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


                                     

                         [H.A.S.C. No. 109-127]

 
ALTERNATIVE ENERGY AND ENERGY EFFICIENCY PROGRAMS OF THE DEPARTMENT OF 
                                DEFENSE

                               __________

                             JOINT HEARING

                               before the

     TERRORISM UNCONVENTIONAL THREATS AND CAPABILITIES SUBCOMMITTEE

                          meeting jointly with

                         READINESS SUBCOMMITTEE

                                 of the

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                              HEARING HELD

                           SEPTEMBER 26, 2006

                                     
[GRAPHIC] [TIFF OMITTED] TONGRESS.#13

                                     

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    TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES SUBCOMMITTEE

                    JIM SAXTON, New Jersey, Chairman
ROBIN HAYES, North Carolina          MARTY MEEHAN, Massachusetts
W. TODD AKIN, Missouri               ADAM SMITH, Washington
JOE WILSON, South Carolina           MIKE McINTYRE, North Carolina
JOHN KLINE, Minnesota                ELLEN O. TAUSCHER, California
BILL SHUSTER, Pennsylvania           ROBERT ANDREWS, New Jersey
GEOFF DAVIS, Kentucky                JAMES R. LANGEVIN, Rhode Island
JOEL HEFLEY, Colorado                RICK LARSEN, Washington
MAC THORNBERRY, Texas                JIM COOPER, Tennessee
JIM GIBBONS, Nevada                  JIM MARSHALL, Georgia
JEFF MILLER, Florida                 CYNTHIA McKINNEY, Georgia
FRANK A. LoBIONDO, New Jersey

                                 ------                                

                         READINESS SUBCOMMITTEE

                    JOEL HEFLEY, Colorado, Chairman
JOHN N. HOSTETTLER, Indiana          SOLOMON P. ORTIZ, Texas
WALTER B. JONES, North Carolina      LANE EVANS, Illinois
JIM RYUN, Kansas                     GENE TAYLOR, Mississippi
J. RANDY FORBES, Virginia            NEIL ABERCROMBIE, Hawaii
JEFF MILLER, Florida                 SILVESTRE REYES, Texas
MIKE ROGERS, Alabama                 VIC SNYDER, Arkansas
JOE SCHWARZ, Michigan                ROBERT A. BRADY, Pennsylvania
CATHY McMORRIS RODGERS, Washington   SUSAN A. DAVIS, California
JOHN M. McHUGH, New York             JIM MARSHALL, Georgia
ROBIN HAYES, North Carolina          KENDRICK B. MEEK, Florida
ROB SIMMONS, Connecticut             MADELEINE Z. BORDALLO, Guam
JEB BRADLEY, New Hampshire           TIM RYAN, Ohio
CANDICE MILLER, Michigan             MARK UDALL, Colorado
TRENT FRANKS, Arizona                G.K. BUTTERFIELD, North Carolina
BRIAN P. BILBRAY, California
               Jenness Simler, Professional Staff Member
                Lynn Williams, Professional Staff Member
                    Brian Anderson, Staff Assistant
                    Heather Messera, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2006

                                                                   Page

Hearing:

Tuesday, September 26, 2006, Alternative Energy and Energy 
  Efficiency Programs of the Department of Defense...............     1

Appendix:

Tuesday, September 26, 2006......................................    53
                              ----------                              

                      TUESDAY, SEPTEMBER 26, 2006
ALTERNATIVE ENERGY AND ENERGY EFFICIENCY PROGRAMS OF THE DEPARTMENT OF 
                                DEFENSE
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hefley, Hon. Joel, a Representative from Colorado, Chairman, 
  Readiness Subcommittee.........................................     2
Ortiz, Hon. Solomon P., a Representative from Texas, Ranking 
  Member, Readiness Subcommittee.................................     3
Saxton, Hon. Jim, a Representative from New Jersey, Chairman, 
  Terrorism, Unconventional Threats and Capabilities Subcommittee     1

                               WITNESSES

Aimone, Michael A., Assistant Deputy Chief of Staff, Logistics, 
  Installations and Mission Support, U.S. Air Force..............     7
Bartis, James T., Senior Policy Analyst, RAND Corporation........    42
Connelly, Richard, Director, Defense Energy Support Center, 
  Defense Logistics Agency.......................................     8
Grone, Philip W., Deputy Under Secretary of Defense for 
  Installations and Environment, Office of the Secretary of 
  Defense........................................................     5
Sklar, Scott, President, the Stella Group, Ltd...................    40
Wagner, Mark, Member, Federal Performance Contracting Coalition, 
  Business Council for Sustainable Energy........................    45
Young, Hon. John J., Jr., Director, Defense Research and 
  Engineering, Office of the Secretary of Defense................     4

                                APPENDIX

Prepared Statements:

    Aimone, Michael A............................................   166
    Bartis, James T..............................................   131
    Connelly, Richard............................................   158
    Hefley, Hon. Joel............................................    57
    Ortiz, Hon. Solomon P........................................    64
    Saxton, Hon. Jim.............................................    59
    Sklar, Scott.................................................    77
    Wagner, Mark.................................................    67
    Young, Hon. John J., Jr., joint with Philip W. Grone.........   138

Documents Submitted for the Record:
    [There were no Documents submitted.]

Questions and Answers Submitted for the Record:
    [There were no Questions submitted.]
ALTERNATIVE ENERGY AND ENERGY EFFICIENCY PROGRAMS OF THE DEPARTMENT OF 
                                DEFENSE

                              ----------                              

        House of Representatives, Committee on Armed 
            Services, Terrorism, Unconventional Threats and 
            Capabilities Subcommittee, Meeting Jointly with 
            Readiness Subcommittee, Washington, DC, 
            Tuesday, September 26, 2006.

    The subcommittees met, pursuant to call, at 2:03 p.m. in 
room 2118, Rayburn House Office Building, Hon. Jim Saxton 
(chairman of the subcommittee) presiding.

OPENING STATEMENT OF HON. JIM SAXTON, A REPRESENTATIVE FROM NEW 
    JERSEY, CHAIRMAN, TERRORISM, UNCONVENTIONAL THREATS AND 
                   CAPABILITIES SUBCOMMITTEE

    Mr. Saxton. Good afternoon.
    Today the subcommittee will hold a joint hearing with the 
Subcommittee on Readiness, chaired by my good friend, Joel 
Hefley, on the alternative energy and energy efficient programs 
of the Department of Defense (DOD). We will also have an 
opportunity to learn about options to affect both energy supply 
and demand in order to foster lasting energy security, which is 
a component to national security.
    Energy security and conservation of natural resources are 
cross-cutting issues of great concern to many members of the 
committee. In fact, we received a bipartisan request signed by 
more than 20 members of this committee requesting this hearing.
    As the single largest consumer of petroleum fuels in the 
United States, the military has an opportunity to serve as an 
early adopter of alternative fuel sources and to offer a 
certain level of market assurance to alternative fuel 
suppliers. Nonetheless, Department of Defense's fuel usage 
represents less than two percent of the total fuel usage in the 
United States. Therefore, we must set realistic expectations. 
The Department of Defense alone cannot shoulder the 
responsibility of formulating and implementing a national 
strategy, nor can it drive the market. However, it is 
appropriate for the Department to exercise the leadership role 
in this area, and likewise for this committee to exercise 
appropriate oversight of those efforts.
    Speaking of leadership, I would like to thank the Vice 
Chairman of the subcommittee, Robin Hayes, for his work on this 
topic. Robin has been productive in bringing about this matter 
to the subcommittee's attention and in engaging the Department. 
This hearing follows a briefing that we had on the subject in 
June, which was also prompted by Mr. Hayes.
    These activities are intended to be the early steps of a 
multiphased oversight effort with regard to the investments in 
the utilization of alternative energy and energy-efficient 
technologies within the Department of Defense.
    Our first panel of witnesses will provide building blocks 
for greater understanding of, one, the steps taken by the 
Secretary of Defense to develop a comprehensive energy security 
strategy; two, how the Air Force, as the largest consumer of 
fuel within the United States Government, is actively 
conducting research, development, testing and evaluation of 
alternative fuels in order to reduce dependency on foreign oil 
and to maintain assured mobility; and, finally, how the 
Department procures and distributes fuel, and the Department of 
Energy Support Center's efforts to assess the current 
conditions of synthetic fuel markets.
    The second panel of witnesses will share their 
nongovernmental perspectives on several items: first, the 
Department of Defense efforts to incorporate energy-efficiency 
renewables and distributed energy programs; second, 
nontraditional options for increasing energy supply; and 
finally, third, options for incentivizing the federal 
contractors and incorporate energy efficiency into government 
programs in order to reduce energy demand in the federal 
sector.
    We would ask the witnesses to begin by providing their 
perspectives on the issues. After the conclusion of the 
testimony, we will open the floor for questions.
    With that, I turn to my friend, Mr. Hefley, for any 
comments that he would like to make.
    [The prepared statement of Mr. Saxton can be found in the 
Appendix on page 59.]

STATEMENT OF HON. JOEL HEFLEY, A REPRESENTATIVE FROM COLORADO, 
                CHAIRMAN, READINESS SUBCOMMITTEE

    Mr. Hefley. Thank you, Chairman Saxton. And I would like to 
begin by thanking you and the Ranking Member and all the 
members of your subcommittee for your support in arranging this 
very important joint hearing.
    As we all know, DOD is the largest single consumer of fuel 
in the United States. And while this may not be the most 
glamorous subject we deal with, energy is critical to success 
on the battlefield.
    Fuel and fuel logistics are an enormous part of the 
Department's operation and budget, as the military consumes 
over 350,000 barrels of petroleum-based fuels per day. And the 
Air Force alone seeks a $600 million increase in the annual 
cost of doing business for every $10 increase in the price of a 
barrel of oil. Although the majority of energy consumption in 
the Department of Defense is for transportation, installation 
energy requirements must also be considered as we work to 
maintain and modernize our military facilities.
    I understand that the Department is actively looking into 
the energy needs across the board and working to find ways to 
reduce energy consumption, improve efficiency and employ 
alternative fuels as they go about accomplishing their mission. 
And I am delighted to be here today and look forward to this 
hearing from our distinguished witnesses.
    Thank you very much.
    [The prepared statement of Mr. Hefley can be found in the 
Appendix on page 57.]
    Mr. Saxton. Thank you, Mr. Hefley.
    Energy conservation is a bipartisan issue, and so we are 
going to turn to Mr. Ortiz for his comments.

   STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE FROM 
         TEXAS, RANKING MEMBER, READINESS SUBCOMMITTEE

    Mr. Ortiz. Thank you, Mr. Chairman. I would also like to 
extend our welcome to our distinguished witnesses.
    The energy needs of this country are one of the most 
important challenges facing our Nation today. Energy needs 
influence our international policies and are key to our 
National Defense Strategy. For this reason, I am pleased that 
we are hearing testimony about what the Department of Defense 
is doing to reduce its needs for external sources of energy.
    The rise in cost of gasoline has affected all Americans, 
and our military is not immune. Rising energy costs are 
consuming a larger portion of the operations and maintenance 
(O&M) budget, so every dollar spent on fuel means fewer dollars 
for operation, training and maintenance.
    In a time of increasing needs and increasing budgets, the 
DOD must find every way possible to stretch its energy dollars. 
And fuel is not only expensive, it is also very heavy. Moving 
fuels takes an enormous logistical effort and consumes a 
strategic lift that could be better used moving soldiers, 
equipment and ammunition. The most effective way to improve the 
deployability of our ground forces is to reduce their fuel 
requirements.
    So finding energy efficiencies isn't just about money, it 
is also vital to increasing the strategic capabilities of our 
forces.
    I have been following the work of the services in 
developing new technologies. Of particular interest is the 
historic B-52 alternative fuels test flight conducted by the 
Air Force on December the 19th. DOD testings and implementation 
of technology such as this will ultimately influence the 
private sector and benefit the economy at large. For that 
reason, it is vital that Congress continue to fund new 
initiatives and for DOD to aggressively pursue them.
    Energy security is vital to our national defense, so we 
must find ways to reduce our energy needs and find new 
technologies to meet our energy requirements.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Ortiz can be found in the 
Appendix on page 64.]
    Mr. Saxton. Thank you very much. Some years ago, Senator 
John Bennett told me that he had purchased a hybrid car. And I 
asked him about it and I asked him how fast it went. He said it 
goes with the rest of traffic. And I asked him how he got his 
big long legs in it; and he said, I don't know, there is plenty 
of leg room. So I went out and bought one. And it is really a 
remarkable technology. And I guess we are here today to kind of 
do what Senator Bennett did to me: to find out where we are in 
DOD, let us ask some questions, and hopefully spur not only 
some discussion here today, but some activity inside of DOD 
that will lead to other things both inside and outside of DOD 
to help us understand where DOD is today.
    Our first panel consists of the Honorable John Young, 
Director of Defense Research and Engineering, Office of the 
Secretary; Mr. Phillip Grone, an old friend who worked here on 
this committee for many years, and he now serves as Deputy 
Under Secretary of Defense for Installations and Environment, 
also in the Office of the Secretary; Mr. Mike Aimone, Assistant 
Deputy Chief of Staff, Logistics Installations Missions 
Support, United States Air Force; and Mr. Richard Connelly, 
Director, Defense Energy Support Center, Defense Logistics 
Agency.
    We are anxious to hear your thoughts of these matters, and 
so why don't we begin, Mr. Young.

    STATEMENT OF HON. JOHN J. YOUNG, JR., DIRECTOR, DEFENSE 
  RESEARCH AND ENGINEERING, OFFICE OF THE SECRETARY OF DEFENSE

    Mr. Young. Chairman Saxton, Chairman Hefley, Congressman 
Ortiz, and members of the committee, thank you for the 
opportunity to testify today.
    I am pleased to have the chance to appear before the 
committee to discuss the Defense Department's broad range of 
activities on energy.
    Energy security, efficiency, and the use of renewable 
resources has been of interest to the Administration long 
before the recent publicity. The National Security Strategy, 
signed in March of 2006, sets forth a challenge for the Nation 
to expand the types and sources of energy and to foster private 
investment that can help develop the energy needed to meet the 
global demand.
    The Defense Department also has unique energy requirements 
which often align with the energy needs of the Nation. For 
example, in early August, Major General Richard Zilmer, our 
Anbar Province commander, submitted an urgent request for 
renewable energy systems for remote forward-deployed forces due 
to the vulnerability of supply lines to insurgent attack or 
ambush by roadside bombs.
    The Defense Department has worked steadily toward many of 
these goals and needs over the past several years. From the 
facility side, by 2005 the Department had reduced the 
facilities' energy use by over 28 percent from the 1985 
baseline, and the Energy Policy Act of 2005 has reset the 
baseline and increased the reduction target.
    Indeed, in 2005, military service installations received 
four of the five Presidential awards for leadership in Federal 
energy management. My colleague, Phil Grone, will be able to 
talk in much greater detail about these efforts.
    DOD continues to develop renewable energy technology and 
facilities on bases using geothermal sources, wind, solar, and 
ocean temperature differentials. DOD has a range of research 
and development programs underway to improve energy efficiency. 
Examples include the use of lighter-weight materials in 
platforms, fuel-efficient engine designs, drag-reducing 
coatings, and testing alternative fuels.
    The Service Funded Energy and Power Technology Initiative 
has focused on lightening the logistics burden of our ground 
forces by developing efficient power generation, energy storage 
and power control and distribution technologies.
    Secretary Rumsfeld directed, in the Strategic Planning 
Guidance this year, that a task force review the Department's 
efforts on power energy alternatives and efficiency. The Task 
Force reviewed DOD plans to invest $1.8 billion on energy-
related efforts between fiscal years 2007 to 2011.
    The military services, combatant commands and defense 
agencies, embraced this task force, and the result was 
tremendous collaboration. Indeed, a key early outcome is that 
the Department has established a Web site for use by the 
Defense Department's program and policy personnel working on 
energy. This site is being populated with completed and planned 
projects, and lessons learned on energy-related programs to 
allow continued collaboration and coordination. While the work 
of this task force is not yet finalized, we are looking at a 
wide spectrum of ideas and opportunities to pursue even greater 
energy efficiency and flexibility.
    Over the next few years, the Department plans to test and 
demonstrate new technologies for reducing energy consumption 
for our weapons systems and their facilities. If the 
technologies are successful, DOD could realize substantial 
annual savings in energy costs in the long run, with full 
implementation, and many of the programs may start yielding net 
savings soon. Some of these technologies should also reduce 
maintenance cost and the associated logistics tails.
    In addition, testing and certifying energy sources for our 
military platforms in concert with the Department of Energy may 
help to catalyze U.S. industry to produce these fuels, enabling 
the Nation to move forward toward the goal of energy security 
and independence advocated by President Bush in his State of 
the Union message.
    In closing, Mr. Chairman, I will stop, leaving much more to 
say. The Department is truly grateful for your strong support 
of our energy initiatives and investments, and I look forward 
to working with you as we increase energy security and reduce 
operating costs for the Department. And I look forward to your 
questions.
    [The joint prepared statement of Mr. Young and Mr. Grone 
can be found in the Appendix on page 138.]
    Mr. Saxton. Thank you very much.
    Mr. Grone.

STATEMENT OF PHILIP W. GRONE, DEPUTY UNDER SECRETARY OF DEFENSE 
 FOR INSTALLATIONS AND ENVIRONMENT, OFFICE OF THE SECRETARY OF 
                            DEFENSE

    Mr. Grone. Chairman Saxton, Chairman Hefley, Mr. Ortiz, and 
distinguished members of the joint subcommittees, I am pleased 
to appear before you this afternoon to discuss the energy 
efficiency programs supporting the management of military 
installations by the Department of Defense.
    As you are aware, the real property and asset management 
portfolio of the Department is extensive. The Department 
currently manages nearly 570,000 buildings and structures, with 
a plant replacement value of more than $650 billion, and more 
than 46,000 square miles of real estate.
    In support of that infrastructure, and as the single 
largest energy consumer in the Nation, the Department expended 
nearly $3 billion on facility energy in fiscal year 2005.
    To achieve the President's objectives for energy 
independence and to meet our management responsibilities under 
the President's Management Agenda, the Department has continued 
its development of a comprehensive energy program that 
conserves energy, invests in energy-demand reduction measures 
and the development of alternative sources, and enhances our 
objectives to reduce the total operational cost of our 
facilities. We are achieving these objectives in a number of 
ways.
    First, conservation. As Mr. Young noted, in fiscal year 
2005 the Department reduced standard building energy 
consumption by 3.3 percent over the previous year, and since 
1985 have reduced that consumption by over 28 percent. Since 
1990, DOD has reduced energy consumption in energy-intensive 
and industrial facilities by nearly 22 percent. Energy savings 
performance contract authority, reauthorized in the fiscal year 
2005 National Defense Authorization Act, and extended for an 
additional 10 years in the Energy Policy Act of 2005, is a key 
tool. In addition, the Department has launched an aggressive 
energy awareness campaign.
    Renewable energy. The Department has significantly 
increased its focus on purchasing renewable energy and 
developing energy resources on military installations. The 
Department's total renewable energy purchases and generation 
accounted for 8.3 percent of all electricity used last year, 
and we have established a goal of 25 percent by 2025.
    A key program is the energy conservation investment 
program, which focuses on projects that produce energy and 
water savings, renewable energy, and the converting of systems, 
existing systems, to cleaner energy sources. The Department has 
achieved significant savings using this program, with projected 
savings on average of at least $2.30 for every dollar expended. 
The success of this program led the Department to increase 
investment in the program for fiscal year 2007 and to enhance 
the mix of renewable energy projects in the program.
    In 2003, roughly 10 percent of the Energy Conservation 
Investment Program (ECIP) program was dedicated to renewable 
energy projects. For the coming fiscal year, we expect 28 
percent of the program to be dedicated to these types of 
projects. And also for the first time, the Department proposes 
to invest an additional $2.6 million through the ECIP program 
for fuel cell projects that support installation and 
installation management.
    Facility metering. In accordance with the Energy Policy Act 
of 2005, the Department is developing metering plans to install 
meters on all facilities where it is economically feasible to 
do so. We expect that the data gathered can be used to enhance 
our conservation initiatives, and benchmarking state-of-the-art 
facilities will provide the ability to prioritize future 
projects,.
    Sustainable design. DOD recently entered a memorandum of 
understanding with multiple Federal agencies and is developing 
uniform facility criteria standards for sustainable renovation 
and construction. New facilities will be required to utilize 
the standards and will operate under reduced energy 
consumption.
    Alternative fuel vehicles. For nontactical applications, 
the Department continues its efforts to increase fuel economy 
and to acquire alternative fuel vehicles. In 2005, DOD 
represented 71 percent of the Federal purchase of biodiesel. In 
recent months, we have installed four new E-85 ethanol 
stations, and the Marine Corps has been particularly successful 
in meeting Federal objectives by increasing fuel economy in the 
nontactical vehicle fleet by 4.4 miles per gallon, reducing 
petroleum use by 26 percent and increasing the use of 
alternative fuels by nearly 30 percent from the established 
1999 baseline.
    Last, biobased products. Although not strictly speaking in 
the energy efficiency program, the Department continues to 
implement aggressively the requirements of the Farm Security 
and Rural Investment Act of 2002 that directed Federal agencies 
to establish procurement preference programs for biobased 
products designated by the Secretary of Agriculture. These 
products provide a sound alternative in a variety of 
applications, and many replace nonrenewable fossil-energy-based 
products, thereby supporting the President's objective of 
energy independence.
    As this committee knows, the Department is working hard to 
reposition, reshape, and sustain our military installations 
worldwide. Your support of our efforts in energy conservation 
and demand reduction and innovative technologies is an 
important part of sustaining those installations over time. We 
appreciate your support and look forward to continuing to work 
with you on these important programs. Thank you.
    Mr. Saxton. Thank you, Mr. Grone.
    [The joint prepared statement of Mr. Grone and Mr. Young 
can be found in the Appendix on page 138.]
    Mr. Saxton. Mr. Aimone.

   STATEMENT OF MICHAEL A. AIMONE, ASSISTANT DEPUTY CHIEF OF 
 STAFF, LOGISTICS, INSTALLATIONS AND MISSION SUPPORT, U.S. AIR 
                             FORCE

    Mr. Aimone. Chairman, and distinguished members of the 
subcommittee, I thank you for the opportunity to appear today 
to describe the Air Force's new Energy Strategy for the 21st 
Century and some preliminary results from our recent flight of 
a B-52 bomber using a blend of synthetic and crude-oil-based 
jet fuel.
    In the aftermath of the hurricanes that impacted the Gulf 
of Mexico last summer, the Secretary of the Air Force directed 
extraordinary actions by all airmen to help mitigate the 
resultant energy issues that faced the Air Force and the 
Nation. The Secretary has formulated a solid vision and a 
concrete strategy to implement this vision.
    Our energy vision is creating a culture where airmen make 
energy a consideration in every action. Our strategy is 
twofold: first, ensuring energy supply-side assurance to 
critical fuel and utilities is achieved to meet combatant 
commanders' requirements; and second, identifying aggressive 
demand-side conservation initiatives focused at aviation 
operations, ground transportation, fleet management, and an 
accelerated installations energy conservation program.
    Mr. Chairman, and members of the subcommittee, I am sure 
you are most interested in the Air Force's dramatic flight of a 
B-52 Stratofortress bomber, powered partially by synthetic fuel 
manufactured from a pilot synthetic fuels plant in Tulsa, 
Oklahoma. The flight took place on Tuesday, 19 September, after 
a set of careful fuel compatibility tests at the laboratories 
at Wright Patterson Air Force Base, and ground engine tests at 
the Oklahoma City Air Logistics Center. These tests allowed us 
to conduct an aviation flight demonstration at the Air Force 
Test Flight Center at Edwards Air Force Base.
    To ensure maximum crew safety in the first Air Force jet 
aircraft powered by synthetically manufactured liquid 
hydrocarbons, the test was conducted using a blend of 50/50 
liquid hydrocarbons and crude refined jet fuel. Also, the first 
flight was arranged such that only a single pod of two engines 
were powered by the blend; the remaining six engines on the 
aircraft used crude oil refined jet fuel.
    The first flight occurred on the morning of Tuesday, 19 
September. And while there was an unrelated mechanical issue 
with the aircraft, over two hours of flight time occurred to 
demonstrate that the aircraft could fly and land safely.
    Additional flights are scheduled. And in fact, if all the 
maintenance actions we have in place stay this afternoon, we 
expect the second flight to occur tomorrow morning at about 
6:30 local time at Edwards Air Force Base, and it should be 
about a 10-hour duration flight.
    As you know, we cannot accomplish our vision without the 
full support and cooperation of industry, and, specifically 
with respect to the aviation operations, without the support of 
the Federal Aviation Administration. We have partnered with 
industry throughout our planning and flight testing, and next 
month we will meet with our commercial aviation counterparts 
for the second time under the auspices of the Air 
Transportation Association and the FAA. Our collective goal in 
these meetings is to ensure we build a road map to successfully 
create adoption of synthetic fuels for the aviation transport 
sector.
    Mr. Chairman, and members of the subcommittee, I stand 
ready to answer your questions.
    Mr. Saxton. Thank you very much, sir.
    [The prepared statement of Mr. Aimone can be found in the 
Appendix on page 166.]
    Mr. Saxton. Mr. Connelly.

STATEMENT OF RICHARD CONNELLY, DIRECTOR, DEFENSE ENERGY SUPPORT 
                CENTER, DEFENSE LOGISTICS AGENCY

    Mr. Connelly. Thank you, Mr. Chairman.
    Chairman Saxton, Chairman Hefley, Congressman Ortiz, and 
distinguished members of the subcommittees, thanks for the 
opportunity today to describe to you the efforts of the Defense 
Logistics Agency to support Air Force and Navy efforts to 
introduce synthetic fuel into the streams of jet and marine 
fuel that we buy on behalf of DOD.
    As the Director of the Defense Energy Support Center, or 
DESC, as I will call it, which is a field activity of the 
Defense Logistics Agency, it is my job to make sure that we an 
uninterrupted supply of clean fuel for the military forces 
whenever and wherever they want it. The surging cost of crude 
oil over the past few years has made the job particularly 
challenging.
    Even though we pride ourselves on acquiring fuel at prices 
which meet or beat the industry averages, it is somewhat 
painful to be captive to a crude oil commodity market that 
reacts to world events in a manner that underlines the downside 
of our reliance on offshore crude resources.
    DESC has been working for some time with the Air Force, 
Navy, Department of Energy. And industry experts examining the 
potential for alternative domestic energy sources that might 
economically provide some relief from our dependence on 
offshore crude. Among these alternatives are the conversion of 
the United States' abundant domestic coal reserves to synthetic 
fuel using the Fisher-Tropsch coal-to-liquid manufacturing 
process.
    In April of this year, the Air Force requested that DESC 
poll industry regarding its ability to provide DOD with 100 
million gallons of synthetic jet fuel, or JP-8 beginning in 
January of 2009, along with capacity estimates for future 
years.
    The Navy subsequently asked that we include 100 million 
gallons of Navy jet fuel, or JP-5, in that request.
    The request for information, known as an RFI, was released 
in May, with responses due on August 10th. The RFI asked the 
respondents a number of questions, including what their 
proposed feedstock would be, where their plant would be 
located, when their planned streams of synjet would become 
available, and what mitigation strategies they might be 
seeking.
    Now, there was significant interest, with 28 firms 
responding, 22 of which intended to manufacture synthetic fuel. 
Twenty of the 22 proposed using the Fisher-Tropsch coal-to-
liquid technology, and 18 said they would use domestic coal. If 
such endeavors could acquire appropriate financing, the 
aggregate stream of synjet by 2016 would far exceed the amount 
necessary to supplant 50 percent of domestic DOD needs.
    The respondents identified significant risk mitigation 
requirements before they could engage in the development of 
coal-to-liquid capabilities. Most identified a need for long-
term contracts, 15 to 25 years, with guaranteed minimal annual 
DOD purchases; and, in addition, most wanted a guaranteed 
minimal price for their product during the contract term. These 
requirements are understandable from the manufacturer's 
perspective, but would expose DOD to a significant risk of 
paying more than the market price for fuel. The length of the 
contract term would be commensurate with the terms of the 
financing arrangement. The guaranteed minimum price would 
protect the oil industry from a dip in the crude oil commodity 
market below the level of economic viability, precisely the 
scenario that doomed an attempt in the early 1980's to 
encourage synthetic fuel production. There was a time when the 
futures markets were not yet available for private risk 
management.
    Now, we estimate that crude oil price threshold to be $53 
to $57 dollars per barrel. Both of these risk mitigators are 
currently beyond our authority. DESC is legislatively limited 
to 5-year contracts and must pay fair and regional prices for 
its fuel. In addition, both of these requirements are outside 
our normal purchase practices for jet fuel contracts, which are 
tied to the market price of jet fuel.
    Many respondents also cited the availability of tax credits 
and Department of Energy loan guarantees as essential to their 
ability to enter the synfuel business. I believe that 
additional information on this aspect is available from experts 
within the Department of Energy.
    Another challenge is that of carbon capture. The Fisher-
Tropsch process produces almost twice as much carbon as a crude 
oil refining process. There is no current requirement for 
carbon capture in either process, but there is concern in the 
industry that such will be required in the relatively near 
future. This would raise the price of synfuel. Not requiring 
carbon sequestration would pose additional risk should it be 
required in the future.
    Senior leadership in DOD is still considering the various 
options for the way forward. As we wait for that, and with the 
concurrence of the Air Force and the Navy, we will solicit for 
synthetic jet fuel within the bounds of our current authorities 
to determine if there is any interest.
    There is little doubt that Fisher-Tropsch coal-to-liquid 
manufacturing could emerge as a significant source of synthetic 
fuel that is fungible and interchangeable with the current 
supply of crude-oil-derived fuel. Without long-term contracts 
with price floors, financing this process will require 
confidence by the financial markets that crude oil prices will 
remain above the $53 to $57 range per barrel.
    Thank you for this opportunity, and I await your questions.
    Mr. Saxton. Thank you very much.
    [The prepared statement of Mr. Connelly can be found in the 
Appendix on page 158.]
    Mr. Saxton. Before we begin questioning, let me just take 
care of a little business.
    After consultation with the minority, I now ask unanimous 
consent that Mr. Conaway and Mr. Israel, members of the House 
Armed Services Committee, be allowed to participate in today's 
joint subcommittee hearing, and be authorized to question the 
witnesses. These members will be recognized at the conclusion 
of the questioning by the other subcommittee members. Hearing 
no objection, so ordered.
    Let me just begin with a question, kind of a general 
question. Back in 1980, Congress, in consultation with the 
Administration, created the Synfuel Corporation. It was a 
government corporation originally funded at a healthy $88 
billion. Even in today's numbers those are big numbers.
    The Synfuel Corporation was intended to produce synthetic 
fuel in partnership with the Department of Energy, which 
provided price and loan guarantees. The three projects started 
in 1981. One was Union Oil at the Parachute Creek Shale Oil 
Project. The second was the Oil Shale Corporation, COSCO. And 
the third was the Great Plains Coal Gasification Project. None 
were successful, and in four years Synfuel shut down.
    The question is: How have conditions changed in the last 
four years, and why might we be more successful this time in 
fostering a supply base? And what, if any, role should DOD have 
in this endeavor?
    Mr. Young. I guess I would start, and the panel may have 
additional comments to make.
    One thing that is obvious, I think, was noted in the 
statements, in your statements, is the price of fuel or price 
per barrel of oil today is significantly higher than the 20 to 
30 that was seen in the past, and that makes many of the new 
fuel processes economical and potentially competitive. They are 
not initially competitive on small scales, and the fuel that 
was purchased for the B-52 test was significantly more 
expensive than the market price. But over time, and with 
potential support in various forms, including the possibility 
of long-term contracts, the market can be created out there, 
and the Department is looking at those issues.
    I think the Department of Energy will play a significant 
role in that. The new act grants them authorities to provide 
loan guarantees that can help foster businesses moving in this 
area, and the Congress has provided tax credits that can assist 
businesses in this area.
    Mr. Aimone. Chairman Saxton, I might offer several other 
additional comments to Mr. Young's.
    The experience over the last 30 years in the industry, both 
within the engineering and design community with regards to how 
to develop and plan and design and construct these types of 
facilities, has matured significantly. As you may be aware, 
there is a facility--actually, several facilities in South 
Africa that are very mature. There is an online facility in 
Indonesia; that didn't exist in the 1980's to the level of 
today, although Sisal had built an early plant in the middle 
1970's, building on the technology that they had refined in the 
1950's and 1960's. So engineering designs have matured.
    The second is, as I mentioned, the worldwide plan 
experience. There are two plants online. There is a handful of 
plants that are in the process of construction. There is a 
significant effort in China going on, all this building in the 
worldwide experience of how to build these plants effectively.
    I might suggest to the committee that there is an excellent 
reference that is called The Unfulfilled Promise of the 
Synthetic Fuels, and it was written in 1986, and essentially 
went through the questions, sir, you asked in great detail, 
actually walking back to 1913 in this country when the first 
initial synthetic fuel attempts were generated in the West 
Virginia coal valleys.
    There is a lot to be understood in that textbook; and I 
constantly re-read that, about every month, to say let's not 
make these kinds of mistakes again.
    Mr. Saxton. Have there been other technological changes or 
advances that have occurred in the last 20 years that give us 
more hope?
    Mr. Aimone. In a nutshell, no, sir. The technology from the 
1920's and 1930's is a very mature technology, at least, I am 
thinking, the indirect coal gasification technology. There is 
better ways of using tooling and the like inside the catalyst 
to get better flow of gases through the catalyst materials to 
give you more contact area, thus more effort.
    There are several universities that have significant 
research programs in place. To mind comes the University of 
Kentucky. I hope to visit the University of Kentucky in two 
weeks to understand their research program. Purdue University, 
Penn State University, and several others that I am sure I 
could go on and explain. So there is significant research in 
this country that is evolving, if you will, not revolutionary, 
but evolving what is in fact a fairly mature technology first 
introduced in the 1920's.
    Mr. Saxton. Okay, great. What role should the Department of 
Defense play in this process from each of your views perhaps?
    Mr. Young. Well, as I noted, the Department has in the 
current President's Future Defense Program, 2007 to 2011, about 
$1.8 billion in investment. The biggest piece of that is $700-
plus million in energy power technology initiatives focused on 
such things as superconducting motors, efficient energy 
storage, new technology and capacitors and distribution 
mechanisms, high power, high voltage, high current switching 
systems. There is a full spectrum of technology in that space 
to try to help particularly focus on military systems to 
deliver more efficiency, maintain performance and potentially 
enhance options, because, as you know, increasingly the power 
load on our systems demand more electrical power in addition to 
the prime moving power for the vehicle. And so we have to be 
conscious about the so-called ``hotel'' load to power radars 
and sensors, as well as the load to drive the vehicle.
    So in that technology space, the investments DOD makes I 
think frequently have a dual-use aspect to them, where many of 
those technologies can move into the commercial marketplace and 
enable some of the things that Mike made reference to in other 
areas. And Phil can talk more about that.
    We help, at least in the marketplace, and even pushing the 
technology, by the deployment of systems in our facilities. And 
work is being done in spaces such as Defense Advanced Research 
Projects Agency (DARPA) on higher efficiency photovoltaic cells 
for solar.
    So across the board I think the Department is a partner 
with other agencies in the government and the commercial 
industry, which is helping to drive this space and push the 
technology forward both in revolutionary places and in areas 
where we see--or evolutionary spaces, and in places where we 
see chances of an evolution. And I will leave it to the panel 
to add to that.
    Mr. Grone. Sir, the only thing I would add to what Mr. 
Young suggested is that there are, just from the perspective of 
the installation side of the portfolio and the nontactical 
vehicle fleet--I mean, just recently we had the example of the 
Marine Corps taking possession through the Army from General 
Motors a new technology, an alternative fueled vehicle which 
the Marine Corps will test for several months to a year and 
provide data back.
    So I do think there is a synergy of the activities of the 
Department and activities of the broader Federal family and 
industry, both in research and development and the actual 
application of the technology to vehicles, where we can have an 
effect on understanding and, ultimately, of markets in terms of 
demonstrating the viability of certain technologies. But 
certainly the throw weight, in terms of the major investments 
and the technologies, the interfaces of other technologies, are 
along the lines of what Mr. Young suggested.
    Mr. Aimone. Mr. Chairman, early on when the Secretary of 
the Air Force asked me to look into this area, I thought of 
myself as a facilities engineer, and had spoken to the 
Secretary about the Air Force's facility energy program. And he 
kind of put his thumb in my chest and said, I like your 
program, now make this work on the aviation side. And I started 
looking at it and first discovered that 80 percent of the 
energy of the Air Force is consumed on the aviation side, that 
the wonderful opportunities over the last 20 years we have had 
to save 30 percent of facilities energy in the Air Force was 
really untouched in energy conservation opportunities in the 
aviation fleet. And, of course, the attitude was well, we can't 
tell the flyboys how to fly.
    Well, the Secretary has helped me articulate to our 
aviation counterparts how to effectively accomplish the same 
training and operational capability, and do it with a little 
bit more sense of energy conservation in the aircraft system.
    At the same time, I had the opportunity to go to Patuxent 
River and look at the Navy fuels Integrated Planning Team (IPT) 
operation and what they were doing in fuels research. And then 
my counterpart in the Navy and I went to Wright Patterson, and 
we compared our programs and invited the Army and the 
Department of Energy to come in place. And what we found out is 
there was a phenomenal program that has been in being for 
years, but just needed a little bit of executive leadership to 
bring it out of the weeds. That, sir, is part of what the Air 
Force can do and I think is doing.
    We have the ability to certify fuel for aviation 
airworthiness. We do that with our counterparts, as Mr. Young 
mentioned in the aviation sector, the original equipment 
manufacturers. We have had an opportunity to meet with them in 
May, and we have a follow-on meeting scheduled for about 30 
days from now where we will continue walking down our road map 
of how do we work together to create the conditions of 
certifying an alternative fuel.
    Mr. Saxton. Thank you.
    Mr. Connelly.
    Mr. Connelly. As my colleague was saying, I think it is the 
role of the services and the Department, DOD, to give us the 
go-ahead as the operational supply chain manager, to go ahead 
and move forward in these markets.
    You did mention, Mr. Chairman, earlier, the percentage of 
domestic consumption. Internationally that translates to 
something less than one-half of one percent of total fuel 
consumed. So while we are probably the biggest single purchaser 
of fuel in the world, and certainly a voice to be heard in the 
marketplace, we are not going to move the market, but we can 
try to exhibit some leadership. What is of main concern to us 
on the buying side is can we do it economically.
    Mr. Saxton. We are going to move over to Mr. Ortiz shortly, 
but I guess I would just like to say that it seems to me that 
the Department of Defense has a real role here to play in terms 
of showing the appropriate kind of leadership on these issues. 
We are the biggest consumer of energy in the transportation 
sector. We have the capacity to do things that perhaps 
individuals don't. And if we put our minds to it, we could have 
a public relations operation that would let the rest of the 
world--or at least the rest of the people in our country know 
what it is that we can do to be successful. And to that extent, 
I think that we are to move forward as aggressively as we can.
    Mr. Ortiz.
    Mr. Ortiz. Thank you, Mr. Chairman.
    You know, since 1980 to now, that is 26 years, and I am 
pretty sure that there were some studies made as to what could 
work and what couldn't work and why they shut down. What has 
changed from 1980 to 2006 that makes us believe that now we 
might be able to come up with some type of fuel without having 
to spend another $80 billion?
    Mr. Aimone. Let me try to articulate two thoughts, sir, if 
I could.
    First, one change is in 1983 and 1984, the price dropped 
out of the oil market, and what had been fairly expensive oil--
in today's market we would cheer for it at $40 a barrel--
dropped to 15, $20 a barrel, literally overnight. That I don't 
believe can happen in the same kind of direction, given the 
worldwide growth of China and India and the current state of 
most of the Organization of Petroleum Exporting Countries 
(OPEC) nations at or near capacity.
    Probably second, sir, I would suggest that in this country, 
the last new refinery built was 1976, which makes it about 40 
years old, admittedly having plant improvements all the way 
throughout. And we operate in this Nation at about 96 to 97 
percent of capacity of refinery.
    One might argue that given those kinds of margins in both 
the supply worldwide crude, the demand in the worldwide 
marketplace, and then ultimately the U.S. refining capability, 
something has to change. It could be another refinery with oil 
that may or may not be available in 20 or 30 years. Or maybe if 
we dream for a moment, it could be an alternative form of 
energy conversion that would convert some of the U.S. sources 
of supply of coal, oil shale and biomass into forms of liquid. 
And although certainly there are opportunities for wind and 
portable in the infrastructure arena for transportation, and 
specifically for aviation, liquid hydrocarbons turns out to be 
the sweet spot for energy per pound or energy per density.
    So to sum, I believe the conditions in the marketplace, the 
conditions in where the plant and equipment is in this Nation, 
the opportunity of maybe locating a refinery other than along a 
coast that might be prone to a hurricane or other natural 
disasters, say, on the West coast, has an opportunity for this 
Nation to stand up and make a difference.
    Mr. Saxton, I would like to beg just one slight technical, 
if you will, discussion point. Although some will claim that 
the Great Plains Plant was a failure--and it certainly went 
bankrupt so from a financial point of view it did--technically 
it operates still today; it operates at a revenue-stream 
positive, producing natural gas from coal as well as other 
significant products for the commercial marketplace. And that 
is since 1983 it has been continuously operating. So it was an 
investment, admittedly a lot of money, and it did in fact 
technically work. Financially, of course, sir, you are correct.
    Mr. Ortiz. Anybody else? If not, I have another question 
now.
    And maybe can you educate us--I mean, you gentlemen are the 
experts--in the difference between alternative fuels and 
synthetic fuels. Now, I know that you cannot utilize pipelines 
to move it; am I correct when I say that?
    Mr. Connelly. I can take that. Yes, sir. The synthetic fuel 
certainly generated through the Fisher-Tropsch process would be 
a fungible process and interchangeable and could be moved by 
pipelines, yeah. Some of the alternative fuels, ethanol, I 
don't think that is the case.
    Mr. Ortiz. Which is the most promising of the fuels that 
could be used by the military? I mean, I know that when you are 
in combat, I mean, you have to move the fuel. And it--is very 
expensive now; I mean, the gas that you get when you drive 
those Humvees and tanks. You probably have to have a big 
storage area, just like you do now, to move the fuel.
    Mr. Connelly. I don't think any of that would necessarily 
change. The requirements would still be there, and the 
capability we have today and we will have in the future will be 
there to store fuel and to move fuel. I guess the point is here 
that this type of fuel that we are talking about, Fisher-
Tropsch and synfuel, would be able to be moved in those same 
pipelines and stored in those same tanks with our other normal 
crude-derived JP-8 fuel. And that is the same fuel, by the way, 
that drives those ground vehicles that you talked about, the 
tanks and the armored personnel carriers; they also run on JP-
8, which is petroleum-based jet fuel.
    Mr. Ortiz. Thank you. I am going to be short because we 
have a lot of----
    Mr. Saxton. Let me just ask a question for clarification 
for everybody--or at least for me. I have always used the 
atomic energy alternative fuel and synthetic fuel as kind of 
synonymous terms, but I get the feeling there may be a 
difference in meaning. Alternative fuels seems like--synthetic 
fuels are, in fact, alternative fuels, and it seems to me like 
alternative fuels are synthetic. So help me out.
    Mr. Aimone. Allow me to take a stab on that answer.
    First of all, the terms are very interchangeable. If you 
look at EPact, the Energy Policy Act of 2005, section 369, it 
defines the term--I will even add another one, strategic 
unconventional fuels, and define that as a combination of coal, 
oil shale or biomass material that could be converted through 
an indirect gasification process into liquid products. So maybe 
if we fall back on the law and say the terminology, or the term 
of art, it might be strategic unconventional fuels.
    I tend to believe that all these terms, alternative fuels, 
synthetic fuels, unconventional fuels are all in the same 
class. For example, there are subtle differences. Oil shale is 
a precursor to oil that has not formed underneath the pressure 
of temperatures of hundreds of millions of years, and that 
precursor material can be retorted; i.e., cooked under pressure 
and turned into oil that could be refined, or it could be 
turned into--or gasified, as any carbon material can be 
gasified, and turned into carbon monoxide that passes through a 
Fisher-Tropsch process gasification.
    So it gets very steep into the terminology, but I would 
even suggest to you that wind and photovoltaic would fall 
underneath this class of alternative energies, and I would 
refer to Mr. Grone on that.
    Mr. Saxton. Thank you. Mr. Hefley.
    Mr. Hefley. Thank you very much, Mr. Chairman.
    For years I represented the Solar Research Institute at 
Golden, Colorado, and it is something else now, they have 
changed the name, still there. They were doing some amazing 
things, but it seemed like one of the consistencies there was 
that it cost more in most cases to produce the power that they 
were producing than the power they got out of it; in other 
words, they were producing a synthetic fuel; it cost more to 
produce that than you actually got out of it.
    Is that the case when you talk synthetic fuels or when you 
talk coal liquefying and things like that? Does it cost more to 
produce a gallon of that fuel than in fuel cost that you get 
out of it?
    Mr. Connelly. At today's prices, Chairman Hefley, it does 
not cost more. What industry is selling as a response to our 
RFI is at a price range for crude, $53 to $57. That is about 
the break-even point where they can do Fisher-Tropsch--
manufacture Fisher-Tropsch fuel and break even, a crude class 
above that level. And they are turning a profit is what they 
are telling us.
    Although the financial markets haven't had the confidence 
yet that the price of crude will remain at a level that would 
allow them to safely make an investment, and hence the risk 
mitigators that asked us--or at least mentioned in response to 
our RFI.
    Mr. Hefley. Well, let me ask you a little different way. If 
we are not talking cost, then let's talk about energy used. 
Does it take more energy to produce a certain--so many British 
Thermal Unit (BTUs) or whatever of energy than you are actually 
getting out of it? Even if the cost might be a break-even at 
$57 a barrel, does it take more energy to produce a unit of 
energy?
    Mr. Connelly. I think that would require some research on 
my part, sir. I will have to take that one and answer it for 
the record if I may.
    Mr. Hefley. Okay.
    Mr. Young. Chairman Hefley, if I could add some comments to 
the discussion.
    The Department has a Defense Science Board task force 
looking at this issue, and also some work was done by a study 
group called the JASONS for the Department. And they looked at 
some of the issues you have raised, and we can try to get you 
that information. But it is very important.
    And Mike Aimone mentioned the process. You have to look 
very carefully at the processes of energy in, energy out, and 
then the byproducts. And those can be optimized in certain 
Fisher-Tropsch processes to be efficient, but there is still, 
as you rightly say, less efficiency relative to crude 
processes. For example, it is estimated that the Fisher-Tropsch 
processes there is as much as four times more capital intensive 
to build the facilities than a comparable crude process, and 
then less of the feedstock energy ends up in the synfuel, if 
you will, that is produced out of that process in general. So 
the efficiency losses are losses that are compensated by higher 
prices in oil, making that process at least viable 
economically.
    Ethanol, for example, which is less useable, in the 
Department's perspective, because it has two-thirds of energy 
by volume of a comparable crude product, and it is also highly 
flammable, has a lower flashpoint, people suggest that that is 
kind of a near break-even or a little--it is very close to 
breaking even on the process to produce that fuel. So you 
rightly say that you have to look carefully at the energy in, 
versus the energy out, and then add that with the cost factor 
to determine economic viability.
    Mr. Hefley. Well, let me ask you, do you see yourself--and 
by yourself, I mean the Department--does the Department see 
itself as a test bed facility for new energy resources, energy 
savings and energy economy? Or do you see yourself as just 
trying to solve the day-to-day practical problems in saving 
energy and doing it? In other words, do you see yourself at the 
cutting edge of trying to produce new sources of energy, or are 
you just trying to meet the daily requirements?
    Mr. Young. Where the requirements of the military demand 
it, we are prepared to be at the cutting edge of technology. 
And some of those include the example I mentioned in the 
beginning, of the complications of getting logistics fuel to 
forward-deployed and remote base locations make some of the 
renewable energy methods or alternative energy methods very 
useful to the military and, frankly, safer for our forces. So 
in those spaces, we are prepared to work hard and make 
investments and potentially be first adopters.
    In other spaces, we can help enable a market that needs to 
be driven by the Nation, and probably a significant role by the 
Department of Energy, and, as was pointed out, the Air Force is 
working to qualify synfuels and ensure that they don't have 
detrimental effects on our engines in terms of engine 
maintenance or wear or premature decay of seals and some of the 
other things that some of the synfuel properties have.
    So I think we can be, as was well noted, a large single 
source but not a market-driving source, but a force to enable 
industry to take those steps. Some of that will clearly require 
additional steps, particularly by the Department of Energy, 
with the authorities invested in them by the Energy Policy Act.
    Mr. Hefley. The reason I ask that is that I can see us 
investing additional moneys over and above what we might invest 
otherwise if you were just using conventional fuels, if you are 
a test-bed facility, because with the amount you use this could 
be the place to test the new technologies and so forth.
    And let me ask you, and then I am through, Mr. Chairman, 
the medical researchers tell us if they just can do their 
research with stem cells and so forth, that we are on the very 
verge of solving Alzheimer's and multiple sclerosis and Lou 
Gehrig's Disease and all manner of diseases if we can just take 
this one little extra step.
    Do you see anything on the horizon that is one of those 
breakthrough, gee-whiz type things, and if we just take this 
other step we can really have a breakthrough?
    Mr. Young. Other panel members may have a comment. I think 
I mentioned earlier I am very pleased with the Energy Task 
Force. The services made substantial contributions and brought 
to bear their knowledge and experiences. DARPA brought to bear 
the work they are doing. And I think one conclusion of the task 
force is it will take a lot of different efforts, each effort 
producing some incremental benefit, to make a big step in this 
space.
    And I don't see any single thing that makes a dramatic big 
step right now. There is a lot of work that needs to be done in 
a lot of areas, from materials to facilities to energy cycle or 
engine cycle changes, all of which will yield significant 
benefits that in many cases have a business that pay for 
themselves for the Department, but no single breakthrough area 
has a dramatic promise right now that is easily within reach of 
us.
    Mr. Hefley. Thank you very much.
    Mr. Grone. Mr. Hefley, on your former question--in the 
business area of installations, the question is really not a 
question of test bed, it is a question of applying technology, 
and the aggressive implementation of applied technology to 
solve energy-efficiency-demand management issues. So as we talk 
about what we have done in the last few years, even in the 
modest ECIP program, of ramping up what we do in the renewable 
energy category, which is wind, solar, geothermal and similar 
technologies. As those technologies continue to improve and 
mature and we apply those, to some degree yes, there is lessons 
learned, there is what one might call them test bedding; but 
really it is aggressive application of technology to meet these 
problems. And again, we are seeing significant savings accrue 
from that within a reasonable break-even period, on average 
about six years.
    So that kind of return on investment, that kind of stimulus 
for both market purposes and lessons learned that we can apply 
to other installations, is an important part of the seed 
capital we provide through ECIP. But again, it is not a test-
bed question. It is different than the tactical question that 
Mr. Young has to wrestle with with the service acquisition 
executives and the research and development community, but from 
a facilities perspective, we are trying to take every aspect we 
can of new technologies and apply them to how we can have 
better energy conservation and better demand management, 
particularly for power on a daily basis.
    Mr. Hefley. Thank you.
    Mr. Hayes. Thank you.
    Mr. Saxton. The gentleman from Arkansas Mr. Snyder.
    Dr. Snyder. Thank you, Mr. Chairman. I appreciate you all 
being here today. I feel a bit like I am sitting in a sex 
education class in the seventh grade, which should be a very 
exciting thing somehow became exceedingly tedious when you have 
it presented in this manner. But I think what you are saying is 
we are down to a lot of hard work, and I think your word was 
incremental in response to the question from Mr. Hefley what 
was the big and dramatic thing.
    Let me go at this a different way. What innovation that--
are you aware of any innovations that have been developed, 
invented in the military or through defense research dollars 
that have now spun off into the civilian world that I now have 
in my car or that was in the plane I rode out on here from 
Little Rock yesterday or Monday? What innovations in the energy 
area have been developed by the military that have now spun off 
into the civilian world?
    Mr. Young. Well, I would say, as you probably well know, 
success has 1,000 fathers usually. So I am cautious to claim 
success. If you go back 10-plus years, a lot of work was 
pioneered at DARPA on applying energy--electrical power to 
military vehicles, and some of those things I think are showing 
up in the cars, the hybrid cars you see today; regenerative 
breaking, the idea you would use a system to stop the car that 
is actually the load on the generator and that generates 
electricity to help recharge your battery. Some of those ideas 
were extremely unique to DOD, so I am careful about it, but 
some of the investments by DARPA made those technologies more 
and more practical, and then they get picked up in the 
commercial sector.
    A lot of work has been done in DOD, DOE and NASA on 
foldable tags and solar cells to get the efficiency up, and 
today we have DARPA looking to kind of crack a glass ceiling on 
the current efficiency of solar cells to get to a new level 
that makes them much more economically viable. Across that 
space, I think several departments, including the Defense 
Department, can claim credit for being a first adapter, being 
willing to pursue a technology and, when it has payoff, you can 
see it quickly picked up in the commercial sector.
    Dr. Snyder. You all said several times that the volume of 
fuel that you all--and energy that you all consume is actually 
a fairly small part of the world's use and U.S. use, and I 
understand that. But who do you think is the leader in the 
United States Government in terms of aggressively pursuing 
energy efficiency and new energy sources?
    Mr. Young. Well, I think the Department of Energy has a 
significant mission assignment there. The Department of 
Defense, because of our opportunity for investment and, as the 
Chairman pointed out, as well as some of our unique military 
needs, certainly is on par. And in terms of a lot of different 
metrics, our installations are leaders in this space. Maybe 
better to let Phil comment, but the Department has been 
recognized with, in many cases, a majority of Federal awards 
because of the steps taken in facilities to make some of those 
modest, but significant improvements in efficiency and reduced 
energy consumption in our facilities.
    Dr. Snyder. A few days ago, or within the last week or two, 
a column, the Commander SEALS I think it was called, SEALS 
Column or something like that, at a naval air station, that 
these commanders do very well in terms of communicating with 
their base and their troops and their military families, and 
wrote a column about--what the real problem the military is 
having now that we are underfunding a substantial number of 
things. We are cutting back the number of hours the libraries 
are open, and cutting grass, and painting and a whole lot of 
things.
    He was discussing the impact on services to military 
families on his particular base, but then in the last column he 
starts talking about we all need to work together to turn off 
the lights and make sure we are doing the most energy-
efficiency stuff. I am thinking, shouldn't we have already 
invented that? Shouldn't that have been something 30 years ago 
that every base in the country before we ever had any kind of 
an energy--you know, $60-plus a barrel, we all should have been 
doing that? It should be automatic at this point, shouldn't it?
    Mr. Young. Yes, sir. I agree, and I think in some cases the 
extreme of that is there are many situations where that is 
automatic. The facilities that are being renovated in the 
Pentagon, actually to the anxiety of some of the very dedicated 
people who work long hours, have situations where the lights go 
off automatically, and you have to take a step to turn the 
lights back on. I know for a fact the lights go off in the 
restroom if nobody--for a while and comes back on. So a lot of 
those steps have been taken proactively.
    Mr. Grone. My observation, Mr. Snyder, from a facility 
management perspective, his awareness is a continuing concern. 
And while it may seem self-evident after 25, 30, 35 years that 
those are the kind of small steps we all should be taking, that 
kind of awareness campaign, to put it in the forefront of 
everyone's mind is something we have to continually come back 
to. It is important to do. It is important to remind people of 
the effect that those small steps have on the overall 
management of the facility, the conservation of the resource, 
the conservation of the dollars.
    There is a natural human tendency to stray toward the free 
rider problem, and making sure the people understand the 
contribution that they can make, as small as it might be. 
Making people aware of the importance of energy conservation is 
something that we take very seriously in the portfolio from a 
business perspective to make sure that our people understand 
how important conservation on a daily basis is.
    Mr. Young. I think if I could, I agree totally with what 
Mr. Grone said, but I would add--pick up on something Mike 
Aimone said. All the services are trying to bring that to light 
in people's minds, including those of our military operators. 
The Navy has had initiatives to make the captains of ships very 
conscious of the fuel they consume and how they consume that 
fuel. The same is being done in the Air Force in terms of 
aircraft, and same thing is being done with tactical vehicles 
in the Army. A lot of emphasis is being put on simulation to 
try to reduce the steaming or flying or driving hours, so on a 
big scale, and then on a small scale in terms of the lights. 
That is, I believe, pervasive and being led by leadership in 
the Department to accomplish those objectives.
    Mr. Saxton. The gentleman from Minnesota Mr. Kline.
    Mr. Kline. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being here.
    Every time the DDR&E company show up, I always wish I had 
paid more attention not in the sex class that apparently Mr. 
Snyder was having difficulty with, but in chemistry.
    Let me just sort of see if I can focus this down on a 
couple of issues. We talk about--or you talk about in testimony 
particularly in the facilities using more--increased use of 
E85, and I think there was a percentage of something like 71 
percent biodiesel, and it seems to me that is pretty 
straightforward to be able to start to use more E85 or 
certainly E10, E20 in the facilities. And then the DDR&E said, 
well, we can't use E85 in the military vehicles, I am assuming 
we are talking about tactical vehicles, because it is too 
flammable and some other issues.
    Can we--I guess, Dr. Young, can we go to you and just sort 
of explore that? What are you and the Department looking at in 
terms of using biodiesel or E85 or E20 or E10 in what I will 
broadly call tactical vehicles, a little bit separate from the 
synfuel we are talking about using, the B-52, I assume, but 
particularly those ethanol and biodiesel sort of blends?
    Mr. Young. I think where it is appropriate, those fuels can 
be used. By some analytical work that has been given to me, 62 
percent of DOD fuel use is expended in combis, so where 
appropriate, some of those fuels, including ethanol, may be 
viable options, but for, as you said, tactical fuels, there is 
two-thirds of the energy in a gallon of ethanol versus a gallon 
of crude-based product, JP-8, and that leads to significantly 
less energy. You would have to take more fuel, and then the 
flammability creates a danger situation. So that would not be a 
preferred option for us, certainly for our deployed forces, and 
in some cases for training operations day to day on aircraft 
carrier and the other hazardous situations military equipment 
is used in. Facilitieswise it is potentially a very viable 
option, and I will let the panel talk to that.
    Mr. Kline. Before you leave that, I really want to focus a 
little bit more on this tactical use. Is there someone in the 
Department who has the responsibility for looking at making the 
engines more efficient so that you could, for example, use one 
of these blends of--it could be E85 or biodiesel or something 
like that to get more efficient use out of it, the 
turbochargers and that sort of thing? I mean, would you look in 
the commercial--civilian commercial world now? You are seeing 
vehicles being made so that they are flexfuel vehicles, and 
that efficiency loss of increased ethanol use is being 
addressed. So I am just--who is, who is looking at that? Is 
anybody in the Department?
    Mr. Young. Absolutely. I think, again, as the task force, I 
think, did a very positive thing in response to Secretary 
Rumsfeld's direction, looked across the Department and shared 
that knowledge across the Department, and we have created a Web 
site to continue to share with the program managers and program 
officials that information. But within the Department there is 
work in the services on kind of incremental and even some next-
generation-type engines where you would adjust the cycle to 
achieve upwards of 25 percent reduction in fuel consumption. It 
is called High-Energy Embedded Turbine Engine Program. It is a 
follow-on to a precursor where we continually looked at all the 
features you said, the combuster, the cycle, the turbines 
themselves to try to get more efficiency. The DARPA has some 
similar work focused on UAV-class engines that could be scaled 
to again achieve the fuel consumption reductions that you are 
talking about.
    So across the board, the Army--we are partnered with the 
Army to look at a ground vehicle demonstrator. The current 
heavy Humvee gets about 8 miles per gallon at 45 miles an hour. 
We believe we can build a lighter vehicle using other materials 
and get as much as 30 to 40 percent fuel savings in a lighter 
vehicle to that point of view.
    So across the board there are a full range of efforts, 
including putting codings--some of these came to the attention 
of the task force, and the Department is reviewing them right 
now. We could put coatings on Navy ship propellers and 
potentially get four to five percent savings in fuel efficiency 
and possibly some reductions in maintenance. Looks like it pays 
for itself and no more--in about a year.
    So we are going to put forward all these business cases and 
let the Department come to, you know, evaluate if we can work 
them in the budget, but clearly the best business cases I am 
very hopeful will be part of the President's budget in the 
coming year.
    Mr. Kline. Okay. Thank you very much, and I see my time has 
expired, so I yield back.
    Mr. Saxton. Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman, and, Mr. 
Grone, it is good to see you again, and I would like to thank 
the Members for their testimony. I have a rather specific 
question to my district. And I would just like to share with 
the committee that I met just this morning with Assistant 
Secretary of the Navy B.J. Penn, and our conversation included 
discussion on the potential for alternative energy production 
out of Guam as part of the development of the new 
infrastructure to support the 8,000 to 10,000 Marines and their 
families who are moving to Guam.
    Now, this gentleman needs nearly 20,000 new personnel 
moving to Guam over the next 10 years, and Guam's appetite for 
energy, like so many other places, will increase substantially. 
With at least $740 million expected to be invested in base 
utilities to support this move, there will be opportunities to 
construct energy-efficient housing, workplaces, and perhaps 
even a new alternative energy power-generation facility.
    Let me therefore go on the record and strongly encourage 
you and your colleagues, as you look at the development on 
Guam, to incorporate as many energy-efficient and modern 
technologies as you can. And to this end, can you tell me what 
are the most promising types of energy efficiency projects that 
the Department is currently utilizing or considering that might 
be employed on Guam? Perhaps you could comment on waste energy 
technology and wave energy power generation. And because the 
over 3,000 new family housing units will be built under a 
privatized housing plan, can you tell me how we can ensure that 
the private industry undertaking this construction is using as 
much energy-efficient technology as possible? And I guess, Mr. 
Grone, we will begin with you.
    Mr. Grone. Well, certainly, ma'am, in the context of the 
facilities that will be built on the island to support 
relocation of Marines from Okinawa to Guam, our standard 
requirements versus sustainable design to improve energy 
efficiency, water conservation will all be built into those 
facilities.
    In terms of specific technologies, for--to support the 
utilities, for example, or waste energy or whatever it might 
be, I think we have to continue to look to the Marine Corps and 
the Navy as they look at the design criteria, the 
infrastructure requirements, and they continue to take the 
master planning process to additional levels of detail to get a 
better handle on that before we can have a specific discussion 
about that. I just don't think we are quite far enough along to 
tell you that we have come to a specific set of assumptions or 
recommendations in that regard, but we know it is of deep 
interest to you and to the committee, and we will keep you 
informed as things proceed.
    Ms. Bordallo. Would any of the other witnesses care to 
comment further on that?
    If I could then, Mr. Grone, if I could ask any of the 
witnesses or yourself to please let my office in on any 
development that will be made, because this is specifically 
what we talked about this morning, and I would appreciate any 
information you could give me.
    Mr. Grone. Yes, ma'am. We will certainly do that. And when 
you ask about specific technology, certainly one of the things 
we may look to, when we privatized housing on Hawaii, one of 
the things that was done there by our private sector partner, 
the largest solar enterprise, solar development in the context 
of a major housing development is that DOD housing 
privatization development on Hawaii. So certainly in terms of 
the work that we have done in housing, other facilities and the 
project on Hawaii I think sort of proves that. We are looking 
toward using those applied technologies as aggressively as we 
can to get the best efficiency and long-term sustainability of 
those assets as we can.
    Ms. Bordallo. Mr. Grone, my second question is when you 
speak of this alternative energy, I understand that DOD has a 
program in Hawaii called the wave energy. Are you aware that 
there is a pilot program?
    Mr. Young. Yes, ma'am.
    Ms. Bordallo. I am curious. We have just as many waves 
around Guam; in fact, I think they are bigger. Could you 
comment on that?
    Mr. Young. We just--there is a project that is in pursuit. 
I believe it was proposed by an enterprise in Hawaii. And so 
through a process we at least endorsed testing of that 
proposition, and so there is tests underway. Largely driven by 
where the company was, I think it proposes the idea, but 
certainly if it is productive technology, it is yet another 
avenue to produce energy, as you said, very efficiently because 
there are waves available for largely free all around the 
world. So very interested in how that project produces----
    Ms. Bordallo. Is that a private program, or is it sponsored 
by DOD?
    Mr. Young. Oh, DOD is participating in the research and 
paying for a portion of it.
    Ms. Bordallo. Thank you. Thank you very much, Mr. Chairman.
    Mr. Saxton. Thank you.
    Mr. Hayes.
    Mr. Hayes. Thank you, Mr. Chairman.
    Gentlemen, thank you for being here. I have been listening 
very carefully. This is something that I have been thinking and 
saying frequently is the future for energy in America, but just 
as an observation, your responses have been careful, 
calculated, cautious, as they always are, and I appreciate 
that. But is this cautious, tepid approach realistic or just 
cautious? Where are we? Brazil, we say, is energy-independent. 
Can we get there? Are we looking in the wrong direction? Can 
you give me a little help here?
    I am just not seeing a level of enthusiasm or interest in 
the project. I know it is the nature of the Department, but can 
we step it up a notch here?
    Mr. Young. Well, sir, I guess that at least falls to me to 
start.
    Mr. Hayes. Or we could get Phil to volunteer.
    Mr. Young. Actually this would be a great chance to set him 
up maybe. I apologize if we are doing that. We don't mean to do 
that.
    I was extremely pleased and a bit surprised to see the 
Department has 1.8 billion over the next 4 to 5 years, 5 years 
invested in this space. It is--most of the investment is 
tailored to help meet our needs, but it has that great benefit 
of helping the Nation also get toward its goals.
    So I think it is positive, but as a result of the tasking 
for Secretary Rumsfeld, we said that is not enough. So the 
Energy Task Force that had tremendous participation from the 
services and agencies put forward another set of new ideas that 
we are combing through now, looking at the business cases. Many 
of those, I think, pay dividends for the Department, but also 
have dividend potential for the Nation.
    And then, as you have heard from other panel members, DOD 
is looking, even though there is an expense, to be a first 
adopter of some of the synfuels that--we are actively testing 
them to see if our engines can run successfully on them, and 
there is tremendous excitement about that.
    You know, visually the market has got to catch up because 
we can't alone carry that marketplace, and that is the only 
hesitation, that it is going to take other parts of the 
government, Department of Energy in particular, and, frankly, 
the private sector to carry some of these much further toward 
the finish line than DOD can alone. But we are extremely 
pleased to be a party to this and having the attention of 
Secretary Rumsfeld down on pushing forward these initiatives 
and being willing even in a tight fiscal environment to make 
investments, help our own energy efficiency, and recognize 
fully that pays dividends for the Nation.
    Mr. Hayes. I feel better already.
    Thinking in terms of plateaus, obviously with ethanol, 
methanol, biodiesel, all these different products, we have gone 
from purely petroleum-based to a plateau of sorts, and again, 
based on you all's experience and professional opinion, is this 
a plateau that needs to move up and out at the same pace? When 
I say up and out, more effort in development than what we have 
got on the table. Do we need to have a similar lateral look at 
what else might be out there. Being an Aggie as well, there is 
tremendous amount of value as well for the agricultural sector 
if we are successful going up with some of these renewable 
fuels.
    Anybody want to take a shot at that? Again, we have this 
new tone of enthusiasm and level of excitement going.
    Mr. Aimone. Mr. Hayes, I have never been accused of not 
being enthusiastic or passionate about the subject of energy. I 
have had the opportunity to be in basically every energy 
initiative the Air Force has created since the 1970's as a form 
of a crisis, and when I had the opportunity in May to brief the 
Defense Sciences Board, my getting off the slide bullet was, 
been there, got the T-shirt, done it before, dot, dot, dot; how 
do we prevent this from again happening?
    And I know the Secretary of the Air Force personally made 
the trip out to Edwards for this B-52 flight. The Under 
Secretary of the Air Force flew out and, in, fact flew on this 
initial maiden flight. That is a pretty enthusiastic----
    Mr. Hayes. I was going to ask if they flew or watched.
    Mr. Aimone. There was a discussion about both not flying on 
the same airplane.
    Mr. Hayes. A lot safer than driving out there in the same 
car out there together.
    But anyway, using that particular example, one of the 
things that I found when I got interested in, I think we need 
to, among other things, understand that the marketplace, the 
petroleum traditional marketplace. And it is human nature, it 
is not just them, traditionally resist change, particularly if 
it threatens what they have always done.
    So do you all in the research that you are doing see more 
interest on the part of the petroleum companies, foreign and 
domestic, to add that to their--to diversify their industry by 
using their expertise and appropriate materials to get into 
this business?
    Mr. Aimone. Sir, when Mr. Connelly was talking to the 
process official, tropes, he mentioned one of the challenges we 
have to address in this Nation is the carbon capture or the 
carbon sequestration that might come from a coal gasification 
process. I might suggest to you that one of the opportunities 
that exists with the partnership of the oil industry is the 
ability to take that carbon dioxide, flood it into oil wells 
that are essentially depleted, and do what is called enhanced 
oil recovery; in fact, the potential of providing several more 
years beyond the, if you will, conventionally termed peak oil.
    So I do see some opportunities of synergism between the 
various marketplaces if we can go forward and do this right, 
and the key word is doing it right.
    Mr. Hayes. I appreciate that.
    One more comment, if I may, Mr. Chairman.
    Mr. Saxton. Make it a good one.
    Mr. Hayes. Okay. It is two good ones. Two things: We have 
to keep the pressure on so that the traditional energy folks 
know we are serious; because the price of gas is coming down, 
which is great, we are not going to stop doing our work. And 
again, the other thing, having the energy put into the 
distribution so we can begin to successfully use these 
products.
    Thank you, Mr. Chairman, for your indulgence.
    Mr. Saxton. You are a great American.
    Mrs. Davis.
    Ms. Davis of California. Thank you. Thank you, Mr. 
Chairman. Thank you to all of you for being here.
    I wondered if I could go back for a second to the memo that 
General Zelmer put out that basically looked to creating a 
self-sustainable energy solution on the battlefield. Could you 
discuss more--I guess my first question is, in response to some 
of my colleagues, too, how come it took the general to ask for 
that? Is it something that had already been contemplated, we 
have been working on, trying to figure out how in the world you 
got that kind of supply, energy supply, to the field without 
having to transport it and risk the lives of those that are 
transporting? Had you been working on that? And where are we in 
trying to actually bring that to bear?
    Mr. Young. Well, certainly we have deployed in many cases 
with the equipment we have had, but made changes as fast as we 
can through things like the Joint Rapid Acquisition Cell or the 
Army's Rapid Equipping Force or Operation Respond Navy Marine 
Corps. And so when we see an adjustment in the requirements, we 
act.
    And then to answer your question more directly, we are 
already working in those spaces pretty aggressively. So 
essentially on the shelf there was a system that generates a 
small amount of wind energy and a battery storage device. There 
was a separate system that stored solar energy or produces 
solar energy through solar and can store that in the battery. 
Those have kind of been combined into something they call the 
transportable hybrid and electric power station. It generates, 
I think, a kilowatt, roughly, of energy by wind and has the 
potential to generate six kilowatts by solar. And there then 
there is a tactical quiet generator that can generate like 
three kilowatts, and so you can get a modest steady load and 
some peak loading, and it looks like that system can serve and 
answer some of the requirement that General Zelmer tabled, and 
we expect to have systems in the field by February, if not 
sooner.
    Ms. Davis of California. If there is a cost to that, 
obviously, in creating that, how do we balance that? How do we 
make the judgment then in terms of whether the cost in 
deploying that is worth it? Has that been an issue?
    Mr. Young. I don't think that has been an issue. You know, 
you get variations in the--I guess the best way I can say is it 
the commander has a mission to accomplish. General Zelmer has 
been one of the first, I think, to rightly say, I can do that 
mission, but in addition to doing that mission, I would like to 
reduce aspects of it in terms of supply, if you can bring me 
some technology.
    Some commanders have asked not to see technology until it 
has been fully tested and vetted, so you get this full range of 
willingness to be a first adopter, if you will, on the 
battlefield, which has certain risks, as well as others who 
don't want to take those steps.
    But across the board, when we get those requirements, the 
Department set up processes, and the Congress has been very 
helpful in providing some funds that let us have these quick 
reaction capabilities, if there is a technology solution 
address a need right away, and that is what is happening.
    Ms. Davis of California. Is there anything else you need 
from the Congress in exploring those possibilities?
    Mr. Young. The one thing I would say, and I have said this 
in previous hearing opportunities, is there are places where 
technology moves quickly these days. You know, you all are 
familiar with how quickly new models of home computers come 
out. Other technologies move in that space quickly, and the 
commercial market has begun to be a primary force in developing 
and delivering new technologies, especially if you get on the 
information side. And increasingly the Global War on Terror 
demands some of those information-side technology tools. So the 
more we can have flexibility and speed and funding, the better 
we are going to be able to adopt technologies and give them in 
the hands of troops.
    We have some challenges now. I have small companies that 
feel like they can't get a contract fast enough. Our budget 
process, you know, if I started today and wanted to do 
something brand new that required some significant amount of 
funds, we would put it in the 2008 budget, and maybe 12 to 18 
months from now I could do something. That doesn't work as well 
as the places where the Congress has been very supportive in 
giving us pools of funds for quick reaction, rapid equipping or 
counterterrorism, so we can act very quickly when either a 
requirement or a technology opportunity presents itself.
    Ms. Davis of California. Okay. Thank you very much.
    One other--I was just going to suggest, I feel somewhat 
encouraged with the discussions between the Department of 
Energy and the Department of Defense. We talk a lot about 
interagency coordination, or we have started talking more about 
that. Can you just tell me, the next panel might want to 
comment on this, how would you characterize that relationship 
in terms of how well we are working today to make sure that we 
are vetting issues properly between the two agencies, or even 
as you go; you know, not just--even agriculture, for that 
matter, in terms of finding new solutions, where are we? How 
would you characterize that? Quickly, I am sorry.
    Mr. Young. I think there is positive progress there, and 
there is always more room for improvement. But I had on my 
calendar--I have a meeting with senior levels of the Energy 
Department, the task force engaged with senior levels and even 
working levels with the Department of Energy, and we have made 
them aware of the work that came out of the task force. So I 
intend to hold the Department as an open book and encourage and 
invite others to look at the portfolio. The Energy Department 
has accepted that and wants to work with us particularly in 
some of the areas where they are going to have some significant 
primary responsibilities in terms of are loan guarantees made 
to stimulate synfuel production and others. In other areas 
where our technology is dual use, but driven by military needs, 
they are keenly interested in seeing how those programs 
progress. So the partnership is good, and we are going to keep 
working at it.
    Mr. Saxton. Thank you very much. The gentlelady's time has 
expired.
    Mr. Schwarz.
    Dr. Schwarz. I would like to talk about the Navy. We don't 
use NSFO anymore, which was Navy Special Fuel Oil, for some of 
you who know what it is, black oil. That was my time in the 
Navy. Would a member of the panel or anyone that wants to step 
in tell me what the Navy is doing both at the level of the 
fleet, fleet air, land-based air to increase their energy 
efficiency?
    I was interested to hear about the coating on the 
propellers, which I assume is some sort of a Teflon material or 
some sort of a plastic to cut down friction to make that--the 
props a little more efficient. Winglets on aircraft, the most 
efficient nuclear propulsion for carriers and for submarines, 
hull design; somebody just give me a good summary of what the 
Navy is doing at the seagoing level and the land-based level 
and at the level of aircraft to be as energy-efficient as it 
can possibly be.
    Mr. Young. If you would offer us a chance to expand the 
record, I would really like to do that, but I can give you the 
starting point and tell you----
    Dr. Schwarz. Real quickly for purposes of the hearing, and 
if you would like to provide something in writing, I would be 
delighted.
    Mr. Young. The new ship designs have bulbless bows, which 
provide a few percent efficiency improvement in fuels savings. 
The DDX design during the time I was in the Navy was changed 
from four large turbines to two large turbines and two small 
turbines. The ship can do, you know, basic loitering and some 
maneuvering speeds and run the whole load on the two small 
turbines, and only at really high-end tactical speeds move the 
turbines. That provides several percent of fuel efficiency.
    On the aircraft side, the Navy has worked very hard in 
making particularly the operators conscious of the cost of 
flying hours and help make decisions about when to fly as well 
as how to fly to save funds. And the Navy has taken, you know--
some of that is a mentality approach. The Navy has made 
improvements adding stern flaps to ships that added both 
stability and several percent savings in the fuel economy 
there. So I would tell you the Navy has a pretty 
comprehensive--and Phil can add on the facility side, but on 
the side you are asking about, ships and airplanes, some 
comprehensive and cultural efforts to improve efficiency either 
through technology or operating choices on the part of the 
sailors and marines out there.
    Mr. Grone. Sir, from a facility perspective, the Navy, as 
Mr. Young indicated, is also stepping out and doing a good deal 
of leading on the design of facilities. We are also doing--the 
Navy is actually doing a good deal of work for the interagency 
on the cost impact of some of the new requirements in the 
Energy Policy Act in the design and construction program to 
identify where those requirements are and to develop the energy 
efficiency measures to achieve the 30 percent reduction that is 
required by the act.
    So the Navy is not just on the hardware side, but also on 
the brick-and-mortar side, stepping up very aggressively to do 
the applied technology work, to do the design work, to do the 
construction activity work that is necessary to achieve the 
kind of conservation savings that we hope to achieve.
    Dr. Schwarz. What is the power plan of choice for the Navy 
surface ship, the Navy combatant surface ship? And then you 
have to start saying, what kind of combat are you talking 
about, the medium to larger-size combatant surface ships for 
the 21st century Navy up to the year 2050.
    Mr. Young. Well, I am operating from my previous 
experience, but the current fleet is, I think, largely 
certainly the majority-plus level.
    Dr. Schwarz. We will exclude nuclear carriers and nuclear 
submarines.
    Mr. Young. Right. Equipped with a General Electric turbine, 
I think 2,500 and 2,500-plus. Going forward in the new 
generation combatant DDX, and there will--the Navy, I believe, 
anticipates a competition between at least a couple of vendors 
for large turbines.
    Dr. Schwarz. But the very efficient steam turbine is where 
we are going to go, would you say?
    Mr. Young. Right. But the new turbine design, exactly as 
you said, it offers significant improvements, and it is derived 
from some of the aircraft engines that have made those step 
improvements driven by the commercial airlines.
    Dr. Schwarz. How about very efficient diesel for smaller 
combatants, yes or no?
    Mr. Young. The JASON study I referenced earlier recommended 
that we take a very hard look at some of the new improvements 
made, additional diesel engines and potential for a small 
diesel engine to be used even in many of the Army vehicles, and 
possibly even reengining the M-1 from a turbine to a diesel. So 
these recommendations are on the table for us to go back and 
take a hard look at right now.
    Dr. Schwarz. Thank you very much.
    Thank you, Mr. Chairman.
    Mr. Saxton. Thank you, Mr. Schwarz.
    Mr. Taylor.
    Mr. Taylor. I want to thank the gentleman and follow up to 
my colleagues' questions.
    I am amazed. I guess I have to point this at Dr. Young. The 
first atomic bomb was detonated in 1945. To the best of my 
knowledge, by 1953 we had operational nuclear propulsion 
submarines. So 8 years from a weapon to an ideal source of 
power for a submarine. Admiral Rickover worked very hard with 
some success of getting a nuclear-powered surface fleet in the 
early 1960's, and everything that he said made sense then, 
makes sense now as far as cutting down your vulnerabilities 
when you have to refuel, as far as the amount of time you can 
spend to see--as far as the amount of time you can spend at 
high speeds when you have to.
    But two things have changed. I am going to guess in the 
early 1960's our Nation still probably produced about 70 
percent of its own oil, certainly more than 50 percent and 
probably closer to 70 percent. Second thing is in the early 
1960's, I would imagine fuel wasn't even a factor in the Navy's 
budget, it was probably so reasonably priced. So given our 
dependence on foreign oil, given to a certain extent our 
involvement in Iraq as a result of our dependence on foreign 
oil, given the volatility of that market, the price spikes, it 
is still very expensive even though it has come down a little 
bit coincidentally in time for an election.
    Why has the Navy shown such reluctance to go back to 
nuclear power for the surface fleet? I am convinced that is the 
way to go. I believe I can speak for my colleague Mr. Bartlett 
that he is certainly leaning in that direction. But if I look 
back at what happened with Admiral Rickover, he is the one who 
came to Congress and said this is the way we need to go. He 
spoke for the Navy and got a reluctant Congress to come along. 
Why is it that Congress is now asking the Navy to look at it? 
What is the reluctance on the Navy's part?
    Mr. Young. If I could, I would really like to let the Navy 
leadership have a chance to answer your question.
    Mr. Taylor. But I think you are in a very good position; 
having held that job and now doing something else, I think you 
can, as we say, speak freely on this. I would like to hear your 
opinion on the Navy's reluctance.
    I mean, obviously we pay the guys who work in those engine 
rooms. We spend a lot of money to train them. We spend a lot of 
money to retain them, but that pipeline for training those 
people is already there. I am told that the ship is more 
survivable. It obviously makes sense as far as replenishment, 
as far as the amount of time you can spend. So there are so 
many reasons why the Navy ought to be pushing for it.
    Give me the downside again based on your experience--and I 
will open this up to the panel. Give me the downside on why the 
Navy hasn't pushed for it sooner, and why they apparently don't 
seem real crazy about the idea right now.
    Mr. Young. I don't have enough knowledge as to what led the 
Navy to retire the surface fleet, and the other knowledge I 
don't have is what is the complete cost to the Federal 
Government of that process, because, you know, the fuel really 
doesn't come--all the costs to the fuel supply are not within 
the DOD budget.
    So I assume the Navy is looking at all those different 
factors and probably willing to consider the issue especially 
in light of, as you said, where the price of fuel is in the 
economy. But there is a clear difference in price between the 
nuclear fuel ships in the Navy and the conventional fuel ships, 
too. There is a difference in cost. There is a difference in 
the labor structure because of the training and skill of the 
workforces required build those ships.
    So there are a lot of different aspects of that issue that 
I think have to be looked at to give a total answer on that, 
and I can't answer it today, but we will ask the Navy to get 
you additional comments.
    Mr. Taylor. In your previous job did anyone, you know, 
fairly up in the office or corps say this is the way we ought 
to going? Is there within the existing office or corps of the 
Navy right now, anyone to carry that proposal to the extent 
that Admiral Rickover did back then? Because I haven't met that 
fellow, and I would like to meet him.
    Mr. Young. Well, there is some people that definitely feel 
strongly about its potential in the nuclear side of the Navy, 
but I can't say people have advocated its broad expansion to 
surface ships and others as aggressively as you have 
recommended.
    Mr. Taylor. If you think of anyone. Thank you very much.
    Thank you very much, Mr. Chairman.
    Mr. Saxton. Mr. Shuster.
    Mr. Shuster. Thank you, Mr. Chairman.
    My question concerns the coal to liquid to coal jet fuel 
program, and I know that there was a test of the B-52, I think 
you mentioned earlier, out of Edwards Air Force Base about a 
week ago. Could you first speak to how that test went? And I 
know it is probably too early to get the full analysis on the 
performance, but preliminarily what was the outcome?
    Mr. Aimone. Sir, the first test flew for about two hours. 
It had a landing gear retraction issue, so we couldn't go up to 
flight altitudes and fly what is called the test points for the 
ten-hour flight. So essentially we flew successfully with the 
engine. We went through various throttle adjustments as we 
burned down fuel to be able to abort the mission and land. So 
from the point of view of a success of an engine operating with 
synthetic fuel, having thrust and all the things associated 
with it, and to quote the pilot of the airplane, I saw no 
difference.
    The instrumentation and the telemetry and all that is being 
analyzed as we speak. We are actually putting most of our 
energy in maintenance of the aircraft, fixing, tweaking some of 
the instrumentation from what we saw on the first flight so 
that we can collect the best information, as I would like to 
hopefully be able to report tomorrow morning the flight 
schedule for 0630 local takeoff for about a 10-hour flight 
where it would go up to altitude, go through a full set of 
flight regime envelope--etched to the envelope type of tests to 
see how the fuel operates.
    So the short answer is it was able to start, taxi, rotate, 
fly and land successfully.
    Mr. Shuster. And you said that hopefully tomorrow you will 
be able to announce another test flight. How soon?
    Mr. Aimone. There is a test flight that is scheduled for 
right now in the morning, and I can certainly inform the 
committee of the success or not of that flight. And it will 
take several days of data reduction to gather the data and 
analyze the exact pressure temperatures and thrusts and those 
types of things, and we expect to have a full report out for 
all the tests, including the roughly 50 hours of engine run 
time to date. In the late December, January, February time 
frame is when we expect to wrap up this entire test program.
    Mr. Shuster. That is good to hear. And is it accurate to 
say that the Navy and the Air Force are very enthusiastic about 
turning coal into jet fuel?
    Mr. Aimone. We are enthusiastic to look for alternative 
sources of supply to achieve energy independence, yes, sir.
    Mr. Shuster. I also understand you are getting pushed back 
from the White House. Office of Management and Budget (OMB) is 
reluctant to give long-term contracts for coal to fuel, coal to 
jet fuel. Is that an accurate----
    Mr. Aimone. I would have to refer you, sir, to OMB.
    Mr. Shuster. From your standpoint in the DOD, you are 
moving forward. You are enthusiastic about, if this test works 
out, which it sounds like it very well will work out, that you 
want to move forward with those long-term contracts?
    Mr. Aimone. Yes, sir. I want to move forward and achieve 
the ability to certify another source of supply of fuel for 
aviation purposes, manned aviation flight, yes, sir.
    Mr. Shuster. And I think Mr. Young may have answered this 
question Mrs. Davis put forward. What can we do in Congress? 
And I think you said we were very good at putting programs 
together, pots of money out there to be able to pursue. Is that 
something that we should be undertaking?
    Mr. Young. I think those efforts can be helpful, and in 
this space you have rightly focused--and the Department is 
internally going to think through whether any additional 
flexibilities would help us. You know, one that is on the table 
for discussion is there is an approach that lets a contractor 
come onto a facility, and I really would like Phil to talk more 
about this, and make an energy improvement, and if it creates a 
savings stream, they can be paid from that savings stream.
    There may be an opportunity the task force has brought to 
the table through some of the services and recommendations to 
let that be done on our platforms or systems. If we let someone 
come in and consider reengining airplanes or putting winglets 
on airplanes or doing something on ships, and if they made that 
investment and created a savings stream, we could do the same 
thing with a piece of tactical equipment that has been done 
with the facility. So we are going to study that and see if 
there is enough opportunity to come and ask for your help with 
the legislation that would enable us to go into these kinds of 
partnerships.
    Mr. Shuster. I think everybody said today there seems to be 
a lot of reluctance out there, why we are not moving forward 
faster. I mentioned the OMB pushed back. Also the 
Administration, from what I have heard, is reluctant to get 
involved in what they believe is pushing the market one way or 
the other, but we do that every day whether it is developments 
at NASA or Department of Defense. It is something we should 
embrace, and we are looking at an alternative fuel supply that 
is a national security issue.
    You are saying you don't have those things in place now 
legislatively that can move forward to do that program. You 
need us to act?
    Mr. Young. I am not sure I am aware of any particular 
reluctance. I think we still need information, just as you will 
ask us for information so you and we can make the best possible 
decisions. The law governing all the branches of government 
right now, I think, limits in general the five-year contracts, 
and indeed when we want to enter into a multiyear contract 
particularly for tactical systems, we have to have specific 
legislative authority even when there is a great business case.
    So to go beyond five years I think we will need some 
legislation, and we will need to bring you the data, but in 
many cases, and I would be more comfortable with my colleagues 
talking about it, the indications are to us that in some of 
these areas because of the capital costs and the facilities to 
produce these synfuels, just being a customer and an anchor 
tenant customer may not be enough. We may need to be a long-
term anchor tenant customer and agree to some price floor that 
keeps that enterprise viable. And as you can see, there will be 
some that will be for that and some that will be concerned 
about that, because if the price of oil were to drop 
significantly, we would find ourselves committed to a contract 
with a pricing floor because we agreed, as Chairman Saxton has 
pointed out, to go into a long-term business venture.
    So we need, I think, to keep collecting a data set, but I 
don't--I would not want you to perceive that as a lack of 
enthusiasm and determination. In fact, I hope you have heard 
from the desire and qualify and tests of the fuels. Right on 
the heels of that is a desire to see that marketplace be able 
to produce it domestically, because right now we don't have a 
domestic source for the quantities that even DOD might want to 
buy synthetic fuels, and so there is a potential for that to be 
bought offshore.
    Mr. Shuster. Thank you very much.
    Mr. Saxton. The gentleman's time has expired.
    Mr. Secretary, let me just ask you this. I am told that the 
Secretary of Defense already has the authority to waive the 
application of any provision of law prescribing procedures to 
be followed and award contracts if, number one--and that is 
under 10 USC, section 2404--if market conditions for the fuel 
source have adversely affected DOD's ability to buy it; and, 
two, the waiver will expedite the government's ability to buy 
the fuel. Why is this authority not sufficient in this case?
    Mr. Young. I think the statistics have said, frankly, the 
Department of Defense's demand for fuel can be met by domestic 
production sources. So there is not an extremist situation 
here. We can make--we can be a positive customer in pushing 
forward the demand for synthetic fuels and in creating capital 
investment to those facilities, but the conditions that would 
let the Secretary of Defense recommend a waiver I don't think 
exist right now, because, frankly, DOD's needs can more be met 
by U.S. production capability.
    Mr. Saxton. Charlie, did you have a comment?
    Mr. Connelly. I would agree with that comment, sir. We have 
thought about it, but we are certainly not in a position to say 
we are in that kind of situation now, and we are able to 
adequately source all the fuels we need worldwide to perform 
our mission.
    Mr. Saxton. Maybe we can talk about this some more as we go 
forward. This is really an important point, and we will work 
with you.
    Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    Gentlemen, thank you for your testimony today. It is a very 
interesting and timely topic, and it is essential that we 
maximize this issue of developing alternative fuels for our own 
national security needs long term.
    During the discussion we talked about--Mr. Connelly, you 
touched on the fact that the capital markets have not yet seen 
the payoff investing in big dollars in this area, and, 
Secretary Young, you said that DOD can't do this all on its 
own. And the previous line of questioning, I think it kind of 
gets to the point of isn't it just, you know, clear here why we 
need a long-term national energy policy in place with a 
dedicated funding, significant amounts of funding to sense 
prime purpose, so to speak, and start to get the benefits from 
it, the breakthroughs? And can we get the attention of the 
capital markets. Could you comment on that?
    Mr. Young. I think some of those issues are particularly 
going to be addressed by DOE. As the Chairman noted, there are 
some tools that under the right extreme circumstances could let 
us take action. Without extreme circumstances the Energy Policy 
Act gives the Department of Energy authority with some modest 
set-alone guarantees and other tools to help stimulate that 
investment. I think DOD's purchase of fuels and testing fuels 
helps stimulate it. So all these are moving forward 
progressively.
    I am not sure I see the Department of Defense getting into 
the loan guarantee business, and we are trying to understand, 
though, the full spectrum and the task force's table, a full 
spectrum of ways the Department--and Mr. Connelly might be able 
to comment more--that we can do this. Either long-term contract 
to buy, would we provide some support? The commercial 
marketplace seems to be willing to make those investments. I 
think he can say better than I but something like 28 responses 
to requests for information on the potential for us to purchase 
200 million gallons of fuel. So there is a lot of interest in 
energy out there. We need to frame the rest of the details and 
figure out what is going to be the appropriate role and the 
role the Congress would support for the government, and some of 
that rests with the Department of Energy as well as the 
Department of Defense.
    Mr. Langevin. Mr. Connelly, would you care to comment?
    Mr. Connelly. The clear signal from our respondees to our 
responders was that they would be seeking risk mitigation 
factors from us before they would be able to obtain the 
financing they would need.
    Mr. Langevin. On the test of the B-52 using the synthetic 
fuel, can you elaborate on--did you get more flying hours out 
of the synthetic fuel that was used? And basically cost ratio, 
was it--was there significant cost savings in using this, or is 
that too early to determine?
    Mr. Aimone. Sir, it is a great question. We blended the 
fuel such that it was a drop in for JP-8. So from a testing 
point of view, it acted like jet fuel. It was, in fact, blended 
such that it would meet the jet fuel specifications, so it had 
no more or no less efficiency in amounts of BTUs per pound. 
Both become very significant in aircraft use. So it is status 
quo because we blended it to be such.
    The fuel itself inherently has the same energy component as 
any of the liquid hydrocarbons in aviation, JP-5, JP-8 
aviation, JP-8, et cetera. Where there is a difference is the 
environmental characteristics of the fuel in its nature. That 
is to say, if it burnt 100 percent synthetic, it would not have 
sulfur, and it would not have the so-called aromatics or 
benzene rings that are producers of both soot and, in the case 
of benzene rings or the case of the sulfuric acid, some type of 
a small component. So the environmental consequences are 
significant there. Although we would like to make sure that we 
look at the whole picture, which is the manufacturer of the 
fuel and ensuring that we take care of the carbon management 
issues in the industry manufacture and fuel.
    Mr. Langevin. The cost issue.
    Mr. Aimone. The cost that we have, this was a research 
quantity of 100,000 gallons of fuel, a one-time purchase, so 
these costs were fairly high. In fact, the actual cost of--the 
actual was about $23 a gallon of the neat or the 100 percent 
synthetic before it was blended.
    Mr. Langevin. How much regular jet fuel?
    Mr. Aimone. It was blended 50/50.
    Mr. Langevin. But the cost of regular jet fuel is----
    Mr. Aimone. Is about $2.50 a gallon, so 10 times, roughly.
    Mr. Young. So if I can use that maybe to tie together the 
previous discussion, that fuel was on the order ten times more 
expensive than what we are paying every day for fuel. This is 
the right thing to do to test and certify and give ourselves an 
alternate source, but nobody would be comfortable with the idea 
that DOD's fuel costs would go up by a factor of ten, and even 
if we could pay that bill, as you have heard testified today, 
that stimulus alone would not likely by itself create the 
capacity in the marketplace. It is going to have to be add, buy 
with other demand. And if we created that demand, the price 
would come down.
    The question is, how fast would the price come down, and 
when can we get it closer to the market? Because I think the 
desire on the Department's part and probably the Congress's 
part is going to have this fuel cost get as close to market as 
possible in the end state over some period of time.
    Mr. Saxton. The gentleman's time has expired.
    Mr. Bartlett.
    Mr. Langevin. Thank you.
    Mr. Bartlett. Thank you very much, gentlemen, and thank you 
very much.
    The Corps of Engineers commissioned the study on oil, I 
think it was dated last September. It was several months before 
it was available openly. In that study it was concluded that 
oil production has either peaked, or its peaking is imminent 
with potentially devastating consequences.
    On page 10 of The Washington Post today was a little 
article referencing a paper just printed in the proceedings of 
the Academy of Sciences which said that the Earth was at its 
highest temperature in the last interglacial period, which is 
about 12,000 years long.
    Mr. Bartlett. And indeed, the article said that the earth 
was at its highest temperature and highest carbon dioxide level 
in a million years. Mr. Young and the rest of the panel, I am 
asking you if you see any common interest or challenge in these 
two reports, the one by the Corps of Engineers on peeking of 
oil, and the article in the proceedings of the Academy of 
Sciences, that the world has reached its highest level of CO2 
and its highest temperature in the last million years, and if 
so, what ought we be doing about it?
    Mr. Young. Mr. Chairman, I know you are, frankly, more 
familiar than I with some of those statistics. One statistic in 
some of the studies is, as much oil as has been recovered and 
consumed to date will be recovered and consumed from now until 
2030 and make a significant dent in the known reserves. These 
factors raise questions about the long-term price of oil, which 
you are extremely familiar with, and they are driving a lot of 
the Department's demand and desires to have options ranging 
from our investments in fuel cells to solar across the border, 
but the Nation as a whole has got to take those steps, and I 
think the department is trying to be a participant, if not, 
frankly, a leader, in many of those areas in pushing that 
effort forward.
    Mr. Bartlett. I would be very skeptical of Energy 
Information Agency projections as to the amount of oil that is 
to be found. They are based on data from USGS, which makes the 
assumption that the 50 percent probability is the equivalent to 
the 50th percentile and therefore the most probable. And most 
of the experts that I know of in the world believe that we have 
probably found about 95 percent of all of the oil that we will 
ever find. There is a very interesting oil chart, which you may 
have a copy of, and Professor Laherrere says that it is 
essentially inconceivable that with all of our exploration 
techniques and computer modelling and 3-D seismic, that the 
world will find as much or more oil than as now exists. We have 
about a thousand gigabarrels of oil out there yet to be pumped. 
USGS assumptions assume that we are going to find another 
thousand gigabarrels of oil out there; that is absolutely 
improbable.
    And I checked with the head statistician from the 
Congressional Research Service, and this is an absolutely 
bizarre use of statistics, to assume that the 50 percent 
probability is the 50th percentile, and therefore the most 
probable thing. Indeed, they have a chart 10 years old from 
which they make projections from where they think oil discovery 
is going to go, and it is not following their optimistic 50 
percent probabilities. It is following, as you would suspect it 
would follow, the 95 percent probability because that is what 
the 95 percent probability said.
    If indeed these two studies--and I think I that they are 
related--what we need to be doing is aggressively moving from 
an economy based on fossil fuels for two reasons: One, they are 
going to run out; and second, we are now releasing more 
carbon--on renewables, you are releasing exactly the amount of 
carbon in the atmosphere that you sequestered from the 
atmosphere in making the renewables.
    And so I think there is indeed a common thread between 
these two articles, and they both demand that we do something 
much more aggressive in the energy area than we are doing. And 
I am appreciative of what you all are doing, but it is in--the 
reality is, they are simply nibbling at the margins, and that 
is maybe all that, in Defense, we would expect it to do, but it 
sure as heck, as a country, it is not what we would expect it 
to do.
    Thank you very much for your testimony.
    Mr. Saxton. Thank you, Mr. Bartlett.
    Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman.
    I want to thank the panel as well, and thank my colleague, 
Mr. Bartlett, for his continued advocacy of paying attention to 
the reality of the situation we face.
    Mr. Connelly, I was glad to see in your testimony that you 
mention the concern that industry has, and by extension the DOD 
has, about possible future requirements for carbon capture and 
the Fischer-Tropsch processes. And I want to thank you for 
thinking about it. And if I could, I want to ask you for the 
record at a later date if you would just submit some of the 
ideas that the DOD and your office is generating as to how you 
would respond to that eventual development, and that is that we 
will require some form of carbon sequestration with a cap and 
trade program to back it up, whatever it might be. If you do 
would that, I would be greatly appreciative of it.
    Mr. Connelly. I would be pleased to do that.
    Mr. Udall. Director Young, Mr. Aimone, great to see you. 
You testified about the Energy Task Force, and I know your 
report is due--I think it is looming, right, in the very near 
future? I have read in some of the testimony that the Task 
Force might lead to a permanent Assured Fuels Task Force, and I 
wonder if you could comment on that. And I would like to put a 
pitch in that, if a permanent group, committee or body were 
chartered or put into force, would you also consider including 
power solutions to such a body?
    Mr. Young. One of the recommendations from the Task Force 
is to continue, if you will, the Task Force. And specifically, 
I think you probably--you said one recommendation is that there 
might be a--the Task Force or a smaller group to look at the 
assured fuels issue and develop options and solutions. I think 
that will be the recommendation we take to the Secretary.
    And on a personal basis I will tell you that the 
participation of the services and agencies in this group to 
achieve collaboration and coordination is one of the highest 
benefits, aside from tabling ideas. And so I would be a fan of 
continuing this forum and sharing the lessons so the Department 
continues to maintain an integrated program going forward as we 
especially consider new investments and opportunities and make 
sure those are fully informed by the knowledge that exists in 
the Defense Department.
    Mr. Udall. Mr. Grone, do you care to comment?
    Mr. Grone. I am going to associate myself with Mr. Young's 
remarks. And I think to the extent--and one of the benefits of 
the work that we have done today is it is broadbased. It is not 
just an R&D question. It is not just a platform question. It 
is--we have tried to take a holistic approach to the entirety 
of the Department of Energy's requirements, be they facility 
based or system based. And I would expect that that kind of 
work in collaboration between our sides of the house and 
certainly with AT&L and certainly with the components would 
continue.
    Mr. Udall. I think there is just so much opportunity here 
as we have discussed in the past. And I would like to be a part 
of seeing that those task forces are stood up in a permanent 
way.
    I would like to thank the Chairman, Mr. Saxton, and the 
other chairman, Mr. Hefley, for responding to the broadbased 
interest on the part of the committee members to have this 
hearing today. I know 20 Democrats or more signed a letter 
asking for this kind of hearing to be held, and I am pleased 
that it has unfolded in this way. And I have never seen in my 
eight years on the Hill so much interest in this across party 
lines. And I think the challenge for us is to keep this 
commitment very steady over the next decades, because of the 
threats but also because of the opportunities this presents. 
And we have often asked the DOD and the men and women in 
uniform to lead our society forward in ways that aren't 
necessarily center to the mission, but whether it is 
integration of our troops, new products and services that have 
resulted in civilian advances in their quality of lives, this 
is key, I think, and I have got great faith in what you all can 
accomplish.
    I wanted to just finish two quick points. I want to thank 
you for your emphasis on the nontactical fleet liquid fuels 
opportunities, because historians are going to excoriate us for 
burning oil in our automobiles because there are so many uses 
of petroleum; there are so many of uses of it that have higher 
value. But as you push a nontactical fleet expansion in 
ethanols and otherliquid fuels, you could make the case that 
that leaves the petroleum for the higher uses in our 
battlefield and in our airplanes and so on. So I want to 
encourage you to continue to do that.
    And then, much more specifically, I know we have talked, 
Mr. Grone, about what you might do in Colorado as we expand the 
presence of the Army, particularly with a fourth ID moving to 
Colorado, but also the academy is there, and NORTHCOM NORAD. 
And you had some plans afoot for the installations there. I 
could make a pitch again that we would like to see that in 
Colorado. We style ourselves as the Saudi Arabia of whatever it 
is, renewable technologies. And I see my time has expired, but 
if you had ten seconds worth of thought on that, I would 
appreciate it.
    Mr. Grone. Well, certainly we continue to work with the 
services on issues related to installations in Colorado. As we 
came out of a fairly comprehensive base realignment and closure 
process, those installations proved to be enduring 
installations. And the work that we are doing--it is important 
that--there is a lot of opportunity I think for joint 
approaches in the Colorado Springs area between the Army and 
the Air Force, and we are continuing to explore those. As those 
mature, we will keep you and the rest of the Colorado 
delegation and the committee informed as we move forward.
    Mr. Saxton. Thank you very much, Mr. Udall.
    Mr. Israel.
    Mr. Israel. Thank you, Mr. Chairman. And thank you so much 
for extending me the courtesy of sitting in on this 
subcommittee. I am a member of the full committee, not this 
subcommittee, and I appreciate your kindness and Ms. Simler's 
assistance.
    I won't abuse the privilege; I just want to make one point. 
I have one very quick factual question and then a slightly 
broader question. The point that I want to make is that Mr. 
Bartlett and I have been working very closely together on a 
bipartisan energy security working group, which we will kick 
off on Thursday with Secretary Gordon England. We are trying to 
bring members together, again on a bipartisan basis, to focus 
in on this issue. And I appreciate the cooperation of the 
Department, as well as Jim Woolsey, who has been one of our key 
advisors.
    Quick question to Mr. Aimone. Is the Air Force Research and 
Development Program on SynFuels fully funded in this fiscal 
year? We are going to do a DOD appropriation at some point 
today. To the best of your knowledge, do you have all of the 
resources that you need for that specific program, or are there 
any funding shortfalls that you are concerned with?
    Mr. Aimone. Mr. Israel, for fiscal year 2007, what we are 
working is approximately $13 million worth of funding to be 
sourced from within Air Force needs--existing Air Force 
capability to be able to meet this need. We think that moves us 
to the continued steps that we are wishing, including the 
purchase of twice the amount of fuel that we purchased this 
year, so 200,000 gallons. There will be a problematic issue 
with that in that the pilot plant that we were able to secure 
the 100,000 gallons from this year is shut down, so we don't 
know exactly the route to secure that fuel, but that will be 
part of our challenges and will be part of our challenge to 
understand how to do that.
    So the short answer is, I believe the money exists within 
the funds available to the Department.
    Mr. Israel. For this fiscal year?
    Mr. Aimone. For fiscal year 2007. For fiscal year 2006, 
that is terminating in three days, we have achieved exactly 
what we wanted to do, and we have enough money to finish out 
the flight tests. We actually believe that we will have a 
little bit of fuel left when we get done with the second and 
potentially third flight test to move the jet up and do some 
on-the-ground engine starts in a very cold weather environment. 
So we think fiscal year 2006 funds are sufficient. We believe 
that with the funds that we have available within the 
Department, we can proceed in the direction we were hoping to 
go to with the Secretary of the Air Force for fiscal year 2007. 
And then fiscal year 2008 is going to be what we are debating 
internally.
    Mr. Israel. We will work together on that, and I am sure my 
colleagues will do just that.
    A slightly broader question to Mr. Young. On the issue of 
DOD's role as a test bed or facilitator or a catalyst, Mr. 
Saxton and I sat in a Stryker combat vehicle in April in Iraq; 
great platform, great tactical vehicle, gets between five and 
ten miles to the gallon. Shortly after that, I met with 
representatives of the big three, and I said, you have Members 
of Congress driving around Capitol Hill in hydrogen demo 
vehicles; why aren't you starting to work on plug-in hybrids 
and hydrogens and other applications for the battlefield? And 
here is what they said, Congressman, we can make anything you 
want. You want hydrogen, we can do it. You want to plug in 
hybrids, we can do it. The problem is, don't tell us what to 
do, ask us to risk all of our capital and our R&D dollars to 
build something that nobody wants to buy. The two worst selling 
vehicles in America right now are the Hummer H1 and the Honda 
Insight, which is a hybrid.
    The DOD has always been a test bed. DARPA helped create the 
computer chip, the Internet, the Boeing 707. So my question is, 
what are you doing specifically with Detroit to incentivize and 
facilitate new partnerships for R&D that may make sense for our 
tactical vehicles? My belief is you are spending about, 
department-wide, about $500 million a year on R&D for advanced 
energy, alternative fuels programs. How much of that is spent 
in investments with Detroit and partnerships with Detroit, not 
only to protect our national security but create jobs in the 
manufacturing industry?
    Mr. Young. I would have to expand on that. You know, we 
target the research to need, and then go out and competitively 
award it. And so some of it is incumbent on companies to come 
and bid and propose ideas to us, we can't necessarily go out 
and pick a small group of three and say, we want to give you 
money. But in those cases, the Army in particular has a strong 
partnership, both through past experience and proximity, with 
some of the auto manufacturers. And I think TARDEC has done a 
lot of work with them on a range of technologies. The 
Department of Energy has particular relationships with--I 
suspect you are extremely familiar with--on hydrogen vehicles 
and other such things. Hydrogen poses some unique problems for 
DOD in terms of tactical battlefield use, but there are other 
options that we are very interested in discussing with them, 
and in many cases, some of the Special Forces and others use 
some specialty or slightly modified commercial vehicles to 
accomplish some of their missions. I know the sealed delivery 
vehicles, some of them are pulled by the high end trucks that 
we buy off the commercial line, so when those products can meet 
our needs, we certainly pursue them because they are usually 
cost effective.
    Mr. Israel. Thank you, Mr. Chairman.
    Mr. Saxton. Well, thank you very much. This has been an 
interesting two hours. Thank you for being with us to share 
your ideas, and thank you for your patience. We appreciate your 
participation, and we look forward to working with you as we 
move forward.
    We will move on now to our second panel, which consists of 
Mr. Scott Sklar, who is president of the Stella Group Ltd.; Dr. 
James Bartis, Senior Policy Analyst of the RAND Corporation; 
and Mr. Mark Wagner, member of the Federal Performance 
Contracting Coalition of the Business Council for Sustainable 
Energy.
    Thank you for joining us, gentlemen. We look forward to 
hearing from you.
    Gentlemen, thank you for being with us, we appreciate it. 
We are interested in what you have to say, so why don't we get 
right to it, Mr. Sklar.

  STATEMENT OF SCOTT SKLAR, PRESIDENT, THE STELLA GROUP, LTD.

    Mr. Sklar. Yes, thank you, Mr. Chairman. I will try to keep 
this short, since I know it is late.
    First, I want to thank the subcommittee for just looking at 
these issues. As you know, it is important.
    Secretary Rumsfeld has two activities underway, the Defense 
Research and Engineering Power and Energy Task Force, and then 
the Defense Science Board Task Force on DOD energy strategy. 
These are good, too, this is good news. And it is good looking 
at these issues from 60,000 feet, but there are some ongoing 
activities that DOD is doing that need to be lauded. DARPA 
programs are really very sophisticated and have been ongoing. 
Some of the work that I wanted to highlight is work on fuel 
cells, biomass, waste utilization. I brought a sample of the 
Nano technology solar they support that they are putting on 
tents. These are light sensitive dyes, totally new materials 
that can make the tents on the battlefield produce their own 
electricity.
    There are a lot of specialized programs, too. The ones I 
like on the procured programs, we have 10,000 solar blankets 
for powering field phones. Here is one of them that is put out 
that--just so that you can keep the field phones running on 
sunlight during the day and then use their batteries at 
nighttime. And obviously, they are out in the military and on 
the battlefield today.
    We have the Air Force's Advanced Power Technology Office 
doing cutting edge stuff the way the military ought to in 
distributed generation from fuel cells to solar to biomass to 
combining power. And the Centers for Army Analysis and for 
Naval Analysis are doing the analytical work we need.
    We have had four executive orders under President Bush and 
an overarching one of President Clinton that have set the stage 
for some of these activities.
    And last, I participated in two studies under DOD auspices 
on November 2003 on Army installation security and then a 
report to Congress issued March 2005 that took about two years 
and dozens of experts within DOD primarily and a few of us on 
the outside. The first one was important because it was really 
a response to the President that, if we had catastrophic grid 
failure or if we had pipelines down, either natural gas or 
fuel, for any length of time, could we have critical functions 
at key military bases? And it was pretty dismal, actually. So 
we need to look at new technology to ensure that we can meet 
the challenges that we face, particularly after September 11th.
    We have a lot of these reports and programs going on 
throughout DOD, but we have a problem. And the problem really 
is that there is no central place within that agency where the 
studies, the ongoing programs and the experts within DOD, 
retired from DOD or have supported DOD, that people within the 
military can sort of find out what is going on. So you have a 
lot of times--every year, we are spending time and money 
repeating the same learning curve. We have got to stop that. We 
need to have experts--projects need to be conveyed both in a 
database and in ongoing programs via National Defense 
Universities, and at the War Colleges for the emerging 
leadership, so they know about what we have discussed, what we 
have studied, and what new technologies either DOD is testing, 
evolving or in fact trying to adopt.
    And, you know, Major General Zimmer, we talked about so 
much; he found out about the units by chance. And we have a 
demo in Arlington, Virginia,10 minutes from here--I am happy to 
show the committee--using solar and wind in a deployable unit 
using shipping containers, where you can add diesels, you can 
expand--contrary to what Mr. Young testified to you--into 
hundreds of megawatts on the field, battle hardened. And they 
were stunned. They should have known about that.
    Similarly, the Defense Science Board--as you know, that is 
underway--was stunned that the Army Analysis Center had already 
done fuel-cost analysis on what it actually cost the military 
to bring one gallon of fuel to the battlefield front. It is 
exorbitant. And so if you are going to do cost/benefit 
analysis, you ought to know what your costs are.
    I included in my testimony lots of studies, but I want to 
point out a few of them.
    First of all, we have commercial technologies in our 
markets that can impact on the military. We have shown, for 
instance, that we can have new technologies--and a recent 
Department of Energy study showed that Europe recycles 
lubricating fuels three times that of the United States--that 
if the Department of Defense looked at new processes and new 
technologies--and we have one company in Texas with a pilot 
line that has shown that you can recycle lubricating fuel used 
by the military. I have a little sample here from this company. 
And most of that recycled fuel is the highest quality 
lubricating oil you can use, so it is military quality, and 
diesel fuel. So why wouldn't we want to have that capability at 
virtually every base and at the front lines so we are recycling 
the fuel we have rather than concocting new ones? Good idea. 
And this is very superior to sort of what I call the primitive 
recycling we use now.
    Mr. Saxton. Excuse me for just a moment. Did you say that 
you--you confused me when you said you can recycle fuel.
    Mr. Sklar. In this case, lubricating oil; I wanted to say, 
in this case, you are correct.
    I also want to say that we have an immense set of new 
technologies from efficiency renewables and distributed 
generation, I listed them in my testimony and provided 
pictures. I brought in, it just hit the markets, our screw-in 
bundled Light Emitting Diode (LED) lights that take about 60 
percent of the energy for the same lumens. And so now we can 
screw them in in basic traditional sockets for lighting. We 
ought to reduce military facilities and on-field installations, 
and with a real move by 60 percent in reduction.
    I would like to add--and again, I am abbreviating my 
remarks--to push that the advanced technologies--and I include 
all the advanced distributed technologies--fuel cells, combined 
heating power, wave-powered buoys, micro hydro photovoltaics, 
solar, thermal, ground-coupled heat pumps, modular biomass--I 
am sure I missed a few, small wind--are utilized cost 
effectively in real terms. The military is using them all, and 
they are hidden away or pushed to the side. We need to expand 
it. We need to replicate it. We need to train our emergency 
officers and leaders with it. And then as these markets expand, 
which they are at 30 percent a year, they will come down in 
cost, and we will have a more resilient, a more agile military 
force and a greater defense that will have less chance of 
having fuel disrupted.
    And then I would like to just comment that there was a 
misstatement here by one of the Defense testifiers that the 
energy balance on biofuels was even. And the Department of 
Agriculture has completed two studies during this 
Administration to show a positive energy balance of 1.4 to 1.8.
    And last, the question of fuels might be better addressed 
with we want a portfolio of fuels, and we want to follow the 
private sector approach of multi-fuel vehicles. And I yield to 
the Chairman--who has a few more hybrids than I own--to 
understand that. But the fact of the matter is we have the 
technology to utilize a range of liquid fuels in our military 
and be agnostic about it, which would give us far more agility 
in the field than worrying about a particular fuel here and 
there that needs to be centralized, pipelined and centralized.
    Thank you very much.
    [The prepared statement of Mr. Sklar can be found in the 
Appendix on page 77.]
    Mr. Saxton. Mr. Bartis.

   STATEMENT OF JAMES T. BARTIS, SENIOR POLICY ANALYST, RAND 
                          CORPORATION

    Mr. Bartis. Mr. Chairman and distinguished members, thank 
you for inviting me to testify today.
    My testimony addresses alternative fuels for military 
operations, specifically alternatives to JP-8 and its close 
relative, JP-5.
    These fuels are preferred for combat operations because of 
their high energy content per unit of volume and because they 
are less subject to accidental ignition, as compared to 
gasoline. In the United States, there exists only two 
technically viable alternatives to crude oil for producing 
significant amounts of JP-8 over the next 20 or so years. One 
option is to tap abundant and rich oil shale deposits in Utah, 
Colorado and Wyoming. The other option is based on a method 
known as Fischer-Tropsch synthesis. This method uses coal or a 
combination of coal and local agricultural wastes or other 
types of biomass to produce liquid fuels.
    But beyond the co-feeding of biomass with coal, no other 
technically viable approaches are ready today for using 
renewable resources to produce significant amounts of JP-8, or 
similar fuels such as diesel or home heating oil.
    In particular, the potential for biodiesel, which is 
produced from vegetable oil today, is severely limited by very 
low yields per cultivated acre and because of the amount of 
suitable arable land available in the United States. Also, at 
the current state of technology development, there is no 
fermentation type process capable of us producing a product 
that would be suitable for blending with JP-8, as is the case 
for gasoline, which can be blended with ethanol.
    Some very promising near-term development work on oil shale 
is underway in Colorado, but pending success in this work, oil 
shale remains a very expensive option for producing liquid 
fuels. For this reason, the remainder of my remarks will be 
focused on the prospects and policy issues for coal-to-liquids 
development.
    My bottom line is that the prospects for a commercial coal-
to-liquids industry developing within the United States remain 
very uncertain. Three major impediments block the way forward: 
uncertainty about the costs in performance in coal-to-liquids 
plants; uncertainty about the future costs of world oil prices; 
and third, uncertainty about whether and how greenhouse gas 
emissions, especially carbon dioxide emissions, might be 
controlled in the United States.
    Given the importance of these three uncertainties, an 
immediate national commitment to rapidly put in place a multi-
million barrel per day coal-to-liquids industry would be 
premature. Rather, Congress should consider a more measured 
approach to developing a coal-to-liquids industry.
    The focus of that measured approach would be to foster 
early commercial experience by promoting the construction and 
operation of an unlimited number of commercial-scale plants. 
Getting early commercial operating experience from a few coal-
to-liquid plants would yield important benefits. Cost and 
performance uncertainties would be reduced. Early operating 
experience would promote post production learning. And most 
important, a small number of early plants could form the basis 
of a rapid expansion of a more economically competitive coal-
to-liquids industry in the future.
    But just as it is in the national interest to promote early 
production experience, it is just as important that this early 
experience be limited to a few plants. A Federal subsidy of 
fuel production from such plants could be very expensive. A 
mere $10 per barrel subsidy for a single small commercial plant 
producing 30,000 barrels per day would add up to a taxpayer 
burden of about $100 million per year.
    A second reason for a measured approach is to avoid adverse 
economic impacts that would be associated with a dramatic 
increase in orders for specialized materials and equipment, and 
such cost increases could spill over to other sectors of the 
U.S. economy. The third reason is that a large increase in coal 
use may just not be consistent with the need to reduce 
worldwide greenhouse emissions.
    An advantage of the Fischer-Tropsch approach is that carbon 
dioxide generated at the plant's site can be easily captured. 
Therefore, the first few coal-to-liquids plants might be able 
to put that carbon dioxide to a good use, such as enhancing 
petroleum in U.S. oil fields. However, until carbon 
sequestration on a large scale is demonstrated as technically 
viable, we must recognize the possibility that coal use for 
both power generation and liquid fuel production may not be a 
sustainable path for the United States.
    There are productive measures that the Federal Government 
can take. The Federal Government should consider cost sharing 
the development of a few site-specific designs. The information 
from such efforts, which each design costs about $30 million, 
would also provide Congress with a much stronger basis for 
designing broader measures to promote unconventional fuel 
development. The Federal Government can also take a number of 
approaches to reduce the risk to owners of coal-to-liquids 
plants of a sustained drop in world crude oil prices.
    The challenge here is to protect the taxpayer by minimizing 
Federal expenditures while at the same time providing 
appropriate incentives to motivate private investment. Purchase 
agreements, which basically involve a guaranteed minimum 
purchase price, are one approach for mitigating financial risk 
that we understand are being considered by the Department of 
Defense. This approach can be effective for reducing risk to 
plant investors. However, I do caution against the use of 
Federal loan guarantees. Firms with the technical and 
management wherewithal to build and operate first-of-a-kind 
coal-to-liquids plants generally have access to needed 
financial resources. Loan guarantees induce the participation 
of less capable firms, thereby increasing the financial 
liability passed to the public.
    If the Federal Government is prepared to promote early 
production experience, then expanded efforts in other areas 
would also be needed. Most important, the Federal Government 
should accelerate the development in testing, including large-
scale testing of methods of long-term sequestration of carbon 
dioxide. This could involve using an early coal-to-liquids 
production plant as a source of carbon dioxide since they are 
excellent producers of it for the testing of sequestration 
options.
    Finally, consideration should be given to enhancing long-
term, high-pay-off, high-risk research in both fossil as well 
as renewable routes to distillate fuels, including routes 
involving fermentation.
    In closing, I thank the committee for looking at this very 
important issue. Thank you.
    [The prepared statement of Mr. Bartis can be found in the 
Appendix on page 131.]
    Mr. Saxton. We thank you, Mr. Bartis, for your very 
excellent testimony.
    Mr. Wagner.

     STATEMENT OF MARK WAGNER, MEMBER, FEDERAL PERFORMANCE 
 CONTRACTING COALITION, BUSINESS COUNCIL FOR SUSTAINABLE ENERGY

    Mr. Wagner. Thank you, Mr. Chairman.
    I am here on behalf of the Federal Performance Contracting 
Coalition. We are a group of energy service companies, 
including Ameresco, Chevron Energy Solutions, Honeywell, 
Noresco, and my company, Johnson Controls. Our business is to 
help military installations become energy efficient and energy 
secure. And please let Mr. Hayes know that we are darn 
enthusiastic about it.
    Mr. Bartlett referenced a recent Army Corps report that 
issued an insightful analysis on energy issues facing U.S. 
military installations. The critical issues in that report were 
energy availability, affordability, sustainability, security, 
and they did mention the fragility of the electric grid.
    The report recommended energy efficiency measures, because 
they are readily available and pay for themselves; expansion of 
renewable energy and onsite generation at military bases; and 
leveraging financial options.
    Currently, we have the technology to address many of the 
problems and the recommendations in the Army Corps report. The 
issue is whether we can adequately deploy those solutions. Let 
me cite several successful projects on military bases that 
provide energy efficiency, reliability, security and renewable 
power.
    At Elmendorf Air Force Base, a 50-year-old heating and 
power plant was replaced with a new energy-efficient 
distributed generation system. Picatinny Arsenal in New Jersey, 
again, distributed energy and back-up generation was installed 
to address energy efficiency and mission needs. At Twentynine 
Palms in California, a dual-fueled co-generation plant was 
erected, and one of the largest photovoltaic solar plants in 
the country was installed. This co-generation plant is fueled 
by gas line, and if the gas line is disrupted by an earthquake 
or mischief if you will, this plant can switch immediately to 
diesel fuel, which is on base and on critical loan to the base 
for the two weeks. That is energy security, sir.
    Naval Station Guantanamo Bay, high-tech windmills are now 
providing more cost-effective power than off the extensive 
grid. And Fort Bragg now has a new combined heat and power 
plant for energy efficiency and security.
    Unfortunately, Mr. Chairman, these successful projects are 
more the exception than the rule. We need the will and the way 
to deploy efficiency and alternative energy technologies that 
we already have at more military installations throughout the 
country, the world and even in Guam, sir.
    To do this, investments are needed in energy-efficient 
equipment and systems. One way to do this is to appropriate 
more dollars, but we know sufficient funding for infrastructure 
improvements are tight. The main program Mr. Grone mentioned 
earlier today was the ECIP program, the Energy Conservation 
Investment Program. According to the Office of Management and 
Budget, this program has a 3-1 return on investment ratio. For 
every dollar that Congress appropriates for this program, the 
Department of Defense saves $3 in energy in these projects. 
Unfortunately, funding for ECIP is basically at the same $50 
million level that it was when it was created 15 years ago by 
this committee. To be honest, with a 3-1 return on investment, 
this program should get a $100 million increase.
    The alternative to direct appropriations if the dollars 
aren't available is financing projects through the energy 
savings, which Mr. Grone also brought up, programs such as the 
Energy Savings Performance Contracting Program. Let me explain 
how that program works. Under the program, the private sector 
energy companies finance, install and maintain new energy-
efficient equipment in Federal facilities at no upfront cost to 
the government. The energy service company is paid back over 
time from the dollars saved by the agency on its energy and 
maintenance bills. The key is that project costs are guaranteed 
by the companies to be paid from the energy cost savings. As 
you can see on the chart, the second bar can exceed the first 
bar, the original energy cost. If the energy savings do not 
occur, the contractor doesn't get paid. In addition, the energy 
savings for each project are measured and verified on a regular 
basis. This acts as an insurance policy for the government.
    The bottom line is that the energy use is guaranteed to be 
reduced; the military base has new energy-efficient equipment, 
and it does not pay any more than it was already paying for 
utilities. The five successful projects I mentioned earlier 
were all done by ESPC, with no upfront funding from the 
government.
    The infrastructure investments for these five projects were 
worth over $200 million to the Department of Defense. This was 
financed by private sector capital and paid back with 
guaranteed energy cost savings.
    While the ESPC program has enjoyed support from Congress 
and the Administration, quite frankly, the program needs to be 
supercharged. It has yet to rebound from 2004, when the 
authority lapsed and all projects stopped. In our written 
testimony, we have offered a number of specific recommendations 
to improve and accelerate the program. I won't go over each one 
individually. But the important thing to note is this program 
is one of the few ways DOD can afford to address its critical 
energy needs of its facilities. Agencies need to be 
encouraged--no, sir, they need to be required to develop 
energy-efficient projects at their installations.
    Finally, let me close with a few comments on sustainable 
buildings. The private sector has embraced green buildings 
because they save money. Sustainable buildings optimize energy 
efficiency and water efficiency, reduce operational costs and 
improve indoor environment and worker productivity. To the 
private sector, it is all about the bottom line because 
sustainable buildings are better and cost less to maintain.
    DOD has embraced the concept of sustainable buildings and 
have signed on to the Federal-wide Memorandum of Understanding 
supporting sustainable buildings, but the problem is resources 
to build them. Far too often MilCon dollars are forced to focus 
on first costs, and the ability to build sustainable buildings 
suffer. The Congress and the Department need to find solutions 
to the first cost trap and develop ways to consider the long-
term operational impact if we don't build sustainable buildings 
today.
    DOD buildings built with fiscal year 2007 MilCon dollars 
will be around long after most of us in this room are gone. We 
should not burden the Department's O&M budgets long into the 
future because we didn't build sustainable buildings today.
    Thank you, Mr. Chairman. I appreciate the opportunity to 
testify.
    [The prepared statement of Mr. Wagner can be found in the 
Appendix on page 67.]
    Mr. Saxton. Thank you very much, Mr. Wagner.
    I would just like to explore a couple of practical issues 
that came to my mind.
    First, Mr. Wagner, while you were talking, I gather from 
the title of your organization that you are a business man?
    Mr. Wagner. Yes, sir, I work with Johnson Controls.
    Mr. Saxton. Good. Then you are the perfect guy for me to 
ask this question.
    Currently in the Department of Defense, we have a 
privatization housing program that is well underway; are you 
familiar with it?
    Mr. Wagner. Yes, sir, very familiar.
    Mr. Saxton. My understanding is that, with regard to solar, 
there are many programs in the country where a house built with 
solar energy or with solar energy applied to it--solar energy 
application, if you will--that the power company will actually 
give a credit for electricity that is fed back into the grid.
    Mr. Wagner. Yes, sir.
    Mr. Saxton. That is okay. Good. My understanding----
    Mr. Wagner. In some States, I know they do it.
    Mr. Sklar. It is called net metering, and it is accepted in 
29 States.
    Mr. Saxton. Okay, that is a good thing. What would prevent 
the Department of Defense from writing specs from a 
privatization project involving housing to build a--to put 
specs in a proposal that would include electrification through 
solar? And I am not quite sure about the logistics of whether 
the contractors would pay for the electricity or be reimbursed 
through the solar process, or whether the military family 
would, but if we put those specs, that would be a private 
investment in military housing not only for the housing, but 
for the energy.
    Mr. Wagner. I would say you would probably have to have the 
project be in a location where solar energy is certainly viable 
and there is a good return on investment, because the way I 
understand the housing privatization project works there, there 
is a certain amount of income stream that the private sector is 
using to finance the cost of the housing that is built.
    The other problem you have got is, who is paying the 
utility bill? If the housing privatization firm isn't on the 
tab for the utility bill, then there is not going to be an 
incentive for them to install higher--but you could structure 
the program like that.
    Mr. Saxton. Good. I will tell Mr. Grone next time I see 
him. Thank you.
    Mr. Sklar, the other issue that I thought was interesting 
was your lubricant recycling suggestion.
    Mr. Sklar. Yes.
    Mr. Saxton. On a military base in theater, is it practical 
to move in a recycling process that would work on a relatively 
large scale? I mean, if you are at Baghdad Airport or you are 
at the air base north of Baghdad, which I can't think of the 
name at the moment--Balad, thank you--or any other number of 
other places, I mean, I have been there. There are fleets of 
cars and trucks, as was pointed out a little while ago, 
Strykers and other tanks, whatever; seems to me like there 
would be a very large need where this process could not only 
save us the necessity of using up additional lubricant but also 
the cost of getting it there.
    Mr. Sklar. Mr. Chairman, you are absolutely right. I am a 
private business man as well, and I have been asked by many of 
the military bases here, domestic, as well as in Iraq and 
Afghanistan, as to looking at recycling. They have to collect 
the fuel, the recycled lubricant anyway. There are concerns 
about the military for recycling or getting rid of fuel that is 
extended, old lubricants. By being able to have the capability 
onsite not only to recycle the lubricant but to return it to 
its highest lubricant value and have diesel fuel--and remember, 
diesel fuel is used extensively for generators overseas--it 
could really be of value.
    In addition, we have waste, moving pallets and other 
biomass, and there has been a big move to bring modular biomass 
generators, gasifiers to get rid of that waste as well. And the 
reason that Major General Zimmer was interested in solar and 
wind shipping containers was also to get rid of the miles high 
of shipping containers over there, trying to figure out what to 
do with them as well. So this concept of recycling what we have 
for higher value has to be a critical concept not just here in 
the States but as we create this next-generation, more agile 
military force.
    Mr. Saxton. Thank you very much.
    Ms. Davis.
    Ms. Davis of California. Thank you, Mr. Chairman.
    Thank you to all of you for being here.
    I think what sometimes happens with the second panel, 
unfortunately, we have fewer people here, but there is also a 
kind of disconnect between what is said in the first panel and 
the second panel, and unfortunately, we don't have you all 
together. And I always find that to be quite frustrating, not 
just on this committee, but on others as well.
    Mr. Sklar. Happy to do that in the future.
    Ms. Davis of California. Could you address--we can point to 
a whole lot of issues, culture perhaps of the DOD, vis-a-vis 
private industry and a host of areas. If there is a way of 
trying to bring those two together, do we not have enough 
individuals working in DOD on these kinds of issues that are 
embedded from time to time in the private sector that would 
make a difference? You know, I know there are no silver bullets 
here, but are there some ways in which you think we can better 
bridge the gap between what is actually going on in the private 
sector with the military? I know that we have certainly--
Homeland Security, for example, major companies that were so 
frustrated because they couldn't bring their technology to bear 
in the Homeland Security effort. And we were just getting 
geared up for that process, but on the other hand, it just took 
forever, and it still is not easy. Can you help me out with 
that? What do you suggest?
    Mr. Sklar. In my testimony, I recommended that there are 
some brilliant lights in the Department of Defense programs 
going on, and we need to figure out a tactic--and it really has 
to be the prodding of this subcommittee, actually--to highlight 
those programs and to get them acknowledged by their peers. We 
have to, again, develop databases so that their knowledge and 
their successes are easy to access because there is no--it is 
so big, it is such a giant agency it is hard to get control of. 
So a lot of the successes that Mr. Wagner just testified on are 
not known generally in the agency, except by some of the people 
involved.
    And last, we need to integrate these successes in the War 
Colleges at National Defense University and the service space 
war colleges so that the leaders of that are coming through 
them--that will be your generals and admirals and colonels--
will be aware of what is going on, will have seen that those 
doing these kinds of cutting-edge things are getting 
acknowledged and rewarded so that they feel open to do it. And 
unless that is all done in sort of a parallel set of tasks, you 
are going to have these hearings again four years from now 
wondering why we are not caught up and having it service-wide. 
So we really need your help as a full committee to help pursue 
this.
    Ms. Davis of California. Did you want to comment?
    I appreciate you all addressed that to a certain extent, 
but there, obviously, is a push back, and I am trying to get 
through that.
    Mr. Wagner. We work with some great folks on bases who 
really want to do the right thing and deploy technology, but 
oftentimes we are faced with the fear of action is greater than 
any greater consequence of inaction, not doing something. We 
find people are at their, gee, I don't know if I should do 
that; is this the right thing to do? These contracts are 
complicated. They are long term. They frankly wring their hands 
over them. They are concerned about approval processes for 
them.
    We need more top level cover, if you will, from leaders in 
Congress and the Administration to say it is okay to go do 
these things. You need to be doing energy efficiency projects, 
and you need to bring these technologies to bear. There ought 
to be a--there are goals out there right now, but they are 
goals. There are not a lot of requirements. And I think that is 
truly important. And I think we find that a lot of projects get 
stalled because someone along the line starts asking a whole 
lot of questions about it, and then everybody backs off because 
they are afraid, you know, let's not get in trouble for this 
one. And we find that on a lot of initiatives that are out 
there.
    Ms. Davis of California. Okay, I guess that is for us, Mr. 
Chairman, to follow through.
    Mr. Saxton. Thank you very much, Mrs. Davis.
    Mr. Udall.
    Mr. Udall. Thank you, Mr. Chairman. I appreciate your 
question, Mr. Chairman, about net metering, and I think Mr. 
Sklar said, in 29 States, net metering is in place. I would 
invite you to take a look at a couple of pieces of legislation 
here that would apply to that metering standard in the entire 
country. There are some vested interests that get pushed back 
with a great deal of alacrity against such an idea, but it has 
proven to be quite a great tool to promote residential as well 
as commercial use of solar technologies to generate 
electricity.
    Mr. Saxton. Good. We are going to be in touch with Mr. 
Grone about it and see if we can't use this as an example where 
the Air Force or the military can have some significant level 
of demonstration project for the American people to take a look 
at. I think that is a great thing.
    Go ahead, I am sorry.
    Mr. Udall. No, I appreciate the commitment to pursuing this 
further.
    Mr. Wagner, I just want to thank you for pointing out in 
your testimony the need to combine existing MilCon and O&M 
resources and look at a longer life cycle, if you will. And I 
think that is the opportunity here in all of these fronts, is 
to look at the external cost as well as the longer lifecycle 
cost. And then if you amortize those correctly, you can make a 
case that almost all of these technologies are equal to or 
surpass existing technologies. So thank you for doing that.
    Dr. Bartis, you talk about the approach that would work, 
excuse me, for coal-to-liquids production, and I want to 
commend you because I think you have really uncovered the way 
to perhaps promote the private sector's involvement in this in 
ways that would really make sense. In particular, you talk 
about the loan guarantees and how they have actually created 
the wrong kinds of incentives, and I think history bears that 
out. And I hope we listen as a committee and as a Congress to 
those recommendations.
    Did you want to make any other comments in that regard?
    Mr. Bartis. I believe the Chairman asked the question, what 
is the difference between now and the SynFuels Corporation in 
the 1980's, and hopefully, we have learned some lessons. In the 
1980's, the SynFuels Corporation was basically industrial 
policy that said the United States is going to produce massive 
amounts of synthetic fuels, independent of what economics said 
of the environment. And what we are advocating is a much more 
measured approach when it comes to shale oil or coal-to-liquids 
in which we test the waters to see what we have there. And if 
we are going to do that, do what else has to be done, 
especially push the renewable side, push the environmental side 
and make sure we understand what these technologies do.
    Mr. Udall. And particularly in Colorado, we are sensitive 
to the oil field dynamic. There are new technologies, the so 
called in-situ processing of oil shale, and it has some 
promising potential. But the oil companies themselves are 
moving slowly, and certainly of the communities that were 
burned by this sudden dissolution of that whole effort don't 
want to experience that again. So I think you remind us that 
history is a great teacher.
    Mr. Sklar, thank you for being here today and for your 
enthusiasm. I think Congressman Hayes would not have asked you 
the question that he asked the previous panel----
    Mr. Sklar. I brought toys and technology for him.
    Mr. Udall. And I do think there is a great interest in OSD 
and the DOD in general because they understand the 
vulnerabilities that we now have because of our dependence on 
or foreign oil and particularly in the liquid fuels area. And 
of course, we are discussing liquid fuels and transport fuels 
in one category, and then the other is electricity and power 
generation in another. And they are linked, but I think the 
most pressing challenge we face, if you set aside the carbon 
equation--which I don't--is on the liquid fuels side.
    I think Congresswoman Davis asked you my question, but I 
wanted to give you a chance to elaborate. You have outlined the 
work you have done with the Department of Defense, and you have 
talked about creating a database and putting this in the 
history and the opportunities here into the War College 
curriculum. Would you care to comment on any additional length 
about what you envision?
    Mr. Sklar. Well, I do want to point out that, in 2003, 
under the Office of the Assistant Chief of Staff for 
Installation Management, they also recommended a development of 
a standard verifiable database on new generation technologies, 
analytical tools dealing with reliability and robustness for 
distributed generation. And the U.S. Air Force, in the same 
year, under a security benefits study said that by adding 
distributive generation to diesels for critical load support 
added several days without traditional fuel supply capability, 
and I have this in my testimony.
    And if 70 percent of the tonnage that the U.S. Army brings 
into battle is fuel, 70 percent, if there is any way to reduce 
that tonnage by using, you know, lubricant recycling, 
distributed generation to reduce traditional diesel and more 
advanced technologies, frankly, even for vehicles, it would be 
immense not only the savings but the agility of the military. 
And it is that recommendation that I mirror out of that 2003 
study, but that I see day to day in dealing with DOD, that if 
we don't create the centralized database, if we don't use the 
bully pulpit of both Congress and OSD to highlight the good 
activities that we see--some of which you heard today--and then 
embed it in this War College program, which is the teaching 
vehicle for our leaders of the future, we are going to miss the 
boat.
    And I have been involved with National Defense University. 
They bring me different energy experts in to interact with 
senior military officers. And in most cases, they are stunned 
about this stuff. I mean, I brought this bundled LED light that 
produces the same lumens for a 60th of the energy, that you can 
screw in. And the officers were told these are not commercial 
yet, that there is no screw in LED lights. Well, there are. So 
the private sector is using them. And I think what Mr. Wagner 
said is, the private sector is willing to put up its own money 
in many cases where they can build margin, and we ought to 
support that as strong and as fast as we can. And then where 
there is learning to be occurred, we ought to support the 
programs within the military, which is willing to take the 
risk, to put them in real world situations.
    And, you know, again, if we don't do it, you will be 
sitting here four years from now--I will be a lot grayer and a 
lot less hair--saying the same thing, and you will be chiding 
these guys saying, why aren't they doing it? So we need your 
help.
    And that is why, by the way, Mr. Chairman, this hearing is 
so important, and I thank you for doing it.
    Mr. Udall. Mr. Chairman, just 20 more seconds because I 
know, Mr. Chairman, the chairman has sat here for a long time 
this afternoon, but the chairman is known as a champion of the 
Special Forces branch of our military, and he understands how 
important it is to winning the war on terrorism. And much of 
what is being discussed here today and the mobile solar panels 
you have here will be very, very helpful to our Special Forces 
efforts as they become more agile, as they are also dependent 
on information and some of the modern ways that we fight, and 
that is why this is also important in this particularly 
specialized area of Special Forces.
    So, Mr. Chairman, thank you again for your indulgence and 
for holding this important hearing.
    Mr. Saxton. Thank you, Mr. Udall.
    I just would comment on your last comment that one of the 
biggest problems Special Forces soldiers have is, when they put 
that knapsack on their back with a 100-plus pounds on it, a lot 
of that 100-plus pounds is batteries.
    Mr. Sklar. Yes, sir.
    Mr. Saxton. To the extent that we can lighten that load or 
replace those pounds that are taken up with batteries with 
other technology that does the same job, the further ahead we 
will be in giving them the capabilities that they need. Good 
point.
    So thank you all for being with us. We appreciate it very 
much. We hope you will stand by in case we have some questions 
as we move forward and thanks for a stimulating discussion.
    Mr. Sklar. Thank you, Mr. Chairman.
    [Whereupon, at 5 p.m., the subcommittee was adjourned.]


      
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                           September 26, 2006

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