[Senate Hearing 109-476]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-476
 
                         WYOMING COAL INDUSTRY

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   on

 ISSUES ASSOCIATED WITH THE GROWTH AND DEVELOPMENT OF THE WYOMING COAL 
                                INDUSTRY

                               __________

                       CASPER, WY, APRIL 12, 2006


                       Printed for the use of the
               Committee on Energy and Natural Resources



                                 ______

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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                 PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho                JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming                DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee           BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska               RON WYDEN, Oregon
RICHARD BURR, North Carolina         TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida                MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri            DIANNE FEINSTEIN, California
CONRAD BURNS, Montana                MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia               JON S. CORZINE, New Jersey
GORDON SMITH, Oregon                 KEN SALAZAR, Colorado
JIM BUNNING, Kentucky
                     Bruce M. Evans, Staff Director
                   Judith K. Pensabene, Chief Counsel
               Robert M. Simon, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
                John Peschke, Professional Staff Member
                Patty Beneke, Democratic Senior Counsel


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Coyne, Joe, Executive Director, Converse Area New Development 
  Organization, Inc., Douglas, WY................................    26
Gern, Dr. William A., Vice President for Research and Economic 
  Development, University of Wyoming, and Chairman of the Board 
  of Directors, Western Research Institute.......................    30
Loomis, Marion, Executive Director, Wyoming Mining Association, 
  Cheyenne, WY...................................................    22
Shilling, Dr. Norman, Product Line Leader, IGCC Power, GE Energy.    15
Shope, Thomas, Chief of Staff, Office of Fossil Eneergy, 
  Department of Energy...........................................     2
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     1
Waddington, Steve, Executive Director, Wyoming Infrastructure 
  Authority, Cheyenne, WY........................................    16

                                APPENDIX

Additional material submitted for the record.....................    45


                         WYOMING COAL INDUSTRY

                              ----------                              


                       WEDNESDAY, APRIL 12, 2006

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                        Casper, WY.
    The committee met, pursuant to notice, at 1:33 p.m., at the 
Wyoming Oil and Gas Conservation Commission Building, Hon. 
Craig Thomas presiding.

            OPENING STATEMENT OF HON. CRAIG THOMAS, 
                   U.S. SENATOR FROM WYOMING

    Senator Thomas. The purpose of this hearing is to be able 
to get the information from you, and bring it back to 
Washington, so that you don't have to go there. So, I want to 
thank all the witnesses for appearing before the committee.
    The purpose of the hearing is to gain better understanding 
of the legislative, economic, and environmental issues 
associated with the growth and development of the Wyoming coal 
industry. Our conversation today has important implications, 
not only for Wyoming, but also for our country and for the 
international community.
    Coal amounts to 90 percent of the United States total 
energy reserves. Coal fuels over half of the electricity 
generated within our boarders. By 2015, global use of coal will 
double. Today coal accounts for 25 percent of worldwide energy 
consumption. In less than 20 years, it will more likely account 
for more than 50 percent.
    The United States has been using coal for two centuries. 
The challenge is to meet our Nation's environment, economic, 
and energy security goals while developing the resource. The 
use of clean coal technology is critical in meeting this 
challenge. Clean coal technologies can dramatically increase 
the efficiency of, and significantly reduce the emissions from 
coal combustion.
    Coal is often associated with the generation of 
electricity, that is going to change in the future. There's a 
growing concern about the dependence on foreign suppliers of 
oil, and coal is one of the effective solutions. Carbon Dioxide 
will be captured during the electrical generation and can 
engage the production of domestic oil fields.
    Paired with the conversion of coal to liquid fuel, these 
technologies will help reduce our dependence on foreign oil. By 
2005 fuels from coal could replace as much as 2 million barrels 
of oil and 5 trillion cubic feet of natural gas a day, Wyoming 
is our Nation's largest coal supplier.
    Last year 36 percent of domestic coal production came from 
Wyoming. We must build on this production's success by 
attracting activities relating to advancing coal technologies 
in our State. The energy policy in 2005 has already set the 
stage for this new era. It established a long ranging program 
which will cover 80 percent of clean imaging projects. It 
establishes three tax credits that will stimulate investment in 
clean coal facilities. It authorizes a billion dollars over 3 
years for liquid coal and gaseous fuels from coal.
    Unfortunately, the President's budget did not reflect the 
Energy Policy Act's emphasis on coal and we're working with him 
on that. We have some real opportunities to get going and we've 
got people in the private sector ready to move forward. These 
are activities that need to take place within the next 2 or 3 
years in the strong private-public partnership and advance that 
effort. Essential infrastructure will rise, will also be 
required to accomplish our bill's full potential when it comes 
to Wyoming's coal resources. The exportation of our vast coal 
resources has been advantageous, but there are added benefits 
to keeping the fuel in the State where the fuel can energize 
other activities. Railroads will be essential to the part of 
our service to increase capacity and provide reliable service.
    Electrical transmission must be constructed. We must 
construct and expand pipeline infrastructure. Our State's 
ability to engage in these kinds of value added activities has 
limited only by our capacity to get these products to the 
market. There are significant challenges, but we're standing on 
the edge of a promising new era in energy development and 
production. Wyoming will continue to be a national leader in 
these efforts. If we overcome these challenges, we can improve 
the Nation and Wyoming's economy, security and environment 
while creating jobs and strengthening education. I look forward 
to hearing our witnesses, to their thoughts on these issues and 
we now turn to our first panel.
    I would like to welcome Tom Shope, Chief of Staff of the 
Department of Energy's Office of Fossil Fuel and Dr. Lowell 
Miller, Director of the Office of Sequestration, Hydrogen and 
Clean Coal Fuels with the Department of Energy. I understand 
the Assistant Secretary, Jeff Jarrett, had some difficulties, 
health difficulties, and wasn't able to be here. I hope all 
goes well with him and we welcome you gentlemen here. Would you 
like to proceed?

  STATEMENT OF THOMAS SHOPE, CHIEF OF STAFF, OFFICE OF FOSSIL 
                  ENERGY, DEPARTMENT OF ENERGY

    Mr. Shope. Thank you Senator, and I would like to apology 
for the Assistant Secretary who was unable to make it, but I'm 
happy to report he is doing much better and looks forward to 
coming out to Wyoming soon.
    Senator Thomas. Good, glad to hear it.
    Mr. Shope. Mr. Chairman, it is a pleasure to join you here 
in Wyoming today. First, I would like to say how much the 
Department appreciates the support of the chairman and the 
members of the committee over the past years and we look 
forward to working with you on fossil energy's research and 
development programs.
    Now, the Senator cited many of the statistics which I am 
going to repeat, but I think they bear repeating, about the 
status of fossil fuels in our country today. It is truly an 
exciting time to be at the Office of Fossil Energy. As the 
Senator mentioned, coal, oil, and natural gas today supply 
about 85 percent of the total energy consumed in the United 
States and coal accounts for well over half of our total 
electricity generation.
    The Energy Information Administration forecast that in 20 
years, coal, oil and natural gas will still account for about 
85 percent of the U.S. total energy consumption and roughly the 
same numbers apply for total world energy consumption. Now, 
that's not to say that we won't be making incredible strides in 
increasing and perfecting alternate and renewable energy 
sources, because the President and the Department of Energy are 
committed to doing just that.
    Rather, EIA's estimates reflect our insatiable appetite for 
energy. Total U.S. energy demand is forecast to increase by 
about 27 percent over the next 20 years, and that's just in 
this country. Total energy demand is forecast to increase by 64 
percent, worldwide. To meet this energy challenge, demand for 
oil in the United States is projected to increase by 25 
percent. Demand for natural gas to increase by 21 percent. 
Demand for coal by 37 percent.
    We can and must meet this growing demand for energy through 
the use of advanced technology. That's what we are focusing on 
at the Department of Energy. At the Office of Fossil Energy, 
these are not just talking points or lofty goals, we are taking 
concepts from the drawing board through demonstration into 
commercialization.
    Real world applications, applications in the field and on 
the ground. And we are doing it by leading cooperative national 
and international research development efforts. And in all 
cases, partnering with industry, scientific and technology 
leaders. Obviously Wyoming and neighboring States play a 
critical role in this process. We are continuing to demonstrate 
new oil and gas production technologies at the Rocky Mountain 
Oilfield Testing Center, located right here in Casper. We 
continue to work with the Western Research Institute, and we 
are working with many advanced technologies of particular 
interest to Wyoming. Like those used for enhanced oil recovery, 
using carbon dioxide injection, which could allow us to 
quintuple our domestic recoverable oil reserves.
    We're continuing to work on advanced technologies like the 
extraction of oil from shale, which could add another 300 
billion barrels of oil to our domestic reserves. These are oil 
shale resources which are concentrated in Colorado, Utah, and 
right here in Wyoming.
    We are also working on advanced technologies that will 
allow us to take regular advantage of unconventional domestic 
natural gas resources, such as coal bed methane, which now 
accounts for 9 percent of all gas produced in the United 
States.
    And of course we are working on advanced technologies that 
will continue to allow us to take advantage of our most 
plentiful fossil fuel, coal. Coal is the workhorse of the 
Nation's electric power industry. Serving as the cornerstone of 
America's central power system. Technology has made coal and 
other fuels far cleaner today than they were a generation ago.
    Electricity generated from coal has risen 177 percent since 
1970, yet emissions of small particulate matter sulfur dioxide 
and nitrogen-oxide emissions have decreased significantly. But 
these successes are not enough, to preserve this economically 
vital energy foundation, we must invest in innovative, low-cost 
environmental compliance technologies for existing plants and 
develop cleaner and more efficient technologies for use in new 
plants.
    Our clean coal programs are driven by President Bush's 
policies and initiatives to achieve energy security and reduce 
polluting emissions in the air as well as greenhouse gas 
emissions. They are underscored by the President's advanced 
energy initiative and his 10 year $2 billion coal research 
initiative. In furtherance of these efforts, we are currently 
undertaking various cutting edge research and development 
projects. While each project and program is aimed at a specific 
technological goal, all the projects are designed to be 
mutually supported and contribute to our ultimate goal a 
completely clean coal-based plant that maintains coal's 
favorable cost advantage over competing fuels.
    Our coal research extends from innovations for existing 
plants to needed technologies of the future in the areas of 
gasification, turbines, carbon sequestration, hydrogen from 
coal, fuel cells and associated advanced technologies. In about 
6 years, we expect our work to result in an up and running 
working, large scale, coal-based powerplant and hydrogen 
production facility that emits no polluting or greenhouse 
gasses into the atmosphere. We call this project ``FutureGen.''
    Think for just a minute about what that will mean. 
FutureGen will prove out the new technologies we're working on 
today and serve as a model for the coal based powerplants of 
the future. FutureGen will not only assure coal's future as the 
dominate source of electric power, it will also be an important 
source of the hydrogen that will fuel a hydrogen based economy 
of the future. That is transformational technology, and it's 
within our reach.
    Of course these advances will be very important to Wyoming, 
with market shares of Western coals continuing to rise and 
production growing at about 20 million tons per year, Wyoming 
leads the Nation in coal production. Our ultimate goal of 
energy security can only be reached by scientists and engineers 
working to research and develop new, cost effective 
technologies to take us beyond our current performance.
    As a Nation we will provide the energy we need, we will 
continue to make incremental and impressive gains in 
environmental performance. It will take time, effort and 
resources, but we're far enough down the research and 
development road to say with confidence that the promise is now 
much larger than the problem.
    The President's energy policy and its related initiatives 
holds nothing less than to consign to the history books the 
energy and environmental challenges that preoccupy our country 
and the world today. We are not indulging in idle fantasies. 
The products of our clean coal and other energy and 
environmental technology research and development will continue 
to supply the energy, the everyday miracle of modern life that 
makes every thing else possible. Mr. Chairman, that concludes 
my oral remarks, I have some written comments for the record 
and I would be happy to answer any questions along with my 
colleague, Dr. Lowell Miller, the Director of Hydrogen 
Sequestration and Clean Coal Fuels.
    [The prepared statement of Mr. Shope follows:]

   Prepared Statement of Thomas D. Shope, Chief of Staff, Office of 
                  Fossil Energy, Department of Energy

    Mr. Chairman, members of the Committee, it is a pleasure to join 
you here in Wyoming today to discuss the promise of technology to allow 
coal to remain the bedrock of the American and the world power 
generation industry. The Department appreciates the support of the 
Chairman and the Members of the Committee over the past years and we 
look forward to working with you as we move forward with Fossil 
Energy's research and development programs.
    It is a fact that coal is our most abundant domestic energy 
resource--we have a 250-year domestic supply at current consumption 
rates, and the entire world has a nearly 200-year supply. Coal is a 
critically important contributor to both America's and the world's 
energy security: a potentially clean, affordable and key source of 
energy for the indefinite future.
    I'd like to begin by laying out a few facts about fossil fuels and 
energy in general.
    The first fact I want to highlight is that fossil fuels--coal, oil 
and natural gas--today supply about 85 percent of the total energy 
consumed in the United States. Oil accounts for 40 percent of that 
total--most of it for transportation fuels--while coal and natural gas 
account for about 23 percent each. Nuclear energy, large hydroelectric 
facilities and other renewable energy account for the remaining 14 
percent. Coal accounts for well over half of our total electricity 
generation.
    Interestingly, roughly the same numbers apply for total world 
energy consumption.
    If we do not change the way we produce and consume energy, the U.S. 
will remain reliant on imported sources of oil. Current forecasts 
suggest that in 20 years the U.S. and the rest of the world would need 
even more energy than we now consume to serve more people in improved 
economic circumstances. Total U.S. energy consumption is forecast to 
increase by about 27 percent and world consumption by 64 percent. The 
use of our domestic resources, especially coal, will continue to be 
important in meeting our energy needs and ensuring our energy security.
    Consumption of oil in the U.S. is projected to increase by 25 
percent; of natural gas by 21 percent and of coal by 37 percent. 
Wyoming and neighboring states will play a critical role in satisfying 
that demand growth. Consumption of nuclear, and renewable energy is 
also projected to increase.
    We will need energy from every available source and, for that 
reason, we cannot be for one source of energy and against another. We 
need them all and we must be for them all.
    How are we going to meet this growing demand for energy? The 
answer, as it always has been, is through human ingenuity--advances in 
technology.
    Intelligence and imagination have allowed us to tap oil and natural 
gas resources deeper in the ground, deeper underwater and in more 
inhospitable places than ever before.
    That will continue as new technologies allow us to develop oil and 
gas resources in parts of the Rocky Mountain region, on the Outer 
Continental Shelf, and in Alaska.
    Enhanced oil recovery technology using carbon dioxide injection 
could significantly increase our domestic recoverable oil reserves by 
allowing more oil to be recovered from mature oil fields.
    At the same time, technology is allowing us to take greater 
advantage of ``unconventional'' domestic resources. Perhaps the most 
prominent example is coal-bed methane, which now accounts for nine 
percent of all gas produced in the U.S. Our coal-bed methane resources 
are centered in Wyoming, Colorado and New Mexico.
    Other unconventional resources, while not yet proven to be 
economic, hold significant potential for the future if certain 
technological hurdles can be overcome. As you know, our oil shale 
resource is concentrated in Wyoming, Colorado and Utah. In addition, an 
estimated 200,000 trillion cubic feet of gas resource exist in methane 
hydrate formations in the U.S. Worldwide, methane hydrates are 
estimated to contain 400 million trillion cubic feet of gas.
    Technology has made solar and wind power sensible technology 
choices in certain circumstances today, and further R&D breakthroughs 
will continue to drive down costs and encourage more widespread 
applications of these technologies.
    Technology has made nuclear power plants safer, more secure and 
more efficient. It has transformed the transportation sector, providing 
far cleaner fuels and, increasingly, more efficient vehicles. And it 
has made industry and society overall much more energy efficient, 
producing more goods and services while using less energy and emitting 
less pollution for an ever-expanding economy. Our economy grew by over 
125 percent from 1972 to 2000, yet energy use increased by only 30 
percent. The EIA projects a further 32 percent improvement in energy 
intensity--energy consumption per dollar of Gross Domestic Product--by 
2025.
    Technology has made coal and other fuels far cleaner today than 
they were a generation ago. While our economy and population have been 
growing, pollution has been declining. Electricity generated from coal 
has risen 177 percent since 1970, yet emissions of small particulate 
matter have decreased by 87 percent, along with a 38 percent decrease 
in SO2 emissions and a 24 percent reduction in nitrogen 
oxide emissions,
    Our ultimate goal is energy security, which can be defined 
concisely as reliable, affordable, and environmentally sound energy for 
the future. That goal can be reached with the help of scientists and 
engineers working to research and develop new, cost-effective 
technologies that take us beyond current performance.
    Based on what we have accomplished to date, anyone with knowledge 
of the energy and environmental field should be an optimist about our 
future prospects.
    President Bush is an optimist, and his energy plan has from day one 
been founded on technology. The President's new Advanced Energy 
Initiative which he unveiled in his State of the Union Address is 
founded on accelerating research in technologies that hold great 
promise. As the President has said, we are on the verge of spectacular 
technological advances that will redraw the energy and environmental 
landscape beginning in our lifetimes.
    We can and will provide the energy we need and we need to have 
short, medium and long term approaches to this challenge. We must also 
continue to make incremental but impressive gains in environmental 
performance. There is no one immediate solution to our energy 
challenge. We must face this challenge with a long term view to change 
fundamentally the way we produce and consume energy. There are things 
we can accomplish in the short term that change the way we power our 
homes and businesses and vehicles. Energy efficiency measures will play 
an important role. But many of the big changes are still some way off. 
It will be perhaps 10 to 20 years before we see the transformational 
technologies we are researching and developing today begin to have 
real-world, beneficial effects on our lives.
    The wait will be worth it. The benefits will be enormous, changing 
our lives and addressing the energy and environmental concerns that 
preoccupy us today.
    There are great things coming in the energy and environmental world 
and many of them have to do with clean coal's promise and the role we 
envision for it in helping to meet our overall energy challenge. The 
Office of Fossil Energy has taken and is taking a lead role, in 
partnership with industry, university researchers, state governments, 
independent energy organizations, foreign governments and others in 
researching and developing technological advances that are making coal 
a cleaner, more efficient source of energy every day. Our clean coal 
programs are driven by: President Bush's energy policy goal of energy 
security; by the Clear Skies Initiative to reduce polluting emissions 
to the air by 70 percent by 2018, and recent complementary 
Environmental Protection Agency regulations; by the climate change goal 
to reduce the greenhouse gas intensity of the economy by 18 percent by 
2012; and by the President's 10-year, $2 billion Coal Research 
Initiative to develop near-zero atmospheric emissions, coal-based power 
generation and hydrogen production.
    Perhaps the best way to survey the goals and activities of the coal 
and power generation sector is to take a brief tour of the Department 
of Energy's clean coal program. If a technology is important, we're 
working on it, often leading cooperative international R&D efforts. And 
in all cases we are partnering with industry and scientific and 
technology leaders.
    The various R&D projects currently underway are mutually 
supportive; while each project and program is aimed at a specific 
technological goal with a specific energy/environmental benefit to be 
met according to a specific timetable, all the projects are designed to 
contribute in one way or another to our ultimate vision: a completely 
clean--that is, emissions free--coal-based plant that maintains coal's 
favorable cost advantage over competing fuels.
    Coal plants have a useful life of at least 40 years, which means 
that there are coal plants currently operating that were built as far 
back as the 1960s, just about the time we as a nation began to take the 
phenomenon of pollution emissions seriously. The federal government and 
state governments have passed pollution control legislation and the 
coal power industry has met the challenge by retrofitting technological 
improvements to older plants and incorporating new technology in each 
new plant as it was built, with impressive results, as mentioned 
earlier.
    That's good, but in order for coal to continue to account for more 
than half of America's electricity supply, and nearly a quarter of 
our--and the world's--total energy output, the coal research program is 
proceeding along three interwoven, complementary tracks: a Clean Coal 
Power Initiative for the commercial demonstration of new technology; 
design, construction and operation of the coal-based power plant of the 
future called FutureGen, a 275-Megawatt, fully integrated, near-zero 
emissions, coal-fired power plant and research facility that will 
produce both electricity and hydrogen while sequestering carbon 
emissions; and a coal research effort that is concentrated on clean 
coal's key technology needs.
    Our coal research extends from innovations for existing plants to 
needed technologies of the future in the areas of gasification, 
turbines, carbon sequestration, hydrogen from coal, fuel cells, and 
associated advanced technologies.
    In about six years, we expect our work to result in an up-and-
running FutureGen plant: a working, large-scale power plant and 
hydrogen production facility that emits almost no polluting or 
greenhouse gases to the atmosphere. Think about: virtually no nitrogen 
oxides, no sulfur dioxides, no mercury, no particulate matter, no 
carbon dioxide. Nothing but energy.
    The goal is for FutureGen to prove out the new technologies we're 
working on today and serve as a model for the coal-based power plants 
of the future. FutureGen holds the potential to not only assure coal's 
future as the dominant source of electric power, but to also be an 
important early source of the hydrogen that will fuel a hydrogen-based 
economy of the future.
    That is transformational technology--and it's within our reach.
    Clean coal is set to continue its enormous contribution to 
America's energy security and as you will see, to world energy 
security.
    While FutureGen is our promise for the future, let me turn to some 
of the more immediate advances being brought about by the Clean Coal 
Power Initiative, or CCPI.
    CCPI has progressed steadily since it was initiated by the 
President in 2002, providing Government co-financing with utility 
partners for new coal technologies that can help utilities meet the 
President's Clear Skies Initiative and other energy goals. Some of the 
early projects are also showing ways to reduce greenhouse gases from 
coal plants by boosting coal combustion and power plant efficiency.
    To take one example from the 10 CCPI projects that have been 
selected after two rounds of competitive solicitations, the ``Mustang'' 
project in New Mexico will demonstrate a multi-pollutant control 
process that can remove virtually all sulfur dioxide and nitrogen oxide 
emissions and 90 percent of mercury emissions.
    While CCPI demonstrates existing new technology, our core coal 
research program is developing the technologies of the future that will 
eventually be essential components of FutureGen.
    We can break the program elements down in general terms, beginning 
with our Innovations for Existing Plants program, which is aimed at 
short- and medium-term goals.
    We aim by next year to develop cost-effective technologies ready 
for commercial demonstration that reduce mercury emissions by 50 to 70 
percent, and eliminate microscopic particle emissions.
    By 2010, we plan to test technologies for cutting mercury emissions 
by an average of 70 percent.
    For the long-term, our coal research goals are ambitious but 
achievable.
    We are far along in research, development and demonstration of 
advanced Integrated Gasification Combined Cycle, or IGCC, technology. 
IGCC, in essence, converts coal to its constituent gases and then burns 
the gas. The IGCC process is inherently clean, highly efficient and 
versatile. It is potentially capable of generating electricity, steam, 
and a broad range of chemicals including synthetic natural gas, and 
virtually eliminating atmospheric emissions of nitrogen oxides, sulfur 
dioxides, mercury and other pollutants.
    With IGCC, carbon dioxide emissions may eventually be reduced by 
half compared to conventional coal technology, with the majority of the 
remaining carbon dioxide emissions ready for capture and permanent 
underground storage.
    As we move along our R&D path for coal gasification, we have 
specific technological hurdles to leap. We have to improve new gasifier 
and turbine performance and reliability while steadily bringing down 
costs. We will have to develop new gas-related technologies and 
integrate them with fuel cells and fuel cell/turbine hybrids.
    Fuel cells are usually thought of as a feature of automotive 
vehicles of the future. Often overlooked is their potential to be a 
very important part of our power generation future, both as an integral 
part of future power plants and as a ``distributed generation'' 
supplement to the electricity grid--a local power source for commercial 
and public buildings, hospitals and residences, for energy-intensive 
telecommunications facilities, and other uses.
    Because fuel cells rely on electrochemical reactions rather than 
combustion, they are inherently efficient, quiet, and virtually 
pollution-free.
    Combined with the kind of IGCC system described earlier, fuel cells 
will make possible near-zero emissions, coal-based power with nearly 
double the efficiency of today's coal-fired plants. Fuel cells are a 
key option for the FutureGen concept.
    Our Solid State Energy Conversion Alliance program, known as SECA, 
is working today to develop fuel cell modules that can operate at one-
tenth the capital cost of today's systems, and hybrid fuel cell-turbine 
systems that operate at up to 60% efficiency on coal. Compare that to 
the average 33 percent efficiency rate at today's coal power plants.
    Another of our research projects is aimed at a new and potentially 
transformational market, given the right price environment, for 
hydrogen derived from coal. Transition to hydrogen from coal as a 
transportation fuel could help reduce our dependence on imported oil.
    Finally, our carbon sequestration program has immense potential for 
reducing greenhouse gas intensity.
    Carbon sequestration is the capture and permanent storage of carbon 
dioxide. Our ability to eliminate CO2 emissions from coal-
based power plants by permanently capturing and storing them 
underground will have a significant, beneficial effect on greenhouse 
gas intensity. That's why carbon capture and storage, as well as 
measurement, monitoring and verification are at the heart of our 
efforts to meet the goals President Bush set out in his Global Climate 
Change Initiative.
    We plan to demonstrate a portfolio of safe, cost-effective 
greenhouse gas capture, storage and mitigation technologies at the 
commercial scale by 2012, with the potential for substantial deployment 
and market penetration beyond 2012.
    By 2018 we should have developed commercial systems for the direct 
capture and sequestration of greenhouse gases and pollutant emissions 
that results in near-zero emissions with less than 10% increase in the 
cost of produced energy.
    To accomplish this ambitious program, we have formed seven Regional 
Carbon Sequestration Partnerships in the United States and Canada. 
Wyoming, it should be noted, is an active participant in two of the 
regional partnerships: Big Sky, led by Montana State University, and 
the Southwest Partnership led by the University of New Mexico. We have 
also formed the international Carbon Sequestration Leadership Forum 
(CSLF) to share scientific and technological information and 
participate in joint projects. The CSLF has drawn the enthusiastic 
attention of many of the world's largest coal consumers and now 
comprises 21 member nations and the European Commission.
    Just last week we conducted a meeting of the CSLF in New Delhi, at 
which we reached another, closely related milestone in international 
energy/environmental cooperation when India become the first country to 
join the government steering committee for FutureGen. As a partner, the 
Indian government will contribute $10 million to the FutureGen 
Initiative and Indian companies will be invited to participate in the 
private sector segment. India is the first of what we hope will be many 
international government partners to join with us in the FutureGen 
project.
    I don't need to point out that Carbon Sequestration technology is 
integral to the design and operation of FutureGen.
    But I do want to emphasize a couple of additional potential 
benefits of carbon capture. First, carbon dioxide derived from power 
plants will be increasingly in demand as a commercial product for 
injection into mature oil fields, adding to our domestic oil reserves 
and production and providing revenue to power generators. And second, 
research projects currently underway are testing the strong possibility 
that CO2 injected into active oil fields can be sequestered 
there, providing a very attractive energy and environmental double 
benefit: reduced greenhouse gas emissions and increased oil production.
    The successful development and deployment of clean coal technology 
will undoubtedly be important to America's energy future. It will also 
be important to Wyoming. Here are a few numbers to illustrate just how 
important:

   Substantial new coal fired power plants are being prospected 
        nearly every week. More than 140 new coal-fired power plants 
        have been proposed representing 85 GW of electricity, over $119 
        billion investment, and enough power to electrify over 85 
        million homes. At least 6 new coal fired plants have been 
        proposed for Wyoming.
   Market shares for western coals continue to rise, with 
        production growing at about 20 million tons per year. More 
        eastern power plants are expected to use western coals, with 
        western coal supply to eastern power plants expected to 
        increase by more than 50 percent through 2030.
   Wyoming continues to lead the Nation in coal production. 
        Your mines account for more than one-third of the approximately 
        one billion tons of domestic coal produced each year, and 
        nearly 70 percent of western coal production.
   Wyoming coal production is increasing, thanks in large part 
        to your world class coal seams and desirable low sulfur 
        composition.
   The Powder River Basin is a tremendous coal producing region 
        with over 65 trains filled with coal leaving the basin each day 
        destined for various end uses throughout the country.
   The coal industry continues to be an important source of 
        employment for Wyoming.
   Coal industry jobs here are among the highest paying, with 
        the Department of Commerce reporting Wyoming's labor earnings 
        from coal mining at more than $300 million. That breaks down to 
        wages of more than $64,000 per year (excluding benefits), more 
        than twice the state average.
   Each coal mining job supports an estimated three related 
        jobs, leading to a total payroll effect of more than $600 
        million to the state of Wyoming.

    Coal is at the heart and soul of Wyoming, both now and for the 
foreseeable future.
    I will conclude by emphasizing how deeply committed we are to the 
research underway today.
    The President's energy policy, his new Advanced Energy Initiative, 
his goals for climate change, his Coal Research Initiative and the 
other activities I outlined propose nothing less than to rewrite the 
future of the energy and environmental challenges that preoccupy our 
country and the world today.
    We must invest today to reach the day when combined energy from all 
sources will be reliable and affordable; when energy-related emissions 
from stationary sources will be minor to non-existent; when a large 
segment of the transportation sector will be converted to fuel-cell 
vehicles running on hydrogen; when our efforts to control emissions and 
increase efficiency will be complemented by less-developed, faster-
growing countries with far larger populations having the benefit of the 
technologies we have taken the lead in developing.
    Imagine, for example, the beneficial effect on global emissions and 
energy resource consumption if China, which is building new coal-based 
power plants at the rate of one a week, were to adopt some of these new 
power generation and energy efficiency technologies and processes. 
We're working with them on it.
    The combination of sensible energy policy, scientific and 
engineering ingenuity, the genius of American business and the rich 
energy resources of Wyoming and other states will allow us to continue 
to grow our economy and enjoy our way of life for centuries to come.
    Mr. Chairman, that concludes my testimony. I will be happy to 
answer any questions the Committee may have.

    Senator Thomas. Okay, thank you. Your remarks will be put 
into the record. I wonder, from the technological standpoint, 
what other issues associated with building an IGCC plant that 
uses Western coal at altitudes above 4,000 feet.
    Mr. Shope. I will defer to the technological expert in that 
area.
    Senator Thomas. Very well.
    Dr. Miller. I think the biggest challenge will be to 
address the moisture that's in the Western coal in order to 
make it compete with some of the other coals. The integrated 
gasification combined cycle starts with the gasifier and that 
is somewhat sensitive to the moisture content of the coal.
    Senator Thomas. I see. Do you have plans to deal with that 
issue.
    Dr. Miller. Yes, we have. There have been an number of 
studies that have been performed using the Wyoming coal as a 
feedstock, looking at different ways to address the moisture in 
the coal. There are gasifiers that can be selected. Some that 
do not require the moisture to be dried and others that do dry 
the coal prior to going through the gasifier and both of them 
are processes which look like they are going to produce 
economically competitive products from the gasification 
process.
    Senator Thomas. Of course, the basic elements are 
essential, but we sometimes get a little politically involved 
in terms of where these projects take place and I hope we 
continue to remember where the source of coal is and that seems 
to me that's the kind of key to where the coal would go. And, 
of course that's the reason we put that provision in the law 
that at least half of this business needs to go in elevations 
that exceeds 4,000 feet.
    Dr. Miller. That's true and most of the studies we are now 
doing, are what we call mine mouth studies, locating the 
facility near the mine mouth or near the source of coal.
    Senator Thomas. Good, thank you. The Department recently 
commissioned a study on the use of carbon dioxide to enhance 
the recovering oil fields, they found carbon dioxide injection 
allows the recovery of 50 percent of the oil in place, compared 
to 33 percent. What opportunities exist for an emissions from 
coal fire generation to be used for enhanced recovery? Does the 
Policy Act of 2005 encourage the construction of infrastructure 
and technological development with these innovative solutions, 
Mr. Shope?
    Mr. Shope. Well, Senator, again, enhanced oil recovery 
certainly is a very promising opportunity for us. Certainly we 
are focusing on carbon sequestration in general. But looking 
for those opportunities for synergies, not just with carbon 
sequestration and geological voids which of course is extremely 
important. But also taking advantage of the opportunities for 
enhanced oil recoveries. I mentioned in my opening remarks some 
of the studies are indicating we could possibly quintuple our 
reserves of oil that we were able to produce. Our FutureGen 
project that I mentioned certainly has carbon sequestration as 
part of it, as part of the FutureGen Alliances consideration of 
the various projects, certainly we are looking at opportunities 
to see if enhanced oil recovery could be a part of that, to see 
how that squares up with other offerings, other bids.
    Of course, then FutureGen Alliance would be making the 
final determination as to what exact sites would be selected. 
But, it is a provision we are trying to work diligently on and 
working, not only within our own office, but working with the 
Office of Science within the Department of Energy, to seek the 
crossover synergies there, but even within the Office of Fossil 
Energy, we are making sure that our oil and gas program is 
working closely with our own sequestration program to maximize 
those opportunities.
    Senator Thomas. Thank you. You mentioned FutureGen, that's 
been talked about for some time, it's been one of the 
priorities the President has talked about, probably more than 
anything else. What's the status of that? What's the timing you 
put on that program?
    Mr. Shope. Senator, I'm very pleased to talk about the 
status of FutureGen, again, as I mentioned, the FutureGen 
project will revolutionize coal use. Eliminating environmental 
concerns and also, more so than just the project itself, it'd 
be validating emerging energy technologies and pioneering new 
partnerships. The request for proposals for site locations has 
gone out, we're now in February, those proposals will be due 
back in May of this year. Once the proposals are reviewed, they 
will be narrowed down and the site selection will be done by 
the FutureGen Alliance themselves.
    The short list would be expected to be produced by mid-this 
year, some time in the latter part of this year, in the summer. 
We will then be engaging in full NEPA compliance for those 
candidate sites that have the potential to be selected for the 
site. Final selection would be targeted to take place in late 
2007. Now, the FutureGen Alliance itself is continuing to gain 
industry acceptance. They've now had another member join up--
bringing the total to nine major producers, major significant 
companies. So, the FutureGen project is moving along well, and 
we're very excited about it.
    Senator Thomas. So, your expectation is this project will 
be decided upon by the end of 2007?
    Mr. Shope. That's correct, Senator. I believe by 2007. We'd 
then finalize design and begin construction, with plant 
operations projected to begin in 2012. They would continue in 
operations for 4 years in 2016 and there would be 2 to 3 year 
maintenance, or follow-up, period to gather additional 
monitoring data and analysis. The target for long term 
commercial employment of this would be within 20 years, 
approximately 2025.
    Senator Thomas. This kind of falls into my earlier comment 
that's a great idea and we're very much for it and certainly 
hope we're giving good consideration on it. But, it's going to 
be awhile. In the meantime, we have some other opportunities 
that could be accomplished much more quickly. Is that true?
    Mr. Shope. Well, again, Senator, I would address it this 
way. As I mentioned, that plant that we talked about for 
commercial deployment would be in 2025. Again, this is a living 
working laboratory.
    Senator Thomas. Right.
    Mr. Shope. And so, all of the technologies that we're going 
to be developing for that plant, are ones that we could be 
using today. As far as gasification, membranes, hydrogen 
technologies, carbon sequestration. All of the technology 
leading up to that plant, so I would hesitate to focus solely 
on the future plant. We also have the benefits leading up to 
it.
    Senator Thomas. We could do the transition from coal to 
fuel right now, can't we?
    Mr. Shope. That's correct.
    Senator Thomas. Dr. Miller, will the water content problem 
that you talked about for Western coal be factored into this 
FutureGen project?
    Dr. Miller. It could be, well, it will be, depending on the 
source of coal that is chosen and the site of the plant. 
However, as we mentioned in my earlier comments, it's not what 
I would call, or what we engineers call a rate-limiting step. 
It is certainly something that can be overcome and there are 
technologies already available. Depending upon what the price 
of the product should be in order to be competitive to solve 
that particular problem, Senator. I don't think it's a, as I 
said, it's not a rate-limiting problem from my point of view.
    Senator Thomas. So this wouldn't be an obstacle to Western 
coal, where the coal is?
    Dr. Miller. One of our studies has shown that, already that 
we can utilize the Western coal and come out with a more 
competitive product when we consider what the other competitors 
might be.
    Senator Thomas. Thank you. Mr. Shope, you mentioned the 
President had talked a lot about a 10-year, $2 billion clean 
coal initiative, would you explain that just a little bit? 
What's this talking about?
    Mr. Shope. Certainly, Senator. Again, I'm pleased to report 
that we're at $1.9 billion of that 10-year commitment and we've 
done it within 6 years, we're talking about the entire coal 
research program that we're working on. FutureGen, of course, 
would be a part of that. Developing clean coal technologies 
that are ready for the marketplace, that are environmentally 
sound and operate in a cost efficient manner. Our budget in 
2006 does put us up, again, to the $1.9 billion mark. By the 
end of the 10 year cycle we could have approximately $4 billion 
in coal research having been committed by the administration.
    Senator Thomas. I see, thank you. Over 6 months ago, the 
Energy Policy Act of 2005 was signed into law. There's been a 
lot of talk about additional litigation and new bills. You have 
a bill now as a result of a decade's amount of work. What do 
you think is necessary to implement what we now have? And are 
there other legislative initiatives that need to be put into 
place to cause this to happen in your view?
    Mr. Shope. Senator, I would defer to folks above my pay 
grade to decide on the long-term policy direction, and any 
legislation that might be needed. I'm open to say that under 
the Energy Policy Act that there are many provisions that we 
don't have the funding to implement. So, from my perspective, 
of course, from a budgetary standpoint, we must focus on what 
is the prize. Focus on what is it that will get the most bang 
for our buck. Is that technology clean? Will we have positive 
environmental impacts? We have to look at what is the impact on 
the market? Is there a market failure that needs to be bridged?
    Senator Thomas. But, do you need more legislative authority 
to do that?
    Mr. Shope. Again, I would have to defer on the question as 
to making that decision.
    Senator Thomas. I know the money is one thing, and I 
understand that to implement these things we need money. But, I 
guess that the thing that I am going to pursue a little and 
pretty soon is whether our challenge is to implement the policy 
that we now have in place or whether in fact, it doesn't seem 
to me that we probably need a new policy. Maybe we need new, 
some features and factors to implement that policy.
    Mr. Shope. Yes Senator, and again there are some wonderful 
provisions within the Energy Policy Act and things that will 
make a big difference. We mentioned earlier the tax credit 
provisions, loan guarantee provisions. These are things that 
will help bridge that valley of death for advanced 
technologies, from development into market, and into 
commercialization. These are incentives that I think are, will 
be beneficial and will pay in the long-term.
    Senator Thomas. Good, I hope you'll keep in touch with us 
as to what you think needs to be done to implement the policies 
we have. Because we have failed, we want to look forward to 
alternatives, we need to look forward to finding more efficient 
ways to produce. We want to look forward to being able to use 
things that we have available to us at this point.
    There are a number of provisions in the energy bill that 
would help coal development in ways that we are discussing here 
today. One of the most important is title XVII, which 
establishes a loan guarantee program to cover up to 80 percent 
of those advanced projects. And there are people lined up with 
private funding to make these projects a reality, but the 
Department has not yet issued guidelines as to how to apply 
these loans. What is your view as to when that will happen and 
what are the provisions we can expect to make a difference in 
the short term?
    Mr. Shope. Senator, the guidelines are currently under 
departmental review. I can report that. I know that the 
Department is looking at creating a central office for the 
management of the loan guarantees. So it would not be something 
that would be done strictly within the Office of Fossil Energy 
but more of a departmental approach. That's being considered 
right now. And the final decision hasn't been made on all that, 
but again, they want to make sure that the loan guarantees pay 
off. Because, as I mentioned before, we want to make sure that 
they are in fact good investments in companies. There's always 
risk associated with any R&D investment, but we want to make 
sure that we maximize, or limit our exposure to it as much as 
possible.
    I've been told that we could expect those guidelines to be 
published in the very near future. We're targeting late spring 
for the publication of them, and targeting some time in the 
fall for implementation of the loan guarantee program.
    Senator Thomas. There appear to be a substantial number of 
private sector investors that are willing to move forward to do 
some of these things. But one of the questions they have in 
their minds, of course, is to what these incentives are going 
to be. What's necessary to qualify for them? How do they get 
implemented? And, certainly, some of these relatively new 
programs, there needs to be some incentives for the private 
sector to invest. And so, I think it's important to move 
forward on it as quickly as we can.
    Mr. Shope. I agree with you, Senator. And as far as the tax 
incentives, if you're addressing those as well, the guidelines 
published in February. We've been working closely with the IRS 
on those and their guidelines were published in February. There 
is information that's now available for entities interested in 
applying for those incentives. The window for their 
applications are, would be closing, I believe its June 30 when 
they're closing. They are open now for the submittal, they will 
be closing it June 30. Once those applications are received, 
the Office of Fossil Energy will be reviewing those and making 
a certification as to the viability, technological viability, 
economic viability of the particular project that is seeking 
the incentive. Once we certify it, it would go to the IRS, that 
would also have to approve of that incentive. The program is 
limited to that $1.3 billion in caps, so the IRS is targeting 
having final selection by fall of this year.
    Senator Thomas. All right. I appreciate that.
    Dr. Miller, do you have any observations as you see it from 
your role? If we're here to kind of address, how do we 
implement these ideas that we have in terms of new techniques 
and so on? Are there any observations that you have that might 
help us move forward?
    Dr. Miller. Senator, I think it's important to remember 
that coal technology is very, very flexible and Wyoming coal is 
particularly well suited for what we call coal conversion 
technology. And, that's using integrated gasification combined 
cycle concept for what we call a coal production facility. 
Which permits us to produce power as well as other products, 
depending upon what the local market might bear or desire at 
that particular point. And, as I said, the coal here is 
particularly well suited for a coal conversion concept whether 
it be for synfuels or whether it be for power or a combination 
of both.
    I think that the energy bill, from my point of view, of 
working with industry, probably addresses the one major factor 
that concerns anybody, an entrepreneur going into building the 
first plant of any kind. An integrated gasification combined 
cycle facility is a lot more complex than a general powerplant. 
A coal conversion facility is the same, the risk is fairly high 
and the capital investment is higher than normal.
    So, by providing that incentive, you reduce the element of 
risk to a point where it might be acceptable to an entrepreneur 
and we can see, even in the past few months, we are 
experiencing a great deal increase in interest through studies 
and through participation in industry looking at trying to be 
the first now to implement one of those facilities.
    Senator Thomas. Great. I appreciate that. Obviously one of 
the questions that's always in mind of people and has to do 
with location of these things and so on, is that we have the 
fossil fuel resources that are generally in this area and the 
market is in other areas, so we have to have, we have to 
consider how we transport it. We have to do it one way or 
another, whether we do it as we do it now with rail and 
transfer the coal to be refined somewhere. Whether indeed along 
with this goes pipelines or transition lines whatever the case 
is, so that we can get this started to market.
    Any closing comments, Mr. Shope?
    Mr. Shope. No, Senator, I am just excited for the 
opportunity to be here today, and again the promise of fossil 
fuels are important, extremely important part of this energy 
mix for energy security, as I mentioned in our opening 
comments, we're going to be defendant on fossil fuels in one 
form or fashion or another for a long time to come. And we do 
need to do all that we can to try and make these fossil fuels 
as clean and efficient as possible. We are diligently trying to 
do that and we look forward to working with you and the 
committee to continue that process.
    Senator Thomas. Well, thank you very much. And we 
appreciate what you do, I know it's difficult. Energy has 
become one of the most pressing issues that we have. It also, 
of course, is a unique commodity and is something that 
everybody has and is used to having. We have to persuade them 
that we have to make some changes to continue the kind of 
service that they have is not always an easy thing to do. But, 
I think that it is becoming more clear to people that we are 
going to have to do things differently and certainly we want to 
do that. So, we just want to urge you to work with us in 
Wyoming and work with our producers here and see if we can move 
forward in accomplishing the policy goals we have. I thank you 
very much for being here.
    Mr. Shope. Thank you.
    Senator Thomas. Okay, we'll invite our second panel to come 
up if you will please. We have Dr. Norman Shilling from General 
Electric, Steve Waddington from Wyoming Infrastructure 
Authority, Marion Loomis from the Wyoming Mining Association, 
Joe Coyne from the Converse Area New Development Organization, 
and Dr. William Gern who will testify on behalf of the Western 
Research Institute at the University of Wyoming. Gentlemen, we 
appreciate very much your being here and certainly you are the 
folks who will fill us in on your observations as to what we 
need to do to cause this to happen and to cause it to happen 
locally for the advantage of the mining people and for the 
Nation to be able to use mining resources.
    So we'll get started and let you make your statements and 
we'll have a few questions. We appreciate you being here.
    Dr. Shilling.

  STATEMENT OF DR. NORMAN SHILLING, PRODUCT LINE LEADER, IGCC 
                        POWER, GE ENERGY

    Dr. Shilling. Thank you. Good afternoon. I am Norm 
Shilling, product leader for IGCC Power at GE Energy. GE 
appreciates the opportunity to participate at this hearing and 
in the Wyoming Energy Summit. GE is a worldwide supplier of 
advanced power generation technologies from renewable resources 
such as wind, water, biogas and solar, to natural gas, oil 
nuclear, and coal, the focus of today's hearing. I will focus 
on five points.
    First, coal will continue to be a significant part of our 
energy mix. We are seeing a nationwide resurgence of interest 
in coal. The West is leading this trend. The power industry has 
grown to recognize the advantages that low cost Western coal 
provides. EIA's most recent Annual Energy Outlook predicts that 
over the next 25 years, the West is one of the regions in which 
the largest amount of coal-fired capacity addition is expected.
    Second, environmental considerations will strongly 
influence any decision to use coal. The environmental 
challenges to coal are well known. We believe that the answer 
lies in using the cleanest, most efficient technology to 
generate electricity from coal.
    This leads to my third point: integrated gasification 
combined cycle, or IGCC, is a technology for using coal more 
cleanly and efficiently. IGCC delivers significantly reduced 
emissions of sulfur dioxide, nitrogen oxides and particulate 
matter. IGCC is highly effective in removing mercury. IGCC 
consumes 30 percent less water than combustion coal technology 
and produces useful byproduct. All are matters of particular 
importance in the West. IGCC also offers the capability to 
remove carbon before combustion thus providing a significant 
savings in cost and efficiency in comparison to post-combustion 
capture.
    Commercial development of large IGCC plants is underway. 
GE, in alliance with Bechtel, is a single source supplier of a 
630 MW IGCC reference plant, with strong contractual guarantees 
& warranties. The alliance is working to reduce the cost of 
IGCC. GE and Bechtel have entered into front-end engineering 
design studies for the 630 MW IGCC reference plant for two 
major utilities--AEP and Cinergy.
    These ``first-of-a-kind'' plants are a critical step to the 
widespread commercialization of IGCC. GE is working now to 
advance IGCC to significantly improve the performance and 
economics of IGCC for low rank coals. The low heating values 
and high moisture in Western coals, as well as the altitudes at 
which Western plants would be located, require further 
engineering, design and development work for IGCC systems that 
are optimized for Western coals.
    My fourth point is to thank you and your colleagues in the 
Congress for recognizing the vital role of cleaner coal in last 
year's energy bill. The advanced coal project investment tax 
credit is valuable as a means to mitigate the cost differential 
facing the first commercial scale IGCC plants. The new DOE loan 
guarantee program, once implemented, offers another financial 
mechanism to support IGCC deployment.
    We are particularly interested in the provisions included 
in section 413 of the Act authorizing the Western Integrated 
Coal Gasification Demonstration Program. If the full 
environmental and energy benefits of IGCC are to be achieved, 
the ability of IGCC to efficiently use Western coals must be 
established. Significant engineering and technology integration 
is required for the first-of-a-kind plants for Western coals. 
The cost-shared Western IGCC demonstration program could 
provide the framework for Federal Government and industry to 
work together to expand the envelope of efficient, low 
emissions IGCC plants to economically use these coals. We 
support and appreciate your efforts to speed the implementation 
of this program.
    My last point is to highlight the opportunities that are 
available through the gasification component of IGCC to deliver 
broader benefit from coal. Gasification is a coal refining 
process. It can generate a slate of products including hydrogen 
and ultra-clean transportation fuels such as diesel. The 
gasification aspect of IGCC thus provides a path away from 
imported petroleum or natural gas for the production of many of 
our national staples. We encourage the consideration of a 
broader Federal policy initiative to take advantage of this 
opportunity.
    In summary, GE believes that the national, economic and 
energy security interests of the United States will be served 
by deploying cleaner coal technologies, such as IGCC, that 
enable us to utilize the full range of our domestic coal 
resources--including those found here in the West. We thank you 
for your leadership, and look forward to working with you to 
this end.
    I look forward to your questions. Thank you.
    Senator Thomas. Thank you.
    Mr. Waddington.

  STATEMENT OF STEVE WADDINGTON, EXECUTIVE DIRECTOR, WYOMING 
             INFRASTRUCTURE AUTHORITY, CHEYENNE, WY

    Mr. Waddington. Mr. Chairman, thank you for inviting me to 
appear here before you today. My name is Steve Waddington, I am 
the executive director of the Wyoming Infrastructure Authority. 
The Authority is a instrumentality of the State of Wyoming. Our 
mission is to diversify and expand the State's economy through 
improvements in the electro-transmission system. And, also to 
support advanced coal technology for electricity production. 
The future for Wyoming coal is great, but we must look to 
address market and infrastructure challenges. My testimony will 
touch on three areas related to the growth and development of 
Wyoming coal.
    Congress and the Federal Government have important roles to 
play to help in all three of these areas which are: the need 
for transmission investments; the need for advanced coal 
technologies to emerge on a commercial scale in Wyoming; and 
the captive shipper issue. One means for future growth and 
development of Wyoming coal is to ship the coal by wire instead 
of by rail. Generating electricity from coal in Wyoming will 
create jobs and other economic boosts for the State. Coal fire 
generation in Wyoming and our world-class wind generation 
potential offer an attractive option for utilities throughout 
the West. But, the key to unlocking this value-added expansion 
of Wyoming's economy is transmission.
    The Wyoming Authority was created to help address this 
issue. We have embarked on a number of important transmission 
developments and our pending projects are summarized in written 
testimony, Mr. Chairman, that I submitted today. There are two 
areas I want to emphasize which Federal actions is important 
for encouraging transmission investment. The first is the 
Department of Energy's role under the Energy Policy Act to 
designate national interest electric transmission corridors. We 
think the projects we're working on, are in the national 
interest and DOE should be prepared to accept applications and 
expedite designations.
    The second area, Mr. Chairman, is to consider providing 
incentives for transmission investment through Federal tax 
policy. The Authority can issue regular bans to finance 
transmission, and included in that is our ability to loan up to 
$1 billion to the private sector. Several other States, in 
fact, are following Wyoming's lead creating State bonding 
authorities to finance transmission. However, because of an IRS 
rule, these public sector bonding capabilities would not be 
federally tax exempt except under very limited and unusual 
circumstances. Congress should consider relaxing these private 
use restrictions for transmission investments. Senator Kent 
Conrad is working on a bill to promote energy production and 
one of his provisions would relax the private use restriction 
and if this became law, our bonds could be issued on a tax 
exempt basis. And, I ask the committee to consider this as a 
means of not just incentivizing transmission investment, but 
lowering the cost of transmission financing for consumers.
    The Energy Policy Act last year signaled the Federal 
Government's intent to continue with stimulating the support of 
advanced coal. And, we've already heard much about that. 
Wyoming needs to be actively participating in these Federal 
programs. These technologies must be developed to work and to 
emerge on a commercial scale to meet the needs Wyoming coal at 
elevation. Otherwise as these technologies become mainstream 
elsewhere in the Nation, Wyoming's full market share may be at 
risk. FutureGen as we've heard is a government industry project 
to design, build and operate the world's first coal-based new 
zeroed emission part of generation plant. The State of Wyoming 
will submit a proposal responding to the FutureGen industrial 
alliances RFP for wholesale sponsorship. The Governor's office 
is leading our effort to put forth a competitive proposal and 
we plan to vigorously compete for the FutureGen demonstration 
plant to be sited in Wyoming.
    Our FutureGen application effort, Mr. Chairman, will also 
help position Wyoming strategically as we prepare to seek 
Federal funds for the rush in integrated coal gasification 
demonstration project that's provided for under section 413 in 
the Energy Policy Act. We are very interested in working with 
you, Mr. Chairman and this committee to ensure that this 
program is adequately funded and that Wyoming is given strong 
consideration as the location for this demonstration project.
    My third topic is just to briefly note the captive shipper 
issue. The captive shipper issue is a threat to the production 
of coal and other key commodities from Wyoming. A captive 
shipping customer is one, who by virtue of its location, has 
access to only one rail provider. Captive shippers can pay rail 
rates of up to 450 percent above railroad costs, by one 
statistic I've seen. As opposed to the 6 percent above cost 
paid by shippers where competition exists. There are bills that 
attempt to address this issue pending before Congress, their 
objectives are summarized in my written testimony.
    In conclusion, the future for Wyoming coal is bright, but 
we must work proactively to address market and infrastructure 
challenges including the need for transmission investments, the 
need for advanced coal technologies to emerge on a commercial 
scale in Wyoming and addressing the captive shipper issue. This 
concludes my testimony, thank you very much.
    [The prepared statement of Mr. Waddington follows:]

  Prepared Statement of Steve Waddington, Executive Director, Wyoming 
                 Infrastructure Authority, Cheyenne, WY

    Mr. Chairman and distinguished members of the Committee, thank you 
for inviting me to make this appearance before you today. My name is 
Steve Waddington. I am the executive director of the Wyoming 
Infrastructure Authority. The Authority is an instrumentality of the 
state of Wyoming. Our mission is to diversify and expand the state's 
economy through improvements in the electric transmission system to 
facilitate increased utilization of Wyoming's energy resources. Earlier 
this year, the Wyoming state legislature expanding the Authority's role 
to also take a leadership role in supporting emerging advanced coal 
technologies as it relates to electricity production.
    I believe the future for Wyoming coal is bright--but only if we 
work proactively to address market and infrastructure challenges that 
have the potential for eroding Wyoming's share of the national coal 
market long term. My testimony will touch on three areas of concern 
related to the future growth and development of Wyoming coal. In all 
three issue areas, Congress and the Federal Government have important 
roles to play, in collaboration with the State, to overcome these 
market and infrastructure obstacles. My three topic areas are: 1) the 
need for transmission investments; 2) the need for advanced coal 
technologies to emerge on a commercial scale using Wyoming coal at 
Wyoming altitudes; and, 3) the captive shipper issue.

                  THE NEED FOR TRANSMISSION INVESTMENT

    One value-added means for future growth and development of Wyoming 
coal is to ship coal by wire, instead of by rail. Generating 
electricity from coal in Wyoming, and shipping the product by wire, 
will create jobs and other economic base for the state. Coal-fired 
generation in Wyoming, combined with Wyoming's world-class renewable 
wind generation potential, offer an attractive option for utilities 
throughout the western interconnect. Many utilities serving fast 
growing urban areas in the west have relied heavily on natural gas-
fired generation in recent years to meet their growth. These utilities 
are now seeking alternatives to diversify their power supply and 
Wyoming has abundant natural resources--and a political will to deploy 
these energy resources--to help meet growth in the west. The key for 
unlocking this value-added expansion of Wyoming's economy is adding to 
the transmission infrastructure.
    It is critically important to recognize that the existing electric 
transmission system was built by electric utilities in a vertically 
integrated manner. As a result, the existing system was built and sized 
to serve local customers, integrate utility-owned generation and to 
support reliability. In addition, the existing regulatory and 
institutional system relied upon to address congestion and facilitate 
resource development on the grid has not functioned well. A wide 
variety of regulatory, financial and policy uncertainties have 
significantly slowed the pace of both private sector and public power 
system investments in the utility transmission system. The impacts of 
these uncertainties on the consumer and overall economic activity have 
been, and continue to be, profound. Unless immediate improvements to 
the transmission grid are made, increasing pressure on existing 
facilities will intensify and system reliability will erode. At the 
same time, the Nation could find itself continuing to over-rely on 
natural gas fired generation located close to load centers. Such an 
outcome would not further the national interest. Each of these concerns 
has a particular significance for the West.
    In the West there is intensifying interest in securing a more 
diverse power supply through increasing reliance on low cost fuels, 
such as coal and wind, that are abundant in areas of the West, but that 
are distant from load centers. However, with few exceptions, in the 
West the transmission system was not designed to support economic 
transfers of power or the development of new sources of supply. To 
enable this development to occur will require new transmission 
facilities.
    The Western interconnection is especially vulnerable as a result of 
growth in the region. To meet these needs, load serving entities are 
seeking to build new power generation to keep pace with both the 
retirement of aging power stations and the need for more capacity to 
meet growing electric power demand. This, along with increasing 
requirements for fuel diversity to offset natural gas reliance and 
improved environmental performance, is placing added pressure on 
existing transmission facilities. There is an immediate need for 
transmission upgrades to enable additional transmission-dependent 
generation facilities to serve load growth in the very near-term.
    The Wyoming Infrastructure Authority was created to help address 
this issue in a positive way for Wyoming. The Authority has embarked a 
several transmission development feasibility projects. Our pending 
projects are summarized briefly below.

TOT3 Partnership with Trans-Elect and Western
    The Authority has entered into a partnership with Trans-Elect Inc. 
to pursue development of new electric transmission between Colorado and 
Wyoming--known as TOT3. The Western Area Power Administration (Western) 
has joined the WIA and Trans-Elect to work jointly together on the TOT3 
project to determine the public service benefits and interest in this 
transmission upgrade. Interest expressed in the proposed line ranges 
from between 2,100 MW and 7,300 MW of additional capacity, including 
prospective coal and wind project developers. Load serving entities in 
Colorado have also expressed interest. We are now entering the 
technical feasibility study phase on this project.

Wyoming-West Partnership with National Grid
    The Authority has also entered a public-private partnership with 
National Grid USA to jointly conduct a transmission study that will 
help lay the groundwork for a significant increase in electric 
transmission capacity between Wyoming and neighboring states in the 
west. This project is dubbed Wyoming-West. The Authority is also in 
active discussions with Western, which operates one existing corridor 
between Southwest Wyoming into Utah, and Western is actively interested 
in working with us on the Wyoming-West endeavor as it moves forward.

TransWest Express Partnership with Arizona Public Service
    Arizona Public Service Company (APS), National Grid and the Wyoming 
Infrastructure Authority (WIA) signed a Memorandum of Understanding 
(MOU) in early March to collaborate in developing new electric 
transmission lines between Arizona and Wyoming. This MOU expands upon 
previous announcements by APS in October 2005 to begin development of 
the TransWest Express Project and by the WIA and National Grid in 
December 2005 that they would jointly undertake the Wyoming-West 
Transmission Study.
    Arizona and neighboring states are experiencing significant growth 
in electricity demand. To help meet that growth, APS envisions 
construction of two new 500,000-volt (500-kV) transmission lines from 
northern Arizona, through Utah to Wyoming. APS and other utilities in 
the west are attracted to Wyoming as an abundant source of low-cost 
wind and clean coal generation. The TransWest Express Project will be 
designed to help meet growth in demand with low-cost sources of supply 
from Wyoming.

The Frontier Line
    In April 2005 four western Governors joined and announced their 
memorandum of understanding to stand ready to support a major 
transmission corridor development between California, Nevada, Utah and 
Wyoming. The Frontier Line will be designed and developed to ensure 
citizens of all four sponsoring States benefit from it. The four 
sponsoring Governors recognized our region needs a significantly more 
robust interstate electricity system in order to enable access to more 
sources of clean energy. The Frontier Line will deliver this goal for 
millions of consumers across the West.
    In the past year there has been significant groundwork laid. The 
Authority has been actively involved, providing technical and financial 
resources toward the successful development of this project. Next week, 
on April 17-18, the four sponsoring Governors are hosting a major 
energy conference to be held in San Diego. A significant announcement 
is planned for this event, laying out the plan for actively beginning 
the detailed feasibility study of the Frontier Line concept.
    Moving to federal actions, Congress recognized the challenges 
related to transmission development with a number of measures in the 
2005 Energy Policy Act. In particular, the Department of Energy's role 
to study and designate critically important transmission expansion 
needs as corridors that are in the National Interest, and the Federal 
Energy Regulatory Commission's backstop siting authority related to 
corridors so designated, is a critically important initiative. For the 
West especially, where transmission is needed across long distances 
involving several states, and likely over vast tracts of Federally-
managed lands, FERC's potential back-stop siting role could be a 
significant help.
    The Department of Energy needs to be encouraged to move ahead as 
quickly as possible with the designation of National Interest Electric 
Transmission Corridors (NIETCs). DOE should also accept proposed 
projects early for DOE review and possible early designation, where 
projects are already underway. The Authority provided DOE with comments 
recently raising a number of concerns with its proposed approach. These 
comments are summarized below.

   It is critically important that DOE's designation of 
        corridors not be limited to those where persistent congestion 
        obtains today. Doing so would put an inappropriate brake on the 
        legislative intent to encourage transmission infrastructure to 
        develop to reduce consumer prices and diversify the fuel mix.
   DOE must expedite the study and designation of NIETCs, and 
        do so by designating corridors for potential projects broadly, 
        as generalized paths between two (or more) locations.
   DOE must fully recognize the features and characteristics of 
        the Western transmission system, and take into account the 
        numerous studies that have already demonstrated the need for, 
        and benefit from, transmission infrastructure investment.
   DOE should recognize several ongoing major transmission 
        expansion efforts in the West, including the Frontier Line, the 
        TransWest Express Project and WIA's two ongoing projects in 
        partnership with Trans-Elect, Inc. and National Grid USA, and 
        anticipate that one or more of these projects will likely apply 
        to DOE for early designation as a NIETC.
   DOE should remain flexible and in a position to accelerate 
        an early review and the designation of corridors on a case-by-
        case basis, and establish the application process for such 
        early designation.

    The Authority can issue revenue bonds to finance transmission 
investments, including extending up to $1 billion in borrowing 
capability to the private sector. Several other States in the west have 
following Wyoming's lead, creating state bonding authorities to finance 
transmission infrastructure. Today, because of a IRS rule known as 
private use restrictions, these public sector bonds would not be 
Federally tax exempt except under very limited and unlikely 
circumstances.
    Congress should consider relaxing the private use exemption for 
transmission investments. The exemption should be relaxed for certain 
circumstances, such as for investment in a corridor that has received a 
national interest designation or is being financed by a public entity 
such as the Wyoming Infrastructure Authority. Another alternative would 
be for Congress to allocate an amount of tax credit bonding authority 
for state entities to use to finance important needed transmission 
infrastructure. By either means, tax exemptions or tax credits, the 
cost of financing the transmission investment would be significantly 
reduced. Lowering the cost of transmission investments would help to 
stimulate its development and deployment, and will reduce the costs to 
consumers.
    Senator Kent Conrad is working on a bill to promote energy 
production and one of its provisions would relax the private use 
exemption in certain circumstances. The language in the draft bill on 
tax-exempt bonds would recognize the Wyoming Authority to be a 
governmental entity and thus qualify relative to waiving the IRS 
private activity rules--making WIA bonds a federally tax exempt 
issuance. This provision is meritorious and I respectively ask the 
committee to strongly consider it on its merits.

                        ADVANCED COAL TECHNOLOGY

    Congress, with the leadership of this committee, has signaled in 
the Energy Policy Act last year the Federal Government's intent to 
continue to stimulate and support clean coal technology and synthetic 
fuels production. Wyoming needs to be actively participating in these 
Federal programs. These technologies must be developed to work and to 
emerge on a commercial scale using Wyoming coal at elevation. 
Otherwise, as these technologies become mainstream elsewhere in the 
nation, Wyoming's coal market share will be threatened.
    The Governor and the State legislature have taken a number of 
significant steps to position Wyoming strategically to secure a value-
added utilization of coal through advance technologies. A Clean Coal 
Work Group is actively engaged. The Infrastructure Authority and the 
Pipeline Authority are both actively involved in this effort.
    Emerging advanced coal technologies are a significant opportunity 
for the future growth and development of Wyoming coal. Wyoming's coal 
market potential can be viewed in terms of a value chain. Currently, 
the commodity, coal, is produced and primarily directly sold and 
shipped by rail for use in electricity generation around the country. 
But in the future there are a number of products and co-products that 
will be profitably produced from Wyoming coal. If petroleum prices 
continue their recent upward trend, these value-added markets will 
become increasingly commercially viable. The figure below shows the 
value chain with coal as the base commodity. As the value of coal-
derived commodities increases, the likelihood of moving even further up 
the primary products value chain increases. Additionally, the co-
products of water and hydrogen could have potential economic value as 
the nation moves toward a hydrogen economy.

FutureGen
    FutureGen is a government-industry cost-shared project to design, 
build and operate the world's first coal-based, near-zero emission 
power plant. The plant will also produce hydrogen and byproducts for 
use by other industries, while capturing and permanently storing carbon 
dioxide in deep geologic formations.
    A FutureGen industrial alliance has been established and on 
December 2, 2005, the U.S. Department of Energy entered into a 
cooperative agreement with the alliance to begin the site selection 
process and prepare a conceptual design for the facility. The Alliance 
has issued its RFP inviting proposals for host sites upon which to 
build and operate the FutureGen plant.
    The State of Wyoming has submitted its notice of intent to submit a 
proposal responding to the FutureGen Industrial Alliance's RFP for host 
sites sponsors. The detailed proposals are due May 4, and the 
Governor's office is leading a concerted effort to put forth a 
competitive proposal. We intend to compete vigorously for FutureGen to 
be developed in Wyoming.
    A total of nine states have formally expressed interest in hosting 
the FutureGen project, representing as many as 22 proposed sites. Given 
the complexity and rigor of the proposal process, there will probably 
be some attrition in the application process and less sites actually 
submitted by May 4. The process will then move to a short-listing of 
candidate sites to be announced this summer. Then DOE will take one 
year to develop an environmental impact statement, and then issue a 
record of decision with a likely even shorter list of sites that it 
deems acceptable. The Alliance will then select the one preferred site 
from this shorter list by around September, 2007.
    We believe Wyoming has a competitive edge because of our strong 
position for permanent storage of carbon dioxide--which is one of the 
key deliverables in the FutureGen project scope. That said, the 
application criteria are rigorous and the competition will be fierce. 
We expect that Wyoming will at least reach the short list and continue 
to be considered as DOE does its environmental study work.

Section 413--a Western Integrated Demonstration Project
    The FutureGen application effort will also help position Wyoming 
strategically to seek an appropriation and allocation of Federal 
program funds to support a Western Integrated Coal Gasification 
Demonstration Project using western coal at elevation. Section 413 of 
the Energy Policy Act calls for this demonstration project as a means 
for ensuring that coal gasification technology emerges on a commercial 
scale using Western coal and operating at Western elevation. Wyoming is 
very interested in working to ensure that this program is funded, and 
we believe Wyoming will merit strong consideration as the location for 
this demonstration project.

                       THE CAPTIVE SHIPPER ISSUE

    The captive shipper issue is a threat to the production of coal and 
other key commodities in Wyoming, as it is in rural America generally. 
A captive shipping customer is one who, by virtue of its physical 
location, has access to only one rail provider. Captive shippers pay 
rail rates of up to 450 percent above railroad costs, by one statistic 
I've seen, as opposed to the 6 percent above railroad costs paid by 
shippers where railroad competition exists.
    One Wyoming example is the Laramie River Station, a coal-fired 
generation facility located near Wheatland, Wyoming. This power plant 
is vital for serving the electricity needs of consumers served by 
cooperative utilities across Wyoming. It is served by one railroad, 
which transports 8.3 million tons of coal annually from the Powder 
River Basin south 175 miles to the plant. The power plant's contract 
with the railroad expired last year and the railroad renewed the 
contract with dramatically higher rates. At four times the railroad's 
average coal hauling rates, these new fees will cost electric customers 
$1 billion over the next 20 years. Since the power plant is captive to 
this sole practical option for shipping the fuel it needs to produce 
power, there was little choice but to accept what would appear to be 
the exercise of monopolistic advantage and, with that, a very rate 
increase.
    Congress needs to act and bills are pending. The Railroad 
Competition Improvement and Reauthorization Act (S. 919 and H.R. 2047) 
would clarify and ensure that the primary objectives of the nation's 
rail transportation policy are:

   To maintain consistent and efficient rail transportation 
        service for shippers, including the timely provision of rail 
        cars requested by shippers;
   To promote effective competition among rail carriers at 
        origins and destinations; and,
   To maintain reasonable rates in the absence of effective 
        competition.

    The Railroad Antitrust and Competition Enhancement Act (H.R. 3318) 
would also help promote competition among railroads and provide better 
rates for shippers. This competition enhancement act would amend the 
Clayton Act to eliminate the antitrust exemption applicable to 
railroads.

                             IN CONCLUSION

    In conclusion, the future for. Wyoming coal is bright--but only if 
we work proactively to address market and infrastructure challenges 
that have the potential for eroding Wyoming's share of the national 
coal market long term. These significant challenges include: 1) the 
need for transmission investments; 2) the need for advanced coal 
technologies to emerge on a commercial scale using Wyoming coal at 
Wyoming altitude; and, 3) the captive shipper issue. In all three issue 
areas, Congress and the Federal Government have important roles to 
play, in collaboration with the State, to overcome these market and 
infrastructure obstacles.
    Thank you for the opportunity to appear before the committee today. 
This concludes my testimony. I would be pleased to answer any questions 
you may have.

    Senator Thomas. Thank you, sir.
    Mr. Loomis.

STATEMENT OF MARION LOOMIS, EXECUTIVE DIRECTOR, WYOMING MINING 
                   ASSOCIATION, CHEYENNE, WY

    Mr. Loomis. Senator Thomas, ladies and gentlemen, I am 
Marion Loomis, I am the executive director of the Wyoming 
Mining Association. Thank you for the opportunity to talk to 
you today about the coal industry in Wyoming.
    WMA represents 24 mining companies in Wyoming producing 
bentonite, coal, trona and uranium. And as you know, Wyoming 
leads the Nation in the production on all four of those 
minerals. On the coal front, Wyoming producers supply over 35 
percent of this Nation's coal. Last year 17 mines produced over 
405 million tons. Those 17 mines generated over $670 million 
for Wyoming in the form of severance taxes, ad valorem 
production taxes, Federal mineral royalties, bonus bids on new 
coal reserves, Abandoned Mine Land Reclamation fees, local 
property taxes on equipment and facilities, State royalties, 
and sales taxes. They provided another $364 million to the 
Federal Government in those same types of taxes.
    The industry employed over 5,300 miners with an annual 
payroll of over $475 million, that's almost $90,000 per miner. 
That money flows through our economy, buying houses, cars, 
food, clothes and provides for an excellent quality of life for 
those miners. The Wyoming geological survey estimated that the 
average selling price for coal in 2005 was $7.75 per ton, so 
the total value of Wyoming's coal production is projected to 
exceed $3 billion. I think it is interesting that 44 percent of 
the selling price of the coal goes to the State and Federal 
Government in the form of taxes, royalties and fees and that 
doesn't include any income taxes.
    I also mentioned that a good deal of that $3 billion comes 
back to the State of Wyoming in the purchase of goods and 
services--trucks, tires, fuel, explosives--and any other 
equipment necessary to run those operations. Wyoming has the 
third largest coal reserves in the Nation. Our proven reserves 
exceed 45 billion tons of recoverable coal. But the total 
resource, that is the proven reserves combined with the coal 
uneconomic today exceed 1 trillion tons. Most of our coal is 
shipped out of State as steam coal for electric plants across 
the Nation. The latest figures which are from 2004 showed we 
consumed 25 million tons of coal in the State of Wyoming. We 
shipped 372 million tons to 35 other States from New York, to 
Oregon, from Texas to Wisconsin and most States in between. 
I've included a map of our distribution of our coal in the 
written information.* That distribution demonstrates the 
ability of Wyoming coal to be shipped economically across 
considerable distances due too primarily due to the fact that 
we have extremely low sulfur content in our coal. But as plants 
across the country install wet scrubbers, Wyoming producers 
will lose that competitive advantage. But we believe that 
Wyoming's efficiency and effectiveness will prevail when it 
comes to producing coal at a competitive price per million 
Btus. Additionally, the quality and contemporaneous nature of 
reclamation at Wyoming coal mines will provide this resource in 
a low impact manner.
---------------------------------------------------------------------------
    * The map has been retained in committee files.
---------------------------------------------------------------------------
    You asked what we thought the future of coal might look 
like, and we were certainly very optimistic for, not only the 
future here in Wyoming, but also in the United States. We feel 
coal will play a continued major role in the electricity 
generation mix. But it's also going to provide a source for 
supplemental liquid fuels. As the world oil production nears a 
peak, the value of our domestic coal reserves and production in 
conjunction with energy conservation will be even more 
important to our Nation's economy and security.
    There's been a great deal of recognition about how 
wonderful the United States is to disruption of oil supplies. 
As you know, 60 percent of our oil supply comes from foreign 
nations. So, to address this most important issue, we feel coal 
is going to be a big part of the answer. Coal to liquids, coal 
to gas has to be a big part of it. It takes .7 to .9 tons of 
coal to make a barrel of liquid, so in order to generate 100 
million barrels per year of coal derived fuel, we would have to 
devote approximately 89 tons of coal a year to a conversion 
plant. That's only 20 percent of our 2005 coal production rate. 
With an average thickness of 70 feet for Wyoming's coal seams, 
it would only take 726 acres per year to supply the coal to 
generate 100 million barrels of fuel. Last year the United 
States imported 145 million barrels of oil from Russia, so we 
would come pretty close to replacing that.
    As I stated above, in the future, coal is going to be 
burned differently, it's in my written comments. The existing 
technology--and it's already been talked about--but the 
existing technology is going to allow new coal fire powerplants 
to capture the particuates which we do today. The nitrogen 
oxide, the sulfur dioxide and the mercury. And further into the 
future we are going to develop approaches to address 
CO2 emissions.
    I think it's important, and you mentioned this time frame 
between what we do today and when IGCC comes online down the 
road and it's important to remember that the real means of 
transition are we're going to have to construct a more 
conventional coal fired powerplants. But, they're going to be 
different than the plants we have today. The ultra super 
critical pulverized plants and the other plants that are 
available with technologies are going to have to bridge some of 
that.
    All of the projections indicate that the demand for 
electricity is going to continue to grow. From 1993 to 2004, 
total generation increased 24 percent. If that growth rate 
continues over the next 10 years, we're going to need an 
additional 15,000 to 23,000 megawatts of generated capacity 
every year. That's 10 plants the size of the Wheaton coal fired 
powerplant every year.
    In summary, we feel coal must play a key role in addressing 
our future energy needs. While renewables and enhanced oil 
recovery can do a lot to address our needs, only coal has the 
reserves to produce significant amounts of new fuels. The 
technology exists to produce these new fuels. Now is the time 
for the United States to take the position that reducing our 
reliance on foreign imports of fuel is critical to our security 
and our economy. Thank you.
    [The prepared statement of Mr. Loomis follows:]

   Prepared Statement of Marion Loomis, Executive Director, Wyoming 
                    Mining Association, Cheyenne, WY

    Senator Thomas, ladies and gentlemen. I am Marlon Loomis. I am the 
Executive Director of the Wyoming Mining Association (WMA). Thank you 
for opportunity to talk to you about the coal industry in Wyoming. WMA 
represents 24 mining companies in Wyoming producing bentonite, coal, 
trona and uranium. As you know, Wyoming leads the nation in production 
of all four of those minerals. This hearing is only about coal, but I 
think it is important to note that Wyoming provides 85-90% of the soda 
ash used in the United States and contributes positively to the foreign 
balance of payments with the soda ash exported from the United States. 
Our bentonite goes all over the world for oil and gas drilling and 
Wyoming leads the nation in production of uranium.
    On the coal front, Wyoming producers supply over 35% of this 
nation's coal. Last year 17 mines produced over 405 million tons. Those 
17 mines generated over $670 million for Wyoming in the form of 
severance taxes, ad valorem production taxes, federal mineral 
royalties, bonus bids on new coal reserves, Abandoned Mine Land 
Reclamation fees, local property taxes on equipment and facilities, 
state royalties, and sales taxes. They provided another $364 million to 
the federal government in the form of federal mineral royalties, 
Abandoned Mine Reclamation fees, and Black Lung fees. I am sure they 
also paid a significant amount in federal income taxes, but I don't 
have those numbers. The industry employed over 5,300 miners with an 
annual payroll of $475 million. That is money that flows through our 
economy buying houses, cars, food, clothes and provides for an 
excellent quality of life for those miners.

              REVENUE TO WYOMING FROM COAL PRODUCED IN 2005
Severance Tax.............................................  $160,000,000
Ad Valorem Tax on Production..............................  $133,000,000
Ad Valorem Tax on Real and Personal Property..............   $11,000,000
Federal Mineral Royalty--Wyoming share....................  $180,000,000
Abandoned Mine Reclamation Fee Returned to Wyoming........   $29,000,000
Bonus Bids Returned to Wyoming............................  $102,000,000
Sales Tax.................................................   $44,000,000
State Royalties...........................................    $8,000,000
                                                           -------------
Total Revenue returned to Wyoming.........................  $667,000,000
                                                           -------------
Payroll...................................................  $475,000,000
                                                           -------------
Production in tons........................................   405,000,000
------------------------------------------------------------------------

    The Wyoming Geological Survey estimated that the average selling 
price for coal in 2005 was $7.75 per ton so the total value of 
Wyoming's coal production is projected to exceed $3 billion. I think it 
is interesting that 34% of the selling price of the coal goes to state 
and federal government and, as I stated above, that does not include 
any income taxes to the federal government.
    Wyoming has the third largest coal reserves in the nation and, as 
stated above, leads the nation in production. Our proven coal reserves 
exceed 45 billion tons, but the total resource, i.e. proven reserves 
combined with coal uneconomic today, exceed 1 trillion tons.
    Most of our coal is shipped out of state as steam coal for electric 
plants across the nation. The latest figures show that Wyoming 
consumers used 25 million tons of coal in 2004. The other 372 million 
tons were shipped to 35 states from New York to Oregon, from Texas to 
Wisconsin and most states in between. That distribution demonstrates 
the ability for Wyoming coal to be shipped economically across 
considerable distances due primarily to the low sulfur content. As 
plants across the country install wet scrubbers, Wyoming producers will 
lose that competitive advantage. But, we believe that Wyoming's 
efficiency and effectiveness will prevail when it comes to producing 
coal at a competitive price per million BTU's. Additionally, the 
quality and contemporaneous nature of reclamation at Wyoming coal mines 
will provide this resource in a low impact manner.
    You asked what we thought the future of Wyoming coal might look 
like. While the future is going to be much different than the past, we 
are very optimistic about the future of coal, not only in Wyoming, but 
also for the United States. As we see it, coal will not only play a 
continued major role in the electricity generation mix, it will also 
provide a source of supplemental liquid fuels. It is our view that the 
trends in oil production will play a potentially significant part in 
the future of coal. We believe that as the world oil production nears a 
peak, the value of domestic coal reserves and production, in 
conjunction with energy conservation, will be even more important to 
our nation's economy and security.
    Many forecasters say that world oil production will peak in the 
next 20 years. There are some that say world oil production actually 
peaked in 2005. Although we won't know for some time how close we are 
to a peak in world oil production, it is accepted that U.S. oil 
production peaked in the 1970's and nothing, including development of 
ANWR, is projected to turn that around. At best ANWR will improve the 
decline curve, but U.S. production will continue to decline. Maybe with 
Enhanced Oil Recovery and ANWR we will be able to hold our production 
flat, but no one seems to suggest that we can increase production.
    There has been a great deal of recognition about how vulnerable the 
United States is to a disruption in oil supplies. Sixty percent of our 
oil consumption comes from foreign sources. Some comes from friendly 
allies such as Canada, Mexico and Ecuador, but a good portion comes 
from countries much less friendly to the United States such as Nigeria, 
Venezuela, and Iraq. OPEC countries supply over 2 billion barrels per 
year of our annual consumption of 7 billion barrels. Just from a 
national security position, it is critical that the United States 
become more self reliant on our own reserves. To not address this most 
important issue puts our nation at risk. Combine the security concerns 
with our balance of payment deficits and it just makes so much sense to 
develop the resources available in the U.S.
    Coal is a major part of the answer. The U.S. has 250 billion tons 
of proven coal reserves. Some of this could be converted to supply 100 
million barrels per year in the near future. It would require 30 coal-
to-liquid plants producing 10,000 barrels per day. However, the coal 
reserves could supply much more than that if the U.S. takes the 
position that energy security is worthy of an effort similar to putting 
a man on the moon. This will need to be approached as strategic and 
sustainable development, including measures that address emissions or 
other environmental considerations related to additional coal 
production and utilization.
    Coal-to-liquids and coal-to-gas has to be a big part of the answer 
to our future supplies. It takes 0.7-0.9 tons of coal to make a barrel 
of liquid. In order to generate 100 million barrels per year of coal 
derived fuel, we would have to devote approximately 80 million tons of 
coal per year to conversion plants. That is only 20% of the 2005 
Wyoming coal production rate. At an average thickness of 70 feet for 
Wyoming's coal seams it would take 726 acres per year to supply the 
coal to generate 100 million barrels of fuel. Last year the United 
States imported 145 million barrels of oil from Russia, 418 million 
barrels from Nigeria, 549 million barrels from Venezuela and 556 
million barrels from Saudi Arabia. We need to find new sources of fuel.
    The cost of coal conversion plants averages about $750 million for 
a 10,000 barrel per day plant. The proportional costs decrease with 
increasing plant size, but it will conservatively take over $20 billion 
of investment to reach 100 million barrels per year. It is important to 
recognize, however, that this will represent only 5% or less of the 2 
or 3 billion barrels per year of new sources that the U.S. will need to 
find.
    One coal to liquids plant has been announced in Wyoming. It would 
produce 11,000 barrels per day with the plans to take it to 40,000 
barrels per day if the money and technology is available. It would be 
located in Carbon County near where the first coal mine in the state 
opened in 1869. There are several other announced plants in the U.S., 
but there is nothing built yet.
    As I stated above, in the future coal will be burned differently 
than it is today. Existing technology will allow new coal fired power 
plants to capture the particulates, NOX (nitrogen oxide), 
SOX (sulfur dioxide), and maybe mercury. Further in the 
future coal fired power plants will need to develop approaches to 
address CO2 emissions. Coal still has so much energy that it 
cannot be ignored; it will be a major part of our electricity resources 
for generations to come.
    The U.S. electricity demand is increasing at a rate of 2% per year. 
All projections indicate that demands for electricity will continue to 
increase. From 1993 to 2004, total generation increased 24%. If that 
growth rate continues over the next ten years, we will need an 
additional 15,000 to 23,000 MWe of generation capacity each year. That 
is 10 plants the size of the Wheatland coal fired power plant every 
year.
    In summary coal must play a key role in addressing our future 
energy needs. While renewables and enhanced oil recovery can do a lot 
to address our needs, only coal has the reserves to produce significant 
amounts of new fuels. The technology exists to produce these new fuels. 
Now is the time for the United States to take the position that 
reducing our reliance on foreign imports of fuel is critical to our 
security and our economy.
    Thank you.

    Senator Thomas. Thank you very much.
    Mr. Coyne.

 STATEMENT OF JOE COYNE, EXECUTIVE DIRECTOR, CONVERSE AREA NEW 
          DEVELOPMENT ORGANIZATION, INC., DOUGLAS, WY

    Mr. Coyne. Senator Thomas, thank you for the time this 
afternoon. I work for the Converse Area New Development 
Organization, a local economic development agency known by the 
acronym ``CANDO''. We work hard with our congressional staff, 
State legislature, Governor, local elected officials and other 
organizations to help grow our local economy.
    I understand that today you are receiving testimony 
regarding the legislative, economic, and environmental issues 
associated with the growth and development of the Wyoming coal 
industry. I would like to address those issues from my 
perspective as a local economic developer in Douglas and 
Converse County, Wyoming.
    In the 10 years that I have been in Wyoming, I have 
witnessed a shift in the traditional thinking here. Folks want 
more than survival. We want to move away from the historical 
third-world economy of mineral extraction. And moreover, we 
want to keep our youth in Wyoming. And to do that we must 
diversify our economy. The opportunity that is before us today 
is to add value to our coal by gasifying it and then exporting 
electricity and ultra-clean diesel fuel instead of train load 
after train load of raw coal. The coal gasification industry 
could significantly enhance Wyoming's and the Nation's economy 
while greatly strengthening our security by minimizing the 
amount of petroleum we import to meet our country's 
transportation needs.
    There are significant risks to development of a coal 
gasification facility or a coal to liquids plant. The cost 
alone is staggering, easily in excess of $1 billion. While 
there is a great opportunity for making serious money, while 
petroleum is selling at $65 to $75 a barrel, who can guarantee 
that the price will stay that high for 20 years? And who is 
willing to prove up the Fischer-Tropsch process with Wyoming 
coal, at Wyoming altitude? Moreover, who is willing to build 
the electrical transmission lines that would be necessary for 
carrying any additional power generated in Wyoming?
    We in Wyoming are very thankful for your efforts, Senator, 
and your colleagues who have addressed some of those concerns 
in the energy bill of 2005. Much more work remains to be done.
    It may be that Wyoming's coal gasification industry gets 
started, not by generating electricity, nor by producing ultra-
clean diesel fuel, but instead simply by producing synthetic 
gas. Existing pipelines can easily move that synthetic gas to 
the market right now. Thereby minimizing the fiscal risk 
associated with coal gasification. However, that limited use of 
coal does not come close to its full potential. It would not 
significantly diversify our economy and it would not go very 
far to reduce foreign oil imports. Eventually, we must do those 
things.
    Currently, Wyoming's procuring a bid to the U.S. Department 
of Energy regarding FutureGen. If the Federal Government's goal 
is to place this facility in one location that it can truly 
change our future, it needs to be built in Wyoming. Other 
States may be able to gasify coal, but I urge you to think 
larger. The gasification of coal allows you to capture 
virtually all of the carbon dioxide from coal. Preventing its 
release into the atmosphere. What you could then do is make 
beneficial use of that gas and not simply sequester it forever 
under ground.
    In Wyoming, carbon dioxide is already being injected into 
the ground, revitalizing our vast oil and gas fields. 
Additionally, the Fischer-Tropsch classes can be combined with 
coal gasification, creating a fantastically ultra-clean diesel 
fuel. While there is a national market for that fuel, Wyoming 
can offer the Federal Government a much more compelling test 
for coal gasification.
    Here's where I would like to challenge your committee 
further, Senator. Our efforts at CANDO and elsewhere in State 
have led us to conclude that coal gasification can best succeed 
if it is matched up with wind or bio-fuel production. For 
instance, Fischer-Tropsch process creates a high-energy by-
product called naphtha, refineries commonly naphtha to increase 
the octane of gasoline and other products. But it could also 
make an excellent companion to wind-power generation. As you 
know, even in Wyoming, sometimes the wind does not blow. In 
fact the intermittent supply of wind is often seen as a major 
drawback in this development. However, if wind energy were 
partnered with coal gasification, the excess naphtha could be 
burned and it burns quite cleanly in generators to provide a 
relatively constant source of electrical power, solving the 
problem of transmission.
    There are equally synergistic opportunities for bio-fuels, 
fertilizers, and other industries associated with coal 
gasification. If our Nation is truly to become more energy 
independent, we will need to look at every resource available. 
Wyoming's vast fossil fuel resources can be perfectly balanced 
with alternative energy production, particularly wind. Too 
often, we have looked only to export raw materials such as 
coal, oil, gas and uranium, which Wyoming has an abundance. But 
we must not ignore the opportunities that are before us just 
because they may seem complicated, complex or initially 
expensive. We can do this today if we are patient, wise and 
visionary.
    Wyoming has unique attributes that you've already heard 
about this afternoon that would allow a project like FutureGen 
to succeed beyond your imagination. Please do what you can to 
appropriately encourage the decision makers to put FutureGen in 
Wyoming. In Wyoming, you will find the support at the 
grassroots level and also at the leadership levels. You'll also 
find all of the building blocks, not just the geology to 
effectively, economically prove that coal gasification is a 
viable energy alternative to importing more foreign oil.
    Senator, thank you for studying this issue. Working 
together, I know that Wyoming can help meet America's growing 
energy appetite and at the same time strengthen our country's 
independence. It's been a privilege to speak with you today, 
and if time permits I'll try to answer any questions.
    [The prepared statement of Mr. Coyne follows:]

Prepared Statement of Joe Coyne, Executive Director, Converse Area New 
              Development Organization, Inc., Douglas, WY

    Mr. Chairman, welcome to Wyoming! I thank you and the committee 
members for your time this afternoon.
    I work for the Converse Area New Development Organization, a local 
economic development agency known by the acronym ``CANDO''. We work 
hard with our Congressional staff, state legislature, Governor, local 
elected officials and other organizations to help grow our local 
economy.
    I understand that today you are receiving testimony regarding the 
legislative, economic, and environmental issues associated with the 
growth and development of the Wyoming coal industry. I would like to 
address those issues from my perspective as a local economic developer 
in Douglas and Converse County, Wyoming.
    First, we should take a moment to make some general observations 
about the rural nature of Wyoming. Some have called Wyoming a small 
city with very long streets. Our total population is less than 500,000 
residents. Douglas has grown to 5,200 citizens, and Converse County is 
only about 12,000 people. By contrast, the population of Albuquerque, 
your hometown, Mr. Chairman, is about 800,000. However, even 
Albuquerque is small compared to the size of the metropolitan areas 
back East or out on the Pacific Coast. Wyoming's rural--even frontier--
nature has cultivated a strong independence in her residents. 
Traditionally, the State has taken pride in its ability to survive.
    The wind here can be astonishing. When similarly strong winds blow 
back East, folks get all excited, give the wind a formal Name and call 
it a Tropical Storm! Yet here, we just brace ourselves and get on with 
our day.
    Our ``long streets'' and open spaces intimidate many. I drove 50 
miles to be here this afternoon--a distance that might take you across 
three state lines as you drive around Washington, DC--but I only spent 
a fraction of the time (about 45 minutes) you would spend driving the 
same distance. In Wyoming, we relish our ``windshield time,'' taking in 
the open space, wildlife and scenery every day.
    Wyoming is, by far, the nation's largest coal producer, shipping 
400 million tons of low sulphur coal annually to 35 states to generate 
electricity. Wyoming's coal industry has established an incredible 
record of safety with its mining operations, and has repeatedly proven 
itself to be a good steward of our environment.
    My point is this: As you examine the issues surrounding Wyoming's 
energy growth, you simply cannot do so with the same perspective as you 
might in other areas of the United States.
    Yet, I have also witnessed a shift in the traditional thinking of 
Wyoming. Folks want more than survival. We want to move away from the 
historic third world economy of mineral extraction. Moreover, we want 
to keep more of our youth in Wyoming. To do that, we must diversify our 
economy. One opportunity that is before us today is to add value to our 
coal by gasifying it, and then export electricity and ultra clean 
diesel fuel instead of trainload after trainload of raw coal. The coal 
gasification industry could significantly enhance Wyoming's and the 
nation's economy, while greatly strengthening our national security by 
minimizing the amount of petroleum we import to meet our country's 
transportation needs.
    There are significant risks to development of a coal gasification 
facility or a coal-to-liquids plant. The cost alone is staggering, 
easily in excess of $1 billion dollars. While there is a great 
opportunity for making serious money while oil is selling for $65-70 
per barrel, who can guarantee that the price will stay that high for 20 
years? And who is willing to prove up the Fischer-Tropsch process with 
Wyoming coal, at Wyoming altitude? Moreover, who is willing to build 
the electrical transmission lines that would be necessary for carrying 
any additional power generated in Wyoming?
    We in Wyoming are very thankful for the efforts of Senator Craig 
Thomas and his colleagues, who have addressed some of these concerns in 
the Energy Bill of 2005. Likewise, the Wyoming Infrastructure Authority 
is working hard to stimulate development of much needed transmission 
lines, while the Wyoming Pipeline Authority pushes for the development 
of more oil and gas pipeline capacity.
    It may be that the Wyoming coal gasification industry gets started 
not by generating electricity, nor by producing ultra clean diesel 
fuel, but instead can simply produce synthetic gas. Existing gas 
pipelines can easily move synthetic gas to market right now, thereby 
minimizing the fiscal risk of coal gasification. However, that limited 
use of coal does not come close to the full potential of Wyoming coal. 
It does not significantly diversify Wyoming's economy. And it would not 
go very far to reduce foreign oil imports. Eventually, we must do those 
things.
    Political and business decisions to be made in the immediate future 
will address the inherent financial risks of coal gasification. I thank 
you for taking the lead on addressing some of those issues in the 
Energy Bill of 2005. Much more work remains to be done.
    Currently, Wyoming is preparing a bid for the U.S. Department of 
Energy regarding FutureGen. If the government's goal is to place this 
federal facility in the one place that it can truly change our future, 
it needs to be built in Wyoming. Other states may be able to gasify 
coal, but I urge you to think larger. The gasification of coal allows 
you to capture virtually all of the carbon dioxide from coal--
preventing its release to the atmosphere--and then to make beneficial 
use of that gas. In Wyoming, carbon dioxide is already being re-
injected into the ground, revitalizing our vast oil and gas fields. 
Further, the Fischer-Tropsch process that can be combined with coal 
gasification creates a fantastically ultra clean diesel fuel. While 
there is a national market for that fuel, Wyoming can offer the federal 
government a much more compelling ``test'' for coal gasification.
    Our efforts at CANDO have led us to conclude that coal gasification 
can best succeed if it is also matched up with wind and bio-fuel 
production. For instance, the Fischer-Tropsch process creates a high-
energy byproduct called naphtha. Refineries commonly use naphtha to 
increase the octane of gasoline and other products. But is also makes 
an excellent companion to wind energy. As you know, even in Wyoming, 
sometimes the wind does not blow. In fact, the intermittent power 
supply of wind is often seen as a significant drawback to its 
development. However, if wind energy were partnered with coal 
gasification, the excess naphtha could be burned (and it burns quite 
cleanly) in generators to provide a relatively constant source of 
electrical power. Likewise, there are synergistic opportunities for 
bio-fuels, fertilizers, and other industries wherever this process is 
followed.
    If our nation is to truly become more energy independent, we will 
need to look at every resource available. Wyoming's vast fossil fuel 
resources can be perfectly balanced with alternative energy production, 
particularly wind. Too often, we have looked only to export raw 
materials, such as coal, oil, gas and uranium. We must not ignore the 
opportunities that are before us just because they may seem 
complicated, complex or expensive. We can do this thing if we are 
patient, wise, and visionary.
    Wyoming has unique attributes that would allow a project like 
FutureGen to succeed beyond your imagination. Please do what you can to 
appropriately encourage the decision-makers to put FutureGen in 
Wyoming. In Wyoming, you will find support at the grassroots and 
leadership level. You will also find all the building blocks to 
effectively and economically prove that coal gasification is a viable 
energy alternative to imports.
    Overall, there is one major deterrent to development of any kind of 
coal plants in Wyoming: The inadequacy of electrical transmission 
lines. Without transmission, Wyoming cannot build another significant 
power plant of any sort. The experts in this area are the folks at the 
Wyoming Infrastructure Authority, and I urge you to listen carefully to 
their comments.
    Finally, I ask you to consider another time in history, when the 
Congress created, essentially, a ``bounty'' to be paid to any company 
that could create an energy efficient appliances. You created an 
industrial race to develop energy efficiency, environmentally friendly 
refrigerators. As a result, consumers quickly got the appliances they 
needed. An adequate incentive was offered to industry, who immediately 
responded, and the entire appliance market was positively impacted. I 
would suggest that a similar bounty might whet the appropriate 
appetites to motive industry to build the first commercially viable, 
full scale, coal gasification plant.
    Thank you for studying this issue. Working together, I know that 
Wyoming can help meet America's growing energy appetite, and at the 
same time strengthen our country's independence.
    It has been a privilege to speak today and, if time permits, I will 
try to answer any questions.

    Senator Thomas. Thank you very much.
    Dr. Gern.

 STATEMENT OF DR. WILLIAM A. GERN, VICE PRESIDENT FOR RESEARCH 
 AND ECONOMIC DEVELOPMENT, UNIVERSITY OF WYOMING, AND CHAIRMAN 
     OF THE BOARD OF DIRECTORS, WESTERN RESEARCH INSTITUTE

    Dr. Gern. Mr. Chairman, thank you. I am William Gern, vice 
president for research and economic development at the 
University of Wyoming. I also speak on behalf of the University 
of Wyoming Research Corporation, which is better known as the 
Western Research Institute, where I serve as the chairman of 
the board of directors.
    I start my remarks with more context. In a report compiled 
by the Wyoming Geological Survey using DOE Energy Information 
Agency data, Wyoming is number one in the States in coal 
production, as you've heard already, and it's held this 
position for more than two decades. It is also number four in 
natural gas and seven in petroleum and number one in uranium. 
When all of this energy is placed into the common accounting 
system using quadrillion, that's 1.0 x 10\15\, British thermal 
units of energy produced, the amount of energy--and the amount 
of energy consumed by a State is subtracted from that total, 
Wyoming leads the Nation in net energy production twice as much 
as the next State, which is Alaska.
    Recognizing Wyoming's status in energy production, the 
University of Wyoming has just completed a successful 
initiative to develop a school for energy resources. This 
initiative recognizes Wyoming's existing strength in energy 
related research and will add important new compliments. The 
school has three elements, all of which are also meet the 
Energy Act of 2005 goals. We will enhance our existing 
institute for energy research. We will add new centers, 
including one examining uses of subbituminous Western coals. 
Here we will study gasification, catalysis, carbon 
sequestration, and trapping. We will develop undergraduate and 
graduate curriculum in energy sciences and the third element is 
the technology outreach center which will provide important 
information concerning the energy related technologies to 
industry and to our government partners.
    The Wyoming legislature passed this legislation providing 
funding to create the energy school in March 2006 and Governor 
Freudenthal recently signed legislation into existence and 
authorizing immediately our ability to commence work in 
establishing this new chapter in the University's role for the 
State of Wyoming. The school is slated to receive $12 million 
for the first two years of a three year ramp-up period and 
thereafter it will be sustained with approximately $10 million 
annually. Significant funding.
    As the energy school proposal was being developed, we were 
mindful of elements in the Energy Act of 2005 and opportunities 
presented by research partnerships with Federal agencies, the 
most important of which is the U.S. Department of Energy. The 
University of Wyoming has great interest in the new PACE-E 
legislation. We recognize the importance of this legislation, 
especially in the elements of dealing with the education of a 
new competent workforce for energy in the United States.
    In order for coal to be used as cleanly as possible, the 
Nation needs greater understanding about the process of 
trapping of carbon dioxide from combustion and gasification 
processes and about the geologic sequestration of carbon 
dioxide. The University of Wyoming (UW) has considerable 
expertise in CO2 tracking and offloading 
technologies and in the geologic sequestration of carbon 
dioxide and its use in enhanced oil recovery. UW is a member of 
the DOE funded Big Sky Carbon Sequestration Partnership where 
our role is to examine CO2 sequestration in 
carbonate rock reservoirs such as the Madison Formation, which 
underlies most of the basin and in the economic analysis of 
carbon sequestration. We are also interested in understanding 
petroleum reservoir stimulation using the offloaded carbon 
dioxide which will further use the Nation's known existing 
supply of oil.
    According to the Wyoming Geological Survey, there's 1.4 
trillion tons of coal in Wyoming, of which 64 billion tons can 
be mined using current technologies. But in order for the 
Nation to use the energy residing in the remaining 1.3 trillion 
tons, new technologies are required. Specifically, in situ 
gasification processes need greater understanding through 
research. Also, we need much more fundamental understanding of 
the biological and physical events associated with coal bed 
methane or coal bed natural gas formation.
    The University of Wyoming Research Corporation is a 
501(c)(3) not for profit research entity known as the Western 
Research Institute funded primarily by U.S. Department of 
Energy and U.S. Federal Highway Administration. In the energy 
sector, WRI continues its strong efforts in coal conversion and 
upgrading power generation, waste management, and utilization 
and alternative fuels, environmental remediation, renewable 
energy technologies, and bioprocessing. WRI supports utilities 
in a number of emissions issues. WRI has built a test scale 
combustion test facility mimicking a coal fired utility boiler. 
This facility now is supporting technology developing 
verification for a number of utilities for coal technology 
companies and in the combustion and emission control equipment 
manufacturers.
    For example, current technologies are testing 
NOX reduction with Breen Energy Solutions, testing 
mercury capture technologies with Mobile Tech USA, testing 
strategies for multi-point pollution control with Headwaters, 
Incorporated. WRI has developed a patented pre-combustion 
mercury removal process that first dries the coal, then uses 
hot recycle gas to remove the mercury. Unlike post-combustion 
processes that remove mercury from the flue gas, WRI's patented 
process removes mercury from coal prior to combustion. This 
process has been shown to remove up to 80 percent of the 
mercury from Powder River Basin coal. In February 2006, WRI was 
notified by the U.S. Department of Energy that their project 
was selected for an award supporting commercial scale up. DOE 
funding, which is approximately $1 million, will be matched 
with $460,000 from industry affiliated co-sponsors such as the 
Electric Power and Research Institute, Southern Company Basin, 
an Electric Power Cooperative, and the North Dakota Industrial 
Commission, Montana, Dakota Utilities in Detroit, Edison, as 
well as Sask Power. WRI is working to develop enabling 
technologies for zero emission coal based powerplants in the 
future. With oxycombustion, fuel is combusted in pure oxygen, 
the flue gas is recycled back into the furnace to maintain 
optimum burning conditions. Because oxycombustion excludes 
nitrogen, the byproduct is nearly pure carbon dioxide, a waste 
gas that can be effectively managed.
    The cost of oxygen, however, is a major issue in the 
development of sequestration ready power systems of the future. 
Working with a specialty gas manufacturer, BOC Process Gas 
Solutions of Murray Hill, New Jersey, WRI is developing a novel 
technology for the lower cost production of oxygen that takes 
advantage of the oxygen storage properties of the mineral, 
perovskite. The cost of producing oxygen using the BOC 
catalytic auto-thermal reformer technology is estimated to be 
20 to 30 percent lower than the cost of cryogenic air 
separation.
    A hydrogen project now underway at Western Research 
Institute at the University of Wyoming is expected to yield 
cheaper and easier ways to produce pure hydrogen from gasified 
coal and other mixed gasses. The new process advances the water 
gas shift process whereby coal is reacted with steam and oxygen 
to produce the synthesis gas. Under a Department of Energy 
grant, WRI and the University of Wyoming are developing a 
device that combines water gas shift technology with improved 
hydrogen separation to maximize the total hydrogen produced.
    Both WRI and the University of Wyoming recognize the 
importance of ARPA-E legislation that is currently being 
discussed and we are pleased, Senator Thomas, that you are a 
co-sponsoring senator. And with that, thank you, Senator, for 
this opportunity.
    [The prepared statement of Dr. Gern follows:]

Prepared Statement of William A. Gern, Vice President for Research and 
Economic Development, University of Wyoming, and Chairman of the Board 
                of Directors, Western Research Institute

    Mr. Chairman, I am William A. Gern, Vice President for Research and 
Economic Development for the University of Wyoming; I will also speak 
on behalf of the University of Wyoming Research Corporation which is 
better known as the Western Research Institute where I serve as the 
Chairman of the Board of Directors.
    Wyoming leads the Nation in net energy production. The Wyoming 
Geological Survey developed a report placing all forms of energy 
production, by each state, into the common accounting system of 
quadrillion (1.0 x 1015) British Thermal Units (Btu's). The 
survey used DoE EIA data (2003) for this report (the report may be 
viewed at http://wvvw.wsgs.uwyo.edu/Coal/DNR_RE_Study.pdf). The 
Geological Survey also used the DoE EIA data to estimate energy 
consumption by state. The result of subtracting consumption from 
production is estimated net energy production. In terms of gross energy 
production Texas led the Nation, with 9.08 quads Btu, Wyoming was 
second with 8.80 quad Btu. It is estimated that Texas consumed 12 quad 
Btu however, meaning that as a state they were a net energy importer. 
At the same time, Wyoming was estimated to have consumed 0.4 quad Btu, 
thereby exporting approximately 8.4 quad Btu to the nation. This is why 
Wyoming is the Nation's leader in net energy production. Alaska was 
estimated to rank second in net energy production with approximately 
4.77 quad Btu.
    Wyoming's energy portfolio is multifaceted, it produced 6.65 quad 
Btu of coal (ranks #1), 1.52 quad Btu of natural gas (ranks #4) and 
0.29 quad Btu of crude oil (ranks #7). Wyoming has led the nation in 
coal production for the past two decades, with Wyoming coals 
responsible for an estimated 35 percent of the nation's electrical 
power. While nuclear power generation was examined in this report, it 
did not attempt to attribute the source of the nuclear fuel; Wyoming 
ranks #1 in uranium production.
    Recognizing Wyoming's status in energy production, the University 
of Wyoming has just completed a successful initiative to develop a 
School for Energy Resources. This initiative recognizes UW's existing 
strength in energy-related education and research, most of which is 
fundamental, and will add important new components. The school has 
three elements, all of which also meet Energy Act of 2005 goals. UW 
will enhance existing research capabilities. We will hire permanent 
research staff and provide state-funded operating budget to elements of 
our existing Institute for Energy Research. Incentives will be provided 
to UW departments in the form of support funding for three-year faculty 
appointments into various energy related centers on the campus as well 
as support for graduate students. A large annual pool of funding is 
available for grant matching (this will be very helpful in winning 
competitive awards from the DoE). Finally an interdisciplinary 
technical advisory board will help steer the scientific work conducted 
under the aegis of the Institute for Energy Research.
    The second element is academic. Funding for 12 distinguished 
professorships is available. This will help attract faculty who have 
achieved international recognition for their research and teaching in 
fields related to energy. Our curriculum will be broadened in 
interdisciplinary directions to support the state's economic health and 
strengthen UW's graduates' preparation for careers in energy-related 
fields.
    The third element is statewide outreach and service. Here a 
permanently funded Energy Outreach Center will provide technical 
consulting, hold statewide workshops, and produce technical reports 
supporting energy project design, scientifically-based analysis of 
energy resources and effective long-term energy planning. The Outreach 
Center will serve as an important link between the School for Energy 
Resources, industry and government agencies.
    The Wyoming Legislature passed legislation, providing funding to 
create the School for Energy Resources in March, 2006. Governor 
Freudenthal recently signed this legislation into existence with the 
authorization to immediately commence the work of establishing this 
important new chapter in the University's role for the state of 
Wyoming. The school is slated to receive $12 million for the first two 
years of a three year ramp-up period, after which it will be sustained 
with approximately $10 million annually.
    As the energy school proposal was being developed, we were mindful 
of elements within the Energy Act of 2005 and opportunities presented 
by research and education partnerships with Federal agencies, the most 
important of which is the Department of Energy. We are pleased with 
Senator Thomas' co-sponsorship of the PACE-E and ARPA-E Senate bills. 
We recognize the importance of this legislation especially the elements 
dealing with education of a competent workforce and of increased 
funding for energy-related research.
    In order for coal to be used as cleanly as possible, the nation 
needs greater understanding about the processes of trapping carbon 
dioxide (CO2) from combustion and gasification processes and 
about geologic carbon sequestration. ``Carbon sequestration'' is 
initiated with CO2 capture from the flue gas, followed by 
usage or storage or both. Flue gas, produced by conventional air 
combustion, contains approximately 10-15% CO2; the balance 
is nitrogen and minor combustion byproducts. Flue gas produced by 
plants using oxygen instead of air for combustion, as in future 
Integrated Gasification Combined Cycle'' (IGCC) plants, also contains 
CO2 but more concentrated (say 50%) and at higher pressures. 
Aqueous-amine absorption currently is widely used for separating 
CO2 from flue gas. This type of separation substantially 
increases the cost of electricity generated. DoE's goal is to reduce 
this cost and therefore they support programs developing new separation 
technology that will reduce the CO2 capture cost, hopefully 
by a factor of 4 (http://www.netl.doe.gov/technologies/carbon_seq/
index.html). DoE's target for IGCC plants is a new separation 
technology that will reduce the CO2 capture cost by a factor 
of 2-3. To our knowledge existing separation technologies, however 
optimized and configured, cannot approach these stretching targets. A 
route to achieve these capture targets is through novel sorbent and 
membrane materials. Sorbent is made of granular material that can trap 
CO2, but not the other flue gas components, and hence is 
similar to the materials used in in-line filters for purification of 
water and air. These materials need both high CO2 capacity 
and high CO2/nitrogen selectivity, and they must be easy to 
regenerate. The University of Wyoming is actively pursuing research to 
identify and develop this needed material.
    UW has considerable expertise in geological CO2 
sequestration. As a member of the DoE-funded Big Sky Carbon 
Sequestration Partnership (Montana State University is the lead 
institution), we are examining CO2 sequestration in 
carbonate rock reservoirs and the economic analysis of CO2 
sequestration. This work is being done UW's Enhanced Oil Recovery 
Institute where we will couple this knowledge with research deepening 
our understanding of petroleum reservoir stimulation using the off-
loaded CO2; an end result will further use of the nation's 
existing known oil supplies.
    According to the Wyoming Geological survey, there is 1.4 trillion 
tons of coal in Wyoming, of which about 64 billion tons can be mined 
with current technologies. In order for the nation to use the energy 
residing in the remaining 1.3 trillion tons, new technologies are 
required. Specifically in situ gasification process needs greater 
understanding through research. In situ gasification is not new; as a 
matter of fact, Wyoming was home for such research over twenty years 
ago. The Nation also needs a much more fundamental understanding of the 
biological and physical events associated coal bed natural gas (CBNG) 
formation. Many important scientific questions remain open--what is the 
rate of gas formation? what are the physical and biological components 
of gas formation? can the gas production be altered through 
manipulation?--to name a few. Finally the University of Wyoming is 
doing considerable research into issues associated with CBNG process 
water production using DoE funding.
    As Wyoming's surface coal mining industry was strongly developing 
in the early 1970's many felt that reclamation of the mined surface 
would be quite slow in the arid, cold regions of the state. The Wyoming 
Abandoned Coal Mine Land Research Program, part of the Wyoming 
Department of Environmental Quality Abandoned Mine Division, produced 
much valuable information for mine managers to use in reclaiming mined 
lands. This program is managed by the University of Wyoming for DEQ and 
many UW-based research projects have resulted in a wide array of 
reclamation techniques useful not only in coal mine reclamation, but to 
the reclamation of other disturbed lands throughout the West. While 
surface coal mining is by its nature a disruptive process, active 
reclamation is effective in returning once mined land into effective 
places for grazing and wildlife.
    The University of Wyoming Research Corporation is a 501(c)3 not-
for-profit research entity known as the Western Research Institute, 
funded primarily by the U.S. Department of Energy and the Federal 
Highway Administration to supports these organizations' mandates for 
the benefit of the Nation.
    In the energy sector, WRI continues its efforts in coal conversion 
and upgrading, power generation, waste management and utilization, 
alternative fuels, environmental remediation, renewable energy 
technologies, and bioprocessing.
    WRI is supporting the utilities on a number of emission issues. For 
example, WRI has built a test-scale Combustion Test Facility that 
mimics a coal-fired utility boiler. This facility is now supporting 
technology development and verification projects for utilities, for 
coal technology companies and combustion and emissions control 
equipment manufacturers. The following are examples of the projects 
being conducted: testing of NO reduction technologies (with 
Breen Energy Solutions); testing of Hg capture technologies (with 
MoboTec U.S.A.); testing of strategies for multi-pollutant control 
(with Headwaters, Inc.).
    WRI has developed a patented pre-combustion mercury removal process 
that first dries the coal, then uses the hot recycle gas to remove the 
mercury. Unlike post-combustion processes that remove mercury from the 
flue gas, WRI's patented process removes the mercury from the coal 
prior to combustion. The process has been shown to remove up to 80 
percent of the mercury in PRB coal (additional mercury is removed 
during combustion). Not only is this technology competitive with post-
combustion processes on a cost basis, it also is easily integrated into 
a power plant, and the treated coal product increases plant efficiency 
by 3-4 percent for Powder River Basin (PRB) coal. What's more, the 
water removed from the coal can be condensed and used at the power 
plant for cooling and other uses, a considerable benefit in the arid 
West. A recent economic study sponsored by the Electric Power Research 
Institute showed the WRI process to be one of the lowest-cost 
technologies for removing mercury from PRB coal-fired power plants. In 
February 2006, WRI was notified by the Department of Energy that this 
project was selected for an award to support commercial scale-up. The 
DoE funding of approximately $1 million will be matched by 
approximately $460,000 from industry-affiliated co-sponsors Electric 
Power Research Institute, Southern Company, Basin Electric Power 
Cooperative, North Dakota Industrial Commission, Montana-Dakota 
Utilities, Detroit Edison and SaskPower.
    WRI supports the coal industry in mine reclamation through the 
development of a novel bio-based source treatment of acid mine drainage 
(AMD). Although the high-sulfur coals of the East make this problem 
more widespread in the eastern half of the country, acid mine drainage 
is associated with hard rock mining and coal mining throughout the 
United States. Other processes treat the drainage through 
neutralization. WRI has partnered with Kennecott Energy to demonstrate 
the effectiveness of the biobased source treatment process at a mine in 
Tennessee. The results to date have confirmed that the process 
effectively controls acid mine drainage by controlling the source of 
the acid within the mine. Additional demonstrations are being planned 
with other coal companies at other mines.
    Since the first commercial coal bed natural gas (CBNG) well was 
established in the Powder River Basin in 1986, CBNG production has 
grown explosively and now constitutes a major resource within the 
energy mix for Wyoming, the region and the Nation. More than 40,000 
wells are expected to be drilled in the next decade alone. The 
management of the produced water, however, remains a significant 
consideration. When an operator drills a CBNG well, large amounts of 
water are withdrawn in order to free the methane to be extracted. In 
some areas of Wyoming and Montana, the water quality is such that it 
cannot be used for agriculture, livestock or discharge into surface 
streams without causing degradation of the water. WRI is working with 
developers and others to demonstrate treatment methods that will allow 
the beneficial use of the produced waters. For example, WRI is working 
with CBM Associates to demonstrate an application that allows the water 
to be used for irrigation purposes. WRI also is exploring the use of 
CBNG produced water in power plants to reduce the draw of fresh water 
for cooling and other plant purposes.
    WRI is working to develop enabling technologies for zero-emissions 
coal-based power plants of the future. With ``oxycombustion,'' fuel is 
combusted in pure oxygen (rather than air which contain considerable 
nitrogen gas) and flue gas is recycled back into the furnace to 
maintain optimum burning conditions. Because oxycombustion excludes 
nitrogen, the byproduct is nearly pure carbon dioxide, a waste that can 
be more effectively managed. The cost of oxygen, however, is a major 
issue in the development of sequestration-ready power systems of the 
future. Working with a specialty gas manufacturer, BOC Process Gas 
Solutions (Murray Hill, New Jersey), WRI is developing a novel 
technology for the lower-cost production of oxygen that takes advantage 
of the oxygen ``storage'' properties of the mineral perovskite. The 
cost of producing oxygen using the BOC Catalytic Autothermal Reformer 
(CAR) technology is estimated to be 20 to 30 percent lower than the 
cost of cryogenic air separation.
    A hydrogen project now underway at Western Research Institute and 
the University of Wyoming is expected to yield a cheaper and easier way 
to produce pure hydrogen from gasified coal and other mixed gases. The 
new process advances the water-gas shift process whereby coal is 
reacted with steam (water) and oxygen to produce a synthesis gas. Under 
a U.S. Department of Energy grant, WRI and the University of Wyoming 
are developing a device that combines water-gas shift technology with 
improved hydrogen separation to maximize the total hydrogen produced. 
The University of Wyoming is leading the development of a ceramic 
catalyst, while WRI will test a variety of vanadium alloy foil 
membranes for durability and optimum effectiveness at lower 
temperatures. Finally, the ceramic catalyst and the vanadium membrane 
will be integrated into a single stackable device that can operate at 
lower temperatures.
    Through this testimony, I want to make apparent that Wyoming is a 
major player in the Nation's energy production. We desire to have a 
much greater role in processes associated with the conversion of coal 
into other forms of energy. The University of Wyoming has established 
the School of Energy Resources for this and other reasons. It will have 
a very important role in research, outreach and education regarding 
energy production. The Western Research Institute continues to apply 
knowledge leading to new and efficient production technologies that are 
less polluting but will result in meaningful new uses for the Nation's 
energy supply.
    Mr. Chairman, thank you for the opportunity to provide testimony to 
this committee.

    Senator Thomas. Thank you all very much. I appreciate your 
comments and I appreciate your ideas. I have a few questions 
and we'll see what we can do there.
    Dr. Shilling, how would you evaluate GE's position with 
regard to technology development as opposed to actually being 
close to constructing a plant for IGCC?
    Dr. Shilling. There is a fairly significant amount of work 
that goes between the development of technologies such as we're 
doing now for low rank coals and then implementation within the 
design. And of course we're developing a reference plant design 
right now for coal for high sulphur coal. We'd have to do 
something similar to bring that to market in terms of a 
reference plant design, a standard plant design. And of course 
the benefits of that, when you look at the typical utility 
that's going to be putting in one of these plants, what they do 
not have within their model of acquiring technology or building 
coal plants is the type of additional engineering that would 
have to go into a--what we call a first of a kind plant. And 
similar to what we're doing now, we would need also to develop 
a first of a kind plant for Western coals. It would allow us to 
take advantage of the lower sulphur that's in Western coals, 
plus it would integrate technology that we're developing now 
for being able to deal with the moisture that's in Western 
coals. And of course that plant will look significantly 
different. We'll have a different balance of the topping cycle 
to the bottoming cycle piece of--you know, the plant 
distribution, where the power's coming from. We'll have a 
significantly different waste handling system as a gas removal 
system, and IGCC is very complex.
    Technology today is very complex. We can see it in the 
development of, for example, advanced aircraft engines, 
locomotives. It's a part of our technology today. It's part of 
our technology society.
    So, going from the design from the development into the 
deployment, there is another step, which the engineering of the 
plant. And I would say that's a--probably right now a major 
feature that still has to be accomplished before we define and 
before we deploy a plant optimized for western coal.
    Senator Thomas. So would you say that the policies and 
incentives that are currently in place are enough for General 
Electric and others to pursue and construct plants, or are you 
simply in the process of research?
    Dr. Shilling. There is--no. We're not just in research. We 
need to deploy these technologies that we're developing very 
rapidly. Within the Energy Act, there is, of course, title IV 
for the incentive tax credit. There is title XVII for the loan 
guarantee. There's section 413 for Western coal demonstration. 
There is still a gap that deals with that first of a kind 
engineering. And again, when utilities look at implementing an 
IGCC project, that winds up being called still the kind of a 
final gap that needs to be closed and we need to find a way to 
fund that and support that development.
    Senator Thomas. Okay. Well, I hope that all of you are 
looking at actually getting something built as opposed to just 
research. And I understand research has to be certainly 
performed. General Electric recently signed the agreement with 
DKRW to use GE's gasification technologies, the proposed coal 
to liquids facility right here in Wyoming. The first phase was 
supposed to produce approximately 11,000 barrels per day of 
ultra clean diesel fuel from carbon base and coal. It is my 
understanding this will be the first application of that 
technology. What are the environmental benefits of producing 
transportation fuel as opposed to running crude oil through the 
refineries?
    Dr. Shilling. The good news is that the coal to liquids is 
very clean compared to what I'll call standard refinery, taking 
in crude and refining that into distillate or into diesel 
fuels. The reason is that we take out--the metals we take out, 
the mercury we take out, the sulphur, as part of the process, 
and it's going to be very, very clean compared to a standard 
refinery where they're dealing with high sulphur----
    Senator Thomas. This process is pretty much available, 
ready to move forward?
    Dr. Shilling. That's right. The technologies are available. 
They need to be integrated into a total plant and whether or 
not the decision is made, for example, to do it with a complete 
processing, after you convert the coal, you will have a--what 
we call synthetic crude, in a way. It has waxes and it has a 
higher and lower order of hydrocarbons. You can do that final 
processing to produce either diesel or methanol or other 
products onsite, or you can ship that to a refinery. And the 
good news about shipping it to an existing refinery is even 
that synthetic crude will also have very low de minimus levels 
of sulphur. So the sulphur part and the mineral part of the 
processing of that fuel or that feed stock within a normal 
refinery even will show significant environmental benefit.
    Senator Thomas. You're not planning to make meth, are you?
    Dr. Shilling. Pardon me?
    Senator Thomas. I'm sorry. That's just a joke. That's what, 
it's in the Medicine Bow area, and that's something that's 
fairly likely to happen, is that right?
    Dr. Shilling. Well right now, GE would be licensing our 
gasification technology into--and providing, of course, the 
engineering support for that into the total project. I believe 
right now that project is moving towards and into the financing 
phase.
    Senator Thomas. Good. Thank you. Mr. Waddington, what do 
you think Congress might do to help improve and move forward 
with this transmission project the Authority's working on?
    Mr. Waddington. Well, Mr. Chairman, we have two public-
private partnerships on relatively near term transmission 
opportunities. And in both instances, one of our partners is 
the Western Area Power Administration along with a private 
sector party. We're just about ready to embark on detailed 
technical study work that's expensive and I would suggest, Mr. 
Chairman, you consider a Federal funding piece to that that 
would help bolster Western's ability to work with us as we get 
into the detailed study. Whether that's a redirect of DOE's 
existing appropriate funds or by some other appropriated means.
    Senator Thomas. WAPA?
    Mr. Waddington. WAPA. Mr. Chairman, they like to be called 
Western, is what I've been told.
    Senator Thomas. Oh, is that right?
    Mr. Waddington. Yes. So I've been trying to get--I've 
called them WAPA for years, and I'm trying to get into the 
habit of calling them----
    Senator Thomas. WAPA sounds more familiar to me. Okay. So a 
frontier corridor is one of the things you're working on. Is 
that right?
    Mr. Waddington. Mr. Chairman, yes, we are involved in the 
frontier line. We also have a partnership and a relationship 
with Arizona Public Service on the Trans-West Express Project. 
Both of those are multi-State, long distance, long term 
initiatives. The two projects I was referring to are actually 
shorter distance projects connecting Wyoming with Colorado and 
Utah.
    Senator Thomas. Good. Just a short answer, because I know 
it's a complicated problem, but obviously, there's more to the 
so-called capacity shipper thing and the railroad thing than 
just the price. Capacity, investment. What do you think is the 
solution to railroad capacity?
    Mr. Waddington. Mr. Chairman, I didn't come today with the 
solution readily at hand. This is a complicated matter. I think 
it's important to Wyoming. It's important to rural States 
throughout the country and it needs a concerted look. But 
frankly it's a complicated matter and I don't have the solution 
for you today.
    Senator Thomas. But there is a capacity problem, isn't 
there, in terms of the Powder River Basin?
    Mr. Waddington. Mr. Chairman, absolutely. There are coal 
plants that are receiving very limited supplies of coal and 
working down their inventories because of the lack of cars, as 
one example. So it----
    Senator Thomas. And market and capacity are higher than 
we're able to provide because of the limitations on the 
capacity of the railroad?
    Mr. Waddington. That's my understanding, Mr. Chairman.
    Senator Thomas. I see. Okay. You mentioned bonding 
authority and the possibility of creating tax exempt status. 
I'm aware of this issue, but I want you to know that other 
things Congress can do--are there other things Congress can do 
to help in the construction or the transmission? There's some 
confusion about sometimes on tax exemption in terms of 
construction and ownership and those kinds of things.
    Mr. Waddington. Well, Mr. Chairman, I'd say in general that 
the Energy Policy Act that passed last year gives us the tools 
if--provided two things. That Congress keeps the implementing 
agency's feet to the fire and those provisions get implemented. 
And second, if there's sufficient funding appropriated as we go 
through times. In general, I think we have an energy policy to 
implement. The one area that I suggested in my testimony that 
might be a new provision is recognition--and several States 
have emerged now with these State bonding authorities, where 
we're trying to make a difference, as one more financing tool 
to move these projects ahead. And federally tax exempt bonding 
would give us a significant lift in terms of lowering the cost 
of those transmission investments.
    Senator Thomas. Yes. Sometimes there's a little discussion 
over who benefits from that, whether it's the builder, whether 
it's the owner, whether it's the user. That gets to be a little 
bit of a complicated question. But I understand what you're 
saying. So, Mr. Loomis, just very briefly, in general terms, 
how do you state the differences between mining coal and other 
types in terms of mining practices, energy content, 
environmental factors, and reserves? We need to explain that to 
people sometimes.
    Mr. Loomis. Senator Thomas, certainly we are blessed here 
in Wyoming, as you're aware, with coals that are surface 
mineable coals that are close to the surface which, in many 
cases in the other parts of the country, they're deeper. Our 
coal seams are thicker, 70 to 100 foot coal seams which, in the 
east Midwest and other States, they might be 3 feet to 10 feet. 
So those two, being relatively close to the surface, are 
extremely thick coal seams, making them much different and the 
reason why we produce so many more tons per man year than an 
Eastern or Midwestern coal. On the environmental side, as I 
mentioned, our coals--and has already been mentioned by 
others--are extremely low in sulphur. Our coals will meet the 
demands of the Clean Air Act of 1.2 pounds of SO2 
per million Btus without scrubbers. So that has been a big 
reason that has allowed us to go coast to coast in competing 
for new markets. That, in addition to our extremely efficient 
mining operations. And as I said, as more and more utilities 
split on what scrubbers, we're going to lose that particular 
advantage, but we still believe we will be the most efficient 
mines when it comes to tons per million Btus.
    Senator Thomas. Okay. Very good. Thank you. Obviously, the 
energy industry's been good at providing employment for Wyoming 
people. You mentioned the salaries and so on. Give us a 
snapshot of the average age and the types of expertise and 
perhaps salaries that exist in the industry.
    Mr. Loomis. I'll kind of take them in the opposite order. I 
mentioned the salaries. We were looking at $80,000 to $100,000 
a year for a miner in Wyoming. The skills are not the labor 
skills of 100 years ago. They're highly technical skilled jobs 
today. The people that work in the mines have to be able to 
look at computers, be able to run them. They're on their 
trucks. They're on the drag lines. Even the dozers that do the 
reclamation work will have GPS systems where they will be able 
to contour that land back to within inches of what is required 
for final topographic relief. So these are highly skilled jobs 
that are available in the industry.
    As far as the aging, I don't have an average age, but I 
know a great deal of the people that are working in the 
operations started at about the same time I did, and I'm 
getting pretty old, Senator. So you know that work force is 
aging as well. So that is a major consideration. It's not a 
crisis. We're addressing it, but certainly the industry is 
going across the country to job fairs in the East and South 
telling people about the jobs that are available here in 
Wyoming. We're going out to the schools in the State of Wyoming 
and trying to make presentations to the high schools and the 
vocational education classes that these jobs are available in 
Wyoming and they should take a look at them. And that they need 
to have math skills, they need to have reading skills, they 
need to have writing skills in order to compete for these jobs, 
but they are good jobs and we're doing that out of the 
association. I'm trying to raise the education level of--or 
knowledge level of these jobs and the ability for Wyoming 
students.
    Senator Thomas. Do you have available employment--have 
people in the industry? Are you short?
    Mr. Loomis. We're short.
    Senator Thomas. You're short?
    Mr. Loomis. Especially welders, electricians, mechanics, 
those skill sets are in extremely short supply.
    Senator Thomas. I see. Okay. Marion, did you hear that 
salary range? What would you guess would be the time frame to 
get to IGCC production? Do your folks have any particular 
feelings?
    Mr. Loomis. Mr. Chairman, Dr. Shilling would be a much 
better person to ask that question of, but I----
    Senator Thomas. Yes. But do you see it though in your 
industry as something happening quite soon, or----
    Mr. Loomis. Mr. Chairman, I think we're going to see some 
of that happening, but I mentioned the need for 10,000 to 
20,000 megawatts a year of new power. That's not going to 
happen with IGCC. It's going to happen, if it happens with 
coal, with more conventional plants. But saying it's a 
conventional plant, it's not going to be the plants that we 
built even 10 years ago. They're going to be cleaner, more 
efficient plants addressing mercury and SOX and 
NOX and particulates. But nevertheless, I don't 
believe we're at the IGCC plant for these immediate needs of 
this Nation. They're going to be the more conventional plants 
with the new technologies for emission control.
    Senator Thomas. So you agree with the concept that there's 
a short term future and a long term future?
    Mr. Loomis. Absolutely, Mr. Chairman.
    Senator Thomas. Mr. Coyne, what do you think Congress might 
do that it hasn't already done to reduce the regulatory, 
economic, and logistical hurdles that exist for attracting coal 
projects to Wyoming?
    Mr. Coyne. Senator, I think there's a handful of things 
that could still be addressed. You're already doing, I think, 
maybe all of this, but first, we need the Department of Energy 
to finish up the regulations. They need to be written and then 
objective wise decisions need to be made by that Department 
regarding that energy bill. Second, there's been a lot of talk 
about a national grid to address the transmission line issues 
through FERC or through other areas. I'm no expert in that 
area, but if there's a path where we could increase the 
capacity to export electricity and to make the grid maybe more 
stable and safer throughout the country, then I would encourage 
you to bless those efforts.
    There's also been a lot of talk recently about the 
development of a single battlefield fuel I think the Department 
of Defense could use. It may be that the Fischer-Tropsch 
process and the ultra clean diesel fuel that it could create 
from coal may be that fuel. I would urge you to encourage the 
Department of Defense to find the money in their many billion 
dollar budget to actually study and determine whether that is 
the fuel and, if so, to move forward with those projects.
    Senator Thomas. What did you call it?
    Mr. Coyne. Single battlefield fuel.
    Senator Thomas. I see.
    Mr. Coyne. And then finally, if there's anything within 
your power to encourage or to drive the completion of due 
diligence for coal gasification efforts, I would encourage you 
to do that.
    Senator Thomas. Think we can get California to buy our coal 
generated fuel?
    Mr. Coyne. When I studied law, there was a little thing 
called the interstate commerce clause that had a lot to do with 
what could cross State lines and perhaps that clause doesn't 
apply to California, but it sure seems that Wyoming's coal is 
clean enough for 34 other States.
    Senator Thomas. What an idea. Okay. I'm not sure I quite 
understood. You are in favor of moving forward with the coal 
gasification, coal conversion, but you think it ought to be 
balanced with non-fossil activities. Is that your point?
    Mr. Coyne. It is, and I think that Wyoming's resources, 
particularly wind, have largely been left untapped because of 
the intermittent nature of wind power through the year, 
throughout the time of the year. It may be that both of these 
industries can best be moved forward if they are joined 
together, particularly when we look at transmission issues.
    Senator Thomas. That's interesting. I had some contacts 
this week saying that if you're going to generate wind power 
you need to participate in the cost of transmission and the tax 
exemptions that go for wind power ought to have a little 
something to do with the transmission costs as well, which 
would be a little different change with the--and then something 
in the future. Of course, I agree with you and unfortunately, 
currently, wind and solar produce about 1 percent of our total. 
Do you see a potential for wind energy to be more efficient to 
where we produce more with the relatively fewer number of 
facilities, or are we going to have to have--are we going to 
have the same kind of efficiency in the production? Or what's 
your view of that?
    Mr. Coyne. The potential for wind power is huge. You would 
need to talk to the doctor on my left about what power of 
hugeness it would need to become in order to become significant 
in the overall picture. But the opportunity's there. It's clean 
fuel.
    Senator Thomas. Yes.
    Mr. Coyne. And certainly there's room for it to grow. In my 
opinion, it's not going to become the significant answer to our 
future energy needs. It's just too small.
    Senator Thomas. All right. No question, but with 
integration is an idea. Do you recall that in the initial idea 
of the wind generation in Medicine Bow was to integrate it with 
the Colorado River. Unfortunately, the Medicine Bow one blew 
away, but that still was the concept, and a good concept. Dr. 
Gern, as you move forward, what is the relationship between 
Western Research Institute and the University Energy College in 
terms of research? How do you work those two functions 
together?
    Dr. Gern. Thank you, Senator. As you know, the Western 
Research Institute is the University of Wyoming Research 
Corporation and our trustees appoint the board of directors of 
the Western Research Institute. And the president of the 
University of Wyoming or that person's designee is to serve on 
the board, and that's why I serve on the board. I am the 
president's designee.
    As we develop this energy school, it is very logical to 
think about the strengths that WRI has and the strength that 
the University has. All universities are strong. Restrictions 
are strong in fundamental research, and that is the research 
that looks down the road a fair distance. But that research, in 
order to be important, must be brought into economic reality. 
It must be placed into businesses. It must be done in such a 
way that it can actually be deployed and therefore employ 
people using it.
    WRI is very good at moving concepts, fundamental concepts, 
into the applied arena and then all the way up to pilot or 
demonstration scale projects. And so I see the relationship, 
one, being as a provider of fundamental research and WRI's 
serving as a site where this fundamental research can be moved 
into the applied realm. That doesn't mean that WRI doesn't do 
fundamental research on its own, but the University is such--a 
much larger research entity than WRI. More research will come 
out of the University just because of size. But WRI has 
significant applied technology based tools and infrastructure 
like this utility boiler that can be used and other things in 
examining a whole bunch of issues.
    One of the things that, for example, we're very interested 
in is in catalytic membranes. Several people have spoken about 
these kinds of new technologies. We are also very interested in 
catalytic membranes. We have developed our own proprietary 
patented catalytic material and placing it into a membrane 
whereby the flow through process can occur, that is you react 
it as the combustion gas moves through and then separate it at 
the same time, is extremely important and really improves the 
efficiency of these things. That's fundamental research and 
then it becomes how you place it into a functioning technology.
    Senator Thomas. That's great. And you have had research of 
course, and we've worked with you in the past and you've gotten 
a considerable amount of dollars there for WRI and for the 
University, for the Rocky Mountain Research Institute and all 
those things, but of course we haven't really been recognized 
as having facilities to do a great deal of--now do you see the 
Energy College as being an energy research center?
    Dr. Gern. I do. The School for Energy Resources, like I 
said, will have three major components, all aimed at supporting 
energy related technologies out of the University. We are 
hoping to hire 12 distinguished professors as soon as we can. 
Now think about this. These are the nation's, or maybe the 
world's experts in areas of energy and we will have the 
capability, the financial capability of hiring these people and 
bring their expertise to the Laramie campus. I think that that 
bodes well for our ability to continue to develop new 
technologies and continue the applied route for these 
technologies, and we're very happy about that.
    Another piece of this is something that is not often 
considered, but the Wyoming legislature did consider it. And 
that is they provided us $1 million a year of matching funds to 
go after Federal projects, DOE projects. And as you know, there 
is always a significant match requirement when you work with 
the Department of Energy and this million dollars is going to 
make us very competitive.
    Senator Thomas. Very good. Very good. We appreciate that. 
That's great. Well thank you all very much for your input and 
we appreciate it. I hope you'll all stay seated for a moment 
because I want to visit with you a little later. But for those 
of you who may be interested, all the statements that are given 
today will be posted on this Energy Committee's website, so if 
you want more of this information, you can find it there.
    From this testimony there may be some questions sent to 
some of you and I hope you'll respond to them and they will be 
put in the record. So, without any further ado, I'll adjourn 
the official meeting of the committee.
    [Whereupon, at 3:06 p.m., the hearing was adjourned.]

                                APPENDIX

              Additional Material Submitted for the Record

                              ----------                              

  Statement of Fred Lawrence, President, Carbon Recovery Technology, 
    Inc., and Dr. Ronald W. Spahr, Professor and Department Chair, 
                         University of Memphis

                    TRANSAMERICA GRID (TAG) PROJECT

    The TransAmerica Grid (TAG) Project is a comprehensive, strategic 
plan to construct a high voltage AC and/or DC transmission system that 
would link the wind and coal rich western and great plains states with 
the large electrical load centers to the east (Chicago, St. Louis, 
Memphis), the west (Los Angeles and through the Pacific Intertie, San 
Francisco and the Northwest), and the south (Phoenix, Tucson, Houston, 
Dallas/Fort Worth). The TAG concept has evolved from discussions within 
the utility, transmission, wind and coal industries and among state 
officials in the West and Midwest over the past 15 years. It addresses 
many of the concerns that currently face the U.S. power industry:
    (1) It provides access and facilitates utilization of up to 10,000 
MW of wind-power resources of the Dakotas, Colorado, Kansas, Montana, 
Nebraska, New Mexico, Oklahoma, Texas, Wyoming, and other wind-rich 
states;
    (2) It provides access and facilitates utilization of up to 14,000 
MW of plentiful clean low-sulfur coal/lignite resources of Colorado, 
Montana, North Dakota and Wyoming;
    (3) It relieves transmission constraints and bottlenecks that exist 
in the West, Southwest, Midwest and Texas;
    (4) It would create synergies by linking the East, West, and Texas 
grids and would also link energy abundant regions with load centers;
    (5) It enhances the deregulation of the U.S. power industry by (a) 
providing new and existing generation with better access to new 
markets, and (b) tying in the Eastern, Western and Texas electrical 
grids, thereby creating a more efficient, essentially national market 
for electrical power;
    (6) The proposed system would provided nationally generated power 
to accommodate regional demand peaks, diversify weather-related and 
hourly peak loads across the country, providing higher utilization of 
efficient power generation and reducing the need for standby peaking 
generation capacity;
    (7) It diversifies seasonal and daily peak loads among load centers 
in the country, thereby reducing further the need for standby peaking 
generation capacity,
    (8) It provides for the diversification of renewable (wind, hydro, 
and solar) electrical generation to increase the reliability of 
renewable power; and
    (9) It stabilizes and improves the reliability of the entire 
electrical grid system in the U.S.
    The TransAmerica Grid project is a huge undertaking--in many ways 
comparable to the construction of the U.S. interstate highway system in 
the 1950's and 1960's. However, unlike the highway system, the TAG 
project will generate revenues from tariffs on the power that it 
transports. These revenues are estimated to be in the range of $2 
billion per year. Although the system itself is estimated to cost $11.7 
billion, once in operation, revenues will allow the system to generate 
a positive net present value in as little as 5-6 years. To develop the 
concept more fully into an actual blueprint with more precise cost and 
revenue projections will require a comprehensive feasibility study. 
Funds from the U.S. Congress are currently being requested by the 
University of Memphis for partially funding this study.

                       LAWRENCE GENERATION STUDY

    The Lawrence Generation Project proposal is a component of the 
Trans-America Grid (TAG) Project, a long-term energy master plan to 
provide greater generation capacity and a stronger electrical grid in 
the central and western United States. It is proposed that the Lawrence 
Generation Project provide electrical power for consumers in Colorado 
and California. Power would be transmitted by transmission lines 
proposed by Trans-Elect, Inc and Wyoming Infrastructure Authority, the 
TOT 3 line to Colorado, and to California by a modified version of the 
currently proposed Frontier Line or the proposed Northern Lights Line. 
These new interstate high-voltage electric transmission line proposals 
grew out of work done as part of the Rocky Mountain Area Transmission 
Study (RMATS).
    The Lawrence Generation Project is located in the Powder River 
Basin, Johnson County, Wyoming. Property, owned by Lawrence Land 
Company, contains approximately 7,500 acres with in excess of 500 
million tons of coal and a second property contains approximately 11.8 
billion tons of coal. The project is expected to generate 2,800 to 
3,000 MW of new clean almost zero emission, electrical power by using 
either a conventional Pulverized Coal Rankin Cycle or by utilizing the 
newer Integrated Gasification Combined-Cycle (IGCC) technology. Either 
alternative is expected to capture carbon dioxide (CO2) and 
other harmful emissions. The CO2 will be used for enhanced 
oil recovery, thus sequestered. CO2 flooding has been 
described as the most cost-effective method for extracting the final 
amounts of recoverable oil from depleted fields. Enhanced oil recovery 
will significantly increase production of crude oil in older producing 
fields and significantly prolong productive lives of the fields in 
which it is applied.
                                 ______
                                 
                  Statement of E.G. Meyer, Laramie, WY

    It is important to properly define the categories of ``clean coal 
technologies''. For example, gasification and subsequent use of the CO 
and H2 either for an IGCC power generation or for an FT reaction to 
produce liquids is a form of a CCT. Likewise, boiler and burner 
configurations to lessen emissions are another form of CCT as is 
treatment of flue gases. Chemical refining of coal to produce char for 
fuel, chemicals for feed stocks, and CO and H2 is a separate CCT 
category. Thus I request that the Committee recognize these and other 
distinct types of technologies and provide adequate support for them. 
It is unwise to focus on a single type of CCT before knowing which ones 
are the best.
                                 ______
                                 
Statement of Scott B. Smith, CEO, Western Research Institute, Laramie, 
                                   WY

    Mister Chairman and Members of the Committee, thank you for 
allowing me the opportunity to submit a statement for the record. 
Chairman Domenici, I'd like to thank the Senate Energy and Natural 
Resources Committee for conducting this field hearing in the great 
state of Wyoming. In particular, I wish to offer our appreciation to 
Senator Craig Thomas for his leadership on the issue of Wyoming's and 
the Nation's energy future.
    As the CEO of Western Research Institute (WRI), it's an honor to 
highlight some of the key energy-related work Western Research 
Institute is performing, largely under the auspices of and in 
coordination with the Department of Energy.

                          INTRODUCTION TO WRI

    WRI is a Laramie, Wyoming-based $8 million-per-year entity and a 
multi-disciplinary team of 70+ highly skilled scientists, engineers and 
other professionals. We conduct research, develop and bring to market 
significant new technologies, and deliver value to private clients 
through contract services.
    In all we do, whether originating new technologies that attract 
industrial partners or working with industrial partners to realize the 
full potential of their concepts, WRI functions in partnership with 
others. In fact, that is our goal: To be a preferred source that 
government and industry clients go to when they seek innovative 
partners and technologies in the energy, environmental and 
transportation materials sectors.
    Our main facilities, located on the University of Wyoming campus, 
house administrative functions and 38 laboratories. Our 22-acre 
Advanced Technology Center (ATC), north of Laramie, contains 15 
buildings with shops and offices, laboratories, and pilot facilities. 
The ATC is where most of our energy technologies get legs under them.
    Western Research Institute is a 501(c)3 not-for-profit research 
entity funded primarily by the U.S. Department of Energy and the 
Federal Highway Administration to support these organizations' mandates 
for the benefit of the Nation. Western Research Institute enjoys a 
relationship with the University of Wyoming but receives no UW dollars 
and no funding from the state of Wyoming. Our aspiration has always 
been to be an asset to the University and, more than that, to serve the 
best interests of the state of Wyoming in the energy, environment and 
highway materials realms.
    In the energy sector, WRI continues its efforts in coal conversion 
and upgrading, power generation, waste management and utilization, 
alternative fuels, environmental remediation, renewable energy 
technologies, and bioprocessing.
    My purpose today is to highlight Western Research Institute's 
considerable work in the field of coal research and technology. WRI is 
the leading energy research entity located in the number-one coal-
producing state in the Nation. I assure you this is not by accident. 
Nor is it a recent phenomenon: For 23 years, WRI's proximity to the 
energy resources in the western United States, especially the Powder 
River Basin, has given us a heightened sense of responsibility and 
purpose in how we conduct our business and set our direction. We have 
made the knowledge of virtually every aspect of coal technology and use 
our domain.

                   SUPPORT FOR TODAY'S COAL INDUSTRY

From the mine mouth to the rails
    WRI has a long history of assisting the coal industry in the area 
of coal upgrading. The high moisture content and resultant low heating 
value of western U.S. coals affects both boiler efficiency and 
transportation costs. WRI is working with Fuels Management Inc. (Miami, 
Florida) to develop its mine-mouth coal drying and upgrading process. 
We constructed a pilot-scale facility in our Coal Research Building at 
the Advanced Technology Center and conducted tests to determine optimum 
processing conditions. The technology is now ready for scale-up, and a 
100-ton-per-day plant is being designed and constructed.

From the utility boiler to the stack
    WRI is supporting the utilities on a number of emissions issues. 
For example, WRI has built a test-scale Combustion Test Facility that 
mimics a coal-fired utility boiler. This facility is now supporting 
technology development and verification projects for utilities, for 
coal technology companies and for combustion and emissions control 
equipment manufacturers. Here are some examples of projects being 
conducted:

   Testing of NOX reduction technologies (with Breen 
        Energy Solutions)
   Testing of Hg capture technologies (with Mobotec USA, Inc.)
   Testing of strategies for multi-pollutant control (with 
        Headwaters, Inc.)

    WRI has taken a lead role in policy support for air quality 
regulations by creating and facilitating the Subbituminous Energy 
Coalition (SEC), an organization of approximately 50 members 
representing the major coal companies in the Powder River Basin, 
utilities burning PRB coal, railroads serving the PRB, and other 
interested parties. The SEC provides a forum for industry discussions 
on environmental control issues and provides a collective voice for PRB 
coal producers and users. The SEC has orchestrated a detailed review of 
proposed EPA mercury rules to ensure that subbituminous coal remains an 
environmentally acceptable and competitive fuel source. Members include 
Arch Coal, Kennecott Energy, Peabody Energy, Basin Electric Power 
Cooperative, Pacific Power and Xcel Energy.
    WRI has developed a patented pre-combustion mercury removal process 
that first dries the coal, then uses the hot recycle gas to remove the 
mercury. Unlike post-combustion processes that remove mercury from the 
flue gas, WRI's patented process removes the mercury from the coal 
prior to combustion. The process has been shown to remove up to 80 
percent of the mercury in Powder River Basin coal (additional mercury 
is removed during combustion). Not only is this technology competitive 
with post-combustion processes on a cost basis, it's also easily 
integrated into a power plant, and the treated coal product increases 
plant efficiency by 3-4 percent for PRB coal. What's more, the water 
removed from the coal can be condensed and used at the power plant for 
cooling and other uses, a considerable benefit in the arid West. A 
recent economic study sponsored by the Electric Power Research 
Institute showed the WRI process to be one of the lowest-cost 
technologies for removing mercury from PRB coal-fired power plants. In 
February 2006, WRI was notified by the Department of Energy that the 
project was selected for an award to support commercial scale-up. The 
DoE funding of approximately $1 million will be matched by 
approximately $460,000 from industry-affiliated co-sponsors Electric 
Power Research Institute, Southern Company, Basin Electric Power 
Cooperative, North Dakota Industrial Commission, Montana-Dakota 
Utilities, Detroit Edison and SaskPower.
    As the Nation develops a Cap-and-Trade market for mercury 
emissions, the importance of accurate measurement from different 
sources becomes not only an environmental issue but a profit-and-loss 
issue. At WRI, we are working with the National Institute of Standards 
(NIST), the Department of Energy and the Electric Power Research 
Institute (EPRI) to develop calibration standards and a methodology for 
continuous mercury emissions monitoring. In 2005, WRI commissioned a 
report from NIST that revealed that different vapor pressure formulas 
used for calibrating mercury testing equipment disagree by as much as 
seven percent. In March 2006, WRI spearheaded a meeting in Orlando that 
attracted stakeholders from around the world to discuss the issue and 
how to approach it. Last month's meeting launched the effort co-
sponsored by WRI, EPRI, the DoE and NIST to establish a NIST protocol 
and new ASTM standard for calibrating monitors. In attendance were 
representatives from NIST, the U.S. Environmental Protection Agency, 
the EPRI, ASTM International (formerly the American Society for Testing 
and Materials), and mercury analysis equipment manufacturers.

Ash management and mined lands reclamation
    The power industry in the United States produces more than 100 
million tons of coal combustion products, or ashes. More than 70 
million tons of ash is disposed of annually, increasing the costs of 
electricity and posing a potential liability to the industry. WRI is 
developing new, large-volume niche uses for ash and provides technical 
services to the ash management and utility industries. These include 
ash-based grouts for the control of underground mine subsidence and 
flowable fill materials for use in construction applications as 
backfills, structural fills and trench bedding. The market for 
construction-grade aggregate in the United States offers a significant 
opportunity for the use of coal ashes. WRI has developed the SYNAGTM 
process, which uses coal combustion ashes to produce lightweight and 
standard-weight synthetic aggregate for use in construction. Partners 
in the development of ash technologies have included Xcel Energy, 
Montana-Dakota Utilities and the North Dakota Industrial Commission.
    WRI is supporting the coal industry in mine reclamation through the 
development of a novel biobased source treatment of acid mine drainage 
(AMD). Although the high-sulfur coals of the East make this problem 
more widespread in the eastern half of the country, acid mine drainage 
is associated with hard rock mining and coal mining throughout the 
United States. Other processes treat the drainage by neutralizing it. 
WRI has partnered with Kennecott Energy to demonstrate the 
effectiveness of the bio-based source treatment process at a mine in 
Tennessee. The results to date have confirmed that the process 
effectively controls acid mine drainage by controlling the source of 
the acid within the mine. Additional demonstrations are being planned 
with other coal companies at other mines.

Coal bed methane
    Since the first commercial coal bed gas well was established in the 
Powder River Basin in 1986, coal bed methane (CBM) production has grown 
explosively and now constitutes a major resource within the energy mix 
for Wyoming, the region and the Nation. More than 40,000 wells are 
expected to be drilled in the next decade alone. The management of the 
produced water, however, remains a significant consideration. When an 
operator drills a CBM well, large volumes of water are withdrawn in 
order to free the methane to be extracted. In some areas of Wyoming and 
Montana, the water quality is such that it cannot be used for 
agriculture, livestock or discharge into surface streams without 
causing degradation of the water. WRI is working with developers and 
others to demonstrate treatment methods that will allow the beneficial 
use of the produced waters. For example, WRI is working with CBM 
Associates to demonstrate an application that allows the water to be 
used for irrigation purposes. WRI is also the exploring the use of CBM 
produced water in power plants to reduce the draw of fresh water for 
cooling and other plant purposes.

                      ENERGY FOR THE 21ST CENTURY

Coal
    WRI is working to develop enabling technologies for zero-emissions 
coal-based power plants of the future. With ``oxycombustion,'' fuel is 
combusted in pure oxygen and flue gas is recycled back into the furnace 
to maintain optimum burning conditions. Because oxycombustion excludes 
nitrogen, the byproduct is nearly pure carbon dioxide, a waste that can 
be effectively managed. The cost of oxygen, however, is a major issue 
in the development of sequestration-ready power systems of the future. 
Working with a specialty gas manufacturer, BOC Process Gas Solutions 
(Murray Hill, New Jersey), WRI is developing a novel technology for the 
lower-cost production of oxygen that takes advantage of the oxygen 
``storage'' properties of the mineral perovskite. The cost of producing 
oxygen using the BOC Catalytic Autothermal Reformer (CAR) technology is 
estimated to be 20 to 30 percent lower than the cost of cryogenic air 
separation.
    WRI is developing new catalysts and related synthesis technologies 
to produce transportation fuels. One such technology converts any 
carbonaceous feedstock into a mixture of alcohols. Imagine a power 
plant using Wyoming coal as the feed. With the WRI process, the plant 
would not only produce electricity but also an alcohol mixture ready 
for blending with gasoline. This mixture of alcohols could replace 
MTBE, could supplement the Nation's ethanol supply, and could serve as 
a chemical feedstock. Used in conjunction with coal gasification, this 
synthesis technology is a coal-to-liquids technology. As a biogas-based 
system, the technology provides a means of capturing and converting 
greenhouse gasses into a useful product.
    A hydrogen project now underway at Western Research Institute and 
the University of Wyoming is expected to yield a cheaper and easier way 
to produce pure hydrogen from gasified coal and other mixed gases. The 
new process advances the water--gas shift process whereby coal is 
reacted with steam (water) and oxygen to produce a synthesis gas. Under 
a U.S. Department of Energy grant, WRI and the University of Wyoming 
are developing a device that combines water--gas shift technology with 
improved hydrogen separation to maximize the total hydrogen produced. 
The University of Wyoming is leading the development of a ceramic 
catalyst, while WRI will test a variety of vanadium alloy foil 
membranes for durability and optimum effectiveness at lower 
temperatures. Finally, the ceramic catalyst and the vanadium membrane 
will be integrated into a single stackable device that can operate at 
lower temperatures.

Other significant WRI energy technologies
    WRITE, WRI's Thermal Enhancement technology, is being developed and 
tested for upgrading heavy oils, specifically to upgrade the thick, 
carbon-rich bitumen produced from oil sands such as those found in 
Canada and Venezuela. An estimated 1.7 to 2.5 trillion barrels of oil 
lies within the oil sands of Alberta, making it the world's largest 
known oil reserve. The bitumen produced from oil sands, however, must 
be either diluted or upgraded to meet the specifications for transport 
by pipeline to refineries. The WRITE Process is a field upgrading 
technology, which is fueled by internally generated coke and which uses 
a distillation step to produce a pipeline-ready material. WRI's partner 
in the technology development is MEG Energy of Alberta.
    The U.S. Department of Energy has traditionally promoted large-
scale gasifier technology development while U.S. Department of 
Agriculture research has concentrated on fermentation methods such as 
those used to produce ethanol. Most agricultural feedstocks, however, 
are not suited to the production of biofuels by fermentation, and most 
biofuel development efforts don't address the needs of farmers. With 
both the DoE and the USDA as partners, WRI is pioneering a farm-scale 
gasification system that can address agricultural waste disposal and at 
the same time make every farmer an energy producer. For example, the 
grass seed producers of the Pacific Northwest currently have a 6.2 
million ton waste grass disposal problem. Assuming they produce one or 
two tons of waste straw per acre and the new process produces 60 
gallons of liquid fuel per ton at $1 per gallon, they could be adding 
372 million gallons of liquid fuel worth $372 million into the Nation's 
net fuel production. Similarly, the farmers could use the same process 
to produce $87 million worth of electricity.

                   GUIDING PRINCIPLES AND CONCLUSION

    WRI believes with the U.S. Department of Energy that domestic coal, 
oil and alternative resources can contribute substantially to our 
Nation's economic strength, energy security and quality of life through 
the 21st century.
    The Cooperative Research Program under which WRI performs most of 
its energy-related work was established to stimulate research in 
support of the mission of the Department of Energy Office of Fossil 
Energy. Western Research Institute supports this mission by developing 
technologies that promote the development of secure and reliable 
domestic energy supplies, clean power generation, and the production of 
hydrogen from domestic coal and natural gas. As a public/private 
research initiative, the program leverages DoE funding, ensuring that 
the demand for energy innovations is validated by private funding.
    Western Research Institute is grateful for the vision of this 
Committee and we are deeply appreciative of the support you give to the 
annual appropriation that funds the Department of Energy's Cooperative 
Research and Development Program. This is the Program that enables WRI 
to perform our work for the benefit of Wyoming and the Nation. The 
Program has been very successful in recent years because it helps 
establish a solid partnership with end users, thereby ensuring that our 
limited R&D dollars are at work in areas that foster energy 
independence and that industry and the American public find relevant 
and commercially worthwhile.
    This testimony is respectfully submitted on behalf of the Western 
Research Institute team shown below.

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