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


 
                   H.R. 5143, THE H-PRIZE ACT OF 2006

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

                                HEARING

                               BEFORE THE

                          COMMITTEE ON SCIENCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 27, 2006

                               __________

                           Serial No. 109-45

                               __________

            Printed for the use of the Committee on Science


     Available via the World Wide Web: http://www.house.gov/science




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                                 ______

                          COMMITTEE ON SCIENCE

             HON. SHERWOOD L. BOEHLERT, New York, Chairman
RALPH M. HALL, Texas                 BART GORDON, Tennessee
LAMAR S. SMITH, Texas                JERRY F. COSTELLO, Illinois
CURT WELDON, Pennsylvania            EDDIE BERNICE JOHNSON, Texas
DANA ROHRABACHER, California         LYNN C. WOOLSEY, California
KEN CALVERT, California              DARLENE HOOLEY, Oregon
ROSCOE G. BARTLETT, Maryland         MARK UDALL, Colorado
VERNON J. EHLERS, Michigan           DAVID WU, Oregon
GIL GUTKNECHT, Minnesota             MICHAEL M. HONDA, California
FRANK D. LUCAS, Oklahoma             BRAD MILLER, North Carolina
JUDY BIGGERT, Illinois               LINCOLN DAVIS, Tennessee
WAYNE T. GILCHREST, Maryland         DANIEL LIPINSKI, Illinois
W. TODD AKIN, Missouri               SHEILA JACKSON LEE, Texas
TIMOTHY V. JOHNSON, Illinois         BRAD SHERMAN, California
J. RANDY FORBES, Virginia            BRIAN BAIRD, Washington
JO BONNER, Alabama                   JIM MATHESON, Utah
TOM FEENEY, Florida                  JIM COSTA, California
RANDY NEUGEBAUER, Texas              AL GREEN, Texas
BOB INGLIS, South Carolina           CHARLIE MELANCON, Louisiana
DAVE G. REICHERT, Washington         DENNIS MOORE, Kansas
MICHAEL E. SODREL, Indiana           VACANCY
JOHN J.H. ``JOE'' SCHWARZ, Michigan
MICHAEL T. MCCAUL, Texas
MARIO DIAZ-BALART, Florida


                            C O N T E N T S

                             April 27, 2006

                                                                   Page
Hearing Charter..................................................     2

                           Opening Statements

Statement by Representative Sherwood L. Boehlert, Chairman, 
  Committee on Science, U.S. House of Representatives............    10
    Written Statement............................................    11

Statement by Representative Judy Biggert, Chairman, Subcommittee 
  on Energy, Committee on Science, U.S. House of Representatives.    21
    Written Statement............................................    23

Statement by Representative Bob Inglis, Chairman, Subcommittee on 
  Research, Committee on Science, U.S. House of Representatives..    11
    Written Statement............................................    13

Statement by Representative Daniel Lipinski, Member, Committee on 
  Science, U.S. House of Representatives.........................    20
    Written Statement............................................    21

Prepared Statement by Representative Jerry F. Costello, Member, 
  Committee on Science, U.S. House of Representatives............    24

Prepared Statement by Representative Eddie Bernice Johnson, 
  Member, Committee on Science, U.S. House of Representatives....    24

                               Witnesses:

Dr. Peter H. Diamandis, Chairman, the X Prize Foundation
    Oral Statement...............................................    26
    Written Statement............................................    28
    Biography....................................................    30

Dr. David L. Bodde, Director, Innovation and Public Policy, 
  International Center for Automotive Research (ICAR), Clemson 
  University
    Oral Statement...............................................    31
    Written Statement............................................    33
    Biography....................................................    35

Dr. David L. Greene, Corporate Fellow, Oak Ridge National 
  Laboratory, Center for Transportation Analysis, National 
  Transportation Research Center
    Oral Statement...............................................    37
    Written Statement............................................    38
    Biography....................................................    40

Mr. Phillip Baxley, President, Shell Hydrogen, L.L.C.
    Oral Statement...............................................    40
    Written Statement............................................    42
    Biography....................................................    47

Discussion.......................................................    47

              Appendix: Additional Material for the Record

H.R. 5143, the H-Prize Act of 2006, as introduced................    70


                   H.R. 5143, THE H-PRIZE ACT OF 2006

                              ----------                              


                        THURSDAY, APRIL 27, 2006

                  House of Representatives,
      Subcommittee on Environment, Technology, and 
                                         Standards,
                                      Committee on Science,
                                                    Washington, DC.

    The Committee met, pursuant to call, at 9:30 a.m., in Room 
2318 of the Rayburn House Office Building, Hon. Sherwood L. 
Boehlert [Chairman of the Committee] presiding.


                            HEARING CHARTER

                          COMMITTEE ON SCIENCE

                     U.S. HOUSE OF REPRESENTATIVES

                   H.R. 5143, the H-Prize Act of 2006

                        thursday, april 27, 2006
                          9:30 a.m.-11:30 a.m.
                   2318 rayburn house office building

1. Purpose

    On Thursday, April 27, 2006, the House Science Committee will hold 
a hearing on H.R. 5143, the H-Prize Act of 2006. The bill is intended 
to create a new incentive to achieve scientific and technical 
breakthroughs required to make the transition to a hydrogen economy.

2. Witnesses

Mr. Phillip Baxley is the President of Shell Hydrogen, L.L.C., a 
separate business unit established by Shell in 1999 to pursue new 
business opportunities in hydrogen fuel and fuel cells.

Dr. David Bodde is the Director of Innovation and Public Policy at 
Clemson University's International Center for Automotive Research 
(ICAR). He was a member of the National Academy of Engineering 
Committee on Alternatives and Strategies for Future Hydrogen Production 
and Use, which issued the 2004 report The Hydrogen Economy: 
Opportunities, Costs, Barriers, and R&D Needs.

Dr. Peter Diamandis is the Chairman of the X Prize Foundation, a non-
profit organization dedicated to fostering innovation through the use 
of competitions. The foundation awarded its $10 million Ansari X Prize 
to promote the formation of a commercial space flight industry. Prizes 
for genomics, energy and education are under development.

Dr. David L. Greene is a corporate fellow of Oak Ridge National 
Laboratory with the Center for Transportation Analysis, National 
Transportation Research Center. He is an expert in transportation and 
energy policy issues.

3. Overarching Questions

    The hearing will address the following overarching questions:

        1.  Are any changes needed in H.R. 5143?

        2.  Does H.R. 5143 provide the right incentives to address the 
        most significant technical barriers to the widespread use of 
        hydrogen as a fuel source?

        3.  How can the Department of Energy (DOE) best use prize 
        competitions to complement more traditional research support 
        mechanisms, including contracts and grants, as a way to develop 
        the hydrogen economy?

4. Brief Overview

    On April 6, 2006, Research Subcommittee Chairman Bob Inglis; 
Science Committee Chairman Sherwood Boehlert; Environment, Technology 
and Standards Subcommittee Chairman Vernon Ehlers; Congressman Roscoe 
Bartlett; Congressman Michael McCaul; Congressman Daniel Lipinski; and 
nine other co-sponsors introduced H.R. 5143, the H-Prize Act of 2006.
    Inspired by the successful Ansari X Prize, which awarded $10 
million to Burt Rutan for sub-orbital space flight, the H-Prize is 
designed to accelerate the drive to a hydrogen economy by creating an 
incentive for new, entrepreneurial players to join the race to break 
down technical and other barriers to the advancement of hydrogen 
technologies.
    The Science Committee, at the Administration's request, created a 
prize program for NASA in the NASA Reauthorization Act of 2005. The 
language of H.R. 5143 is largely based upon that of the NASA Act (P.L. 
109-155).
    A summary of H.R. 5143 and a section-by-section analysis are 
included in Part 7 of this charter.
    Hydrogen gas is considered by many experts to be a promising fuel, 
particularly in the transportation sector. When used as a fuel, its 
only combustion byproduct is water vapor. The widespread adoption of 
hydrogen as a transportation fuel has the potential to reduce or 
eliminate air pollution generated by cars and trucks.\1\
---------------------------------------------------------------------------
    \1\ The Science Committee and its Subcommittees have held numerous 
hearings on the use of hydrogen since the announcement of the 
FreedomCAR Initiative by then-Secretary of Energy Spencer Abraham on 
January 9, 2002. The FreedomCAR program was centered on fuel cell 
vehicles, which use hydrogen as fuel.

---------------------------------------------------------------------------
The Full Committee held the following hearings:

February 7, 2002--Full Committee Hearing on The Future of DOE's 
Automotive Research Programs

April 2, 2003--Full Committee Markup of H.R. 238, Energy Research, 
Development, Demonstration, and Commercial Application Act of 2003

March 5, 2003--Full Committee Hearing on The Path to a Hydrogen Economy

March 3, 2004--Full Committee Hearing on Reviewing the Hydrogen Fuel 
and FreedomCAR Initiatives

The Energy Subcommittee held the following hearings:

June 26, 2002--Subcommittee on Energy Hearing on FreedomCar: Getting 
New Technology into the Marketplace

June 24, 2002--Subcommittee on Energy Field Hearing on Fuel Cells and 
the Hydrogen Future

There was one hearing held jointly with the Energy Subcommittee and the 
Research Subcommittee:

July 20, 2005--Joint Hearing--Subcommittee on Energy and Subcommittee 
on Research--Fueling the Future: On the Road to the Hydrogen Economy

In addition, these programs were also subject to scrutiny during 
hearings on budget priorities and within the Administration's Climate 
Change Technology Program. Transcripts of these hearings are available 
on the Committee website or from the Congressional Research Service.
    However, unlike harvested wood or mined coal, the hydrogen gas used 
as a fuel is not a naturally occurring energy resource. Hydrogen must 
be produced from hydrogen-bearing compounds, like water or natural gas, 
and that requires energy--and, unlike gasoline, more energy is always 
required to produce it than is recovered when hydrogen is burned in a 
fuel cell. Hydrogen has the potential to reduce America's dependence on 
foreign oil, but the degree to which hydrogen will displace foreign 
energy supplies depends on what energy source is used to generate 
hydrogen gas in the first place.
    If hydrogen can be produced economically from energy sources that 
do not release carbon dioxide into the atmosphere--from renewable 
sources such as wind power or solar power, from nuclear power, or 
possibly from coal with carbon sequestration, then the widespread use 
of hydrogen as a fuel could make a major contribution to reducing the 
emission of greenhouse gases.
    While the promise of hydrogen is great, so are the technical 
challenges. Experts suggest that major advances will be required across 
a wide range of technologies for hydrogen to be affordable, safe, 
cleanly produced, and readily distributed. The production, storage, and 
use of hydrogen all present significant technical challenges. While DOE 
research programs have produced promising advances, those programs are 
still a long way from meeting their goals of developing economically 
viable hydrogen technologies. Indeed, the American Physical Society in 
a 2004 report stated that ``no material exists today that can be used 
to construct a hydrogen fuel tank that can meet the consumer 
benchmarks,'' that is for affordably storing enough fuel on-board a car 
or truck to enable a long enough ride between refuelings.

5. Issues

What could be gained by establishing a prize program to promote 
        advances in using hydrogen as a fuel?
    Traditionally, DOE has relied upon established researchers in 
national labs, industry, and academia to carry out its mission of 
developing energy technologies for use by the private sector. Most 
commonly, DOE identifies a technical hurdle and then issues research 
solicitations of varying specificity. These solicitations detail the 
type of technologies the agency wants to fund and the performance goals 
the agency anticipates the technology will meet when introduced to the 
marketplace. For example, DOE might issue a solicitation for automotive 
fuel cell technologies. Such a solicitation may include the requirement 
that the fuel cells be a particular type of fuel cell, or may be 
targeted at known technical problems. Projects are then selected 
against the criteria set out in the original solicitation. DOE may use 
grants, cooperative agreements or contracts to carry out projects, and 
industrial participants are required to share costs.
    Prizes would presumably involve less direct DOE involvement in day-
to-day research activities than would any of the traditional technology 
development routes. Instead, DOE would offer a prize for the 
development of a particular technology or for a particular achievement, 
and then would wait to see what contestants produced. Proponents of 
prizes argue that this would be less costly and less bureaucratic, and 
might spur more creative thinking. In addition, they argue that 
inventors and entrepreneurs (as opposed to national labs or major 
energy companies) would be more inclined to compete for a prize than 
compete for more traditional grants and contracts.
    Proponents of prizes further argue that traditional peer review 
processes tend to favor proposals that seem safe over those that may 
produce surprising and potentially more innovative results. Many have 
commented--in a wide variety of contexts--that the federal procurement 
system can be intolerant of risk, and can place costly bureaucratic 
demands on private-sector contractors.
    Other advocates cite prizes as having additional benefits. Prizes 
are seen as mobilizing much more private capital than matching grants, 
since numerous contestants all spend their own money on technology 
development while they vie for the same funds. (Traditional grant 
processes usually have at most a one-to-one funding match.) Prizes 
allow the Federal Government to shift much of the risk and the 
financial burden of technology development from the government to the 
contestants. For some, the most important aspect of prizes is their 
ability to educate, inspire, and mobilize the public for scientific, 
technological, and societal objectives.
How does a prize program need to be structured to be successful?
    Prize contests can be less clear-cut than they first appear. 
Problems can develop in the design of the contest, the selection of a 
winner, and in the aftermath. A National Academy of Engineering (NAE) 
panel examining the use of prizes by federal agencies\2\ suggested the 
following design principles for prize programs:
---------------------------------------------------------------------------
    \2\ Concerning Federally Sponsored Inducement Prizes in Engineering 
and Science, Steering Committee for the Workshop to Assess the 
Potential for Promoting Technological Advance Through Government-
Sponsored Inducement Prizes in Engineering and Science, Washington, DC: 
National Academy of Engineering (1999).

          Treatment of intellectual property resulting from 
        prize contests should be properly aligned with the objectives 
---------------------------------------------------------------------------
        and incentive structure of the prize contest.

          Contest rules should be seen as transparent, simple, 
        fair, and unbiased.

          Prizes should be commensurate with the effort 
        required and goals sought.

    DOE would have to design its prize contests carefully. The goal for 
which the prize was being awarded would have to be clearly enough 
described that contestants (and DOE) had a firm sense of what DOE was 
seeking and why. On the other hand, too detailed a description by DOE 
would limit the kinds of ideas that a contest could yield. A very 
detailed description would not end up being much different than 
contract specifications.
    The selection of a prize winner can also be difficult. Judges need 
to be open to unexpected ideas. There are historical examples of 
revolutionary ideas losing prize contests because the judges were not 
open to unexpected ways of achieving the stated goals.\3\ Decisions 
also need to be made about who is allowed to compete for a prize. For 
example, H.R. 5143 does not allow federal employees to compete except 
on their own time. It is silent on whether entities receiving federal 
funding can compete. Should entities that are already receiving federal 
backing be able to compete for a federally funded prize?
---------------------------------------------------------------------------
    \3\ The best-selling book Longitude by Dava Sobel describes just 
such a case. John Harrison developed method for measuring exact 
longitude based upon a clock that kept time accurately even during a 
ship's pitching and rolling at sea. However, despite the proven test of 
his invention at sea, the group administering the prize (the Board of 
Longitude) refused to award him the prize money--which historians 
attribute to the Board's domination by astronomers who favored a rival, 
astronomy-based method of determining longitude.
---------------------------------------------------------------------------
    The award of a prize does not guarantee, by itself, that the social 
benefits of the technology will be realized or that the technology will 
be commercialized. In the wake of the award of any prize, DOE would not 
be the entity to decide how to put a winning idea into actual use. A 
prize winner might not have the financial wherewithal or even the 
technical capacity to actually turn their winning idea into a viable 
product. It may therefore be necessary for DOE to take additional 
actions to promote technologies after the award of prizes.
    Finally, it is unclear whether prizes would be a less costly way of 
doing business once all the costs DOE would have to incur in running a 
successful contest are taken into account.

How dependent upon prizes should DOE be for the development of critical 
        technologies?
    Prizes are being proposed as a supplement to, not a substitute for 
traditional R&D programs. Indeed, H.R. 5143 makes that point explicitly 
in the last section of the bill. Traditional programs are especially 
important if developing a specific technology on a specific timetable 
is critical to a DOE objective, such as development of a coal-fired 
power plant with zero carbon emissions. The timing of technology 
development may be easier to control through traditional solicitations 
and research awards.
What kinds of goals are appropriate for prize contests?
    Prizes benefit from clear-cut goals. In general, the more complex 
the goal of a contest, the more complex DOE's role would likely be. 
(For example, evaluating a set of integrated technologies that 
radically change hydrogen distribution and use is a more demanding 
undertaking than evaluating the performance of a hydrogen storage 
tank.) At some point, the complexity might eliminate the advantage of a 
contest over traditional means of technology development. If 
appropriately designed, prize contests can reveal important 
information, particularly about the failures that emerge upon 
integration of subsystems, that can inform the plans and priorities of 
the Department's on-going hydrogen research program.

How large does a prize need to be to induce investment?
    One of the key objectives of some prizes is to induce investment. 
Often, the prestige of having won the prize is seen as having greater 
value than the prize itself. Winning contestants, as in the Ansari X 
Prize, have been known to spend more in an effort to win a prize than 
they gained from the prize itself, and several contestants that did not 
win also invested. Thus, the prize level must be high enough to garner 
attention and prestige. But at the same time the prize amount must be 
realistic enough to be appropriated. Also, if there is a limited pool 
of potential contestants, even a large prize may not induce more 
investments.

6. Background

Prizes
    There are two types of technology prizes: recognition and 
inducement prizes. Recognition prizes are post-facto prizes, intended 
to reward a past accomplishment. The Nobel Prizes are the most famous 
prizes of this type. Inducement prizes are awarded to an individual or 
group who has the best entry in a defined contest or who first meet 
some specified technical goal.
    The NAE report specifically recommended that federal agencies 
experiment with inducement prizes. Among other things, inducement 
prizes may best serve ``to `stretch' the state of the art in 
technology.'' As an example, the Defense Advanced Research Projects 
Agency awarded $2 million in 2004 for its Grand Challenge Prize to 
Stanford University researchers for their design and construction of an 
autonomous ground vehicle that was able to navigate a 131.2 mile course 
through the Mojave Desert.
    Typically, inducement prize contests are either best-entry contests 
or goal-oriented contests.
    H.R. 5143 includes both types of prizes. In a best-entry contest, a 
prize is given for the best entry submitted during a given time period, 
even if the winning entry in a given year falls short of the ultimate 
technical objective. DOE's Solar Decathlon competition, held on the 
National Mall last summer, is a good example in the energy R&D arena. 
Decathlon teams must design and build fully-functioning houses powered 
exclusively by the sun.
    By contrast, goal-oriented contests have a clear technical 
objective. The prize is awarded only if a pre-determined goal is met 
and verified. The $10 million Ansari X Prize was awarded in 2004 after 
SpaceShipOne, a privately built three-person craft, made a required 
second flight 62 miles (100 km) above the surface of the Earth within a 
two-week period. The ability to meet a bright-line technical objective 
does not necessarily guarantee economic viability.
    Inducement Prizes can be divided further into four different types 
of objectives:

          New or Best Invention prizes reward the first new 
        technology or technique that meets some technical objective. 
        The Ansari X Prize falls in this category.

          New Application prizes reward refining or integrating 
        existing technologies to meet a new objective. The previously 
        mentioned DARPA Grand Challenge Prize is this type of prize.

          Performance Improvement prizes reward improving the 
        performance of an existing product used for an existing 
        application.

          Technology Diffusion prizes reward the diffusion of 
        new innovation, for example requiring that a specified number 
        of units be sold in the commercial marketplace.

    H.R. 5143 contains three prizes. The first is a set of $1 million 
prizes for advancements in hydrogen storage, hydrogen production, 
hydrogen use and hydrogen distribution. This is a best-entry contest 
that rewards performance improvements. The second prize rewards 
prototypes that meet objective contest criteria established in advance. 
This is a $4 million goal-oriented contest for a new application, 
namely the use of hydrogen in vehicles or other energy use 
applications. The third prize is a $10 million goal-oriented contest 
for the best invention that leads to transformational changes in the 
distribution or production of hydrogen. Winners of the third prize 
would become eligible for up to $90 million in matching funds for every 
dollar of private funding raised by the winner for commercialization of 
their winning technology.

Existing Energy Prizes
    Section 1008 of the Energy Policy Act of 2005 authorizes DOE to 
spend $15 million to carry out a more general prize program for ``grand 
challenges of science and technology'' including to reduce U.S. 
dependence on foreign oil. DOE is said to be studying this authority 
for use in the hydrogen arena. In addition, the Federal Government 
already operates a number of competitions and contests in the energy 
R&D area. For example, DOE's Solar Decathlon, mentioned above, is a 
best-entry ``design'' competition.\4\ Entrants must provide enough 
solar power to perform all the functions Americans have come to expect 
at home--washing clothes, running the dishwasher, powering computers, 
and, of course, maintaining a comfortable temperature. Winners are 
selected in subcategories--architecture, livability, comfort, power 
performance, etc.--and an overall winner is determined as well. 
Competitions of this type are often particularly useful for 
demonstrating how a technology can be incorporated into a commercially 
attractive product. In fact, the University of Colorado's winning 
BioS[h]IP house was designed for and will be delivered to a client.
---------------------------------------------------------------------------
    \4\ The Solar Decathlon was the subject of a November 2, 2005 
Energy Subcommittee hearing, Winning Teams and Innovative Technologies 
from the 2005 Solar Decathlon.
---------------------------------------------------------------------------
    As with the Solar Decathlon, many existing energy R&D prize 
competitions focus on student competitions. In DOE's Future Truck 
competition, teams of students from 15 top North American universities 
refined their re-engineered Ford Explorers to achieve lower emissions 
and at least 25 percent higher fuel economy, without sacrificing 
performance, utility, safety, and affordability. DOE and Natural 
Resources Canada help sponsor the North American Solar Challenge, a 
competition to design, build, and race solar-powered cars. Solar 
Challenge teams, primarily from universities, compete in a 2,500 mile 
race from Austin, Texas to Calgary, Alberta. A number of American Solar 
Challenge teams go on to compete in the biennial World Solar 
Challenge--a 3,000 kilometer (1,863 miles) race across Australia. And 
the American Forest and Paper Association and DOE Office of Industrial 
Technologies have sponsored student competitions to find novel uses for 
the more than two billion tons of waste every year produced by the 
forest products industry.
    In at least one recent case, a government-sponsored energy 
competition involved industry contestants. The California Energy 
Commission and the Environmental Protection Agency's ENERGY STAR 
program jointly sponsored Efficiency Challenge 2004, an international 
design competition for energy efficient AC/DC power supplies. In two 
award categories, power supplies were judged on different criteria. The 
market-ready category weighed practical factors such as power supply 
cost and packaging, along with energy efficiency. In the open category, 
power supplies entered were evaluated without any cost or packaging 
constraints. This latter category was intended to showcase the most 
efficient power supply designs from both industry and academia.

Hydrogen
    In his 2003 State of the Union speech, President Bush announced the 
creation of a five-year, $1.2 billion Hydrogen Fuel Initiative, which 
built on the FreedomCAR initiative announced in 2002. Together, the 
initiatives aim to enable the transition to a hydrogen-based 
transportation economy, by developing technologies for the production, 
transportation and distribution of hydrogen, and the vehicles that will 
use the hydrogen. Fuel cell cars running on hydrogen would emit only 
water vapor from the tailpipe and, if domestic energy sources were used 
to produce the hydrogen, would not be dependent on foreign fuels. The 
Administration has requested $289.5 million for the Hydrogen Fuel 
Initiative in Fiscal Year (FY) 2007, an increase of $41.8 million over 
the FY 2006 funding level. Federal funding for the Hydrogen Initiative 
totals $631.7 million for FY 2004-2006, about 52 percent of the 
proposed initiative. Of that total, $121.5 million (19 percent) has 
been earmarked by Congress for specific projects.
    Major advances are needed across a wide range of technologies if 
hydrogen is to be affordable, safe, cleanly produced, and readily 
distributed. The production, storage and use of hydrogen all present 
significant challenges.

          Lowering the cost of hydrogen: At present, hydrogen 
        (when produced from its most affordable source, natural gas) is 
        three to four times more expensive to produce than gasoline. 
        Current DOE research efforts seek to lower that cost enough to 
        make fuel cell cars cost-competitive with conventional 
        gasoline-powered vehicles by 2015; and to advance the methods 
        for producing hydrogen from renewable resources, nuclear 
        energy, and coal.

          Creating effective hydrogen storage: Current hydrogen 
        storage systems cannot deliver the vehicle driving distance 
        that automakers say consumers demand. New technology is needed.

          Creating affordable hydrogen fuel cells: Fuel cell-
        based propulsion is now up to 10 times more expensive than 
        internal combustion engines. A major goal of current DOE 
        research efforts is to reduce the cost of fuel cell propulsion 
        to affordable levels.

    Analyses of the Hydrogen Fuel Initiative by the American Physical 
Society (APS) \5\ and the National Academies of Science (NAS) \6\ note 
that meeting the goals of the overall hydrogen initiative will require 
fundamental breakthroughs--not just incremental improvements. For 
example, storing hydrogen gas requires too large a volume for practical 
on-board storage in vehicles. New materials would be required to store 
hydrogen in more condensed form and release it when needed--a very 
difficult technical problem. The APS study states, ``No material exists 
today that can be used to construct a hydrogen fuel tank that can meet 
the consumer benchmarks.'' The NAS estimated that fuel cells themselves 
would need a ten- to twenty-fold improvement before fuel cell vehicles 
become competitive with conventional technology. Current fuel cells 
wear out quickly, and lifetimes are far short of those required to 
compete with a gasoline engine. Large improvements have been made since 
the NAS report was released, but additional improvements are still 
needed. DOE estimates that roughly a five-fold decrease in fuel cell 
cost will be required, while at the same time increasing performance 
and durability.
---------------------------------------------------------------------------
    \5\ The Hydrogen Initiative, APS Panel on Public Affairs, 
Washington, DC: The American Physical Society (March 2004).
    \6\ The Hydrogen Economy: Opportunities, Costs, Barriers, and R&D 
Needs, Committee on Alternatives and Strategies for Future Hydrogen 
Production and Use, Washington, DC: National Research Council and the 
National Academy of Engineering (2004).
---------------------------------------------------------------------------
    Both reports recommended changes to the hydrogen initiatives, 
particularly arguing for a greater emphasis on basic, exploratory 
research because of the significant, perhaps insurmountable, technical 
barriers that must be overcome. DOE has responded, in part, by 
expanding the hydrogen program to include work in the Office of Science 
focused on design of new catalysts, solar hydrogen production, and the 
study of ion transport in fuel cell membranes.
    Even if the technology advances to a point at which it is 
competitive, the transition to a hydrogen economy will require an 
enormous investment to create a new infrastructure. Changes in 
regulation, training and public habits and attitudes will also be 
necessary. Estimates of the cost of creating a fueling infrastructure 
(replacing or altering gas stations) alone are in the billions of 
dollars.
    As currently envisioned, the transition won't happen quickly. 
According to the NAS study, significant sales of hydrogen vehicles are 
unlikely before 2025 even under the most optimistic technology 
assumptions.

7. Section-by-Section Description of H.R. 5143

Section 1. Short Title.

    The H-Prize Act of 2006.

Sec. 2. Definitions.

Sec. 3. Prize Authority.

    Requires the Secretary of Energy to create a prize to advance the 
research, development, demonstration and commercial application of 
hydrogen energy technologies.
    Requires the Secretary to advertise the prize competitions widely 
to encourage broad participation, including a specific direction to 
announce the prize competitions through publication of a Federal 
Register notice. Requires the Secretary to enter into an agreement with 
a private, non-profit entity to administer the prize competitions. 
Authorizes the Secretary to use funding directly appropriated for such 
purposes to DOE or other agencies and to accept funds provided by 
private entities or individuals. Prohibits the announcement of any 
prize competition until sufficient funds are available. Sunsets the 
authority to award prizes in 2017.

Sec. 4. Prize Categories.

    Defines prize categories for:

        (1)  Components or Systems. Establishes up to four $1 million 
        prizes awarded every other year to the best technology 
        advancements in components or systems related to hydrogen 
        production, hydrogen storage, hydrogen distribution, and 
        hydrogen utilization. Provides the Secretary the discretion to 
        reduce the amount or number of prizes based upon the 
        availability of funds.

        (2)  Prototypes. Establishes one $4 million prize for 
        prototypes of hydrogen-powered vehicles or hydrogen-based 
        products that best meet or exceed objective performance 
        criteria. Awards prototype prizes in years alternate with the 
        technology advancements prize. Prohibits the Secretary from 
        awarding the prize if no entrant meets the objectively defined 
        performance criteria.

        (3)  Transformational Changes. Establishes a $10 million prize 
        for transformational changes in technologies for the production 
        and distribution of hydrogen that meet or exceed far-reaching 
        objective criteria. Authorizes the Secretary to provide up to 
        $90 million more in matching funds for every dollar of private 
        funding raised by the winner for the continued development of 
        their winning technology. Authorizes prize winners to accept 
        these additional funds as cash or as a government contract 
        equivalent to the prize amount. Limits the total award to $100 
        million.

    Requires the Secretary to establish contest criteria through 
consultation with the Hydrogen Technical Advisory Committee, other 
federal agencies including the National Science Foundation, and private 
organizations including the National Academy of Sciences. Requires the 
Secretary to appoint contest judges from the private sector and 
agencies outside DOE. Excludes judges who may have a personal or 
financial relationship with any contest participant.

Sec. 5. Eligibility.

    Requires contestants to register through the process published in 
the Federal Register. Requires contestants be incorporated and maintain 
a primary place of business in the U.S. if a private entity, or must be 
a U.S. citizen if an individual. Excludes from participation any 
federal entities or federal or national lab employees while on duty.

Sec. 6. Intellectual Property.

    Waives claims by the Federal Government to any intellectual 
property rights derived from participation in the prize competitions.

Sec. 7. Liability.

    Requires contestants to waive claims against the Federal Government 
resulting from participation in prize competition activities. Requires 
contestants to have liability insurance against damages resulting from 
participation in any prize competition activity and to name the Federal 
Government as an additional insured entity.

Sec. 8. Authorization of Appropriations.

    Authorizes $55 million for each of fiscal years 2007 through 2016. 
Limits the use of appropriated funds for administrative expenses to no 
more than $1 million in any fiscal year.

Sec. 9. Nonsubstitution.

    Expresses a sense of the Congress that the prize competitions shall 
not act as a substitute for any R&D programs.

8. Witness Questions

Mr. Phillip Baxley , Dr. David Bodde, Dr. David L. Green

          Are there any changes you would recommend making to 
        H.R. 5143?

          Does H.R. 5143 provide the right incentives to 
        address the most significant technical barriers to the 
        widespread use of hydrogen as a fuel source?

          How can the Department of Energy (DOE) best use prize 
        competitions to complement more traditional research support 
        mechanisms, including contracts and grants, as a way to develop 
        the hydrogen economy?

Dr. Peter Diamandis

          Are there any changes you would recommend making to 
        H.R. 5143?

          What are the advantages of using prize programs to 
        encourage technological progress in areas like the use of 
        hydrogen as a fuel source?
    Chairman Boehlert. The Committee will come to order.
    I want to welcome everyone here today for what has turned 
out to be a very auspiciously timed hearing.
    Suddenly, the whole Nation is focused on gas prices and in 
a panic on our ``addiction to oil'' and the Congress is in a 
panic trying to figure out how to respond. Our options in the 
immediate future are limited, but our options in the mid- and 
long-term are not. And unless we exercise those options, we are 
going to lurch from oil crisis to oil crisis and each one is 
going to get worse, and the toll on our economy will grow. The 
future will be grim if we don't act now. If we fail to act now, 
we will have to pay later.
    There are many steps we need to begin to take. For 
starters, we need to reduce demand by means such as imposing 
tighter fuel economy standards. That is a mantra for me, and I 
suppose people are getting a little bit used to me repeating 
that over and over, but it is an issue whose time has come. But 
over the longer run, we need to find ways to run our 
transportation system on substances other than petroleum, 
including biofuels and, perhaps, hydrogen.
    The hydrogen economy holds out great promise, but it also 
presents great hurdles. We are pretty far away from knowing how 
to create, store, distribute, and use hydrogen cleanly and 
efficiently. We need to devote all of the ingenuity we can 
muster to attack this problem.
    That is why I was so pleased when Chairman Inglis 
introduced H.R. 5143, an innovative approach to encouraging 
innovative research. The bill is carefully crafted to encourage 
ongoing work that can lead to incremental improvements in 
hydrogen technology, and to draw more scientists and engineers 
into trying to remove the highest hurdles on the hydrogen 
highway.
    We know from history that prizes can help solve tough 
technical problems. And this committee has a record of 
promoting the use of prizes; we created the highly successful 
Malcolm Baldrige Award and most recently we established a prize 
program at NASA. Prizes can draw more money and more people 
into the search for technical solutions, and they can provoke 
more inventive thinking.
    Now, no one is suggesting that this prize substitute for 
the existing hydrogen R&D programs, which the President and 
this committee have strongly supported. Those programs are 
necessary to make sure the Nation has a cadre of experts 
engaging in ongoing work in this area. But we can expand the 
pool of financial and human resources further with prizes.
    So I am eager to hear today from our experts on the 
specifics of the bill. I expect that this bill will move 
through the House swiftly, and we want to make sure we have got 
this program written in exactly the right way. We also have to 
examine the funding levels in the bill: we want them high 
enough to make a difference, but not any higher than that, 
given how tight the federal budget is. My guess is that the top 
prize could be reduced to $10 million without reducing the 
program's impact.
    But while we work out the details, we shouldn't miss the 
larger message. This committee is committed to moving forward 
with new ways to promote new technologies, and I think the H-
Prize fits that bill.
    I congratulate Mr. Inglis for proposing it, and as a matter 
of fact, I have nominated him personally for the X Prize for 
Legislative Initiative. And I want to congratulate him for 
working so closely with the Committee in drafting this bill.
    And I will yield the remainder of my time to Chairman 
Inglis.
    [The prepared statement of Chairman Boehlert follows:]

          Prepared Statement of Chairman Sherwood L. Boehlert

    I want to welcome everyone here today for what has turned out to be 
a very auspiciously timed hearing.
    Suddenly, the whole Nation is focused on gas prices and our 
``addiction to oil'' and the Congress is in a panic trying to figure 
out how to respond. Our options in the immediate future are limited, 
but our options in the mid- and long-term are not. And unless we 
exercise those options, we are going to lurch from oil crisis to oil 
crisis and each one is going to get worse, and the toll on our economy 
will grow. The future will be grim if we don't act now.
    There are many steps we need to begin to take. For starters, we 
need to reduce demand by means such as imposing tighter fuel economy 
standards. But over the longer-run we need to find ways to run our 
transportation system on substances other than petroleum, including 
biofuels and perhaps hydrogen.
    The hydrogen economy holds out great promise but it also presents 
great hurdles. We are pretty far away from knowing how to create, 
store, distribute and use hydrogen cleanly and efficiently. We need 
devote all the ingenuity we can muster to attack this problem.
    That's why I was so pleased when Chairman Inglis introduced H.R. 
5143--an innovative approach to encouraging innovative research. The 
bill is carefully crafted both to encourage ongoing work that can lead 
to incremental improvements in hydrogen technology, and to draw more 
scientists and engineers into trying to remove the highest hurdles on 
the hydrogen highway.
    We know from history that prizes can help solve tough technical 
problems. And this committee has a record of promoting the use of 
prizes; we created the highly successful Malcolm Baldrige Award and 
most recently we established a prize program at NASA. Prizes can draw 
more money and more people into the search for technological solutions 
and they can provoke more inventive thinking.
    Now, no one is suggesting that this prize substitute for the 
existing hydrogen R&D programs, which the President and this committee 
have strongly supported. Those programs are necessary to make sure the 
Nation has a cadre of experts engaging in ongoing work in this area. 
But we can expand the pool of financial and human resources further 
with prizes.
    So I'm eager to hear from our experts today on the specifics of the 
bill. I expect that this bill will move through the House swiftly, and 
we want to make sure we've got this program written in exactly the 
right way. We also have to examine the funding levels in the bill: we 
want them high enough to make a difference, but not any higher than 
that, given how tight the federal budget is. My guess is that the top 
prize could be reduced to $10 million without reducing the program's 
impact.
    But while we work out the details, we shouldn't miss the larger 
message. This committee is committed to moving forward with new ways to 
promote new technologies. I think the H-Prize fits that bill.
    I congratulate Mr. Inglis for proposing it and for working so 
closely with the Committee in drafting his bill. And I will yield the 
remainder of my time to him. Mr. Inglis.

    Mr. Inglis. And that is the prize that I get, and I thank 
you very much, Mr. Chairman, for yielding to me. Thank you very 
much for holding the hearing as well.
    I thought I would show just a couple of slides, because I 
know a picture is worth a thousand words.
    [Slide.]
    We know that we have got some surface waves about 
interruptions in supply, and those are causing some of our 
price increases. But underlying those surface waves is this sea 
of rising demand. That is a gas line at a gas station in China. 
We expect--Exxon Mobil says within the next--well, about 2030, 
worldwide energy demand will increase by 60 percent. That will 
necessitate a 40 percent increase, says Exxon Mobil in their 
report, in OPEC oil production. Even if they have got it, do we 
really want to be that much more dependent on them?
    So the question is how to move to something else, how to 
break this addiction to oil. Our goal has been to develop the 
most non-governmental way for the government to help achieve 
the result of breaking through to hydrogen. So the idea is to 
take the ``can-do'' American spirit, put it with the prize and 
the recognition of winning the prize, some financial 
incentives, and hopefully bring the best and the brightest to 
bear on these technological challenges.
    As we have proposed it, there would be a million-dollar 
prize every other year for breakthroughs in production, 
storage, distribution, and utilization of hydrogen, every other 
year a $4 million prototype prize, and then within 10 years, if 
you can transform from well to wheels the--our use of hydrogen, 
you would get $100 million. But since this is a non-
governmental approach, it wouldn't exactly be $100 million. It 
would be $10 million in cash and then up to $90 million, 
dollar-for-dollar match for your venture capital. So it is a 
way of testing to see if the market agrees that you have got a 
product to sell. If you don't, and you can't find $90 million 
worth of venture capital, then you don't get the $90 million. 
It is a way of getting all of the way to the government's 
interest, which is a product on the market. We are not 
interesting in developing technology and putting it on the 
shelf. The government's interest is to get all of the way to 
the market.
    We have done it before, as the Chairman alluded to that we 
have had prizes before and very successful prizes. The 
Transcontinental Railroad involved some prizes, if you will, 
given to the railroad companies, cash, stipends, $48,000 a 
mile, plus 33 million acres of land given to those companies. 
So we can do this, because we have. We have also done it before 
with flight--transatlantic flight, the Orteig Prize was won by 
Charles Lindbergh. It rewarded his going across the Atlantic 
and back. And then, of course, as we will hear from Peter 
Diamandis, we are going to hear about the wonderful work of the 
Ansari X Prize. This is, of course, the--a picture of Burt 
Ratan's SpaceShipOne, which was the first one to go into space 
and back within a two-week period.
    So, Mr. Chairman, I would thank you again, for holding the 
hearing and for advancing the bill. I think we have got to 
breakthrough to hydrogen. We can, because we must. And I thank 
you for yielding.
    [The prepared statement of Mr. Inglis follows:]

    
    
    
    Chairman Boehlert. I thank you very much. And now you know 
why, my colleagues, I have nominated Chairman Inglis for the X 
Prize for Legislative Initiative.
    Now, Mr. Lipinski.
    Mr. Lipinski. Thank you, Mr. Chairman.
    I--as--keeping with usual here, would like to certainly 
associate myself with all of the comments of the Chairman of 
the Committee and also with Mr. Inglis. I would like to thank 
Mr. Inglis for his leadership on this very important issue and 
I am pleased to be here for the hearing on Mr. Inglis' H-Prize 
Act of 2006. I would like to welcome the witnesses and look 
forward to hearing all of your testimony. And I apologize that 
I am going to have to leave early, because I have other 
commitments to be at after this.
    Energy is on the mind of all Americans right now, 
especially with them being very upset about the current gas 
situation. Gas prices have risen to record highs, and oil 
companies are reporting record profits.
    Our natural gas prices concern many of my constituents in 
Chicago this winter. And for some families, it makes hard 
choices to keep their heat on during the coldest months. We can 
be thankful it was a relatively mild winter in Chicago, but 
that may be a bad sign related to global climate change.
    We are also becoming increasingly aware of the threats 
posed to our national security by our continued reliance on 
foreign fossil fuels. Our main proposal in the Congress is to 
help relieve the pressure of energy prices. These range from 
short-term solutions, such as ending tax subsidies for oil 
companies or easing various regulations, to long-term 
approaches like research in hydrogen fuel, biofuels, and other 
renewables.
    No one idea or program is going to solve all of our energy 
problems, but if we do not start to assemble the tools and 
build an energy model for the future, we will be no better 20 
years from now than we are today. We will likely be much worse 
off.
    An economy based on energy outside the fossil fuels is no 
longer implausible, but to get there, we must invest in 
research and development now to be able to sustain our economy. 
Research grants are a basis of this process, but we, in 
Congress, have a responsibility to find creative and new ways 
to inspire researchers, business leaders, and our youth to 
solve the problems their society faces.
    One such example of innovative thinking is a bill 
introduced by Ranking Member Gordon that replicates the 
successful DARPA program model and puts it to work in the 
Department of Energy. H.R. 4435, which I am proud to support, 
would establish a new ARPA-E function at DOE to speed the 
commercialization of innovative energy ideas and help reduce 
our dependence on foreign fuel.
    Today's legislation, H.R. 5143, seems to inspire 
researchers, entrepreneurs, and other competitive spirits in an 
effort to find specific solutions to the major challenges 
facing development and commercialization of hydrogen fuel. The 
H-Prize will help expand the possibilities of hydrogen 
research, promoting people not normally involved in the federal 
research and development to explore one of the greatest 
challenges facing us today. This prize will help us take 
advantage of America's greatest resource, our ingenuity and our 
creativity, in order to tackle the problems before us.
    We have some of the best and brightest minds in the world 
in the United States as well as an economy that supports and 
encourages entrepreneurship, and the H-Prize will focus our 
inventiveness to address the greatest challenge that faces our 
country.
    Hydrogen holds enormous potential as the base of our future 
economy, a potential we cannot and must not ignore.
    Again, I thank Mr. Inglis for introducing this legislation, 
and I look forward to hearing the testimony of our witnesses 
today.
    [The prepared statement of Mr. Lipinski follows:]

          Prepared Statement of Representative Daniel Lipinski

    Thank you, Mr. Chairman; I am pleased to be here today for this 
hearing on H.R. 5143, the H-Prize Act of 2006. I would like to thank 
Mr. Inglis for taking leadership on this important issue. I would also 
like to welcome the witnesses and I look forward to hearing their 
testimony. I apologize that other commitments will unfortunately 
prohibit me from staying for the full hearing today because the topic 
is an important one.
    Energy is on the minds of many Americans right now and they are 
very upset about the current situation. Gas prices have risen to record 
highs and oil companies are reporting record profits. High natural gas 
prices concerned many of my constituents in Chicago this winter and 
forced some families to make hard choices to keep their heat on during 
the coldest months. We can be thankful that it was a relatively mild 
winter, but that may be a bad sign relate to global climate change. We 
are also becoming increasingly aware of the threats posed to our 
national security by our continued reliance on foreign fossil fuels.
    There are many proposals in Congress to help relieve the pressure 
of energy prices. These range from short-term solutions, such as ending 
tax subsidies for oil companies or easing various regulations, to long-
term approaches like research in hydrogen fuel, biofuels, and other 
renewables. No one idea or program is going to solve all of our energy 
problems, but if we do not start to assemble the tools and build an 
energy model for the future, we will be no better off 20 years from now 
than we are today, and likely we will be much worse off.
    An economy based on energy outside of fossil fuels is no longer 
implausible. But to get there, we must invest in research and 
development now to be able to sustain our economy. Research grants are 
the basis of this process, but we in Congress have a responsibility to 
find creative and new ways to inspire researchers, business leaders, 
and our youth to solve the problems that society faces.
    Once such example of innovative thinking is a bill introduced by 
Ranking Member Gordon that replicates the successful DARPA program 
model and puts it to work in the Department of Energy. H.R. 4435, which 
I am proud to support, would establish a new ARPA-E function at DOE to 
speed the commercialization of innovative energy ideas and help reduce 
our dependence on foreign fuel.
    Today's legislation at hand, H.R. 5143, seeks to inspire 
researchers, entrepreneurs, and others competitive spirit in an effort 
to find specific solutions to the major challenges facing development 
and commercialization of hydrogen fuel. The H-Prize will help expand 
the possibilities of hydrogen research, promoting people not normally 
involved in federal research and development to explore one of the 
greatest challenges facing us today.
    This prize will help us take advantage of America's great 
resource--our ingenuity and creativity--to tackle the problems before 
us. We have some of the best and brightest minds in the world in the 
United States, as well as an economy that supports and encourages 
entrepreneurship, and the H-Prize will this focus inventiveness to 
address the greatest challenge that faces our country.
    Hydrogen holds enormous potential as the base of our future 
economy--a potential we cannot and must not ignore.
    Thank you, Mr. Chairman, and I yield back the remainder of my time.

    Chairman Boehlert. Thank you very much, Mr. Lipinski.
    Ms. Biggert.
    Ms. Biggert. Thank you, Mr. Chairman. I want to thank you 
for holding this hearing today and giving the Committee an 
opportunity to discuss the creation of an H-Prize.
    I also want to thank the bill's sponsor, Mr. Inglis, for 
sharing a draft of his legislation with me and seeking my input 
prior to its introduction.
    As Chairman of the Energy Subcommittee, I participated in a 
meeting of various hydrogen and fuel cell stakeholders that Mr. 
Inglis convened in December of last year to discuss the idea.
    At that meeting, I urged all involved to keep in mind the 
recommendations included in a 1999 National Academy of 
Engineering report on inducement prizes. The Academy 
recommended that prizes should complement, not substitute for, 
direct federal support of research and development. The Academy 
also advised that rewards should be commensurate with the 
effort required and the goal sought. To me, this advice is just 
good common sense.
    Unfortunately, I do not believe that this legislation meets 
these criteria. I do not believe that authorizing a $100 
million prize for the development of ``transformational 
technologies'' meets either of these criteria. This is a 
criticism that I shared with the bill's sponsor well in advance 
of the bill's introduction.
    According to the Organization for Economic Cooperation and 
Development, the market for fuel cells and related products is 
projected to reach $29 billion by 2011. With potential 
applications in transportation, power generation, and portable 
power, the market for fuel cells and related products, the OECD 
estimates that this market could grow to over $1.7 trillion by 
2021.
    Isn't a billion- or trillion-dollar market prize enough? 
Isn't this enough of an incentive to encourage scientists, 
engineers, entrepreneurs, and energy companies, large and 
small, to invest in the development of fuel cells and new and 
innovative ways to produce and store hydrogen?
    The 2005 Solar Decathlon, while structured differently than 
the H-Prize, attracted 20 qualified teams. Each team received 
$5,000 in federal funds to leverage between $200,000 and 
$300,000 in outside investment for their prizes--for their 
projects. The result was a diverse combination and outstanding 
display of solar and other advanced energy technologies. The 
total cost to the DOE: $1 million.
    According to press accounts, two dozen teams from five 
different countries competed for the $10 million Ansari X 
Prize, and we will hear more about that later, but the best 
part about that prize is that it didn't cost taxpayers a penny.
    I think that it is safe to say that the market for hydrogen 
and fuel cell technologies dwarfs the market for spaceships, 
and yes, even solar technologies combined.
    To put this in another context, the prize of all prizes, 
the Nobel Prize, is only a $1.3 million prize.
    Why haven't we ever offered a prize to find a cure for 
cancer? Don't we already know more about hydrogen and fuel 
cells than we know about cancer?
    In addition, the Energy Policy Act of 2005, which just 
became law in August of last year, authorized over $3.3 billion 
for research into the production and distribution of hydrogen 
and the development of fuel cells.
    I also want to observe that while the last section of the 
bill does explicitly prohibit any H-Prize program from 
substituting for federal research and development programs, in 
no way does this provision prevent the substitution of funding. 
Substituting direct federal support for research and 
development with a prize is exactly the opposite of what the 
National Academy of Engineering recommended. Neither the 
President nor Congress is going to be able to find the money 
for such a prize without taking funds out of other vital energy 
research and development programs.
    Properly designed, an H-Prize could provide useful feedback 
and constructive direction to the Hydrogen Fuel Initiative. 
Designed with a specific goal in mind, prizes could spur the 
development of technologies linking the critical pieces of the 
hydrogen economy, those that make, move, store, and burn 
hydrogen. But I am in no way convinced that we need to spend 
$100 million on such a prize.
    Before closing, I want to acknowledge Mr. Inglis' insight. 
We too often focus exclusively on whether research programs are 
meeting milestones and timelines, but forget to keep in mind 
the goal of fostering innovation. We also tend to focus on the 
dominant funding mechanisms--grants, contracts, and cooperative 
agreements--without considering the full range of options. Mr. 
Inglis is making us consider our decisions more fully, and 
rightly so. So I look forward to continuing to work with the 
bill's sponsors to address my concerns, and I yield back the 
balance of my time.
    [The prepared statement of Ms. Biggert follows:]

           Prepared Statement of Representative Judy Biggert

    Thank you, Mr. Chairman. I want to thank you for holding this 
hearing today, and giving this committee an opportunity to discuss the 
creation an H-Prize. I also want to thank the bill's sponsor, Mr. 
Inglis, for sharing a draft of his legislation with me and seeking my 
input prior to its introduction.
    As Chairman of the Energy Subcommittee, I participated in a meeting 
of various hydrogen and fuel cell stakeholders that Mr. Inglis convened 
in December of last year to discuss the idea of an H-Prize.
    At that meeting, I urged all involved to keep in mind the 
recommendations included in a 1999 National Academy of Engineering 
report on inducement prizes. The Academy recommended that prizes should 
complement--not substitute for--direct federal support of research and 
development. The Academy also advised that rewards should be 
commensurate with the effort required and the goals sought. To me, this 
advice is just good common sense.
    Unfortunately, I do not believe this legislation meets these 
criteria. In particular, I do not believe that authorizing a $100 
million prize for the development of ``transformational technologies'' 
meets either of these criteria. This is a criticism that I shared with 
the bill's sponsor well in advance of the bill's introduction.
    According to the Organization for Economic Cooperation and 
Development, the market for fuel cells and related products is 
projected to reach $29 billion by 2011. With potential applications in 
transportation, power generation and portable power, the market for 
fuel cells and related products, the OECD estimates that this market 
could grow to over $1.7 trillion by 2021.
    Isn't a billion or trillion dollar market prize enough? Isn't this 
enough of an incentive to encourage scientists, engineers, 
entrepreneurs, and energy companies large and small to invest in the 
development of fuel cells and new and innovative ways to produce and 
store hydrogen?
    The 2005 Solar Decathlon, while structured differently than the H-
Prize, attracted 20 qualified teams. Each team received $5,000 in 
federal funds to leverage between $200,000 and $300,000 in outside 
investment for their projects. The result was a diverse combination and 
outstanding display of solar and other advanced energy technologies. 
Total cost to the DOE: $1 million.
    According to press accounts, two dozen teams from five different 
countries competed for the $10 million Ansari X-Prize. But the best 
part about the X-Prize is that it didn't cost taxpayers a penny.
    I think it's safe to say that the market for hydrogen and fuel cell 
technologies dwarfs the market for spaceships, and yes, even solar 
technologies--combined.
    To put this in another context, the prize of all prizes--the Nobel 
Prize--is only a $1.3 million award.
    Why haven't we ever offered a prize to find a cure for cancer? 
Don't we already know more about hydrogen and fuel cells than we know 
about cancer?
    In addition, the Energy Policy Act of 2005, which just became law 
in August of last year, authorized over $3.3 billion for research into 
the production and distribution of hydrogen and the development of fuel 
cells.
    I also want to observe that while the last section of the bill does 
explicitly prohibit any H-Prize program from substituting for federal 
research and development programs, in no way does this provision 
prevent the substitution of funding. Substituting direct federal 
support for research and development with a prize is exactly the 
opposite of what the National Academy of Engineering recommended. 
Neither the President nor Congress is going to be able to find the 
money for such a prize without taking funding out of other vital energy 
research and development programs.
    Properly designed, an H-Prize could provide useful feedback and 
constructive direction to the Hydrogen Fuel Initiative. Designed with a 
specific goal in mind, prizes could spur the development of 
technologies linking the critical pieces of the hydrogen economy those 
that make, move, store, and burn hydrogen. But I am in no way convinced 
that we need to spend $100 million on such a prize.
    Before closing, I want to acknowledge Mr. Inglis' insight. We too 
often focus exclusively on whether research programs are meeting 
milestones and timelines, but forget to keep in mind the goal of 
fostering innovation. We also tend to focus on the dominant funding 
mechanisms--grants, contracts, and cooperative agreements--without 
considering the full range of options. Mr. Inglis is making us consider 
our decisions more fully--and rightly so. I look forward to continuing 
to work with the bill's sponsor to address my concerns, and I yield 
back the balance of my time.

    Chairman Boehlert. Thank you very much.
    Dr. Baird.
    Dr. Baird. I appreciate the Chairman. I appreciate the 
gentlelady's comments and would associate myself with them.
    I applaud the gentleman from--for coming up with great 
ideas for how to stimulate exploration in hydrogen. I just 
would question how we call it a non-governmental modality when 
the government is going to be putting up the funding. It always 
seems to me that the prize for innovation, under a free market 
system, should be that you profit from your invention. And 
while we have a host of ways to stimulate that at the federal 
level, I think we need to acknowledge that they are government 
ways and be honest with that.
    So I will look forward, actually, and my main question will 
be: what will be the cost-benefit ratio here? What are we 
investing? What will the return on investment be? And frankly, 
what would that return on investment be if we didn't have such 
a prize? Would not the free market incentive, as we see the 
escalating cost of gasoline, be sufficient without this 
expenditure, and might it be expended in a different manner?
    But I look forward to this debate, and I am glad we are 
having it.
    I thank the Chairman.
    [The prepared statement of Mr. Costello follows:]

         Prepared Statement of Representative Jerry F. Costello

    Good morning. I want to thank the witnesses for appearing before 
our committee to discuss H.R. 5143, the H-Prize Act of 2006. The bill 
intends to create a prize to advance the research, development, 
demonstration and commercial application of hydrogen energy 
technologies.
    Traditionally, the Department of Energy (DOE) has relied upon 
established researchers in national labs, industry, and academia to 
carry out its mission of developing energy technologies for use by the 
private sector. Most often, DOE identifies a technical hurdle and then 
issues research solicitations to detail the type of technologies the 
agency seeks to fund. Moreover, DOE may use grants, cooperative 
agreements or contracts to carry out projects.
    While this method has worked well to advance scientific technology, 
H.R. 5143 also intends to meet the same goal by offering a prize for 
the development of a particular technology or for a specific 
achievement. As we have seen in the past, several prize programs were 
established to encourage the development of science and technology 
through a competitive process.
    I recognize that prize competitions benefit from clear-cut goals 
and have inspired research to accelerate the advancement of hydrogen 
technologies. However, I believe it is important that prizes act as a 
supplement to, not a substitute for traditional research and 
development programs. I encourage continued advancements in research, 
development, demonstration, and commercial application projects and 
will work with my colleagues to attract our country's best and 
brightest minds to address U.S. energy challenges.
    I look forward to hearing from today's panel of witnesses.

    [The prepared statement of Ms. Johnson follows:]

       Prepared Statement of Representative Eddie Bernice Johnson

    Thank you, Mr. Chairman and Ranking Member.
    I would like to commend the Chairman, Ranking Member and staff for 
arranging today's hearing and always enjoy discussing how Congress can 
work better to spur innovative technologies.
    Clearly, our nation faces an energy crisis. Oil prices are 
skyrocketing, and as the hot sun bakes my home state of Texas this 
summer, energy prices will become as unbearable as the Dallas heat.
    I am glad my colleagues have been forward-thinking to introduce 
legislation to stimulate research and development of a hydrogen 
economy.
    The Science Committee has held hearings in the recent past on the 
issue of the hydrogen economy. What I have heard witnesses say is that 
technology is not developed enough for America to benefit from a 
hydrogen economy for many years.
    I fear the consequences of a ``head in the sand'' approach, with 
energy prices as they are. We must invest in alternative fuels such as 
hydrogen to address this crisis.
    H.R. 5143 has been compared with the X Prize, but I want to point 
out that the X Prize was funded with private resources.
    I believe the Committee should consider what unintended 
consequences could arise with a prize administered by a federal agency, 
rather than by private industry.
    Thank you, Mr. Chairman. I yield back the balance of my time.

    Chairman Boehlert. Thank you very much.
    And now to our very distinguished panel. And every time I 
look at a panel of experts that come before this committee, I 
am reminded that Washington is not the source of all wisdom. As 
a matter of fact, I would like to add more wisdom here, but one 
of the ways we get it is by having experts like you. So we 
thank all of you for being facilitators and of counsel to the 
Committee, if you will.
    Our witnesses include Dr. Peter Diamandis. He is Chairman 
of the X Prize Foundation, a non-profit organization dedicated 
to fostering innovation through the use of competitions. The 
Foundation awarded its $10 million Ansari X Prize to promote 
the formation of a commercial space flight industry. Prizes for 
genomics, energy, and education are under development. Thank 
you, Dr. Diamandis, and we understand another commitment forces 
you to have to leave at 11:15, so don't think as he departs he 
is boycotting the rest of the meeting.
    Dr. Diamandis. Thank you, Chairman.
    Chairman Boehlert. Our second witness is Dr. David Bodde. 
He is the Director of Innovation and Public Policy at Clemson 
University's International Center for Automotive Research. He 
was a member of the National Academy of Engineering Committee 
on Alternatives and Strategies for Future Hydrogen Production 
and Use, which issued the 2004 report ``The Hydrogen Economy: 
Opportunities, Costs, Barriers, and R&D Needs.''
    Our third witness is Dr. David Greene. He is a corporate 
fellow at Oak Ridge National Laboratory with the Center for 
Transportation Analysis, National Transportation Research 
Center. He is an expert on transportation and energy policy 
issues. Dr. Greene.
    And finally, Mr. Phillip Baxley, the President of Shell 
Hydrogen, L.L.C., a separate business unit established by Shell 
in 1999 to pursue new business opportunities in hydrogen fuel 
and fuel cells.
    Gentlemen, thank you very much for participating in this 
and being willing to serve as counsel and educators for this 
committee.
    Dr. Diamandis, you are first up.

 STATEMENT OF DR. PETER H. DIAMANDIS, CHAIRMAN OF THE X PRIZE 
                           FOUNDATION

    Dr. Diamandis. Thank you.
    Chairman Boehlert, members of the Committee, I thank you 
for permitting me to come here and give testimony today on 
prizes and the H-Prize.
    My name is Peter Diamandis. I am the Founder, Chairman, and 
CEO of the X Prize Foundation.
    We started the Foundation in 1995. In fact, the first 
public discussion ever on the X Prize was in this room in 
testimony to Congressman Walker at that time. Our mission is to 
bring about radical breakthroughs by using prizes. And in fact, 
we believe that inducement prizes, versus recognition prizes, 
like the Nobel Prize, have the chance to bring huge returns for 
immediate change versus something achieved 30 years ago.
    Incentive prizes have a tremendous history, as we have 
heard some from Chairman Inglis' presentation early on, and it 
was reading about Lindbergh's flight across the Atlantic that 
actually inspired me. I read that this $25,000 prize offered in 
1919 sparked $400,000 in expenditures. Literally 16 times the 
prize amount was spent. And they didn't spend $1. And in fact, 
the most unlikely winner, Lindbergh, called the ``flying fool'' 
the day before he took off, changed the course of history and 
ignited a multi-hundred-billion-dollar industry of aviation.
    When he landed in Paris, he was swamped by crowds. What 
followed after that was tremendous. Within 18 months of his 
landing, the number of passengers in the United States went 
from 5,700 to 180,000, a 30-fold increase in passenger traffic 
in the United States. The number of airplanes quadrupled. The 
number of pilots tripled. It was not the technology. It was a 
paradigm shift that occurred. The prize changed the way the 
public thought about aviation. That is very important. Prizes 
not only cause technology to be brought into existence, but 
they change the way we think about these subjects.
    My passion since the age of nine has been going into space, 
and for 40 years, I have watched the cost of space flight go up 
and reliability not change at all. And I became, you know, 
disenchanted with waiting for NASA to open up space. And it was 
that reading of the Lindbergh book that caused me to build this 
Ansari X Prize.
    I offered out a $10 million purse. We picked $10 million so 
that it was not too large; we didn't want the Boeings and 
Lockheeds competing, but large enough to incentivize those 
entrepreneurs, those hungry, risk-taking entrepreneurs willing 
to risk everything to change what they believed in--offering 
for three people to go into space, come back down, and within 
two weeks make that trip again. We had 26 teams from seven 
countries compete for this coming from places I had no 
expectation, from Romania, from Israel, from Russia, from Great 
Britain, from Canada, from the United States competing to win 
this $10 million prize and spending $100 million to win it.
    The results were fantastic. With 50 times the prize--our 
seed capital yielded 50 times the amount spent to try and win 
that $10 million prize. And you go now to the Air and Space 
Museum and see SpaceShipOne, the winning vehicle, hanging next 
to the Spirit of St. Louis. And for me, that was the prize in 
my heart, to see that happen. It was spectacular. October 4 of 
2004, SpaceShipOne made two flights into space.
    When that happened, for me, what occurred was we changed 
the paradigm that space flight was not just for 100 very smart, 
government-selected astronauts. Now kids believe that they can 
fly into space. That was the most important thing: changing the 
paradigm. I can't focus on that enough.
    We also launched an industry. You know, Branson is now 
committed to over $100 million to go after SpaceShipTwo. Of the 
26 contenders, at least eight or nine of them are bringing 
their vehicles into commercial practice. That would not have 
happened. You know, the X Prize drove that breakthrough. The 
technology had been around for decades to have this happen, but 
the Prize, literally, caused the spark. It was the crucial seed 
required to galvanize that to happen.
    So successful prizes that are well designed, well timed, 
and appeal to the audience can have huge returns on investment.
    Why do prizes work? Let me offer out the following four 
things that are very important as to why prizes work.
    One, they attract alternate funding. Prizes have to be an 
amazing story. They are about the human drama. They are about 
the risk. And they attract different flavors of money, not your 
traditional venture capital. They attract risk-taking money. I 
call it ``ego money.'' The Larry Ellisons who backed an 
America's Cup team and spent $70 million for a trophy. Twenty 
billion dollars a year is spent paid in sponsorship dollars for 
car races, boat races, bike races, or whatever it is. It 
attracts that kind.
    The media spotlight. Prizes have to create heroes. It is 
never about the technology. The heroic element drives people to 
think in the shower around the clock. You can't buy that level 
of dedication.
    It bypasses bureaucracy. A lot of the most brilliant people 
will never, ever, ever apply for a grant, because they could 
not stand the process of going through that. But a prize says 
you win if you do this. You know. Bypass all of the bureaucracy 
and go directly to the solution and you will win the money. And 
that allows the most brilliant, and sometimes the most radical 
thinkers, to enter and solve the problems that we have.
    Most importantly, prizes elevate a problem so high that it 
attracts people from outside the discipline. We all know how to 
think the way we think. You know. Biologists approach things 
from a biological problem. But if you put up a prize, you have 
a physicist come in or a historical person come in. So it 
attracts solutions outside disciplines and outside nations.
    We, at the X Prize, have dedicated ourselves. We have grown 
the organization. Larry Page, a co-founder of Google, has 
joined our board. Craig Venter discovered--you know, cloned the 
human genome, and we are building ourselves into a world-class 
prize institute, focusing on developing prizes for different 
areas. We are working on an automotive X Prize we hope to 
launch this year for cars that significantly exceed 100 miles 
per gallon. We are going to be launching a genomics X Prize. We 
are looking in entrepreneurship and education and other arenas.
    In closing, let me highlight our work with NASA.
    In 2003, prior to the winning of the Ansari X Prize, some 
of my friends at NASA headquarters approached us and asked, 
``What can we do to help?'' I said, ``NASA should be doing 
prizes.'' They hired us to do a study. We spent about six 
months working and going through all of the agency elements and 
came up with 100 prize ideas. To do a prize properly is not 
picking a target. We have developed a prize innovation process 
that figures out, first, what is the problem you are trying to 
solve. Understand that first. Is it CO2 emissions? 
Is it energy independence? Is it energy storage? What is the 
problem? And then it--and then basically drive it forward.
    So we have developed this process, and we are pleased to be 
able to bring that technology and bring that capability to the 
Committee.
    Thank you for your time.
    [The prepared statement of Dr. Diamandis follows:]

                Prepared Statement of Peter H. Diamandis

    Chairman Boehlert and members of the Committee, thank you for 
permitting me to submit this testimony on the use of inducement prizes 
for advances in hydrogen technology. My name is Peter H. Diamandis. I 
am the Founder, Chairman, and CEO of the X PRIZE Foundation.
    Founded in 1995, the X PRIZE Foundation fosters innovation in a 
unique way. Rather than awarding money to honor past achievements or 
directly funding research with uncertain outcomes, the X PRIZE 
Foundation creates high profile competitions that attract and motivate 
creative solutions to important problems. Our mission is to bring about 
radical breakthroughs for the benefit of humanity utilizing prizes.
    Incentive prizes have a history stretching over several hundred 
years, with successful prizes having dramatic effects. One of the most 
famous--and the one that personally inspired me to start X PRIZE--was 
the Orteig Prize, won by Charles Lindbergh in 1927 for his dramatic 
non-stop flight from New York to Paris in 1927. This $25,000 prize 
caused nine teams to spend $400,000. Lindbergh's, the most unlikely of 
the nine teams, won the purse and ignited an aviation renaissance.
    The huge crowd that mobbed Lindbergh in Paris was just the first 
indicator of the impact his achievement would have. Within eight months 
of his flight, the number of airplanes in the U.S. quadrupled, the 
number of pilots tripled and the number of individuals buying airline 
tickets increased 30-fold from 5,700 to nearly 180,000.
    Lindbergh's success in winning the Orteig Prize gave a jump-start 
to commercial aviation. It was the efficiency of the Orteig Prize and 
the tremendous leverage it offered that drove me to create the Ansari X 
PRIZE to solve the problem of private space flight.
    Since the age of nine, my passion has been space flight. I'm a 
child of the Apollo vision that this country once had. However, as I 
watched the aerospace industry develop over the past few decades, it 
was evident to me that innovation in space flight had stalled. During 
the past 40 years the cost of space flight has gone up, but the 
reliability has not improved. To disrupt these trends, I created an 
international competition with a $10M purse, for the first privately-
funded team to develop and fly a three-person, reusable spaceship to 
100 kilometers altitude, twice within two weeks. The prize was 
announced under the arch in St. Louis, 10 years ago next month (May 
18th, 1996), along with 20 astronauts, the NASA Administrator, the FAA 
Associate Administrator and the Lindbergh Family. During the following 
decade I raised the $10 million purse, recruited 26 teams from seven 
countries to compete and built a world-class team of individuals who 
became expert in how to create, manage and award Inducement Prizes.
    As you may know, the Ansari X PRIZE was won on Oct. 4, 2004, by 
Mojave Aerospace Ventures, led by designer Burt Rutan and financier 
Paul Allen. The competition caused teams to spend over $100 million to 
win the $10 million purse, and attracted over five billion media 
impressions that changed the public paradigm that space flight is only 
for government employees. The winning spacecraft--SpaceShipOne--now 
hangs next to the Spirit of St. Louis and the Wright Flyer in the 
Smithsonian National Air & Space Museum.
    The long-term effects won't be known for years, but it's already 
clear that X PRIZE helped spawn a new industry with dramatic 
technological, social and investment opportunities. Richard Branson 
paid $121M for the winning technology, and thousands of consumers have 
paid deposits for space tourism tickets. Several other commercial space 
flight companies were spawned by the X PRIZE competition and are still 
operating.
    Inducement prizes are fundamentally different than conventional R&D 
funding. Inducement prizes define a problem and pay for successful 
solutions--they do not pay for the work itself, they do not define or 
pre-judge technical approaches, and they do not pre-judge 
qualifications.
    Successful prizes are well-designed, well-timed, appeal to a broad 
audience, and offer potential rewards--prestige, publicity, and future 
business--far in excess of the purse itself. Inducement prizes have a 
unique ability to efficiently drive research that leads to high-
leverage breakthroughs. The return-on-investment can be huge; the 
Ansari X PRIZE leveraged seed capital 50-fold. Why is that? Why can 
inducement prizes work so well? There actually is a science to this 
process, something with the X PRIZE Foundation has spent 10 years 
learning. Following are some the important reasons:

        1.  Prizes Attract Alternate Funding Sources: Prize teams are 
        able to attract risk-taking capital which is put up by 
        corporate sponsors or wealthy individuals who actually 
        encourage risk-taking because they seek the publicity and 
        desire to win. Prizes tap into the $20 billion pot of money 
        spent each year on event and sports-related sponsorship.

        2.  Media Spotlight: The intense media spotlight and 
        opportunity to become a global hero, drives teams to work 
        around the clock. Incentive prizes cause these teams to work 
        harder than any employment contract could ever achieve. If 
        leveraged correctly, the media can also play a key role in 
        educating the public about each team and their breakthroughs.

        3.  Bypassing Bureaucracy: Many brilliant individuals abhor 
        bureaucracy and would rather not go through the paper work and 
        peer-review process that would completely and totally frustrate 
        them. Prizes set up a clear process: Solve the problem, by 
        what-ever means, and you win the money and the fame.

        4.  Crossing Disciplinary & National Boundaries: Most 
        importantly, prizes encourage innovators from outside the 
        typical fields or nations to address your problem. 
        Breakthroughs typically come when a fresh mind, without pre-
        conceived biases, looks at the challenge.

    Creating and managing successful inducement prizes is much harder 
than it looks. There have been many attempts in the past which have 
failed. Prizes must not be about technology alone, they must be 
structured to create and follow heroes, have dramatic and demonstrable 
conclusions, and must be something the public and media are made to 
care about. Success requires a carefully structured and balanced 
approach that involves expertise in many areas, including science, 
technology, rules & competition design, event management, arbitration, 
financing, sponsorship, media relations, public relations, and 
government relations.
    Since the awarding of the $10 million Ansari X PRIZE we have 
focused on building the X PRIZE Foundation into a world-class prize 
institute using best practices and its 300 man-years of experience, to 
create, administer and award prizes that will help change the world. We 
are currently working on inducement prizes in several areas, including 
automotive, genetics, education, entrepreneurship, and--of course--
space.
    In closing I would like to highlight our work with NASA, since I 
believe it provides a useful model for the type of prize creation and 
management contemplated by the H-Prize Act. In 2003, prior to the 
winning of the Ansari X PRIZE, the leadership of NASA asked the X PRIZE 
to conduct a study on how prizes could be used to support their 
mission. Under contract to the Agency, we came up with over 100 prize 
ideas and helped them structure the Centennial Challenges Program, 
which is now funded annually to approximately $10 million per year. The 
X PRIZE Foundation now works closely with NASA assisting and advising, 
and in a number of cases managing their larger prizes. In this 
situation, NASA puts up the prize purse and the X PRIZE Foundation is 
responsible for raising the sponsorship funds to manage the prize, 
writing the rules, attracting the teams, and following through to a 
successful conclusion.
    It is important to note that NASA does not manage the prizes 
themselves; they identify the prize area and secure the prize purse. 
They depend on an independent partner like X PRIZE to write the rules 
and implement the competition. In my view this separation of 
responsibilities is fundamentally important. The prize organization 
must often act quickly, with authority, and must be able to assure 
potential competitors that they will be treated fairly and without 
political bias. Thus, for example, once a particular prize has been 
established and the management plan approved, one should avoid mixed 
responsibilities for rule-creation, committee selection, judging, and 
arbitration.
    Inducement prizes are well-suited to stimulate innovations in the 
fields of both energy and transportation, and for that reason towards 
the long-term goal of a hydrogen economy. Technology advances are 
plausible, large markets are possible, investors are poised, and there 
would be great public interest in fundamental breakthroughs. The multi-
billion dollar question, of course, is what are the prize rules, who 
will compete, and when will it be won. The H-Prize Act would hasten the 
needed breakthroughs, and the X PRIZE Foundation is ready to help.
    Thank you for your time and attention.

                    Biography for Peter H. Diamandis

    Dr. Diamandis is the Chairman and CEO of the X PRIZE Foundation 
(www.xprize.org), which awarded the $10,000,000 Ansari X PRIZE 
(www.xprize.org) for private space flight. Diamandis is now focused on 
building the X PRIZE Foundation into a world-class prize institute 
whose mission is to bring about radical breakthroughs for the benefit 
of humanity. The X PRIZE is now developing X PRIZEs in fields such as 
Genomics, Automotive, Education, Medicine, Energy, and Social arenas.
    Diamandis is also a leader in the commercial space arena, having 
founded and run many of the leading companies in this sector. He is the 
Chairman & Co-Founder of the Rocket Racing League (www.xracing.com). 
Diamandis also serves as the CEO of Zero Gravity Corporation 
(www.nogravity.com) a commercial space company developing private, FAA-
certified parabolic flight utilize Boeing 727-200 aircraft. Diamandis 
is a co-founder of Space Adventures, Inc. (www.spaceadventures.com), 
the company which brokered the first launches of private citizens to 
the International Space Station.
    In 1987, Diamandis co-Founded the International Space University 
(ISU) (www.isunet.edu) where he served as the University's first 
managing director. Today he serves as a Trustee of the $30M ISU that is 
based in Strasbourg, France. Prior to ISU, Diamandis served as Chairman 
of Students for the Exploration and Development of Space (SEDS) an 
organization he founded at MIT in 1980. SEDS is the world's largest 
student pro space organization.
    Dr. Diamandis attended the Massachusetts Institute of Technology 
(MIT) where he received his undergraduate degree in molecular genetics 
and graduate degree in aerospace engineering. After MIT he attended 
Harvard Medical School where he received his M.D. In 2005 he has was 
also awarded an honorary Doctorate from the International Space 
University.
    He is the winner of the Konstantine Tsiolkovsky Award, twice the 
winner of the Aviation & Space Technology Laurel, and the 2003 World 
Technology Award for Space, the 2006 Orbit Prize and the 2006 Lindbergh 
Award. In 8th grade, while living in New York, Dr. Diamandis won first 
place in the Estes rocket design contest.
    Diamandis' personal motto is: ``The best way to predict the future 
is to create it yourself!''

    Chairman Boehlert. Thank you very much.
    I think--mark him down as a supporter of the concept.
    Dr. Bodde.

  STATEMENT OF DR. DAVID L. BODDE, DIRECTOR OF INNOVATION AND 
PUBLIC POLICY AT CLEMSON UNIVERSITY'S INTERNATIONAL CENTER FOR 
                   AUTOMOTIVE RESEARCH (ICAR)

    Dr. Bodde. All right. Thank you very much, Mr. Chairman. 
And thank you, also, for the opportunity to discuss this very 
creative and innovative piece of legislation.
    I think this does offer great hope for removing from this 
country the curse of oil dependence and for moving us then into 
an energy economy that is founded on domestic resources and on 
our own technology advantages.
    The H-Prize would accomplish this, in my judgment, through 
two principle mechanisms.
    First, it would stimulate and nurture the research base 
from which these innovations are drawn. It will do this by 
attracting new researchers and innovators and by calling public 
attention to that.
    Second, it would perform one of the most difficult feats in 
our economy, and that is accelerating research, in this case 
hydrogen-related research, across the gap between innovation 
research, that is innovation funding--excuse me, between 
research funding and new venture kinds of funding. These 
communities move in parallel. They don't communicate well. And 
that gap between research funding and innovation funding is a 
very large one. This would help move across it.
    Now to achieve that, we have to bear in mind, I think, 
three fundamental principles.
    First, continuity. To have this effect, the prize has got 
to be continuous, it has got to be reliable, and it has got to 
be predictable across the 10-year course of it.
    Second, additionally. It has got, of course, to attract 
risk capital, but it should not do this at the expense of the 
basic funding for research for the hydrogen programs.
    And finally, learning and adaptation over the course of the 
10 years that this program would be in operation. We are going 
to learn a lot of things about prizes and a lot of things about 
this, and we need to have a conscious mechanism for adaptation.
    Now, as requested, I would like to offer some suggestions 
for the operation of the program, and I would like to do this 
in the context of each of the three principle prize components 
or prize categories, I should say.
    The first prize category is for advancements in components 
or systems. Now this is where you get the chief effect of the 
expansion of the research base, the attracting of new 
researchers into hydrogen-related activities. I would like to 
offer three suggestions for your consideration in looking at 
this part of the program.
    One, to include in the criterion for eligibility, 
scientific discoveries that lead directly to components and 
systems. Now I know the point of the legislation is to provide 
an incentive for innovation and not for science, for 
applications and not for basic discovery. But in some cases, 
the applications themselves will be relatively straightforward 
and fall right out from the scientific discovery once that 
discovery is announced, and so if we were to add directly 
related scientific discoveries to the criterion for 
eligibility, that would not only do justice in connecting 
reward to benefit, but would also remove any possible incentive 
for a discoverer to sequester a discovery until it could be 
embodied in some kind of device or component. And it would also 
increase the talent pool available for hydrogen-related 
research.
    The second suggestion, allowing enabling technologies to be 
eligible. Now, by an ``enabling technology,'' I mean an advance 
in a seemingly unrelated field that springs forward the 
advances in the field that one is seeking. Take battery 
technology, for example. Improved batteries would relieve 
pressure on the--for performance of a fuel cell and would have 
a dramatic effect in accelerating the hydrogen economy. And so 
this is what I mean by an enabling technology. Likewise, 
software for on-vehicle energy management, another kind of 
enabling technology. Hydrogen safety, carbon sequestration, 
there is a list of things that could significantly advance a 
hydrogen economy, but--and in my judgment, should be a part of 
the eligibility requirements.
    The third suggestion that we apply the principle of 
continuity most strongly here. In order to attract people to an 
H-Prize competition, we need to build the pipeline of 
researchers and investigators, and that, frankly, starts at the 
high school level. It starts with interesting kids in science, 
showing them career opportunities in science, nurturing that 
through college through a graduate degree, and then into the 
research community. This pipeline takes a long time to build, 
and it takes continuity and assurance that that career will be 
there at the end of the pipeline to have the effective 
incentive.
    Now the second prize category, that of prototypes, 
addresses one of the most important difficulties in science and 
innovation in this country today, and that is the gap between 
research programs and innovation funding. What is called, or 
what I call, maturation funds, perhaps seed capital for 
innovation is another way to think about it, are needed here to 
move across the gap between the two cultures. Some federal 
programs already provide this. The SBIR, STTR, ATP programs are 
certainly very capable in providing this, but here the reward 
is given--or the award, I should say, is given before the 
performance in anticipation of the performance. In contrast, 
the H-Prize would complement these by being given after the 
performance, and so it could be a very powerful supplement to 
these kinds of programs in providing this bridging funding.
    The first prize category is that for transformational 
technologies for the distribution or production of hydrogen, 
which is, in my view, the most challenging. And I think special 
thought and care has to be put into the implementation criteria 
for this.
    Finally, learning and adaptation is one of the most 
important parts of this program. Certainly the awarding 
foundation should report its results periodically and follow up 
the awards given to understand systematically what has come 
from this program.
    In conclusion, I think this is a very valuable program and 
one that will help our energy security, the environment, and 
our competitiveness.
    [The prepared statement of Dr. Bodde follows:]

                  Prepared Statement of David L. Bodde

    Thank you, Ladies and Gentlemen, for this opportunity to discuss 
the H-Prize Act of 2006, now before this committee. I believe the H-
Prize offers an innovative policy that could accelerate our nation's 
transition toward more secure and sustainable energy by:

          Stimulating and nurturing the relevant science and 
        engineering research from which innovation must spring; and,

          Accelerating hydrogen-related research to cross the 
        gap from science opportunity to investment opportunity.

    To fully accomplish this, the H-Prize program should operate with 
several principles in mind.

          Continuity. The prizes must be offered reliably and 
        for a period long enough to build the technology pipeline, 
        rather than simply create a windfall for those already there.

          Additionality. The funds needed to support the H-
        Prize must supplement rather than compete with the core funding 
        appropriated in support of hydrogen-related research and 
        development.

          Learning. We cannot now anticipate the changes, 
        social as well as scientific, that will occur over the 10-year 
        life of the H-Prize program, and so the administration of the 
        prize program must carefully document its experience, learn 
        from that experience, and adapt accordingly.

    In what follows, I will set out my reasoning in support of these 
summary points, and offer suggestions for the operation of the H-Prize 
program.

Building the Foundation: Advancements

    The first category of the H-Prize structure, ``advancements in 
components or systems,'' can serve to expand the research base upon 
which innovations will draw. These prizes would accomplish this by 
drawing attention to the importance of the hydrogen revolution, and by 
combining prestige with monetary value in attracting additional 
researchers into the field. To achieve the greatest benefit, however, I 
would suggest that consideration be given to:

          Including scientific discoveries that lead directly 
        to components or systems in the eligibility for an 
        ``advancements'' prize;

          Allowing enabling technologies to be included in the 
        award criteria; and,

          Ensuring continuity over the ten-year life of the 
        program to lower the career risk for technologists considering 
        hydrogen-related research.

Including Directly Related Scientific Discoveries
    The intent of the H-Prize is to accelerate the hydrogen transition 
by focusing on the application of technology, not the creation of new 
knowledge-and properly so. Yet the boundaries between science and 
innovation remain indistinct,\1\ and in some cases a science 
breakthrough could directly release a wide array of components and 
systems. For example, Wilhelm Roentgen's announcement of the discovery 
of X-ray phenomena in 1895 was followed quickly by a host of 
applications in medical and other fields, none of which would have 
occurred in the absence of this seminal announcement. To allow this 
possibility for hydrogen, I would suggest including directly supporting 
science discoveries in the eligibility for this category of H-Prize.
---------------------------------------------------------------------------
    \1\ Research in science yields an understanding of the natural 
world and the laws that govern the behavior of materials, complex 
systems, living organisms, and so forth. In contrast, innovation 
concerns the man-made world and the creation of devices and methods 
that improve our daily lives. More so than science, innovation brings 
with it entrepreneurial and market considerations, thus making the 
real-world connections between these two phenomena complex and varied.
---------------------------------------------------------------------------
    Including directly connected science might offer two ancillary 
benefits as well. First, it could broaden the pool of researchers who 
would find the H-Prize relevant. And second it would remove any 
possible incentive to sequester a discovery until an applications 
device could be made.
Including Enabling Technologies
    Technology revolutions often build upon combinations of advances in 
seemingly unrelated fields--often termed ``enabling technologies.'' 
Consider home refrigeration, for example. When the mechanical 
refrigerator swept into the market in the 1930s and 1940s, it destroyed 
an industry (ice manufacturing and delivery), reshaped another (the 
corner grocery became the supermarket), and improved the productivity 
of homemaking enormously. Yet this innovation depended upon several 
enabling technologies for its success--efficient, small scale 
refrigeration cycles; widespread availability of electric energy; and 
compact, powerful alternating-current motors.
    In the case of hydrogen, enabling technologies can prove powerful 
also. For example, a technology that greatly enhanced the safety of 
hydrogen use would serve the transition well even if it were not 
strictly related to any single component or system. Similarly, a 
breakthrough in carbon sequestration might allow coal, shale, and other 
abundant hydrocarbons to be used for hydrogen production without 
environmental damage. Such a breakthrough, though not strictly hydrogen 
production, would advance the transition markedly. Thus, I would 
encourage a very broad interpretation of the term ``related to.''
Providing Continuity
    The general principle of program continuity applies most strongly 
in this first prize category. That is true because human beings must 
invest many years of preparation as their entry ticket for any field of 
technological research. For the prize program to draw additional 
entrants to hydrogen-related research fields, it must be perceived as 
stable over the time required for preparation and career launch--and 
for that reason, this category of H-Prize might diminish in 
attractiveness to new entrants as its ten-year ``sunset'' approaches. 
None of this militates against learning and adaptation in the awards 
process; rather, it suggests that greater predictability will make the 
awards more attractive to those considering a career in the field. Less 
predictability would have the opposite effect.

Crossing the Gap: Prototypes

    The second category of H-Prize addresses one of the most important 
problems in science and innovation--the availability of maturation 
funds to move a technology across the gap between research funding and 
investment funding. This gap arises because research funding tends to 
asks questions of discovery, seeking knowledge of how the natural world 
works. Answers to these questions do not always illuminate how the 
constructed world--that of the devices and systems that serve humans--
can be improved through innovation. In too many cases, potential 
investors cannot translate readily from scientific possibility to a 
marketable innovation, and so they await a prototype or some other 
evidence to help them judge the risks and returns from innovation. Thus 
a technology, even with ongoing research support, can languish in the 
chasm between research support and venture development funding. To be 
sure, some companies and foundations do invest in technology maturation 
research, but the resources are generally below the amount needed for 
greatest benefit. Thus, the prize would most probably add to the total 
resources available for innovation.\2\
---------------------------------------------------------------------------
    \2\ The ``prototype'' prize category would also complement the 
SBIR, STTR, and ATP programs, which serve much the same function but 
with awards given in anticipation of success rather than after it 
occurs.
---------------------------------------------------------------------------
    The prototype category of the H-Prize could provide incentives for 
private parties--perhaps foundations, research corporations, or first 
stage investors--to commit technology maturation investments. In 
effect, it lowers the risk for investors funding a technology 
maturation project by offering the possibility that its cost can be 
recovered. The most astute of these investors would find their 
technology ``bets'' effectively hedged by the prize. The least astute 
would not--and, of course, should not.

Transformational Technologies

    The third category of prize--a $10 million cash prize and a match 
for private investment funds up to $90 million--would reward major ``. 
. .transformational changes in technologies for the distribution or 
production of hydrogen. . .'' Thus it would provide incentives for the 
infrastructure side of the hydrogen market, which is likely to prove a 
highly capital-intensive undertaking. However, this prize category also 
poses challenges that appear greater than in the previous categories.
    First, the prize might prove redundant. Entrepreneurs and venture 
capital investors seek opportunities with demonstrable potential for 
exponential growth--exactly the kind of venture that appears to be 
contemplated in the prize description. A new venture meeting these 
objective criteria would probably have little difficulty attracting 
venture capital, especially in view of the increasing risk aversion now 
characterizing the venture investment industry.\3\
---------------------------------------------------------------------------
    \3\ The most urgent need is for early stage funding. In 2005, for 
example, only three percent of venture funds committed went for startup 
and seed capital investments. Early stage investment occupied another 
16 percent. The remaining 81 percent went for expansion and late-stage 
investments. Data from National Association of State Venture Funds.
---------------------------------------------------------------------------
    Second, one cannot know in advance the appropriate scale of 
investment, and hence the size of the award might not mesh well with 
the need. If the winning venture were small, the availability of a 
large federal match might tempt its owners to accept too much capital. 
Experienced venture investors recognize that too much funding can be as 
inimical to long term success as too little. On the other hand, if the 
winning venture were on the scale of, say, a shale oil plant (tens of 
billions of dollars), the prize would add little beyond prestige to the 
total incentive.

Learning and Adaptation

    Learning and adaptation should be designed into the H-Prize process 
from the beginning for three reasons. First, the awards program will 
learn from its own experience, and can improve in response to that 
learning. Second, the ten-year duration of the H-Prize program will 
surely see significant advances in every field of science, especially 
the hydrogen-related technologies. Award categories most relevant at 
the beginning might well recede in importance 10 years into the future. 
And third, an evolving public recognition of the scope and urgency of 
the worldwide energy-environment-economy trilemma could lead to changes 
in energy policy over the period. Because of such changes, the award 
criteria (and possibly the administrative processes) that are most 
appropriate at the beginning of the program might become less so by its 
end.
    For these reasons, I suggest that some formal process for learning 
and adaptation be included in the H-Prize program. An annual or 
biennial report of progress, to be submitted by the administering 
institution, could establish the factual basis for learning. These 
reports should surely include a follow-up analysis of each award to 
ascertain its outcome as measured against progress toward a hydrogen 
transition. To be sure, there is some tension between the earlier-
mentioned principle of consistency and the desirability of adaptation 
with learning. The core idea should be to adapt the means but hold 
constant the ends.

In Summary

    Reducing our nation's dependence on oil will improve the 
environment, relieve the economy of large income transfers to oil 
producers, and strengthen our national security. I believe the H-Prize, 
as set out in H.R. 5143, could do much to accelerate this greatly 
needed transition from petroleum to a hydrogen economy. This is a 
constructive and innovative proposal, and it deserves your fullest 
consideration.

                      Biography for David L. Bodde

    Senior Fellow and Professor, Arthur M. Spiro Center for 
Entrepreneurial Leadership, Clemson University. Research and expertise 
in:

          Intellectual property management

          Markets for new energy technology

          Corporate entrepreneurship

          Next-generation hybrid electric and hydrogen fuel 
        cell vehicles.

PREVIOUS PROFESSIONAL EXPERIENCE

University of Missouri-Kansas City, July 1996 to September 2004

    Charles N. Kimball Chair in Technology and Innovation at the 
University of Missouri, Kansas City. Joint appointment as Professor of 
Engineering and Business Administration.

Midwest Research Institute (MRI), January 1991 to July 1996

    Corporate Vice President and President of MRI's for-profit 
subsidiary, MRI Ventures. Responsible for new enterprise development 
through cooperative research, new ventures, licenses, and international 
agreements. Managed technology development consortium of five private 
companies to commercialize technology from the National Renewable 
Energy Laboratory (NREL). Worked with Department of Energy and senior 
NREL management on strategic initiatives for the laboratory.

National Academy of Sciences, April 1986 to January 1991

    Executive Director, Commission on Engineering and Technical 
Systems. Directed research and studies on public and private issues in 
science and technology.

U.S. Government, March 1978 to March 1986

    Assistant Director, Congressional Budget Office, United States 
Congress. Directed economic analyses of legislation affecting energy, 
industrial competitiveness, agribusiness, science, technology, and 
education.
    Deputy Assistant Secretary, Department of Energy. Policy research 
regarding nuclear energy, coal, synthetic fuels, electric utilities, 
technology transfer and national security. Emphasis on nuclear breeder 
reactors and nuclear non-proliferation. U.S. delegate to International 
Nuclear Fuel Cycle Evaluation, which sought an international agreement 
on plutonium recycle and measures to slow the proliferation of nuclear 
weapons.

TRW, Inc., January 1976 to March 1978

    Manager, Engineering Analysis Office, Energy Systems Planning 
Division. Built business using systems analysis and engineering 
studies. Emphasis on application of aerospace technology to energy 
problems, especially radioactive waste disposal and synthetic fuels.

U.S. Army, 1965 to 1970

    Captain. Platoon leader, company commander, and battalion 
operations officer. Airborne and Ranger qualified. Service as combat 
engineer in Vietnam (1968-69). Bronze Star, Army Commendation Medals. 
Remained in the Army Reserve as an R&D officer advising on the 
management of defense laboratories and nuclear research programs.

EDUCATION

Harvard University
    Doctor of Business Administration, March 1976. Doctoral thesis on 
the influence of regulation on the technical configuration of the 
commercial nuclear steam supply system. Thesis research cited in 
subsequent books on nuclear energy. Harding Foundation Fellowship.

Massachusetts Institute of Technology

    Master of Science degrees in Nuclear Engineering (1972) and 
Management (1973). Atomic Energy Commission Fellowship. Experimental 
thesis on irradiation-induced stress relaxation.

United States Military Academy

    Bachelor of Science, 1965. Commissioned Second Lieutenant, U.S. 
Army.

CORPORATE BOARD MEMBERSHIPS

Great Plains Energy

    Board member of electric energy company, 1994-present. Chair, 
Nuclear Committee; Chair, Governance Committee; Member, Audit 
Committee.

The Commerce Funds

    Founding director of family of mutual funds, currently with $2.2 
billion assets under management. Growth and Bond Funds achieved 
Morningstar 5-Star ranking. 1995-present.

PERSONAL BACKGROUND

    Grew up in Kansas City, Missouri. Married (since 1967) with four 
children. Enjoy competitive athletics, especially racquetball and 
tennis. Frequent backpacker, amateur historian, bad poet, and worse 
musician.
    Author of The Intentional Entrepreneur (M.E. Sharpe 2004); co-
author of The Hydrogen Economy (National Academies Press 2004); and 
editor of Managing Enterprise Risk: What the Electric Industry 
Experience Implies for Contemporary Business (Elsevier 2006). 
Additional publications in technology management, energy, and policy.

    Chairman Boehlert. Thank you very much, Dr. Bodde.
    Dr. Greene.

 STATEMENT OF DR. DAVID L. GREENE, CORPORATE FELLOW, OAK RIDGE 
   NATIONAL LABORATORY, CENTER FOR TRANSPORTATION ANALYSIS, 
            NATIONAL TRANSPORTATION RESEARCH CENTER

    Dr. Greene. Yes, thank you.
    Good morning, Mr. Chairman and Members of the Committee and 
all of those others present today.
    We all are aware that our country faces serious energy 
problems, and I would like to thank Congressman Inglis for 
putting up this graph of Exxon Mobil's view of the world in the 
future, because I think it shows us three really important 
things that we need to keep our eye on. One is that demand for 
transportation fuels and petroleum fuels is going to continue 
to grow in the future. The second is that, even in Exxon 
Mobil's view, production outside of OPEC will reach a peak and 
they believe plateau, others believe decline. And the third is 
that the source of supply for the rest of that energy is OPEC, 
although it is highly unlikely that they will supply that 
energy, because, as the Department of Energy has shown in their 
own analysis and Professor Dermott Gately at NYU has shown, 
it--they can make more money--more revenue by leaving a good 
bit of that oil in the ground.
    Our energy situation changed dramatically 35 years ago when 
oil production in the United States peaked in 1970, and it has 
never returned to that level. That and the formation of OPEC 
fundamentally changed the world oil markets. The peaking or the 
plateauing of oil production for the entire world outside of 
OPEC is going to make an enormous difference as well.
    Now I don't know of anything that could do more to solve 
our nation's energy problems in the long run than the creation 
of technologies to enable clean and efficient, economical 
hydrogen-powered transportation. However, there are major 
technological barriers, independent technological barriers that 
stand in the way of doing this. And here, I would like to read 
from the report that--from the National Academies that Dr. 
Bodde participated in. They said: ``There are major hurdles on 
the path to achieving the vision of the hydrogen economy. The 
path will not be simple or straightforward. Specifically, for 
the transportation sector, dramatic progress in the development 
of fuel cells, storage devices, and distribution systems is 
especially critical. Widespread success is not certain.''
    The Department of Energy's own Hydrogen, Fuel Cells and 
Infrastructure Technologies Multi-Year Plan echoes these same 
three technological challenges. They say: ``Hydrogen storage 
systems for vehicles are inadequate to meet customer driving 
range expectations without intrusion into the vehicle cargo or 
passenger space. Hydrogen is currently three to four times as 
expensive as gasoline.'' And I think in saying that, they mean 
also delivery of hydrogen and including the cost of that. 
``Fuel cells are about five times more expensive.'' Some people 
say ten times more expensive. I would say in each of these 
areas, we are facing approximately order of magnitude 
challenges to changing the technology. Very difficult. And 
these technologies are not likely to be self-reinforcing. That 
is, we need, essentially, independent scientific breakthroughs 
in each of those three areas.
    I think the H-Prize categories correspond well to these key 
areas in which breakthroughs are needed.
    Another area that the National Academy Committee cited was 
the sequestration of hydrogen or production of hydrogen from 
renewables. Sequestration is not a part of this even though it 
would be a supporting technology, but I think that is 
appropriate as well, because sequestration is needed--going to 
be needed by many other fossil-fuel-using technologies, and I 
personally do not think the challenges there are as great as 
the ones for hydrogen that I have noted above.
    I think this bill will increase the likelihood of 
overcoming these technological barriers by mobilizing creative 
minds that might not otherwise tackle them. And I think the--I 
would endorse their--the arguments given by Dr. Diamandis and 
Dr. Bodde on these points.
    I would like to emphasize strongly, as strongly as I 
possibly can, that creating the H-Prize cannot substitute for 
adequately funding research, development, and demonstration. I 
realize coming from a National Lab that is a little bit self-
serving, but nonetheless, I think it is true.
    It is sometimes said that science is 95 percent 
perspiration and five percent inspiration. We have heard a lot 
about inspiration, but I want to emphasize that the 
perspiration is just as important. And there is simply no 
substitute for a sustained and concentrated effort. Thus, I see 
the H-Prize as a useful supplement to a well designed and 
adequately funded R&D program, and I think the writers of this 
bill have recognized that appropriately.
    I have some other recommendations on specifics of how 
judges might be selected. I think that it would be appropriate 
for the judges to be selected independently rather than by a 
government agency. I think that clearly would show people that 
there is no political influence in this and that the prize is 
going to be awarded fairly.
    Finally, I just wanted to congratulate the Committee and 
its staff for listening to the expert panel that it convened 
previously and reflecting those recommendations in their--the 
legislation, and I want to wish them every success with this 
important initiative.
    Thank you.
    [The prepared statement of Dr. Greene follows:]

                 Prepared Statement of David L. Greene

    Good morning. My name is David Greene. I am a Corporate Fellow of 
Oak Ridge National Laboratory where I have researched transportation 
energy policy since 1977. The comments I offer the Committee today are 
mine alone and do not necessarily reflect the views of Oak Ridge 
National Laboratory, UT-Battelle or the U.S. Department of Energy. I am 
also a National Associate of the National Academies. I point out these 
two affiliations in the interests of disclosure since some of my 
comments below pertain to these institutions.
    We are all aware that our country faces serious energy problems. 
Despite world oil prices at or near historic highs, U.S. net oil 
imports averaged 60 percent for the year 2005 and for the first three 
months of this year, as well (USDOE/EIA, 2006). According to estimates 
by the Energy Information Administration, oil imports added $230 
billion to our balance of trade deficit in 2005. By my own estimates, 
U.S. oil dependence costs, comprised of transfer of wealth to oil 
exporting countries and negative impacts on our Gross Domestic Product, 
amounted to approximately one quarter of a trillion dollars last year 
(Greene and Ahmad, 2005). By my best estimates, the economic costs of 
our oil dependence over the past three decades exceed $3.5 trillion. 
These estimates do not include political, strategic and military costs 
which are difficult to estimate but clearly very large.
    I know of nothing that could do more to solve our nation's energy 
problems in the long run than the creation of technologies to enable 
clean, efficient, economical hydrogen-powered transportation. However, 
major technological barriers stand in the way of achieving this goal. I 
endorse the following conclusions of the National Academies Committee 
on Alternatives and Strategies for Future Hydrogen Production and Use 
(NRC, 2004) with respect to the technological barriers to hydrogen 
powered transportation.

         ``There are major hurdles on the path to achieving the vision 
        of the hydrogen economy; the path will not be simple or 
        straightforward.

         Specifically for the transportation sector, dramatic progress 
        in the development of fuel cells, storage devices, and 
        distribution systems is especially critical. Widespread success 
        is not certain.'' (NRC, 2004, p. 116)

    The Department of Energy's Hydrogen, Fuel Cells and Infrastructure 
Technologies Multi-Year Research, Development and Demonstration Plan 
identifies three key ``technology barriers'' that must be overcome if 
the vision of hydrogen-powered vehicles is to be achieved.

          ``Hydrogen storage systems for vehicles are 
        inadequate to meet customer driving range expectations (>300 
        miles) without intrusion into vehicle cargo or passenger space.

          Hydrogen is currently three to four times as 
        expensive as gasoline.

          Fuel cells are about five times more expensive than 
        internal combustion engines and do not maintain performance 
        over the full useful life of the vehicle.'' (USDOE/EERE/HFCIT, 
        2005, p. ii)

    The H-Prize categories correspond well to the key areas in which 
breakthroughs are needed. As stated above, these are, (1) hydrogen 
storage, (2) fuel cell power train cost and durability, and (3) the 
cost of producing hydrogen, especially from renewable energy resources. 
A fourth critical area noted by the National Academy Committee is the 
sequestration of carbon if hydrogen is produced from fossil fuels. 
While this is indeed key to achieving the full environmental benefits 
of a hydrogen economy, I believe that the technological challenges in 
this area are not as great and, in addition, that it is not a problem 
peculiar to the use of hydrogen as an energy carrier. Other uses of 
fossil fuels will also likely require carbon sequestration.
    From a scientific and engineering point of view, the needed 
technological breakthroughs appear to be independent. That is, a 
breakthrough in one area, e.g., on-board hydrogen storage, will not 
necessarily increase the likelihood of a breakthrough in fuel cells or 
hydrogen production. The fact that multiple, independent breakthroughs 
are needed magnifies the technological challenge. For this reason it is 
wise to mobilize creative thinking throughout our society.
    I believe that H.R. 5143 would increase the likelihood of 
overcoming these technological barriers by mobilizing creative minds 
that might not otherwise tackle them. A substantial, prestigious prize 
provides motivation that an R&D contract cannot: a challenge with the 
promise of public recognition for scientific achievement. The H-Prize 
will also cast a wider net, potentially including individuals and 
organizations that would otherwise not be part of the hydrogen R&D 
effort.
    Let me emphasize as strongly as possible that creating the H-Prize 
cannot substitute for adequately funding research, development and 
demonstration. It is sometimes said that science is 95 percent 
perspiration and five percent inspiration. The fact is, there is simply 
no substitute for sustained and concentrated effort. Thus, I see the H-
Prize as a useful supplement to a well-designed and adequately funded 
R&D program.
    H.R. 5143 clearly intends to isolate the H-Prize competition from 
political considerations and conflicts of interest. This is not only 
the right thing to do but is essential if the H-Prize is to provide the 
intended incentives for innovation. With this in mind, I believe it 
would be wise to specify in the legislation the independent third party 
to be responsible for selecting award winners. Designating an 
institution such as the National Academies that has a long and well 
established history of independent, objective assessment would make 
clear, in advance, that neither politics nor special interests would 
influence the selection of winners.
    The draft bill states that the Secretary of Energy, through an 
agreement under section 3(c), shall assemble a panel of qualified 
judges to select the winner. . .'' It is not clear to me from this 
language whether the Secretary of Energy has authority to appoint the 
judges or whether this authority would reside with the third party 
administering the competition. In my opinion, in order to avoid even 
the appearance of political influence in the selection of winners, the 
authority should be given to the independent third party.
    Finally, I congratulate the Committee and its staff for listening 
to the expert panel it convened on the H-Prize, digesting their 
recommendations and incorporating them in this draft legislation. I 
wish you every success with this important initiative.
    Thank you for your attention. I look forward to answering any 
questions you may have to the best of my ability.

REFERENCES

Greene, D.L. and S. Ahmad. 2005. ``Costs of U.S. Oil Dependence: 2005 
        Update,'' ORNL/TM-2005/45, Oak Ridge National Laboratory, Oak 
        Ridge, Tennessee, January.

(NRC) National Research Council. 2004. The Hydrogen Economy, Committee 
        on Alternatives and Strategies for Future Hydrogen Production 
        and Use, National Academies Press, Washington, DC.

(USDOE/EERE) U.S. Department of Energy, Energy Efficiency and Renewable 
        Energy. 2005. ``Hydrogen, Fuel Cells & Infrastructure 
        Technologies Program: Multi-Year Research, Development and 
        Demonstration Plan,'' Revision 1, February, 2005, Washington, 
        DC.

(USDOE/EIA) U.S. Department of Energy, Energy Information 
        Administration. 2006. ``Weekly Petroleum Status Report, March 
        2006,'' Table H1, Washington, DC.

                     Biography for David L. Greene

    A Corporate Fellow of Oak Ridge National Laboratory (ORNL), David 
Greene has spent 25 years researching transportation energy and 
environmental policy issues. Dr. Greene received a B.A. degree from 
Columbia University in 1971, an M.A. from the University of Oregon in 
1973, and a Ph.D. in Geography and Environmental Engineering from The 
Johns Hopkins University in 1978. After joining ORNL in 1977, he 
founded the Transportation Energy Group in 1980 and later established 
the Transportation Research Section in 1987. Dr. Greene spent 1988-89 
in Washington, DC, as a Senior Research Analyst in the Office of 
Domestic and International Energy Policy, U.S. Department of Energy 
(DOE). He has published more than one hundred seventy-five articles in 
professional journals, contributions to books and technical reports, 
and has authored or edited three books (Transportation and Energy, 
Transportation and Global Climate Change, and The Full Costs and 
Benefits of Transportation). Dr. Greene served as the first Editor-in-
Chief of the Journal of Transportation and Statistics, and currently 
serves on the editorial boards of Transportation Research D, Energy 
Policy, Transportation Quarterly, and the Journal of Transportation and 
Statistics. Dr. Greene has been active in the Transportation Research 
Board (TRB) and National Research Council (NRC) for over 25 years, 
serving on several standing and ad hoc committees dealing with energy 
and environmental issues and research needs. He is past Chairman and 
member emeritus of TRB's Energy Committee, past chair of the Section on 
Environmental and Energy Concerns and a recipient of the TRB's Pyke 
Johnson Award. In recognition of his service to the National Academy of 
Science and National Research Council, Dr. Greene has been designated a 
lifetime National Associate of the National Academies.

    Chairman Boehlert. Thank you very much, Dr. Greene. Don't 
worry about being a little self-serving with your testimony. On 
occasion, we are noted for that, too.
    Mr. Baxley.

 STATEMENT OF MR. PHILLIP BAXLEY, PRESIDENT OF SHELL HYDROGEN, 
                             L.L.C.

    Mr. Baxley. Thank you.
    Good morning, Mr. Chairman, Members of the Committee. I 
want to thank you for your invitation to testify here today. 
Let me just, one more time, repeat, I am Phillip Baxley. I am 
President of Shell Hydrogen with responsibility for Shell's 
hydrogen business activities in North America.
    Shell Hydrogen's global business was set up more than seven 
years ago to pursue and develop business opportunities related 
to hydrogen and fuel cells. In fact, I am pleased to note that 
Shell Hydrogen was actually asked to testify before this same 
distinguished Committee over six years ago on the emerging 
issue and the emerging importance of hydrogen.
    A hydrogen economy, Shell believes, provides benefits 
through economic growth, job development, investment 
opportunities, and a sustainable, secure energy supply. 
Additionally, hydrogen can directly address air pollution and 
provide many pathways to address the reduction and eventual 
elimination of greenhouse gases.
    The primary challenges, at this time, are to further 
develop fuel cell vehicle technology and achieve mass 
production levels. I believe the development of a Hydrogen 
Prize can supplement and extend the great work that is already 
being done in these areas.
    The goal of providing hydrogen as a fuel on a significant 
scale requires a coordinated undertaking within all levels of 
government, the automotive industry, the energy companies, and 
the supply network.
    From a fuel supply perspective, there has been a hydrogen 
economy, and is a hydrogen economy, and hydrogen infrastructure 
in place for decades. Globally, 50 million tons of hydrogen are 
produced and consumed every year, mainly in our own refineries 
and chemical plants, and mostly used for producing clean 
traditional fuels. Just to put this number in perspective, this 
amount of hydrogen could power all the family vehicles in the 
United States if they were fuel cell vehicles.
    Additionally, most areas of significant population are 
close to hydrogen production facilities now. The challenge, 
then, is to bring hydrogen into the everyday lives of consumers 
in convenient locations.
    [Slide.]
    This can be done, and it is already being demonstrated 
conceptually, at Shell's Benning Road station right here in 
Washington, DC, which you can see on your monitors here. And I 
would also point out that this is an example from Shell, who 
has been working on this over seven years, of an example of 
actually going out and doing it and trying to make this happen. 
And I would also invite those of you who haven't had the 
opportunity to come out and visit the Shell hydrogen station on 
Benning Road to do so, to drive a fuel cell car, and to fuel up 
with hydrogen.
    Our Benning Road station is a part of a longer-term goal of 
establishing a number of large-scale, integrated pre-commercial 
activities, which we call ``Lighthouse Projects.''
    Last year, through the passage of the Energy Policy Act, 
Congress demonstrated a commitment to producing commercial fuel 
cell vehicles and developing a hydrogen infrastructure. I would 
like to commend Representative Inglis for his leadership in 
introducing H.R. 5143. The Federal Government can have an 
important role in fostering technological innovation. The 
creation of the Hydrogen Prize is an important step in that 
direction.
    In support of an H-Prize, I want to highlight three areas: 
leadership opportunities and significance of visible 
Congressional support, involvement and innovation across a 
broader community, and commercialization and the growing global 
market.
    First, the H-Prize will raise the profile of hydrogen on 
the national stage and demonstrate visible leadership from 
Congress on an important issue for the economy, the 
environment, and from a national security perspective. The 
Energy Policy Act helped the hydrogen economy emerge in a 
larger, more substantial way. A Hydrogen Prize demonstrates 
further leadership to increase public awareness around 
hydrogen, thereby working towards a successful evolution of 
hydrogen commercialization.
    Secondly, an H-Prize will stimulate involvement and 
innovation across a much broader community than the Department 
of Energy programs or funding alone can provide. The incentives 
outlined in the H-Prize Act are competitive, but it is 
imperative that the H-Prize is well managed so we do not weaken 
the Department of Energy program when we are appropriating 
these funds. It is important to expand on the progress being 
made to the implementation of the energy bill and continue to 
develop clear, consistent government policy for hydrogen so the 
market can thrive.
    One of the strongest points in support of the H-Prize is 
the ability to stimulate involvement and innovation across a 
much broader community than it is possible with DOE funding. 
For example, student competitions at universities, at small 
labs, at start-up companies, and my favorite is even the folks 
in their garages will be able to participate, which has been a 
hallmark of American ingenuity and competitiveness in so many 
other pioneering areas. And perhaps not just in the United 
States, but such a prize would likely attract interest and 
talent from around the world.
    Finally, an H-Prize can only accelerate commercialization 
and support the growing global market. The race for global 
dominance in the hydrogen economy has begun. Shell believes 
that hydrogen will likely be widely used commercially within 
the next generation in the United States, Western Europe, 
China, and Japan. An H-Prize can play a role in assuring U.S. 
leadership in the development and deployment of a hydrogen 
economy by attracting world talents to the United States. The 
market applications are the ultimate prize for many of the 
participants, however, the criteria established to award prizes 
needs to be considered well in order to properly stimulate 
innovation in the marketplace. The scope of the prizes awarded 
through the H-Prize also need to be well defined and well 
thought out.
    This issue is more important than ever, and we need to do 
it right.
    Thank you all for the opportunity to testify here today. 
This concludes my testimony. I would be happy to answer any 
questions you have.
    [The prepared statement of Mr. Baxley follows:]

                  Prepared Statement of Phillip Baxley

    Good morning Mr. Chairman and Members of the Committee, thank you 
for the invitation to testify today. I am Phillip Baxley, President of 
Shell Hydrogen LLC, with responsibility for Shell's hydrogen business 
activities in North America.
    Shell Hydrogen's global business was set up more than seven years 
ago to pursue and develop business opportunities related to hydrogen 
and fuel cells. Our goal is to bring hydrogen into commercial use for 
transportation and other related needs. Through existing and planned 
demonstration projects Shell Hydrogen is bringing hydrogen out of its 
industrial settings to places where consumers can access it as a fuel 
for their vehicles.
    You are all aware of the energy challenges we face here in the U.S. 
and around the world. In North America, Shell is a leader in the 
development of unconventional hydrocarbon resources, like shale oil and 
tar sands, as well as renewable energies and hydrogen technologies. We 
remain committed not just to increasing the world's energy supply, but 
to broadening its portfolio as well. A national energy portfolio that 
includes significant use of hydrogen fuel and fuel cell applications 
will make lasting contributions to our future energy needs. Last year, 
through the passage of the Energy Policy Act, Congress demonstrated a 
commitment to producing commercial fuel cell vehicles and developing a 
hydrogen infrastructure. We are pleased to see further congressional 
support through legislation complementing ongoing activities put in 
motion by the energy bill.
    The goal of providing hydrogen as a fuel on a significant scale 
requires a coordinated undertaking within all levels of government, the 
automotive industry, and energy companies. Most of the research and 
development attention is focused on finding an inexpensive on-board 
hydrogen storage solution, and I hope the development of a hydrogen 
prize can supplement the work that is already being done. We must also 
address the technical and operational challenges through public-private 
partnerships and identify what is needed to accelerate the 
commercialization of hydrogen fuel cell technology. In many respects, 
hydrogen vehicles must be part of our primary focus because it is the 
vehicles themselves that are furthest from commercial readiness.
    From a fuel supply perspective, there has been a hydrogen economy 
and hydrogen infrastructure in place for decades. Globally, 50 million 
tons are produced and consumed every year, mainly in our own 
refineries, for producing clean traditional fuels. To put this number 
into perspective, this amount of hydrogen could power all the family 
cars in the U.S. if they were fuel cell vehicles.
    Additionally, most areas of significant population are close to 
hydrogen production. [Images 1 and 2] Now the test is to bring hydrogen 
into the everyday lives of consumers in convenient locations.
    This can be done and is already being demonstrated, for example, 
with our Benning Road station here in Washington, D.C. [Image 3] As you 
may know, President Bush and a number of Members, staff and agency 
officials have visited the facility--over 1,400 visitors since the 
November 2004 opening.
    The Benning Road station is part of our longer-term goal of 
establishing a number of large-scale, integrated pre-commercial 
activities, which we call ``Lighthouse Projects.'' We are focusing on a 
limited number of projects--mainly transportation applications 
involving hundreds of vehicles and several combined hydrogen and 
gasoline refueling stations. Because significant numbers of vehicles 
are required for `real world' operational experience in order to 
validate network supply and refueling operations, we are focused on the 
northeast and west coast corridors at this time. Before the end of the 
year, we plan to have two more stations on-line in New York and Los 
Angeles.

The Hydrogen Prize Act of 2006

    I would like to commend Representative Inglis for his leadership in 
introducing H.R. 5143. The Federal Government can have an important 
role in fostering technological innovation--the creation of the 
Hydrogen Prize is an important step in that direction.
    My remarks will cover the following areas:

        1.  Leadership opportunities and the significance of visible 
        congressional support.

        2.  Involvement and innovation across a broader community.

        3.  Commercialization and the growing global market.

    First, the H-Prize will raise the profile of hydrogen on the 
national stage and demonstrate visible leadership from Congress on an 
issue that is important for the economy, the environment and from a 
national security perspective.

    A hydrogen economy will not emerge by virtue of technology alone. 
Any development will be a combination of technology, economics and 
policy decisions.
    The Energy Policy Act helped the hydrogen economy emerge in a 
larger, more substantial way. A Hydrogen Prize demonstrates further 
leadership to increase public awareness around hydrogen, thereby 
working toward a successful evolution of hydrogen commercialization.
    Shell sees hydrogen as an important part of our future energy mix. 
To market hydrogen within the foreseeable future, we working along two 
channels--first, to increase public awareness of hydrogen-based 
projects and further explore retail hydrogen fueling stations, and 
second, by actively supporting technological development essential for 
rendering hydrogen accessible to a broader market. We work with 
partners to promote and support the development of the infrastructure 
and technical solutions that the world needs because we know we cannot 
do it alone. On the basis of raising the awareness of hydrogen and 
promoting it as a stable energy carrier, this legislation will provide 
an opportunity to address these challenges, as well as allowing for new 
technical jobs and building new supply chains.
    There are several critical hurdles to overcome before hydrogen can 
reach its full potential in the market. Shell will continue to work 
together with our partners in the industry and different areas of 
government to achieve sufficient levels of mass production to drive 
down costs while meeting the energy needs of the country. It will be 
helpful to open up to a broader group through the management of a prize 
because prize incentives have a place in conquering our emerging 
technology hurdles.

    Secondly, an H-Prize will stimulate involvement and innovation 
across a much broader community than the Department of Energy programs 
and funding alone can provide.

    The incentives outlined in the H-Prize Act are competitive, but it 
is imperative that the H-Prize is well managed so we do not weaken the 
existing Department of Energy program budget when appropriating these 
funds. It is important to expand on the progress being made through the 
implementation of the energy bill and continue to develop a clear, 
consistent government policy for hydrogen that the market can thrive 
in.
    One of the strongest points in support of an H-Prize is the ability 
to stimulate involvement and innovation across a much broader community 
than is possible even with DOE funding. For example, student 
competitions, universities, small labs, startup companies, even folks 
in their garages can participate--which has been a hallmark of American 
ingenuity and competitiveness in so many other pioneering areas. And 
perhaps not just in the U.S., but such a prize would likely attract 
interest and talent from around the world as well.
    A hydrogen economy provides benefits through economic growth, job 
development, investment opportunities, and a sustainable secure energy 
supply. Additionally, hydrogen can directly address air pollution and 
provides many pathways to address the reduction and eventual 
elimination of greenhouse gases. The primary challenges at this time 
are to further development fuel cell vehicle technology and achieve 
mass production levels. Commercialization will not be achieved without 
these two components working with our effective utilization of 
refueling facilities and supply systems.
    The current Department of Energy funding and fuel validation 
program are extremely important technology development programs. To 
move research to reality now requires further attention to the bridge 
that needs to be built in the next ten years from small-scale 
demonstrations toward commercial operation.

    Finally, an H-Prize can only accelerate commercialization and 
support the growing global market.

    The race for global dominance in the hydrogen economy has begun. 
Shell believes that hydrogen will be widely used commercially within 
the next generation--in the United States, Western Europe, China and 
Japan. An H-Prize can play a role in assuring U.S. leadership in the 
development and deployment of the hydrogen economy by attracting world 
talents to the U.S.
    The benefits of hydrogen as a clean, competitive energy solution 
can be delivered to millions of people around the world in the next 
twenty years. Any innovation requires time because of technical issues, 
public acceptance and practical experience.
    It is often said that developing the hydrogen economy will be a 
marathon, not a sprint. The course will not be completed quickly; we 
need to prepare for a long commitment. This is an evolution; we cannot 
switch to the new vehicles or construct a whole new infrastructure of 
hydrogen filling stations and distribution networks all at once.
    As with all energy transitions, this transition will take time and 
occur in phases. Technological advances and market acceptance are 
expected to define the phases. In addition, a corresponding education 
effort in hydrogen safety will ensure public readiness as hydrogen 
becomes increasingly available.
    The use of hydrogen will accelerate over the next 10 to 20 years as 
the technologies and infrastructure evolve. The market applications are 
the ultimate prize for many of these participants. The criteria 
established to award prizes needs to be well understood in order to be 
valuable in the marketplace. The scope of the prizes awarded through 
the H-Prize Act need to be well defined. This issue is more important 
than ever and we need to do it right.

Conclusion

    Increased use of hydrogen as a fuel provides benefits to energy 
security, the environment and economic growth. Developing a Hydrogen 
Prize is attractive from a public policy standpoint because hydrogen 
can be produced from a wide range of primary energy sources--finding 
the most efficient and marketable way to do this is definitely 
something the government is in the position to promote and lead. The 
future is in our hands and the obstacles can be overcome if we make the 
right choices about hydrogen today.
    Thank you for the opportunity to appear before the Committee today. 
This concludes my testimony. I would be pleased to answer any questions 
you may have.



                      Biography for Phillip Baxley

    Phil Baxley is President of Shell Hydrogen LLC and General Manager 
of Business Development for Hydrogen in North America. Shell Hydrogen, 
a unit of Royal Dutch Shell's global Renewables and Hydrogen business, 
was established in 1999 to pursue and develop business opportunities 
related to hydrogen fuel and fuel cells. Mr. Baxley has been with Shell 
Hydrogen for six years, with prior Shell assignments in Exploration and 
Production, Business Development, Research & Development and 
Engineering. Before joining Shell, he was an Environmental Consultant 
with Intera Technologies of Austin, Texas. Mr. Baxley has degrees in 
biomedical engineering (Rice University) and chemical engineering 
(University of Florida) and serves on the Boards of Questair 
Technologies and the National Hydrogen Association.

                               Discussion

    Mr. Inglis. [Presiding.] Thank you, Mr. Baxley.
    The Chairman put me in the Chair, so that means I get to 
ask questions first, which is a wonderful opportunity.
    And I would take us back to 1957. Sputnik has just been 
launched, and you know, maybe it doesn't matter. Maybe we 
should just let the Russians go to the moon, and perhaps the 
market will come up with a solution. Perhaps someone will want 
to go to the moon and compete with the Russians. And maybe it 
doesn't matter. Maybe the government doesn't need to do 
anything.
    That is not exactly what happened in 1957 and following. 
What happened was we in America responded and began an enormous 
race, a race that has benefited us ever since with all of the 
technology that we are enjoying even as we sit here.
    So to those that missed the national security implications 
of our current posture from reliance on a fuel source that we 
don't control, I would encourage them to think beyond the 
possibility that maybe the market can come up with a solution 
to that. Perhaps there is a role for government in getting us, 
as quickly as possible, beyond this danger point that we are 
in.
    So that is not a question. That is further commentary.
    But Mr. Baxley, why is it important to accelerate the 
commercialization? Maybe the market is just going to get there. 
The market, as you said, is the prize. Why accelerate to 
commercialization?
    Mr. Baxley. Well, for us, for me, as a businessman, Shell 
is in this as a business, and we view hydrogen, biofuels, 
solar, wind, all as business opportunities for the future. We 
see the need for those businesses. And so in any of those 
businesses, we are looking for opportunities as to how do we 
move that towards commercial reality sooner than later. How do 
we take those investments and make them real? So for hydrogen 
specifically, I think the challenge is, a lot of--in a lot of 
cases, there is great technology work being done. There is a 
great deal of work being done on how to make this happen within 
companies, within the government, but I think there is also a 
need to address many of the other aspects of hydrogen. That is, 
raise the awareness on the part of the public, in terms of 
consumers about hydrogen and the realities, and the H-Prize is 
one way, among many, that we might do that.
    So one of the attractive features of us as the Hydrogen 
Prize, and by the way, the Hydrogen--a Hydrogen Prize is 
something that we in Shell have been thinking about, actually, 
for some time would be a good motivator. If done properly, a 
Hydrogen Prize would be a good motivator to inspire to engage a 
much broader community to work on not only the technical 
challenges but also to drive to bring this to reality. Because 
what we found is that when you get technology to the 
marketplace, that is when the real innovation happens. So as 
soon as possible, they are looking for ways to inspire people 
to put the technology, to get it applied, and let the 
innovation happen after that.
    Mr. Inglis. Dr. Diamandis, is that inspiring the public, 
what you are talking about, with a paradigm change?
    Dr. Diamandis. It is, and the question, sir, is the prize 
has to be simple and well defined. And for example, when we did 
the Ansari X Prize, there were so many different ways we could 
go. And there is an issue of what I call sufficiency. We didn't 
shoot, for example, for the Prize to go to orbit. In fact, 
originally, we were shooting for a Prize to go to 100 miles 
altitude, and we backed it off from 100 miles to 100 
kilometers, 62 miles. Most people don't know the difference 
between the two, but we did. The energy requirements were 
significantly more. And by taking 100 kilometers and three 
people, which took us a year of work to figure out that one 
crisp, clear goal. We were--it was achievable. It was 
sufficient--it was an issue of sufficiency. It was sufficiently 
large enough to capture the passion and get things going. And 
now that that is in place, the industry has ignited. We are 
talking to NASA about a $50 million orbital prize.
    So my question is, you know, to pick the right problem to 
solve to get people thinking about this stuff differently. In 
space tourism, or personal spaceflight, 10 years ago, was a 
laughable matter. People, you know, thought it was this far 
away thing, not possible. The--you know, the Ansari X Prize 
brought it into, ``Oh, yeah. It is now possible.'' And it 
changed the way people thought about that.
    So I would say in issue of energy independence and so 
forth, you know, what is that right first prize that is 
achievable in the near term and, once achieved, then ignites 
people and people say, ``Oh, of course we can get independent 
of oil. Of course we can reduce CO2 emissions.'' So 
I--those are my thoughts on that.
    Mr. Inglis. Thank you.
    I think my time has expired.
    Dr. Lipinski.
    Mr. Lipinski. Yeah. Thank you.
    Thinking about the X Prize makes me go back to--it probably 
was the late '70s, not that anyone remembers the TV show 
``Salvage 1'' where, essentially, that was it. Some people put 
together in their backyard a--some sort of rocket ship. That is 
about all I remember about it, but it certainly, as a kid, 
really got me even more interested. I was interested in the 
space program and everything, but that idea really did resonate 
with me. I don't think it resonated with too many viewers, 
because I don't think it was on too long, but--so I like that 
idea.
    But I want to go to Mr. Baxley who sort of brought this up 
and suggested that we will have people with this H-Prize, you 
know, working on--in their garages. And it will bring all kinds 
of people into working on this hydrogen project because of the 
H-Prize.
    My big question is: is it going to really be--I want to 
hear what everyone has to say about this. Okay. Mr. Baxley, 
from Shell, certainly Shell is on a different--completely 
different playing field than someone in their garage or any 
other researchers probably. Who is really going to be inspired 
to get involved in this? Is it actually going to wind up being 
the big corporations who are already doing some of this 
research who are really going to be the ones who are doing 
this? Or is this--and so it is not going to really make a 
difference. Or are there going to be other people who the prize 
actually gets them interested in it, and do they actually have 
a chance to make the type of breakthrough that someone with a 
company with a large amount of money behind it has the ability 
to do?
    So I just wanted to go and I want to ask each of the 
witnesses what their thoughts are on this. So we will start 
with Mr. Diamandis.
    Dr. Diamandis. Thank you, sir.
    I think, again, if the prize is well structured and 
dramatic enough, there are enough billionaires and multi-
millionaires out here that would love to go and win this. Paul 
Allen gives credit to the X Prize for the $25 million 
investment he put into SpaceShipOne's development. He read 
about it on the internet and said, ``Wow, this is a really cool 
thing.'' You know, ``Who can I get to go and win this?'' And he 
teamed with Burt Ratan, who had presented it to him, and he 
went and pursued this.
    So again, it has to be something that is dramatic. It has 
got to be something that evokes heroism. And it can't just be 
about a technology. You know, GE's efficient refrigerator did 
not make front pages, but humans risking their lives and doing 
something amazing does.
    Dr. Bodde. Sir, I recently had the privilege of talking to 
a group of high school students in Greenville, South Carolina, 
and this was after Congressman Inglis had just introduced the 
idea of the H-Prize. And I think, starting not from the 
billionaires but from the other end of the market, I want to be 
able to look at a class of students and say, ``Look, this is 
important stuff, and there are career opportunities for you in 
this. And if you are good enough, and I want all of you to be 
good enough, you can win this prize, and here is what it is. 
And it is going to be available for you, and you can work your 
way through this lengthy pipeline, from difficult science 
classes to difficult college science classes to a doctorate to 
a research institute, and you could win this thing.'' I want to 
be able to say that. And if I can say that with credibility and 
people all over the country can do that, I think we will have 
considerable motivation.
    Mr. Lipinski. Dr. Greene.
    Dr. Greene. Well, I think I agree with both of these 
points. Entrepreneurs, with some money to risk and the desire 
to take a risk and see if they can achieve, that is one. People 
at--professors at universities who might be inspired to try 
this with an idea that doesn't require a lot of money but is 
something no one else has thought of. Through--I think the 
motivation for a large company like Shell and their research 
laboratories is smaller but still there. They would like to win 
the prize, I think, and get the recognition for that. Of 
course, for us, National Laboratories, we are specifically 
excluded, but I think that is okay.
    Mr. Lipinski. Well, Mr. Baxley, does it make a--does this 
really make a difference to Shell? And the other question would 
be--I would--I don't know enough to know specifically, but I 
would imagine, okay, you are with Shell Hydrogen. There must--
you must be at a point and have information, have the research 
done that would put you ahead of others, at this point, being 
able to reach the--this prize. I--so does it make a difference? 
You had said it would make a difference. So for a second 
question, do you think your company and other companies are 
probably far ahead of anyone else in being able to reach this?
    Mr. Baxley. Well, let me just make a couple of comments.
    I think, first of all, Shell, very much, is focused on, you 
know, how do we bring the fuels our customers are going to need 
to the market for the 15,000 retail outlets we have in the 
country. How are we going to make a business out of that? But 
there are many, many more aspects to doing that. This is not 
just about the technology. It is about the market acceptance. 
It is about all of the codes and standards that have to be 
developed. It is about awareness on the part of fire marshals, 
awareness on the part of consumers. It is really an exposure of 
all of this stuff that has to happen, and we are working on 
that, not just on technology but we are working on outreach 
programs through the National Hydrogen Association and others. 
But the Hydrogen Prize, to us, is much more about raising--
simply raising the debate, raising the dialogue, raising the 
awareness that hydrogen is not only challenging, but is also 
attainable, and it is also something that is something that 
this country should pursue as one option, as one big option, 
and try to make that happen. No assurances it will happen. We 
are committed to it. The Hydrogen Prize is really a testament 
to the government and to the government's leadership in trying 
to make that happen, not only in the way that it inspires 
entrepreneurs to participate. I will give you a specific 
example for Shell Hydrogen. We are not only doing hydrogen 
stations, we are the only ones setting up joint venture 
companies to work on technologies with other partners. We also 
have set up two venture funds, one here in North America, and 
one in Europe, and we are setting up one in Asia. Those venture 
funds that we invest with other companies specifically for the 
purpose, not only of understanding what other technologies are 
out there, what other opportunities there are to invest in, but 
to seed the things that need to happen that--we can't do all of 
that ourselves. There are so many things that need to happen. 
And such a large undertaking is moving--this is really an 
unprecedented undertaking, if you think about it, to move from 
where we are with petroleum-based fuels, to move to a hydrogen 
fuel infrastructure with hydrogen-fueled vehicles. There are so 
many aspects to that. A Hydrogen--the Hydrogen Prize touches on 
many, many of those things, not only in technology, not only 
public awareness, it also touches on an incredibly important 
issue to us, as a business, and that is inspiring people like 
you, Congressman, but scientists and engineers we are going to 
need in the future to--aspiring them to get into this business. 
So many, many positive aspects from a fairly modest investment.
    Chairman Boehlert. Thank you very much.
    Mr. Lipinski. Thank you.
    Chairman Boehlert. The gentleman's time is expired.
    We want inspiration and incentives, and this is a 
combination of the two.
    Dr. Diamandis and Dr. Greene, here is one for you.
    You both mentioned the important need to clarify and 
clearly divide responsibility for the Prize between DOE and 
whatever entity is chosen to administer the Prize. First, we 
may need to make even clearer that we do expect an outside 
entity to administer the award. At what division do you 
recommend? And what if DOE established a criteria for the Prize 
and some criteria for selecting judges, such as avoiding 
conflicts of interest, which is a natural, and then let the 
administering organization pick the judges and the winner. 
Would that work? And does that description leave out any task?
    Dr. Diamandis.
    Dr. Diamandis. Thank you, Mr. Chairman.
    I think your point is a very, very important one.
    The DOE, using them as the example, should really be 
defined--it should be, really, in charge of providing the 
capital, the Prize money, and helping to define what are the 
problems they want to solve. After that, I believe that the 
hand-off should take place to an organization that can manage 
and run the Prize.
    What do I mean by that?
    The rule development is something that from--in our 
organization, we bring--my vice chairman, for example, is the 
Fellow Bob Weiss, who has produced 26 motion pictures. The 
human drama element, the story line of the Prize is very 
critical. The technology development is the package in the 
middle and wrapped around it is the human story. And if that is 
not taken properly--I--so I don't think the engineers in DOE 
are going to worry about that part, how it is portrayed on 
television or the front page in newspapers or talked about on 
the--around the water cooler. And in fact, it is that packaging 
that really allows the marketing and the expansion and 
generates the paradigm shift. The technology comes along for 
the ride.
    So the rules development, I agree with the comments made 
earlier, that the judging should be completely independent, so 
it is a group--the outside managing organization selects 
qualified judges----
    Chairman Boehlert. So the administering organization picks 
the judges----
    Dr. Diamandis. Yes.
    Chairman Boehlert.--and the winner?
    Dr. Diamandis. Yes. Should select the judges. The judges 
would then select the winner. The rules have to provide for 
very clear-cut, measurable results that the judges can say they 
either met or not. Period.
    Chairman Boehlert. So the Prize selection criteria would be 
developed by the administering agency?
    Dr. Diamandis. Yes, sir.
    Chairman Boehlert. Okay.
    Dr. Greene.
    Dr. Greene. I think that is about right. That satisfies my 
concern that despite the fact that the Secretary of Energy is 
obviously a person of great integrity, you don't want to put 
him in the position of being political appointees selecting the 
judges for the technical contests. Rather, that should, I 
think, be done independently so that it is very clear to 
everybody involved there is no politics in this. There is no 
bias. There is no anything. This is going to be a fair and open 
competition. I think that is absolutely essential. And I think 
it is correct that the Department of Energy should say, ``These 
are the things we want to get out of this Prize.'' They have 
very carefully developed an R&D plan that, with consultation 
with industry, with consultation with the universities and all 
across the board, they know what the technical challenges are.
    And I guess my only issue is that it must be that the 
administering organization understand those technological 
questions as well.
    Chairman Boehlert. Another comment?
    Thank you very much.
    Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman.
    I want to welcome the panel. Thank you for your time today.
    There are, as you all know, a number of myths associated 
with hydrogen and the hydrogen economy. And as you point out in 
almost all of the testimony today, we have a long road to 
travel to build the infrastructure, to educate citizens. But in 
particular, in that spirit, I want to focus on the question of 
should the Prize be targeted explicitly at renewable hydrogen 
production. Right now, most of the hydrogen, as I understand 
it, that is produced, is produced by reforming conventional 
fossil fuels. And if that is the road down which we are going 
to travel, I think the benefits are less, obviously, than if we 
move to a--truly a new energy regime, a new hydrogen energy 
regime.
    So I wanted to direct that question at the panel. And also, 
if you could, talk about any technological hurdles that we 
would expect to overcome.
    Maybe I can start from right to left, my right to left, Mr. 
Baxley, and then move across.
    Mr. Baxley. Well, thank you, Congressman.
    I would say that, certainly, Shell believes that the road 
to a hydrogen economy has to go through sustainability, and it 
ultimately has to be delivered--renewable hydrogen. And that is 
a challenge we are working on. I think, and though we haven't 
worked out the--I would fully support that an aspect of the 
Prize has to be about, you know, how do we do that. How do we 
get the sustainable green hydrogen?
    Mr. Udall. Next, Dr. Greene.
    Dr. Greene. I agree with that. I think all of the analyses 
we have done indicate that the cheapest way to make fossil--to 
make hydrogen is from fossil fuels, in the future from coal 
rather than from natural gas, as it is made today.
    I think we face a question as to how important it is to 
keep the price down in--especially in the early stages of 
introduction versus have renewable. But it is clear that if we 
make hydrogen from coal and we don't sequester the carbon, we 
will increase greenhouse gas emissions rather than decrease 
greenhouse gas emissions, even with the efficiency improvements 
that hydrogen fuel cell vehicles would offer.
    Mr. Udall. Dr. Greene, is it--technological research 
suggests that it is easier to sequester that carbon than it 
would be in a conventional power plant today?
    Dr. Greene. Yes.
    Mr. Udall. Yes.
    Dr. Bodde.
    Dr. Bodde. Well, I certainly agree with those comments, but 
I would just add one other thing, and that is that the 
beginning of a hydrogen economy will probably produce hydrogen 
very differently than we will in a mature, steady state 
hydrogen economy, and we ought to allow for that prospect as 
well in thinking about the H-Prizes, because we have to 
remember what these H-Prizes do. This is seed capital. This is 
the very earliest innovation capital into an area. And if done 
right, it springs loose the rest of the whole thing. But if we 
go right for the end state at the very beginning, we may never 
get there. It may be too hard.
    And so I certainly agree with the other comments, but I 
would at least allow a possibility for production of hydrogen 
from fossil fuels, properly sequestered as well.
    Mr. Udall. I apologize if I mispronounced your name.
    But what you are saying is you want to spread the 
technology, get people excited, demonstrate it, and if that 
involves the traditional approaches to producing hydrogen 
today, you think that is a trade-off worth accepting, knowing 
that over time we can move to the more visionary hydrogen 
economy that we all are excited about?
    Dr. Bodde. Yes, sir. I believe that is the case. I believe 
there will be a transition period in which we will have to do 
things that will be, perhaps, less than optimal from the 
ultimate hydrogen economy perspective, but those will fade 
eventually.
    Mr. Udall. Doctor?
    Dr. Diamandis. Sir, one of the best points about prizes is 
if they are properly structured, and I can't stress that 
enough, they don't prejudge the solution, and they allow for 
radical ideas to come bubble up from outside the normal 
industry. Again, one of the difficulties, of course, is that we 
are humans and we have developed industries, and we have--we 
tend to see things within the way we are used to. But if a 
prize is properly structured and the rules are set, you really 
have the ability for something to blindside you out of no 
place: genetically engineered algae or microbes that generate 
hydrogen or new physics, a new chemistry that comes from a 
laboratory some place in the middle of, you know, a small town 
in India. You know, those are the things that you hope for. And 
everything--the entire success of the Prize 5 or 10 years out 
all depends on what is done in the first six to 12 months of 
writing those rules. But if the rules are written properly, 
great. But the chances are very much against those. And there 
are some great stories I can tell you about rules properly--not 
properly written that would waste $100 million.
    Chairman Boehlert. Well, we can tell you some of those 
rules, too.
    Mr. Udall. I would----
    Chairman Boehlert. The gentleman's time has expired.
    Mr. Rohrabacher.
    Mr. Rohrabacher. Thank you very much, Mr. Chairman.
    I would like to thank you, Mr. Chairman, for your 
leadership on this and other issues dealing with energy and 
trying to find answers to the challenges that we face in the 
future.
    And special thanks to Chairman Inglis and the leadership he 
is providing specifically on this issue. And I look forward to 
working with you and developing this concept and getting this 
through the process.
    Let me start, however, with one fundamental question about 
hydrogen that is actually stemming from Mr. Udall's questions, 
and that is: we do have to have a fundamental other energy 
source in order to make the hydrogen before that becomes 
anywhere near economically feasible, is that correct? Well, 
we--as we just heard. Why is nuclear energy not one of the 
things that is being on the plate here? I mean, I didn't hear 
any discussion about nuclear energy. Isn't that the ideal, if 
we are talking about greenhouse gases, which I may or may not 
be concerned about in terms of global warming, but I may be 
concerned about getting things going into the air for other 
reasons? Isn't nuclear energy the ideal source of energy for 
producing hydrogen?
    This is to the panel. And of course Mr. Diamandis doesn't 
want to comment on that, but what about the other three? And 
then I will have one for you, Mr. Diamandis.
    Dr. Bodde. Well, I--in my judgment, sir, I certainly think 
that is on the table. I certainly think it should be one of the 
competitors. But as my colleagues have said, one does not want 
to prejudge the solution. One wants an open competition for 
these kinds of early stage breakthroughs without any bias 
toward one or another of the contestants.
    Dr. Greene. There are, essentially, two pathways that are 
being considered in the research program with respect to 
nuclear energy. One is nuclear energy via electrolysis to 
produce hydrogen. That has very serious cost problems. Nuclear 
energy is a relatively expensive way to make electricity in the 
first place, and electrolysis is currently the most expensive 
way to make hydrogen, so you have a very difficult problem on 
that path.
    In the long run, there are thermochemical processes that 
are being worked on, but most, including the National Academy 
report, consider these to be among the most long-term future 
technologies for producing hydrogen. That would be where you 
would like to go, an efficient means of using nuclear energy to 
thermochemically dissociate water and produce hydrogen. But 
that is two, three--some number of decades off, according to 
best judgment.
    Mr. Rohrabacher. However, the use of nuclear energy to do 
this would--I mean, we have that technology and that knowledge 
now, correct?
    Dr. Greene. Via electrolysis.
    Mr. Rohrabacher. Right.
    Dr. Greene. It is just very expensive.
    Mr. Rohrabacher. How expensive are we talking about?
    Dr. Greene. I will have to get back to you on that, but I 
think it is several times more expensive than, say, producing 
from coal or natural gas.
    Mr. Baxley. Congressman, I appreciate you raising that 
issue, because the point I want to make, just to reiterate, is 
that we view hydrogen very much like we do electricity. It is 
what I call ``liquid electricity.'' So hydrogen is a 
universal--the universal power fluid. And the attractiveness of 
hydrogen is that it allows for the potential to make fuel and 
other uses from a wide diversity of domestic supply. Nuclear is 
just one of them.
    Mr. Rohrabacher. Right.
    Mr. Baxley. I couldn't tell you whether it is nuclear, 
coal, solar, wind. I can't even predict the price of oil a year 
in advance, so I want to--don't want to prejudge that, but 
certainly nothing, that we know of now, and certainly nuclear 
and coal are two obvious ones that we have large domestic 
reserves of. They are not off the table.
    Mr. Rohrabacher. Okay.
    Mr. Baxley. But in the near-term, I think, you know, we are 
more pursuing how do we make sure it is safe, how do we make 
sure it is available for the customers, how do we make it 
affordable, and in the long-term, how do we make it 
sustainable.
    Mr. Rohrabacher. All right.
    Well, let me put, for the record, Mr. Chairman, that the 
high pressure helium reactor that I have mentioned in this 
committee once before offers the production of energy and 
electricity. This is a new reactor system developed by General 
Atomics in San Diego, which currently has reactors working in 
Japan and in one other location. The--this reactor, and I 
remember that you had followed up on that question the last 
time we had a hearing on this, offers an opportunity to provide 
that energy without the byproduct of plutonium, which actually 
this reactor actually eats plutonium, so thus we could produce 
hydrogen and energy in the third world without leaving the 
remnants over that could be used for nuclear weapons.
    In terms of the actual Prize itself, Dr. Diamandis, you 
have been very successful. I remember we had a meeting in, I 
think, my backyard on this years ago. You have been very 
successful in the goals that you have set out and the 
methodology that you have achieved, but you were very specific 
in what you wanted to have achieved. And it was the first 
people who achieve the goal, rather than having a panel of 
judges deciding which of many people have met the standards, do 
you find this approach so far to be less definitive than what 
your operation was?
    Dr. Diamandis. Good to see you again, Congressman 
Rohrabacher.
    Mr. Rohrabacher. Good to see you.
    Dr. Diamandis. The--as I mentioned, understanding the 
problem set was very important for us. For example, for the 
Ansari X Prize, it wasn't developing a new rocket engine. You 
know. It was--the problems we were trying to solve were that 
the public didn't believe that private people could fly into 
space. That was the biggest problem. The capital was not ever 
being invested in this arena. The regulatory laws didn't exist 
to allow private industry to do these things. These were the 
problems that we were--we decided what the problem statements 
were, okay, and whether that comes from DOE or it comes from 
yourselves, the--those problem statements, and then we went 
through this iterative process of coming up with prize ideas, 
taking those prize ideas, testing them with the public, with 
sponsors, with potential contenders, and then iterating it 
until we came up with a clear set of rules. And I do think, 
because of our genetic inbreeding as humans, we compete. And 
that is where--we do the best when we compete, whether it is on 
the football field or whether it is wherever. It----
    Mr. Rohrabacher. Is it important to do the first person who 
achieves this or is it to have----
    Dr. Diamandis. I think you get the----
    Mr. Rohrabacher.--a judgment as to who best achieves it?
    Dr. Diamandis. We have studied this in great detail, and 
our feeling is that having the first person to achieve but 
having a second- and third-place prize as well, but you have a 
frontrunner out there and a second and third place allows those 
who might not think they can win first prize still to come and 
you double and triple the number of competitors that way.
    Mr. Rohrabacher. Thank you very much.
    Chairman Boehlert. The gentleman's time is expired.
    And if I am interpreting correctly what the gentleman said 
in his preamble to his question, he is arguing for a balanced 
portfolio as he introduces the subject of nuclear into the 
equation. And I think we can all agree that a balanced 
portfolio is absolutely essential, and I thank the gentleman 
for acknowledging some leadership. The test of leadership is 
whether there is followership, so I would be more than willing 
to meet with the gentleman in his backyard, as he did with Dr. 
Diamandis, to talk about such things as CAFE standards, because 
I know the gentleman is concerned about national security 
issues, and that is a national security issue.
    Mr. Miller.
    Mr. Miller. Thank you, Mr. Chairman.
    And Mr. Chairman, I am going to be--I am going to try to be 
on my best behavior today.
    I want to pursue questions very like the questions that 
others have pursued and several of you have referred to. Dr. 
Diamandis, you said that a prize should not prejudge the 
solution, that you should account for the possibility that the 
solution that emerges is not one that you expected. Dr. Bodde, 
is it? Dr. Bodde, you said that the outcome should not be 
biased by the prizes.
    I am concerned that by pursuing a hydrogen economy we are 
already biased towards a solution, because the real challenge 
before us, I agree with what Mr. Inglis said that we need to 
have a response to our energy needs that is similar to what 
happened after Sputnik, but I am not sure that that quest is 
for a hydrogen economy specifically but for some approach to 
energy that is sustainable, that makes us energy-independent 
and that does not produce greenhouse gases that I do worry are 
going to affect the climate.
    And not everyone is sold that the hydrogen economy is the 
way to go, that the hydrogen economy will be the winner of the 
various competing forms of energy. The problems are actually 
pretty well described in the prize categories. The advancements 
for hydrogen production. Well, several had pointed out that 
hydrogen is not actually a source of fuel, that there are not 
large reserves of hydrogen. Hydrogen has to be stripped from 
another fuel source.
    At other hearings before this committee, witnesses have 
testified that hydrogen is not actually a source of fuel, it is 
a method of--or not a source of energy, but is a method of 
transporting energy, and we are going to have to find the 
hydrogen from somewhere. And if it comes from finite sources of 
energy, not renewable, sustainable sources of energy, perhaps 
we are not making that great an advance in going to a hydrogen 
economy.
    Also, the present methods for stripping hydrogen out of 
other fuel sources is pretty dirty. And yes, hydrogen may only 
produce water, but the process of getting the hydrogen is 
dirty.
    Hydrogen storage. There have been plenty of suggestions, or 
some suggestions, at least, that leaks hydrogen, that is widely 
being used, that there is a--that there are thousands or 
millions of hydrogen cells in the economy in the United States. 
Small leaks will actually have a pretty significant 
environmental impact there.
    Hydrogen distribution. We have got a lot tied up in an 
infrastructure for fuel that is a liquid on planet Earth, which 
hydrogen is not. Hydrogen utilization may be the easiest 
problem to solve.
    By making this Prize about hydrogen, are we not already 
biasing towards hydrogen as a solution to our energy needs 
instead of the other solutions that may be out there?
    Mr. Boehlert mentioned conservation, mentioned CAFE 
standards. He--I have sponsored the legislation that he is one 
of the principle authors of to require fuel efficiency 
standards I think by 2013 but we can easily achieve with 
existing technologies. Why are we not doing more about 
conservation? Are we biasing our energy approach by focusing 
this Prize and so much that we are doing that focuses on the 
hydrogen economy?
    Dr. Diamandis.
    Dr. Diamandis. Thank you, sir.
    I should say that for many of those same reasons, we 
believe that a new generation of automobiles that significantly 
exceed 100 miles per gallon equivalent is possible, and we are 
looking to launch this year an automotive X Prize along those 
lines, specifically for the--I think a lot of the issues 
driving this legislation: reduction of CO2 emissions 
and energy independence. So you know, we have attacked it 
based--we are looking, in our foundation, to attack that 
specific niche in the near term, because while we are talking 
about, you know, generational solutions here in this committee, 
we are trying to focus on what can be done in the next three 
years. And we do believe a prize for the design, development, 
marketing, and putting cars on the road, not just prototype 
cars, is possible through a prize area.
    What you are talking about is an E-Prize, an energy prize, 
versus an H-Prize.
    Mr. Miller. Right.
    Dr. Diamandis. And it depends, again, where the DOE wants 
to draw the circle. Does it want to draw it specifically on 
hydrogen or around energy? And of course that problem statement 
then defines the competition you are going to run.
    Mr. Miller. Dr. Bodde.
    Dr. Bodde. Yes, sir. I think there are--a lot of the 
ability of the Prize to incentivize a variety of technologies, 
a portfolio of technologies, will come from the way the 
boundaries are drawn on--around what is eligible and what is 
not. That is what I argued for, including enabling 
technologies, battery technologies, for example, that are 
perfectly fungible for all electric vehicles versus hydrogen 
vehicles. Either way, we need good battery technology. Either 
way, we need good energy management systems onboard vehicles.
    So I think if the boundaries are drawn properly that an H-
Prize can incentivize many of the technologies we would want in 
an E-Prize in general.
    Mr. Miller. Do you think, Dr. Bodde, that it should be an 
E-Prize instead of an H-Prize? Is what we are getting at not--
really an energy solution, not a hydrogen solution? Are we not 
biasing this towards hydrogen among the various options that--
we are not sure which one is going to work, which--as you said 
earlier, we shouldn't bias the outcome.
    Dr. Bodde. Well, I think either one would work, quite 
frankly.
    Mr. Miller. An E-Prize as well as an H-Prize?
    Dr. Bodde. Yes, but it is important to do something. It is 
important not to let this whole thing pass and not take some 
action, in my view.
    Mr. Miller. Dr. Diamandis, should it be an E-Prize?
    Dr. Diamandis. It depends on what this--what the Congress, 
what the White House wants to achieve. At the top of the game, 
it may well be both, and I shouldn't--you know, my favorite 
saying is: ``If you are given a choice, take both.'' An E-
Prize, in the near-term, in terms of looking at biofuels and 
renewables and so forth where hydrogen is one of the solution 
sets for the long-term, may be the most efficient way to go.
    I do know we have an immediate problem, and 
entrepreneurship in this country can bring about immediate 
solutions, if we properly incentivize them.
    Mr. Miller. And if I--just one more second, Mr. Chairman.
    Mr. Baxley said that he could not predict petroleum costs a 
year in advance. The people in my district can't predict the 
price at the pump in the morning what it will be at in the 
afternoon, so yes, we do have an immediate problem.
    Chairman Boehlert. You are darn right we do.
    Thank you very much, Mr. Miller.
    Mr. McCaul.
    Mr. McCaul. Thank you, Mr. Chairman.
    I want to thank Chairman Inglis for introducing the 
legislation. I am proud to be an original co-sponsor on the 
bill. I think hydrogen does provide a great promise. And just 
thanks for your leadership on this.
    Universities provide great research and development 
throughout this country. They, in some instances, have a 
relationship with the private sector. In my own district, the 
University of Texas is researching hydrogen fuel cells on 
monies provided by the National Science Foundation and the 
Department of Energy.
    I have got, really, two questions. The first one is: what 
role do you see the universities playing in this, and would 
they qualify?
    And then the second question is probably more technical. I 
have actually driven a hydrogen car, so I--we know the 
technology is there. It is there today. The problem, as I was 
told, is that it costs about $1 million to build one of these 
cars. And I know one of the metals used currently is platinum, 
which increases the cost. But I understand there is also more 
research being done to develop another alloy that could be 
used.
    What do you see--in this Prize, it calls for, in 10 years, 
wheel-to-wheels transformation. What do you see as some of the 
challenges that we need to overcome to bring down that cost? 
And I know, providing the infrastructure throughout the country 
for hydrogen is an important issue as well and the storage 
issue. But if you could sort of comment, the whole panel, on 
the technology challenges and then also on the university 
issue.
    Anybody who wants to answer that.
    Dr. Bodde. Well, let me begin, sir, if I may with the 
university side.
    The--it is first important to realize that technology is 
all a people game. It is all about who you have on the court, 
and that determines the style of play, for any particular 
technology. And so it is helpful to think of universities as 
basically ``people factories.'' They are things that draw 
together not only the people that we move through the pipeline 
in the university, but also people from overseas, guest 
researchers, and so forth, into a community of interest focused 
around a particular problem.
    Now out of that are bound to come the solutions that come 
when you have bright, creative people that are gathered 
together.
    Certainly, university researchers should be included within 
the category of those eligible for the Prize whether they are 
on research grants from the Federal Government or not, in my 
opinion.
    Dr. Greene. I think the greatest technological challenge is 
storing this hydrogen on a vehicle. We have ideas of carbon 
nanotubes. We have metal hydrides. We have high pressure 
compression. We have liquefied hydrogen. All of these have 
very, very serious problems and, in my opinion, are not really 
close to providing the functionality that a consumer expects on 
a vehicle. This is a very, very difficult problem. And it is 
the kind of thing that we almost need a solution that nobody 
has even thought about yet.
    I mean, I--what I say about it is I haven't seen any good 
ideas. So I think this is the most serious technological 
challenge. The platinum and the fuel cells is certainly a 
problem, the durability of membranes and those kinds of things. 
Those, to me, look like the kinds of things that will be solved 
with continued research and learning and that sort of process. 
I am really worried about storage of hydrogen.
    Mr. McCaul. The oil industry will tell you it is a 20-
year--this won't happen any sooner than 20 years. Do you agree 
with that or disagree? I know it is very speculative.
    Dr. Greene. I am surprised they will predict that but not 
the price of oil. I can't say. I am----
    Mr. McCaul. Is it 10 years that we are--this is obviously a 
goal. It is an aspiration. Do you think this is achievable?
    Dr. Greene. I think, you know, what is trying to be 
accomplished here is to make some of those things happen that 
we don't know how to make happen yet, to see what kind of 
creative ideas people will come up with.
    Mr. McCaul. Mr. Baxley.
    Mr. Baxley. As a representative of an oil company, let me 
just make a comment.
    First of all, I do very much hope and anticipate that 
universities would participate in this program. I think it is 
tremendously important for them to do that. I think it is 
tremendously important to overcome a whole host of technical 
challenges. We have got a whole host of them, storage being, 
obviously, the most prominent.
    But in terms of the timing, you know, we didn't set up 
Shell Hydrogen seven years ago just to have fun. We set up 
Shell Hydrogen seven years ago to really figure out how we 
could go forward and make this happen, how we could make it 
into a business. Based on everything we have seen, we are still 
here after seven years. We are growing. We are going to 
continue to be here, from everything I have been told. We see 
the potential for hydrogen to be introduced in the next five to 
seven years in selected markets around the world. So this is 
not a situation where everybody is going to wake up one morning 
and go down to the Chevy dealer and there are going to be fuel 
cell cars. This is going to be more a situation like the Prius 
or the other hybrids where there are going to be limited 
markets where it is going to be introduced. We are working hard 
to figure out how do we introduce that, for example, on the 
West Coast and the East Coast of the United States in, you 
know, the period of the next 10 years.
    So the other point I would make is that we keep saying, you 
know, this is far out, and we use that as an excuse not to work 
on it. It is important. It is important to work on all of the 
other things, the nearer term: better fuels, better fuel 
supply. Biofuels is a solution in the interim. There are other 
solutions, but we have got to make sure that we keep the focus 
on hydrogen, and that is why I think the Hydrogen Prize is so 
important, because hydrogen is the one thing that has so many 
big technical challenges. It is a big step for man. The other 
ones we think we have a clear path to how to achieve in the 
biofuels and some of the other areas, but hydrogen has so many 
challenges, you really need to get all of the brainpower you 
can focused on this----
    Chairman Boehlert. Thank you.
    Mr. Baxley.--as soon as possible.
    Chairman Boehlert. Thank you very much, Mr. Baxley.
    Mr. McCaul. Thank you, Mr. Chairman.
    Chairman Boehlert. Thank you, Mr. McCaul.
    Mr. Green.
    Mr. Green. Thank you, Mr. Chairman. And I thank the Ranking 
Member, as well. We appreciate greatly having the opportunity 
to hear quite an outstanding panel.
    I would like to address my first comment, if I may, to Dr. 
Diamandis. Good morning, sir, and I commend you on how well you 
have handled the X Prize. I was fascinated by it as I saw it 
unfold.
    Dr. Diamandis. Thank you.
    Mr. Green. I am concerned, first, with the separation of 
responsibilities that you make reference to. Could you kindly 
explain how you envision this working, please?
    Dr. Diamandis. Sure. I think that we have a current working 
relationship with NASA that is appropriate to use as a model. 
We assisted the agency in setting up what is called a 
centennial challenge program. They had a law passed and signed 
into law allowing them to do prizes of any size. Prizes above 
$10 million require additional authorization from Congress, but 
they can do larger prizes.
    The way it works is NASA identifies an issue, a problem. We 
are going to be announcing a prize with them next year, which 
is--I mean next week, which is about a $2.5 million prize 
involving lunar landing technology, but I can't say more than 
that. And they basically say we are interested in--here are the 
problems we have. We don't have technology developing in this 
area. We then take that problem and we go out, we write the 
rules, we go bring in the advisors, we set up, actually, 
sometimes if a chunk of money is available, we will say this is 
first and second and third-place prize amounts that we 
recommend, and then we do it in an iterative process where they 
come back and give us their input. It has been a very 
cooperative process so far.
    Once that is set, we go out and find a set of independent 
judges. We go and register the teams. There is a whole legal 
structure of master team agreements, liability issues. It is--
you know, 10 years of work has shown us where the problems have 
been in these scenarios. But that independence, if--we are not 
going to sell our soul, so if the rules that they want are 
something that we believe doesn't make sense, we will say we 
are not interested in managing the competition.
    Mr. Green. In managing the competition and selecting the 
winners, are we limited in terms of who can win?
    Dr. Diamandis. Again, that is a very good question, because 
one of the places you get your greatest, greatest success is 
when you open up. You don't--in the world of aerospace, you 
don't want to turn away those pesky bicycle mechanics from 
Dayton, Ohio, you know, when you have got an aviation 
competition. Because really, again, perfect example, out-of-
the-box thinking coming in to solve and beating the 
government's funded Langley approach.
    So one of the issues we deal with from NASA, for example, 
is is it domestic only. You know. Again, Congress writing a 
check to a Chinese team winning this is not, probably, 
something you want in headlines, but making a global 
competition is where you are going to have the greatest 
benefits. Universities are going to be a key element of this, 
without any question. And you are going to have alliances 
between a Shell and a university and a wealthy backer. That is 
going to happen. You want a free market economy bringing 
together unlikely teams and allowing for crazy ideas to 
surface. Remember, the day before something is a breakthrough, 
it is a crazy idea, otherwise, it is not a breakthrough.
    Mr. Green. Back to your comment about the possibility of a 
winner being less than the most popular person on the planet, 
how do we--how do you envision dealing with that one concern?
    Dr. Diamandis. I am not--when you say the not--I mean, one 
of the things, for example, is that in the Orteig Prize for 
crossing the Atlantic, the most likely winner was Admiral Byrd 
who had flown to the North Pole. And Lindbergh was an upstart. 
In fact, people refused to sell him an airplane, because they 
thought he would kill himself. And the day before he flew, the 
New York Times wrote an editorial and said, ``Mr. Lindbergh, 
please don't fly. You are going to kill yourself and set back 
aviation a decade.'' And he went anyway and, in fact, changed 
the course of history.
    Mr. Green. Well, let me broaden the question. Can a 
government win?
    Dr. Diamandis. I don't think--in the Ansari X Prize, we 
precluded--we, in fact, required that all teams demonstrate 90 
percent or more private financing. We don't want a government 
coming in here and winning it. We wanted teams worrying about 
every penny they spent, and we wanted to drive breakthrough by 
restricting capital. If you have private money, the free market 
economy will drive you to solutions. I mean, the problem is 
that we have had bloated government contracts in the aerospace 
industry, and perhaps in the energy industry as well, I can't 
speak to that effectively, that haven't driven really, you 
know, people considering crazy ideas, because they are afraid 
of taking the risks. You know. I get up and speak in this 
committee about the fact that we are killing ourselves in this 
country by being so risk-averse. Prizes allow risk taking.
    Mr. Green. Thank you, Mr. Chairman.
    Chairman Boehlert. Thank you very much, Mr. Green.
    Ms. Biggert.
    Ms. Biggert. Thank you, Mr. Chairman.
    I just wanted to say that, you know, I think hydrogen is 
certainly a very, very important concept. We--I keep talking 
about let us think hydrogen nuclear and not oil and gas, and so 
this is something that we have got to resolve and very, very 
soon. But I do think that nuclear, too, is--and the cost of all 
of these things, nuclear is so important in the long run, and 
we are working on fast reactors, the recycling, and hydrogen. I 
mean, we have moved forward. I can remember Secretary Abraham 
coming to Argonne, which is in my district, and to look at the 
fuel cells and saying how small--how fast can you make them 
smaller so that they can go into a car so that we will have it. 
And that happened pretty fast. I am amazed. And I have driven a 
hydrogen car, and it was pretty scary, because it is a million-
dollar car right now, and I was driving around the streets of 
Washington, DC, and I wanted to make sure I didn't bump into 
anything. I think I was more worried about that than the fact 
that there was liquid hydrogen under the back seat.
    So I think that, you know, we are moving ahead, and I guess 
just my problem--concerns have been just with the amount of 
money and the--having to refocus from other things, perhaps.
    And Mr. Baxley, you mentioned that Shell has been thinking 
about doing such a--undertaking such a prize. I think that 
would be a fabulous idea. If you have considered it, why hasn't 
it gone forward, and would that--could that still be in the 
future?
    Mr. Baxley. I will, first of all, say that it was one of a 
number of things we considered in terms of how to really engage 
this--the public's imagination, from university sponsorships to 
television advertisements to printed advertisements. So we 
didn't develop it a whole lot further until, actually, 
Representative Inglis suggested that the government sponsor it, 
which we think is a great idea. Actually, we think it is an 
issue of not just industry leadership. It is an issue of 
government leadership, and we think it is important for--I 
think it is really great if we can get both the federal level 
of government and industry all on board by saying this is an 
important issue to sponsor.
    So it is something that, you know, we will look at moving 
forward with. We are looking at how to structure a prize in 
other areas as well. But certainly, on this topic, we are--we 
think it is great if the government can lead the----
    Ms. Biggert. Well, of course, one of the things that we 
hear about that so many of the companies is the huge profits 
that have been made by the oil and gas industry. And why not 
use the profits to pay for such a prize? It would be good PR.
    Mr. Baxley. Well, as I said, we are interested in pursuing 
a prize, and we are interested in sponsoring various 
initiatives to make sure that we move forward in hydrogen, just 
as we are sponsoring many other issues on renewables. So I 
appreciate that comment, and we are seriously considering, you 
know, and will seriously consider being involved in this Prize 
or any Hydrogen Prize going forward.
    Ms. Biggert. It seems like some say that this could be 
argued to be a handout to the industry, and particularly with 
the $100 million prize. And Dr. Diamandis pointed out in his 
opening remarks that he selected a $10 million prize in part 
because he didn't want the big competitors like Boeing and 
Lockheed Martin from being the only competitors. And then do 
you--would you agree--would you all agree with that that this 
could happen because--if it were to be a $100 million prize, 
that the big groups would be--in that case, it was Boeing and 
Lockheed because it was space, but would the big companies get 
into this and--to use the money?
    Dr. Greene. I don't think this is my area of expertise. I 
defer to the----
    Ms. Biggert. Okay.
    Dr. Greene.--people who are in innovation policy and 
setting----
    Ms. Biggert. Well----
    Dr. Greene.--up prizes.
    Ms. Biggert.--Dr. Diamandis, then, do you think that that 
could happen?
    Dr. Diamandis. It is--this may be a little bit different in 
the aerospace industry, which, again, I have much deeper 
knowledge there. But again, my--on how much this Prize should 
be, I think the most important thing that this legislation 
would go--be--could do to go forward is actually allow an 
organization, like the X Prize Foundation or someone else you 
chose, to go through the proper process and not pick a number 
out of the air. We actually go through a process. It takes us 
time to figure out what is the right amount. And we go to the 
innovative--we go to the entrepreneurs. We go to the people in 
the garage. We go to large corporations and find out where--
what peaks their interest. And----
    Ms. Biggert. You are talking about the X Prize now?
    Dr. Diamandis. I am talking about how we do--we are about 
to launch a genomics prize, an automotive prize. The process we 
go through, which part of it includes setting the amount of 
cash, not too large, not too small, and also setting the--
structuring the competition, how it is properly structured. Is 
it one or multiple?
    Ms. Biggert. So don't you think that the Federal Government 
should do the same thing?
    Dr. Diamandis. I do. I think there is a process to go 
through before you launch a 10-year effort. As I said--what I 
said earlier is investment--proper investment in the next few 
months will determine the ultimate success or failure of the 
Prize.
    Chairman Boehlert. The gentlelady's time is expired.
    But to continue on this vein, since we have to do the 
appropriating, and since these are very difficult times, we are 
not short of requests for the limited resources we have. Let me 
put it another way. Would $10 million, as some have suggested, 
be enough of an incentive to accomplish what you hope to 
accomplish with the whole Prize activity?
    Dr. Diamandis. Sir, let me offer out an idea along those 
lines.
    Ten million dollars is a great starting position. One of 
the things that is of greatest value in a prize is when you are 
able to bring a corporate sponsor to the table. So if the 
government were to say, ``We want to do a study to create an H-
Prize or an E-Prize and we are going to put $10 million as a 
starting amount to go this. And then we are going to allow 
corporations to come in and title that.'' So, to use my 
colleague here at Shell, you would want a Shell to come in and 
say, ``Let us make it from $10 million to $50 million. We are 
going to add $40 million to the equation.''
    And why? Because a corporation coming in who spends $10 
million will typically spend $30 million promoting the fact 
that they invested $10 million. Very important, because the 
promotion part of this is----
    Chairman Boehlert. The bill does allow that. Mr. Inglis' 
bill does allow that.
    Dr. Diamandis. Yeah, and I think that is a very important 
part that--and also it may be--one of the things we are 
considering , for example, in our automotive and such is that 
allowing the public to contribute to the amount of the prize. 
They are the ones who want the breakthroughs in the automotive 
industry, want the breakthroughs in energy. And these are 
things we think about night and day in my organization for the 
last 10 years. How do you--where do you get the greatest 
effect? Having a corporate sponsor where it is titled, the X, 
Y, Z, H-Prize, whatever, will give you the greatest benefit. 
You know, we had the Ansari family. I wish we had a 
corporation.
    Chairman Boehlert. Thank you very much.
    The gentleman's time has expired. The gentlelady's time has 
expired. My time has expired.
    It is time for Honda.
    The Chair recognizes Mr. Honda.
    Mr. Honda. Thank you very much.
    And just a comment on disclosure. This Honda was made in 
America.
    And I do have a hybrid Toyota. And all of the questions I 
was prepared to ask have been asked and responded to, but there 
is one thing that does kind of nag at me, and I am sorry I 
missed your initial testimony.
    But at the risk of looking a little ignorant, let me go 
ahead and ask the question.
    It sounds like we are--we want to use taxpayer monies to 
create an incentive program from which, if there are any 
benefits to be accrued from the contest, it doesn't appear that 
there is any return on the investment to the public in terms of 
revenues back to the government in this kind of a program, 
whereas if it were done as you had done it previously, which 
attracted a lot of attention and a lot of sense of competition 
and accomplishments, too, that even though the government 
wanted to sort of insert themselves in the area of security and 
safety, what benefits does the general public accrue in terms 
of return on investments in terms of revenue and--you know, 
because we are looking at the size of the Prize and the kinds 
of prizes that are out there. And I believe in incentives. I am 
a schoolteacher. I believe in incentives, intrinsic and 
extrinsic. But where is the return on investment of this?
    Dr. Greene. I think the major motivation of the government 
being interested in hydrogen has to do with what economists 
would call public goods: protect the environment, energy 
security. And deal with the market failure of imperfect 
competition as the OPEC cartel and the world oil market and the 
problems that causes. These are the benefits, I think, as I see 
it, that the government and the public expect from an eventual 
successful hydrogen-powered transportation and energy system. 
And that is the return that we are looking for, and it is 
trillions and trillions of dollars.
    But as far as return in the near term, I don't know the 
answer to that.
    Mr. Honda. I don't disagree with your response, it is just 
that I think that is what we look at anyway when we try to put 
appropriations or bills together for purposes of R&D at the--at 
least at the nascent stage, and we are looking at also 
considering doing some for developmental stages where we can 
bridge the gap towards commercialization.
    But--yes, sir. Mr. Baxley.
    Mr. Baxley. I think, if I understood the question, and it 
is actually a very, very relevant question. And I have to agree 
with what Dr. Greene said, but I also would point out that it 
is more than just the public good issues. It is more than just 
the environment, the effects of climate change, which we are 
still trying to figure out what that is, and the effects on our 
national security, which are all huge dollar impacts. But I 
would also point out another thing that I think all of you are 
aware of, and that is job creation and new industry creation. 
Hydrogen has the potential to create whole new industries and 
whole new technology platforms, like other transformations, 
that would create jobs. So that is a tremendous benefit to the 
economy. And I viewed the Hydrogen Prize legislation as seed 
money. This is the government putting in a limited amount of 
seed money, and I don't think it has to be $100 million. I 
think something in the order of $10 million would be sufficient 
seed money, presuming that you also get sponsorship from 
private sector and other organizations.
    But the important thing is the leadership putting the seed 
money in and getting it started and helping them to make that 
happen. That is what I think is the important part.
    Mr. Honda. Thank you, Mr. Baxley.
    And to the Chair, if I may, I have a bill called H.R. 1491, 
which addresses incentives in terms of looking at research and 
having--the Federal Government having a role in bringing 
research to commercialization and, at a certain point, engaging 
the private investors at a certain point in time, because there 
are many research that it is going to take more time than the 
private industry are comfortable with. So I figure that we 
should partner with them to bring that research to a point 
where it becomes commercially viable.
    So if you would look at H.R. 1491 and see how that fits 
with your concepts, I would appreciate any feedback that you 
might have, because I believe that in the times when we have 
scarce resources in our country for whatever reason, people can 
argue about why we have scarce resources, I do believe that we 
should invest, as we did in the Internet, on behalf of the 
Federal Government, to promote new ideas and create jobs, as 
you have said.
    Yes, sir.
    Dr. Diamandis. Mr. Honda, I might ask you to think about a 
prize as almost fixed-cost science or fixed-cost engineering. 
You have a specific goal you want to achieve, you don't pay it 
until it is done. If you think about it, you know, it would be 
the most efficient way to implement NIH and NSF type funding 
programs, but clearly you can't do that. But I am just saying 
in terms of use of money for the best public good, it is the 
most highly-leveraged, most efficient way the government could 
ever use its funds.
    Mr. Honda. Thank you. And it helps me feel better about the 
word ``prize'' and leveraging, so that is a good way to think 
about it.
    Thank you.
    Chairman Boehlert. Thank you very much, Mr. Honda.
    And Mr. Wu advises that all of the pertinent questions have 
been asked. He is just here because of his deep and abiding 
interest in the Committee's activities, and we thank you for 
being here.
    And I thank all of my colleagues for being here.
    Now, Dr. Bodde, I can't let this end. Chairman Inglis has 
told me you have got a great story about how your mother 
inspired you to be a scientist. Would you share that with the 
Committee?
    Dr. Bodde. Sir, this happened one summer in 1959, I guess 
it was, driving across Kansas. And of course, those were the 
days where there was no air-conditioning, and so all of the 
windows were open. And mom says, ``Well,'' you know, ``look up 
there. There is a Soviet satellite circling the Earth, and it 
is the duty of every patriotic young American to go out and 
study science and engineering so we can beat the Russians.'' 
Well, sure enough, I went out and studied science and 
engineering, and sure enough, we beat the Russians.
    So the chief lesson I draw from that is: mom is always 
right.
    Chairman Boehlert. You are darn right, and I hope we can 
energize the mothers of America to give that same message to 
the young students and our educational system, because we are 
being challenged as never before. We are still number one, but 
we have got a lot of work to do to maintain that number-one 
position.
    Is there anything else for the good of the order, because 
our distinguished witnesses have other activities? But----
    Mr. Inglis. Mr. Chairman, if I could indulge just a couple 
minutes to----
    Chairman Boehlert. A couple of minutes for the 
distinguished Chair.
    Mr. Inglis.--follow up on your comment and Chairman 
Biggert's comment, they were very helpful, about the amount of 
the Prize, because, you know, my goal in setting a prize, 
initially, is up to $100 million. And of course the Secretary 
has, under our bill, the discretion to do what Dr. Diamandis 
described, and that is to set the amount up to $100 million. If 
in consultation, I would hope with somebody as knowledgeable as 
Dr. Diamandis, the Secretary of Energy decided, ``No, all you 
need is $10 million,'' or maybe you need $10 million from 
government and $50 million from private enterprise, then the 
Secretary has that flexibility under the bill.
    Chairman Boehlert. Yeah.
    Mr. Inglis. It could also enable us to appropriate only 
smaller amounts in the initial year and then larger amounts 
when the Secretary of Energy reports back.
    Chairman Boehlert. Thank you.
    Mr. Inglis. So that is----
    Chairman Boehlert. Point well taken.
    Mr. Inglis.--certainly a doable objective, and working 
with, as I said, somebody as expert as the X Prize Foundation 
could get us there.
    My goal in setting $100 million, as throwing it out there, 
is to avoid a middling Department of Energy program, because a 
middling Department of Energy program is nowhere near the 
threat level that we are dealing with. We are at great risk, 
and it is the kind of risk that Dr. Bodde just described from 
his mother. Her perception of how at risk her country was and 
inspiring her son to get involved in science is the kind of 
reaction we need to be having, less we end up 20 years from now 
in the same spot that we could have--we were after the 1973 oil 
embargo, which is all a lot ado about nothing, and then we fell 
back into our old ways.
    So I think that we can find a way to do this using the 
expertise of people like the X Foundation--X Prize to get us 
there.
    Chairman Boehlert. Thank you very much.
    I don't mean this to be a point-counterpoint, but I do want 
to recognize the distinguished gentlelady, Ms. Biggert.
    Ms. Biggert. Thank you, Mr. Chairman.
    I think when Mr. Inglis talked about making the--in 
frontloading it, that is a very important concept to keep in 
mind, because when we appropriate money, we put it in the 
Treasury until somebody claims it. And those appropriated funds 
really cost us money, because we--right now, the government has 
borrowed $297 billion from the public in 2005, and interest on 
the--on public debt is a major expenditure, so not putting the 
money in prior to, you know, when we need it is important.
    Chairman Boehlert. Thanks for the intervention.
    Thank you all very much, my colleagues, and thank you, 
distinguished witnesses. We really appreciate it.
    Stay tuned.
    Hearing adjourned.
    [Whereupon, at 11:35 a.m., the Committee was adjourned.]

                               Appendix:

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                   Additional Material for the Record




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