis was important enough 
to try to make a difference by developing a promising new desalination 
technology. So, I left my post at the Naval Research Laboratory in 1999 
and established a small research and development company with the help 
of a small group of visionary investors. My intention was to try and 
develop a chemical engineering method using industrial crystallization 
practices that would result in a new method for the large scale, 
inexpensive, more environmentally friendly, desalination of seawater. 
In this effort, I have become acquainted with the broad range of 
desalination and water treatment issues, with researchers improving 
existing technologies and with the development of new technologies.
    I have over 250 scientific publications, with many in the field of 
gas hydrate, which is the industrial mineral we have identified to be 
used in the chemical engineering/industrial crystallization process 
that we believe has an excellent chance to become a new method for 
large scale, inexpensive seawater desalination. I am involved in the 
field of gas hydrate in a number of areas including the recovery of 
natural gas from oceanic and permafrost hydrate, industrial 
applications of gas hydrates including two technologies for 
desalination, and the planetary science aspects of gas hydrate. My 
edited introductory book on gas hydrate is being used as a course 
textbook by universities not just in the United States but also across 
the world. An industry-standard book on the exploration and extraction 
aspects of hydrate natural gas is currently about to go into press for 
publication in the autumn. My company holds over 10 patents in the 
field of chemical engineering for desalination and has more 
applications under examination and in preparation to make applications.
    The one thing that is no longer a matter of debate is that a 
national shortage of fresh water exists in the United States. To some 
extent, the problem is parallel to any couple, which has not saved or 
invested enough to allow them leisure in their retirement. Their 
problem is not understanding how to manage their money better, for no 
matter how they manage it, there will not be enough to confer what they 
want. Their problem is that they do not have enough money. Similarly, 
the world's water problem can be mitigated somewhat by conservation and 
better water use but the widespread impending water shortage can only 
be fully resolved by finding new and inherently artificial sources of 
fresh water. The only available source of large quantities of fresh 
water potentially lies in the world's oceans. But this fresh water must 
be removed from the seawater by a process called desalination. We must 
find both better and new ways to produce new fresh water.
    Currently, desalination is targeted, mainly because of its high 
cost, at what could be called, ``make-up water''. That is, desalinated 
water is now intended to bridge the gap between the amount of water 
that can be produced from existing natural fresh water sources and the 
actual demand. Our intention should be to be able to carry out seawater 
desalination at costs that make it competitive with natural fresh water 
sources. When this can be achieved, some, if not most of the water that 
is currently being extracted from natural sources, can be allowed to 
remain in the natural cycle. Our aim should be not only to produce 
adequate volumes of fresh water from seawater, but also to restore the 
environment as a natural outcome of achieving the technology required 
for this new paradigm.
    There is a national shortage of water now and the problem is 
intensifying. In addition, where there is overuse of natural water 
sources this leads to environmental damage. It is therefore prudent to 
initiate a two-pronged attack on the problem of water shortage through 
desalination. Immediately, it is necessary to encourage existing 
desalination production. This can be achieved by providing incentive 
payments to producers (of any desalination technology) that would have 
the effect of reducing the cost of energy consumed for desalination. 
The aim should be, however, that new technology developments should 
achieve sufficient improvement in energy cost of desalination so that 
the new or sufficiently improved technology can be implemented without 
the energy incentive payments required for the existing technology. In 
other words, the incentivization should be fixed on the energy 
component of desalination and not on the cost of the desalinated water 
as a whole. incentivization of the energy cost should be regarded as a 
temporary measure required only to bridge the transition to more 
efficient desalination. While making incentive payments to lower the 
energy costs of conventional desalination, it is mandatory to also 
support research that would lead to enabling new technologies. 
Investing in research will broaden the technological base in a way that 
mitigating current production costs cannot. The promotion of innovation 
and research into new and more efficient technologies should be 
embedded into the Bill.
    In order to make real progress on developing new and more efficient 
desalination technologies, research and development into new 
desalination technologies should be undertaken as a matter of urgency. 
Very little innovative research in new technologies is presently being 
funded. Commercial companies are making insufficient investment to move 
any new technologies. American industry has enough other issues that 
developing enabling new technologies is low on their priority list. 
Increasing research funding for breakthrough and new technologies has 
the potential to accelerate a solution. Unfortunately, much of the 
research and development is being spent on ``safe'' development, which 
involves incremental improvements to existing technology, which is 
actually process optimization, not research. This is happening because 
of the natural, but unintended operation of research funding where only 
projects that achieve well-designated goals are regarded as fully 
successful. Funders have become very conservative because the 
achievement of the goals identified in proposals and statements of work 
are the basis of ``grading'' of the program managers, even though the 
actual achievements may be very limited and the improvement small. 
Innovative research, where the fully identified solution is inherently 
unknown and where the actual framing of the research path itself 
depends on results produced during the course of the research, is 
almost unknown today. Therefore, where research is supported as the 
second prong of the attack on this water problem, it must be vectored 
toward speculative research and development or it will simply be 
consumed while producing no great result. Only increased-risk research 
and development can produce the great result of a downward step-
function in the energy cost of desalination and the new fresh water 
provision paradigm.
    Each technology for desalination has its own particular inherent 
costs and benefits, inhibiting factors and opportunities. Because of 
this, the different technologies are usually compared through their 
cost structure. Of these, energy is the primary cost element, although 
construction costs can vary considerably for different technologies. 
Desalination technologies fall into two different categories; 
conventional and unconventional. Conventional technologies for seawater 
desalination today consist of thermal and membrane processes. These 
technologies are termed ``conventional'' because they are regarded as 
working, industrially practiced technologies that have low risk. With 
respect to the difficulties commonly encountered in some of these 
conventional technology desalination installations, for instance the 
Tampa reverse osmosis facility, substantial risk factors remain even in 
what is considered conventional technology by industrial proponents. It 
must be pointed out that sequentially newer conventional technologies 
only become recognized as conventional after they are implemented in a 
number of commercial installations. The only way for a potential new 
desalination technology to emerge is for adequate research to be 
undertaken. There is no methodology for evaluating the likelihood of 
success of potential desalination technologies other than doing enough 
applied research and development to establish operating parameters and 
cost factors.
    Of the conventional desalination techniques, thermal processes or 
distillation, for instance, is characteristically the most energy 
expensive because of the energy cost of boiling water. Modern multi-
stage, multi-flash distillation technology is much more efficient than 
simple boiling, but it still is generally the most expensive method. 
Thermal methods are the oldest of the desalination technologies and 
their development has been carried the farthest. There is less 
potential for development in this technology than any other. Membrane 
filtration desalination methods, principally reverse osmosis, has its 
main energy requirement in pumping the source water to high pressures 
necessary to force it through the membrane filters. Improvements in 
membranes and membrane technology, and in energy recovery techniques, 
have vastly improved performance over the last ten or 15 years, but it 
is still relatively energy expensive. Unless there is some breakthrough 
in membrane technology that will vastly reduce the energy cost, there 
is again potentially very little gain to be expected, no matter how 
much R&D funding is applied. Development of conventional desalination 
technologies concerns the incremental improvement of existing 
technologies. As a technology matures, increasingly large investment in 
product improvement tends to increase performance in only smaller and 
smaller increments. Both of these conventional methods extract all or 
most of the water and produce considerable volumes of environmentally 
potentially harmful brine that has to be safely collected, transported 
and disposed of in an environmentally acceptable manner. This produced 
brine must be mixed with seawater.
    Because of the limited scope for reaching the new desalination 
paradigm with further development of existing technology, focused 
research is required on new methods that have potential for seawater 
desalination. These methods are mainly in the fields of electrical and 
chemical engineering applications. A common attribute of electrical 
methods is that while they may work efficiently with brackish water, 
the currently practiced methods do not work efficiently with full-
salinity seawater. Current developments in capacitive deionization, 
however, show promise for being able to desalinate seawater. 
Desalination through chemical engineering, where the formation of a 
crystalline substance incorporating water and rejecting salt from the 
crystallized material, is an attractive option.
    Principal among the chemical engineering methods for seawater 
desalination is the use of gas hydrate in an industrial crystallization 
process. Gas hydrate is a solid crystalline material formed from a cage 
of water molecules hosting hydrate forming gas molecules within voids 
in the cages; the entire structure being stabilized by weak electrical 
bonding forces. It is a special type of clathrate, or inclusion 
compound. Common hydrate forming gases on Earth are the hydrocarbon 
gases (methane, ethane, propane, and butane), carbon dioxide, sulfur 
di- and trioxide, amongst others. At higher pressures and/or colder 
temperatures, virtually all gases will form hydrates. Although gas 
hydrate has often been regarded as a type of freeze desalination 
because of the apparent similarity of gas hydrate to water-ice, the 
differences between them are far more important. Water-ice (freeze 
desalination, which has limited scope for seawater desalination as part 
of an industrial process) is essentially isobaric and the control of 
temperature alone is available for freezing and melting the water. In 
contrast, the stability of gas hydrate can be controlled by varying 
both temperature and pressure. When gas hydrate forms, it is known for 
strongly rejecting dissolved solids (salts). Gas hydrate occurs 
commonly in nature, although not at pressure-temperature conditions 
where it can be easily observed. Natural gas hydrate, which is only now 
being recognized as potentially one of the major energy reserves of the 
planet, occurs in both oceanic marine sediments along continental 
margins and in permafrost regions. Understanding how natural gas 
hydrate forms has led to research to use gas hydrate as an industrial 
crystallization product for large scale, inexpensive desalination.
    My company, MDS has initiated and carried out sustained research 
and development of gas hydrate industrial crystallization. MDS is now 
recognized as one of the leading gas hydrate research laboratories in 
the world, and the only one regularly growing large volumes of gas 
hydrate in short periods of time. We have designed, engineered, and 
fabricated unique experimental apparatus and are currently in what we 
believe are the last stages of perfecting the hydrate desalination 
method as an industrial technology. We have identified two different 
sub-technologies for hydrate formation that each have particular 
attributes for controlled hydrate formation and are pushing toward 
development of practical industrial processes. The main one of these is 
intended to produce very large volumes of fresh water very 
inexpensively, with very low energy costs.
    The water matrix or buoyant hydrate separation process is intended 
to operate in the sea or in shafts nearby the sea using cold, 
relatively pure deep seawater. In this process, the hydrate is formed 
at depth where pressure is provided by the weight of water using 
natural gas that forms positively buoyant hydrate. No water is pumped 
to pressure and the cost for injecting the hydrate forming material can 
be very low where certain common supply conditions can be utilized. 
Once the hydrate is formed, under counter-flow conditions that hold the 
crystallizing hydrate in the deep hydrate formation region for a 
desired period of time, the hydrate is allowed to float upward under 
its own buoyancy. As it rises in the column or shaft, it passes with 
insignificant mixing from a region of seawater in the lower part of the 
shaft to a region of fresh water in the upper part of the shaft. Within 
this fresh water region, it naturally is subject to decreasing pressure 
as it rises and becomes unstable at a certain pressure and begins to 
dissociate. Dissociation is a process similar to melting where the 
structure at the margin of solid hydrate breaks down and releases the 
constituent gas and water. The gas and water naturally separate. The 
gas is drawn off for reuse or use elsewhere, such as in the generation 
of power, and the fresh water is available to be drawn off. Once the 
startup period for an apparatus is complete, the amount of water drawn 
off is directly related to the formation of hydrate. It is intended 
that very large volumes of hydrate be crystallized and that very large 
production of water take place. Because no artificial pressurization of 
water or thermal energy costs of the water are required, it is possible 
to economically remove only a small portion of fresh water from the 
whole of the seawater, which results in an environmentally friendly 
residual cooling water (the process of hydrate formation is exothermic 
and the water is naturally heated) that will require no mixing with 
seawater to make it tolerable for marine organisms.
    In the course of the MDS research, considerable spin-off technology 
has emerged in the field of being able to carry out desalination using 
negatively buoyant gas hydrate and where the source water is too warm 
for hydrate to form spontaneously as it will in the colder water but 
whose bulk does not have to be refrigerated, in artificially 
pressurized apparatus, dewatering industrial process water effluent, 
such as the settling ponds of phosphate fertilizer factories, removing 
water from complex fluids such as water and ethylene glycol mixes, 
separating different gases, such as SOx from exhaust or natural gas, 
food processing, and the removal of water vapor from gas.
    I regard it as likely that in the new desalination paradigm, 
different technologies can complement rather than replace existing 
technologies. This is known as a treatment train, the aim of which is 
to improve overall efficiency and performance. One of the main negative 
features of new technology development is that existing technology 
adherents inherently regard the development of new technologies as a 
threat their desalination technology. It is more likely, however, that 
bringing hydrate industrial crystallization to the desalination 
marketplace will actually stimulate the greater use of existing 
desalination technology, principally membranes or some other 
desalination methods suitable for brackish water. Future large scale, 
inexpensive desalination may involve the use of more than one 
technology, each removing salt within the operating conditions in which 
each offers best performance. For instance, thermodynamic and process 
modeling of a chemical engineering process for industrial 
crystallization using gas hydrate indicates that the process is most 
efficient at rendering salt from raw seawater of almost any oceanic 
salinity down to the level of lightly brackish water. Operated less 
efficiently (with respect to rate of water removal as a function of 
product salinity), the method may be capable of producing water of 
potable dissolved solids standards. Even at this level, however, the 
product water almost certainly will need polishing. When a conventional 
desalination technology such as reverse osmosis can operate within its 
most efficient energy/cost region to both polish and produce final 
product water as part of a multi-system approach, this should remove 
the need for incentive payments for energy.
    MDS has identified Southern California as the first place that we 
would like to establish a major desalination facility. The deep, cold 
water necessary for the water matrix hydrate process to operate 
efficiently is available immediately off the narrow continental shelves 
of California, particularly southern California. There is no doubt that 
a market for competitively priced, new sources of fresh water exists. 
We are presently carrying out a site survey for an artificial island on 
the Coronado Bank off San Diego, which imports over 95% of its fresh 
water. And there is no doubt that if our production targets can be 
achieved that substantial reduction in water extraction for southern 
California may be achieved, with a consequent beneficial effect for the 
environment and for the water availability situation in the upstream 
basin of the Colorado River. Our intention is to develop a desalination 
installation based on our new technology that will not only provide for 
all the potable water for San Diego but to also allow San Diego to 
export desalinated water inland. Other sites for this MDS technology 
are also possible to the north along the coast.
    In closing, I would like to add that government sponsorship of new 
desalination technologies and combinations of new or new and 
conventional technologies, is the one critical factor that may result 
in the establishment of a seawater desalination paradigm that has the 
potential to radically alter the present situation of an existing, and 
intensifying shortage of fresh water.
                                 ______
                                 
    Mr. Radanovich. I have a question for probably both Mr. 
Sabol and Mr. Wattier. Both of you are doing the research on 
bringing down the costs and efficient production of water from 
desalination. One of you is a public agency, the other is 
private business, and we are talking about a bill that is 
talking about public financing of this type of technology. I am 
assuming, Mr. Wattier, that Long Beach would be the beneficiary 
of something like a subsidy where perhaps GE would not be. Is 
that the case?
    Mr. Sabol. Well, I think, in some ways, GE and other 
companies that manufacture equipment and provide services into 
this market could be a short-term beneficiary of a energy 
subsidy as proposed in the bill. The method of GE's benefit 
would be that it would spur the market to buy more systems. We 
would, therefore, sell more equipment into the marketplace.
    Mr. Radanovich. But as far as doing the research, you would 
not be applying for a grant to continue the research, would 
you?
    Mr. Sabol. GE invests its own money in research. We 
oftentimes partner with the government. Several of the previous 
panel members have worked with GE in the past.
    We are working currently on a desalination solution that 
combines wind power with membrane technology to provide 
alternative energy sources of desalinating water. So we do 
frequently use government funding and combine it with our own 
funding to accelerate the pace of development.
    Mr. Radanovich. Is there a difference between the type of 
research you would do, Mr. Sabol, as opposed to what kind you 
would do, Mr. Wattier? Does public financing have a more 
appropriate role in one place or the other, or do you just view 
it as research is good, no matter what.
    Mr. Wattier. I would agree with your latter statement, that 
research is good. And certainly the private sector can move the 
technology a long ways forward. Certainly the connection with 
wind energy and membranes is a very interesting one that Mr. 
Sabol has mentioned. I think that is a very interesting area of 
opportunity.
    Mr. Radanovich. Can you, either one of you, or anybody else 
want to tell me about the future efficiencies that are going to 
be gained by further research? Is it just by perfecting the 
membrane? You know, just more work on the membrane? Or is it in 
new types of technology, that they are still kind of in its 
infancy?
    Mr. Wattier. I think they are both. What we have developed 
in Long Beach is a process application. We have not developed 
any new membranes. We are using existing off-the-shelf 
membranes from several manufacturers and using them in a 
different method. So we haven't developed any new membranes.
    But the cost of membranes continues to come down. You may 
have been aware that the Chinese recently started manufacturing 
membranes. So there will be Chinese membranes on the market. 
There are Korean membranes on the market, which we have tested, 
which work very well. So the private sector, both in the U.S. 
And worldwide, is continually improving the efficiency of the 
membranes and the cost of the membranes.
    So there are really two things going on. The private sector 
is really spurring the development of more efficient, cost-
effective membranes; and then what we are doing in Long Beach 
is using them in a different method.
    Mr. Radanovich. And economics is bringing the price down.
    Mr. Wattier. Yes.
    Mr. Sabol. At GE, we are working on a variety of 
technologies. I mentioned some in my earlier statement. It is 
focused primarily around membrane technology developments, 
allowing more salt removal with less energy. There is a lot of 
advancement that can be made there through materials changes 
and the fabrication techniques around membranes. We are also 
looking at making much larger membranes, much larger systems 
that enable more efficiency.
    We are also focused very heavily, because of GE's interest 
in the energy markets as well, on the combination of energy and 
water. The optimization of that system provides a lot of 
benefit as well. So that is another area of focus for us.
    Mr. McCort. Mr. Chairman, relative to research, I think 
membrane technology is the area that there has been the major 
increases in cost reduction in recent years, and I think that 
is going to continue. That is an incremental step, and we will 
continue to work on research in that area. It is not the type 
of research that my unit of government would perform. We would 
look for that to occur either in the private sector or be 
funded at the Federal level.
    I think we also have to recognize that the research needs 
to occur in breakthrough technology. Unfortunately, these are 
the areas with the highest failure rate, new innovative ideas, 
and the--but they have the highest potential, also, to cause us 
to leap forward in technology.
    I think there are two different types of research that goes 
on.
    Mr. Radanovich. Very good. Thank you.
    Mr. McCourt, you had mentioned studying an environmentally 
acceptable manner to dispose of brine waste. Can you give me an 
idea of what those possible economic solutions might be?
    Mr. McCourt. Mr. Chairman, the normal methods for inland 
brine disposal at this time involve two basic methods. One is 
to do deep well injection. That would be where you actually 
drilled deep wells and injected the now concentrated brine 
water into a layer that is even more concentrated, because it 
is so far down into the ground, hopefully improve it. The 
theory being that at some future date when we now tap into 
that, technology will have advanced and we will recover that 
water and reuse it again.
    Mr. Radanovich. Be able to use it?
    Mr. McCourt. Yes. The second method involves basically an 
evaporation-type method, where the waste product is put in 
large evaporative lined ponds. The water then evaporates off. 
The waste product is then captured, and there is methods used 
to--well, we are looking for methods to try and see how we can 
use that waste product in an economically feasible way.
    Some of the research going on now, though, is to take that 
very brine water and see if there aren't other agricultural 
crops that can be grown with the brine water, for example, and 
use it economically in that manner.
    Mr. Radanovich. Thank you very much.
    Mr. McCourt, you mentioned about the cost of energy and how 
it relates to the affordability of this desalinized water. Is 
there a threshold that you would go through to the point where, 
if energy costs increased so much, that desalination costs go 
up too high to be reasonable?
    Mr. McCourt. Mr. Chairman, I am sure there is. The effect 
that would have where we live--we live in the desert. We don't 
have any alternate sources. So what will happen is, as the cost 
of water, in this case, desalination water that we are going to 
use to augment our other supply sources, continues to increase, 
it will just basically squash any economic growth that may be 
able to occur in our community.
    Mr. Radanovich. Thank you. Thank you, gentlemen.
    Grace.
    Mrs. Napolitano. Thank you, Mr. Chairman.
    Mr. Max, I was very interested in listening to your 
testimony in regard to the different types of technology that 
you have evolved with or have been working with. Does the desal 
process that you are applying use membranes?
    Mr. Max. No, except in that we use them to infuse a gas 
into the seawater that we need for the process to work. But 
that is not the same. And those membranes are not--it is gas 
moving through membranes into the water, so there is no----
    Mrs. Napolitano. Since you advocate this increased risk 
research, you make a distinction between research and process 
optimization. The desal research is not doing innovative 
speculating, so you want more innovative. How can we better 
direct desal research toward that, and does your proposal also 
include addressing contaminated and brackish water or just 
desal?
    Mr. Max. We are primarily focused on desalination, but we 
also are looking at water treatment in general. But, as Mr. 
McCourt said, the greater the risk, the greater the reward. 
This is something where, you know, if you want to play very 
safe you have no chance of making a breakthrough, even in 
membrane research. You know, in order to get new membranes, you 
have to try and do new things; and it is not always possible to 
predict exactly what the outcome of your investment is. 
Sometimes it is going to work; sometimes it is not going to 
work. It is a matter of risk taking.
    But we are in a very--what I would regard as a very 
desperate situation, and a little bit of extra risk for a 
relatively small amount of money is pretty good.
    $3 billion a year on research has brought us one percentage 
improvement in the price of water just from one company. $3 
billion, that is a lot of money. I don't think there has been 
that much improvement in the last year for the $3 billion, 
because it is focused on conventional technology.
    Mrs. Napolitano. That then brings another question to my 
mind, is that we have found sources of water, but they are 
not--we are not able to use them. In other words, we have 
contaminated water aquifers; we have brackish water in others. 
The cost of water has, at least when I was serving on 
sanitation, gone from 200 an acre foot now to I am hearing 600 
and 800 in San Diego being proposed. Where do you see this 
ending? Considering what we are looking at now in new 
technology, do you think the water cost per acre foot will be 
lower, or are we looking at an escalation because of the cost? 
Because--because--because----
    Mr. Max. It is a complicated thing. For instance, the cost 
of membranes is going to go up because they are made out of 
petroleum and gas; and as that cost goes up, the cost of those 
materials go up. And I think that it is not just--energy hits 
everything. It hits transport, it hits the cost of materials, 
and it hits the actual cost of process.
    On the cost of process, I think that with reverse osmosis, 
at the moment, it is basically the best way we can think of 
energy cost for any process, is in kilowatt hours rather than 
dollars. Because dollars can be an Enron accounting process 
sometimes, although I don't expect anybody here does that.
    But if you go in kilowatts, at the moment, the reverse 
osmosis has an energy cost of about 16 kilowatt hours a 
thousand gallons. That is going to drop with energy recovery 
down to around 12, I think. Some people say they can get it 
down to 10. Then, at that point, you are into the second law of 
thermodynamics, and there is just not more you can do. That is 
why you need to go to a different technology.
    One of the reasons why reverse osmosis is being thought of 
as brackish groundwater is that when you have the lower 
dissolved--volume of dissolved solids in the water, it is a 
much more efficient--a much more energy efficient process. Work 
on brackish water reversed osmosis is really not very expensive 
at all. When you get into full seawater, then it can become 
very, very expensive for a whole lot of different reasons. But 
our focus in our chemical engineering process is for full 
salinity seawater.
    Mrs. Napolitano. Thank you, sir.
    Mr. McCourt, how can we decide how much Federal support is 
appropriate for research and how much funding should go to 
direct support of projects?
    Mr. McCourt. Mr. Chairman, madam, I am glad I don't have to 
make that decision; and I am glad you are up there to do that. 
From where I sit, the more the better.
    Mrs. Napolitano. Thank you, sir.
    Mr. Wattier, how will brine disposal be handled in your 
desal plant, and if you would explain what ocean floor plan is.
    Mr. Wattier. Let me clarify. What we are building now in 
Long Beach is a large research facility. And a lot of people 
get confused. It is not for potable consumption. It is 
research.
    So what we are essentially doing is taking water out of an 
existing channel, taking it apart, measuring it and putting it 
back together and putting it where it came from. So there is no 
brine discharge issue with regard to the 300,000 gallon-per-day 
project that is currently under construction.
    The project that we have proposed to move forward on next, 
the Under Ocean Intake and Brine Discharge Project, which would 
be a $5 million research project jointly with the Federal 
Bureau of Reclamation, would be testing two things. It would be 
testing an under ocean intake, where you would have a series of 
perforated pipes under the ocean floor which would allow the 
water to percolate down through the sand and then provide some 
pretreatment for your membranes. Pretreatment of the membranes 
as they found out in Tampa, is a very, very important process. 
And so that is how--what we would be testing over the next 
couple of years.
    In addition, we would be testing, running that system 
backwards, putting the brine out underneath the ocean floor and 
percolating it up through the ocean floor to eliminate any 
concerns of the brine discharge.
    Mrs. Napolitano. There is a contaminated area in the Long 
Beach area. I think it is Palos Verdes Point. The DDT 
contamination that EPA has been watching with the sanitation 
district, would that have any effect on your project?
    Mr. Wattier. No, I don't believe so. That is further west, 
and I don't think there is any impact of that on our quality in 
Long Beach.
    Mrs. Napolitano. But water migrates. You have storms. You 
have the ability for some of that to spread.
    Mr. Wattier. Well, obviously, those are things we will be 
testing fully during this multi-year research effort. But, 
again, I don't expect that to be a problem because of the way 
the oceans currents run in southern California.
    Mrs. Napolitano. But that is a concern for the whole area.
    Mr. Wattier. Sure. Anybody that needs to fully analyze. And 
we have done some of this with our other partners in southern 
California, the quality of the ocean water, analyzed for all 
the constituents, including things like DDT.
    Mrs. Napolitano. Thank you, sir.
    Mr. Rhinerson, in the San Diego desal plant, what is the 
total project capital cost and how would it be financed?
    Mr. Rhinerson. The 50 MGD plant that we are planning, off 
the top of my head, I think is in--around the 200, $250 million 
range. It would be financed by the water authority with revenue 
bonds and, hopefully, receive some financial support from the 
Metropolitan Water District that has talked about support and, 
hopefully, through H.R. 1071 that is before you today.
    As I said, the cost of the water that we are projecting 
there is about $800 at the fence. That is before we transport 
it into our distribution system. We are today paying about $450 
an acre foot for water for Metropolitan. So you can see the 
cost differential of desalinated water is almost twice--you 
know, it is up there.
    So in order to stimulate the market for building 
desalinated water plants that will actually produce water--and 
this plant is projected to produce about 5 percent of San Diego 
County's needs. We can do that because we will then blend that 
water with the other less expensive water that we are buying 
from Metropolitan. Our water transfer and those things and the 
overall cost is then disbursed over the 2,000,000 people 
customer base that we have.
    So, in general, that is the capital cost and the pricing 
structure that we envision.
    Mrs. Napolitano. Well, there is another question that I 
would have, because San Diego gets most of its water from the 
Met. Was the San Diego agreement to receive water transferred 
from farms in Imperial Valley seen as somewhat of a threat by 
MWD? And, along that, are your plans for the new project a 
further threat to the finances of the Met, because it will 
reduce the water sales to San Diego?
    Mr. Rhinerson. At this point, I find Metropolitan to be 
very supportive of desalination. They are a member of the U.S. 
Desalination Coalition. I think the view of all of us in 
southern California is looking at a diversified water portfolio 
and identifying new supplies that we will have in the future. 
Because the Colorado River is a limited resource, and we know 
we are in the sixth year of a drought. Lake Mead is at 50 
percent, Lake Powell is way down, and certainly the State water 
project is a limited resource.
    We in southern California need to identify new water 
supplies as we look out 20, 30 years and beyond; and 
desalination plays an important part of that picture. I think 
that our relationship with Metropolitan is very positive and we 
are on the same page in that regard.
    In San Diego, our long-range facilities master plan looked 
at changing San Diego's portfolio from about 80 to 90 percent 
of our water from Metropolitan and the Colorado River and the 
State water project to a more diversified portfolio where 
seawater desalination by the year 2030 can deliver about 15 
percent of San Diego's water needs. The ag-to-urban water 
transfer is another slice of that pie. That delivers about 20 
to 30 percent.
    Water conservation is extremely important, and we are very 
aggressive about that. Water reclamation is very important, and 
then certainly the continued supplies from Metropolitan. With 
that strategy of identifying new water from desal and 
diversifying our water portfolio, we believe that San Diego can 
have a safe and reliable water future. But desal is very 
critical, and this bill is very important to help stimulate the 
market and encourage agencies like mine to go forward with 
actually building a plant that will produce water on a large 
scale for our urban population.
    Mrs. Napolitano. Thank you, sir.
    Last question and I will quit.
    Mr. Sabol, your statement mentions possible tax incentives 
for the desalination industry. Can you explain how this would 
work?
    Mr. Sabol. There is a variety of potential options. The 
point of including it in my written testimony is to say that it 
is another form of incentive that could be provided to 
manufacturers of equipment or builders of desalination 
facilities to enable them to get over the hurdle of the 
incremental cost.
    I think it is important to recognize that we don't have an 
unlimited supply of water at a dollar a thousand gallons. That 
is the issue we are facing. That is why we are all here. We 
need to bring to bear conservation strategies, investment 
technology, tax incentives potentially, subsidies, other things 
to make a new industry come to life to provide relief to that 
strain that we have on our dollar a thousand gallon water 
supply. So tax incentives could be one way to do that.
    Mrs. Napolitano. Thank you.
    And the last statement, Mr. Chair, is that, hopefully not 
only will the different industries and the different 
organizations that are interested in providing new technology 
and working with us, that they and the Federal agencies that 
are involved sit at the table and talk to each other. Many 
times, we do not. The right hand doesn't know what the left 
hand is doing. Unfortunately, that effects how we are able to 
deal with some of the issues that come up before this 
Committee; and I have very grave concerns about how we may be 
spending money where we shouldn't be and not spending it where 
we should.
    With that, thank you, Mr. Chair. Thank you very much.
    Mr. Radanovich. Thank you, Mrs. Napolitano; and I want to 
thank the panel for being here and the valuable information 
that you provided on this issue. Thank you very much.
    This does conclude our hearing today. The meeting is 
adjourned. Thank you.
    [Whereupon, at 12:30 p.m., the Subcommittee was adjourned.]

                                 
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