[Senate Hearing 109-692]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-692
 
                     U.S./INDIA ENERGY COOPERATION

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                                   to

 EXAMINE UNITED STATES AND INDIA ENERGY COOPERATION IN THE CONTEXT OF 
GLOBAL ENERGY DEMAND, THE EMERGING ENERGY NEEDS OF INDIA, AND THE ROLE 
             NUCLEAR POWER CAN PLAY IN MEETING THOSE NEEDS

                               __________

                             JULY 18, 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               KEN SALAZAR, Colorado
GORDON SMITH, Oregon                 ROBERT MENENDEZ, New Jersey
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
                          Henry Abeyta, Fellow
                  Jonathan Epstein, Legislative Fellow


                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Bingaman, Hon. Jeff, U.S. Senator from New Mexico................     2
Bunning, Hon. Jim, U.S. Senator from Kentucky....................     3
Domenici, Hon. Pete V., U.S. Senator from New Mexico.............     1
Gadbaw, R. Michael, Vice President and Senior Counsel, General 
  Electric Company...............................................    38
Poneman, Daniel B., Principal, The Scowcroft Group...............    34
Pumphrey, David, Deputy Assistant Secretary for International 
  Energy Cooperation, Department of Energy.......................     3
Simons, Paul, Deputy Assistant Secretary for Economic and 
  Business Affairs, Department of State..........................    11
Thomas, Hon. Craig, U.S. Senator from Wyoming....................     2
Victor, Dr. David G., Director, Program of Energy and Sustainable 
  Development, Stanford University...............................    27

                                APPENDIX

Responses to additional questions................................    49


                     U.S./INDIA ENERGY COOPERATION

                              ----------                              


                         TUESDAY, JUNE 18, 2006

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:10 a.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Pete V. 
Domenici, chairman, presiding.

 OPENING STATEMENT OF HON. PETE V. DOMENICI, U.S. SENATOR FROM 
                           NEW MEXICO

    The Chairman. Hello, everybody. The purpose of today's 
hearing is to examine recent developments in U.S./India Energy 
Cooperation. After committing to a framework exactly one year 
ago, President Bush and India's Prime Minister announced an 
agreement in March this year on civil nuclear cooperation 
between our countries. This is an historical agreement that I 
believe will lead to a strategic relationship between our great 
democracies. I'm pleased with the recent action taken by my 
good friend, Senator Lugar, of the Foreign Relations Committee 
to pass the U.S./India Civil Nuclear Agreement, withstanding 
bipartisan, strong bipartisan support. I encourage the Senate 
and Senator Frist to bring this measure to the Senate floor 
prior to departure of the August recess.
    In hearings that led up to the approval of the Foreign 
Relations Committee nonproliferation issues, issues related to 
sharing nuclear technology played a promising role. A related 
measure focused on U.S./India energy security. Cooperation did 
not receive the same level of media attention but it raises a 
very serious issue that we all became keenly aware of after the 
hurricanes hit our gulf coast last year and that is that human 
and economic toll that can result from a tight, inter-dependent 
world energy market reliant on energy sources that are subject 
to disruption. Energy security is not only a concern for the 
United States but for the developing countries like India, that 
has a population to surpass China in the next 50 years, an 
economy rapidly expanding with a growth rate of over 7 percent 
in 2005, resulting in increased energy consumption which is 
expected to double in the next 25 years. Our witnesses today 
will speak to the role of technological cooperation and 
industry partnerships to aid in developing options to meet 
future global energy demands while assuring diversified, 
proliferation-resistant energy sources.
    My good friend Senator Bingaman and I have engaged in 
serious discussions on another topic of global importance, that 
is of climate change and I have said that I do not know where 
we will end up but I do believe that a large number of our 
citizens are concerned about climate change. I think that 
Congress needs to explore ways to reduce our contribution to 
those gases. Our cooperation with India also encourages the 
development and the developing world to do their part by 
adopting sustainable energy sources that reduce greenhouse 
gases and their emissions. It is no secret to anyone in 
Washington that I am a serious proponent of expanding nuclear 
power generation along with many members of the Senate who sit 
here today. The global community is rapidly examining nuclear 
power as a means of providing sustainable energy. India has 
announced plans to significantly expand its civil nuclear 
program with nine reactors currently under construction. I am 
hopeful that cooperation with India will lead to significant 
opportunities for U.S. industry in nuclear powers resurgence as 
India and other countries develop plans for expanded nuclear 
power in the next decade. I strongly support an evolving 
strategic U.S. relationship with India. India is home to one 
billion people, the largest democracy and a worthy partner that 
we can work with in our pursuit of global security. I look 
forward to the testimony today and hope that the Senators who 
are here are also looking forward to what we are going to hear 
today.
    We are going to have two panels testifying before us. On 
one panel we have Mr. David Pumphrey, Deputy Assistant 
Secretary for International Energy Cooperation at the 
Department of Energy and Mr. Paul Simmons, Deputy Assistant 
Secretary for Economic and Business Affairs at the Department 
of State. I will stop with that and ask if Senator Bingaman 
will have any comments and then either of you two Senators. 
Thank you for coming today. It is a very interesting panel.

         STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR 
                        FROM NEW MEXICO

    Senator Bingaman. Thank you very much, Mr. Chairman, for 
having the hearing. It is an extremely important hearing and 
set of issues. I'm interested in hearing from the witnesses, of 
course, about the energy cooperation aspects of this but also 
about the implications of what is proposed for our 
nonproliferation efforts in the world. I hope to have some 
questions when we get to that part of the hearing. Thank you.
    The Chairman. Thank you.
    Senator Thomas.

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

    Senator Thomas. Thank you, Mr. Chairman. I think it is an 
interesting issue as well. Nuclear power has great promise, of 
course, and I think we are looking at the growth and change in 
the world, change in the economies, India being one of those 
that is going to make a change in the world and so this is an 
opportunity. I think we need to work with them to talk about it 
in terms of air quality and the environment. However, that 
responsibility with nuclear power doesn't end just with the 
environment. We have to be concerned about nuclear 
proliferation and so on. So I think it is important we work in 
this area and help to develop the economy, our relationships as 
well as the safety, over time. So thank you. I look forward to 
your comments.

          STATEMENT OF HON. JIM BUNNING, U.S. SENATOR 
                         FROM KENTUCKY

    Senator Bunning. Thank you, Mr. Chairman. This hearing 
represents an important step in recognizing that energy prices 
are governed by a global marketplace. The price my constituents 
pay for gasoline at the pump in Kentucky and the price 
Americans pay for natural gas to heat their home is directly 
related to energy demands in countries like India. The growing 
demand for energy in India will stretch limited international 
resources and push energy prices even higher. To meet worldwide 
energy challenges, it is important that America and India 
cooperate.
    America is the worldwide leader in mining, processing, 
burning and gasifying coal. It is the most abundant domestic 
energy resource that we have. Similarly, India relies on coal 
to fuel more than half of its energy needs. With its 
electricity growth forecast to increase by 8-10 percent 
annually, India has the potential to be an important new 
marketplace for our America coal and electricity companies. In 
partnership with India, we can apply the newest clean coal 
technologies and mining techniques. India will benefit from our 
experiences and American companies will take advantage of a new 
market. Cooperation is not only about helping India or 
developing a new market for American goods, it is a way for us 
to take control of our own energy prices. Every time an 
American company shares a new technique or asset or a new 
project, we can increase the efficiency of India's energy 
production and usage. Added efficiencies will curb demand and 
decrease pressures on international energy prices. As we help 
India develop a vibrant, efficient and environmentally friendly 
energy marketplace, we must ensure that American companies who 
share their technologies are protected. They need a level 
playing field with India's companies in terms of regulations, 
market participation and intellectual property rights. The 
partnership of America and India is an opportunity for both 
nations to realize significant benefits. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator. I note the arrival of 
Senator Craig. We were just finishing a few observations by 
each Senator before we proceeded. Do you have any?
    Senator Craig. No, Mr. Chairman.
    The Chairman. Very good. All right. Witnesses, let us 
proceed. Mr. Pumphrey, if you would start.

  STATEMENT OF DAVID PUMPHREY, DEPUTY ASSISTANT SECRETARY FOR 
    INTERNATIONAL ENERGY COOPERATION, OFFICE OF POLICY AND 
          INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY

    Mr. Pumphrey. Thank you, Mr. Chairman, members of the 
Committee. I am pleased to appear before you this morning to 
discuss India's expanding role in global energy markets and the 
important energy cooperation taking place between our two 
countries. India has been mentioned already, a Nation of over a 
billion people with an economy growing at nearly 8 percent per 
year has a large and rapidly increasing appetite for energy. 
Providing clean, reliable and affordable energy to sustain this 
high level of economic growth is a critical challenge for the 
Indian government. Between 1980 and 2004, energy demand 
increased by over 270 percent and based on our latest EIA 
assessments, we expect demand to double again by the year 2030. 
Concerns about assuring adequate energy supplies prompted 
President Bush and Prime Minister Singh to focus on energy 
security cooperation as a key aspect of a transformed Indo-U.S. 
strategic relationship. This focus on energy security was 
reflected in the launch of the new U.S./India energy dialogue 
on May 31 of last year, chaired by Secretary Bodman and Deputy 
Chairman of India's Planning Commission, Dr. Montek Singh 
Ahluwalia. The goal of the dialogue is to identify concrete 
actions the two countries can take to help India address its 
energy challenge through increased trade and investment and 
cleaner domestic energy production, energy efficiency, clean 
energy technologies and diversified imports of energy.
    This dialogue has established five Working Groups, each co-
chaired by the Department of Energy and an appropriate 
government of India counterpart and we also have a number of 
other U.S. Government agencies involved in the activities. So I 
will briefly highlight some of the key activities and 
accomplishments so far and of course, there is more detail in 
the formal testimony.
    Coal, as was mentioned, currently provides about half of 
India's energy and is expected to remain the dominant fuel in 
the future. The dialogue is focused on a number of activities 
to improve the mining, transport and utilization of coal. 
Perhaps the most significant development has been India's 
decision to become a partner in the Government Steering 
Committee of the FutureGen alliance. India is contributing $10 
million to this demonstration powerplant, which will capture 
and sequester carbon dioxide.
    India has recently discovered significant reserves, new 
reserves of natural gas but lacks an adequate infrastructure to 
move this gas to major national markets. In addition, India has 
a large potential for coal-bed methane. We have brought 
together the private sector and government officials to review 
the potential for natural gas development and to assist the 
government of India in shaping the regulatory environment 
necessary to attract the investment in these natural gas 
resources.
    Looking towards the longer term, we are also working with 
India on the first efforts to drill for gas hydrates offshore. 
We hope this research will accelerate efforts and develop this 
resource of considerable untapped potential. Energy efficiency 
and renewable energy resources, we believe, will also make an 
important contribution in shaping future demand for energy in 
India. We have undertaken a number of activities to support 
energy efficiency practices and stimulate investment in 
renewable energy. This work builds on significant programs 
undertaken by the U.S. Agency for International Development. 
Clearly, nuclear energy will be an important part of India's 
energy future as well. While we have had only limited exchanges 
under the dialogue, meaningful collaboration in this area will 
be contingent on the modification of our own legal framework.
    In looking longer term again, at our urging, the ITER 
partners have invited India to participate as a full member in 
this project to advance fusion energy research. Private sector 
investment in all parts of the energy supply chain is critical 
to achieving any of India's energy goals. We and the government 
of India have made it a priority to include the participation 
of U.S. and Indian business community in aspects of all of the 
Working Groups. We have launched several events designed to 
bring U.S. industry in contact with Indian counterparts, 
including a CEO Roundtable in Houston put together by the U.S./
India Business Council with the Minister of Petroleum and Gas 
to discuss investment in India's oil and gas sector. Finally, 
we have also been working with India to help develop its 
emergency response capability and its own strategic stockpiles. 
Over the past few years, we have hosted study tours to visit 
the U.S. SPR sites, invited Indian officials to international 
conferences in the United States and invited Indian 
representatives to visit with the International Energy Agency 
to better understand how the IEA members plan for and respond 
to severe supply disruptions.
    Mr. Chairman and members of the committee, let me conclude 
by emphasizing that the economic growth that India is 
experiencing today will lift many people out of poverty. It is 
in our mutual interest to help India meet its energy needs and 
become a more efficient user of energy in order to sustain this 
growth. We are convinced that bilateral, multi-lateral energy 
cooperation maximizes everyone's energy security. Thank you 
again, Mr. Chairman, for the opportunity to address the 
committee and I'll be happy to take any questions that you or 
the members have.
    [The prepared statement of Mr. Pumphrey follows:]

 Prepared Statement of David Pumphrey, Deputy Assistant Secretary for 
 International Energy Cooperation, Office of Policy and International 
                     Affairs, Department of Energy

    Mr. Chairman and Members of the Committee, I am pleased to appear 
before you this morning--the one-year anniversary of the Joint 
Statement concluded by President Bush and Prime Minister Singh--to 
discuss India's expanding role in the global energy market and the 
important energy cooperation taking place between the U.S. and India.
    President Bush placed energy security high on his agenda from the 
beginning of his first term and that commitment has only increased. The 
President's policy recognizes the global nature of the energy markets, 
and that a nation's energy security does not end at its national 
boundaries. Our overarching energy security objective is to promote 
adequate and reliable supplies of affordable energy, as well as the 
clean and efficient use of energy resources. As the world's largest 
producer and consumer of energy resources, the U.S. must play a leading 
role in addressing the world's energy challenges and ensuring a secure 
energy future. The world's demand for energy is growing rapidly and the 
demand growth will be increasingly concentrated in the developing 
world.
    We are working internationally to create expanded energy 
partnerships with major consuming and producing countries. These 
partnerships are designed to improve energy security globally through 
domestic energy resource development, increasing the use of clean 
fuels, improved legal and regulatory regimes, increasing private 
investment, diversifying resources to include alternative and renewable 
energy sources, and helping the developing countries and growing 
economies to be more efficient producers and consumers of energy.

                         INDIA'S ENERGY OUTLOOK

    India--a nation of over a billion people with an economy growing at 
approximately 8 percent per year--has a massive and rapidly growing 
appetite for energy. Rapid population growth, expanding industrial 
production, economic development, urbanization, and increased motor 
vehicle ownership are all driving this energy demand. Between 1980 and 
2004, energy demand increased by over 270 percent. In 1980, total 
primary energy demand was only 4.16 quadrillion BTUs but by 2004 demand 
had risen to over 15 quadrillion BTUs of commercial energy, thus making 
it the fifth largest consumer of energy in the world behind only the 
United States, China, Russia, and Japan. This growth will continue at a 
rapid pace with total energy demand projected to be 25.7 quadrillion 
BTUs by 2020 and 32.5 quadrillion BTUs by 2030.
    India is the world's third largest coal producer behind China and 
the U.S. Coal consumption was 478 million short tons (mst) in 2004, 
growing to 775 million mst by 2020. India's coal has twice the ash 
content of U.S. coal, resulting in serious environmental and health 
consequences for its population. Currently, about 53 percent of India's 
total energy (and 70 percent of India's electric power generation) is 
derived from coal.
    Of the remaining sources:

   nearly 33 percent is derived from oil;
   8 percent from natural gas;
   5 percent from hydro-electric power;
   less than one percent from renewable (solar and wind) 
        sources; and,
   the remaining 1 percent comes from nuclear energy.

    India's current civilian nuclear program has an installed capacity 
of 3,850 megawatts electric (MWe), but, according to the Government of 
India, it is expected to reach 20,000 MWe by 2020.
    India's demand for oil and natural gas is substantial, and will 
only increase as its economy grows and industrializes. Indian 
consumption of natural gas has risen faster than any other fossil fuel 
in recent years, from 63 trillion cubic feet per year (Tcf) in 1995 to 
1.09 Tcf in 2004. Its use is projected to reach 1.5 Tcf by 2010 and 2.2 
Tcf by 2020. Oil accounts for 33 percent of India's total energy 
consumption. India's average oil production level was 828,000 barrels 
per day in 2005. Future oil consumption is expected to grow from 2.6 
million barrels per day (mmbd) in 2005 to 3.7 mmbd in 2020 and 4.5 mmbd 
in 2030. In 2005, India imported (net) approximately 1.7 mmbd of oil. 
Based on conservative estimates, these imports will continue to grow as 
consumption needs will rapidly outpace growth in production capacity. 
Looking ahead, in 2020 India's production capacity will be 1.4 mmbd, 
leaving an estimated import demand of 2.3 mmbd. Likewise, by 2030 
import demand will continue grow to 2.9 mmbd as production will only 
increase slightly between 2020 and 2030 (1.4 to 1.6 mmbd.)

                         U.S. POLICY RESPONSES

    The U.S. began engaging India on energy more than a decade ago. We 
realized the enormous growth potential in its economy and recognized 
the implications for our energy security and for the global 
environment. My colleague from the Department of State can elaborate on 
the Civil Nuclear Cooperation Initiative; I would like to discuss more 
fully the broad range of energy-related activities we have undertaken 
with India. Today, the Department of Energy leads a wide variety of 
joint activities with India designed to increase its energy security 
while building a lasting partnership and friendship between our two 
nations. These partnerships include participation from several 
agencies, the Department of State, the Department of Commerce, the 
Agency for International Development, the Trade and Development Agency, 
and the Environmental Protection Agency.
    Our efforts in 1994 focused on improving the efficiency of India's 
coal-fired power plants, promoting the use of clean fuels such as 
natural gas, wind and solar energy, helping establish public-private 
partnerships in industrial energy efficiency, and improving the 
investment climate for U.S. energy firms.
    President Bush and Prime Minister Vajpayee bolstered our energy 
cooperation in November 2001, issuing a Joint Statement establishing 
energy as one of five pillars of the Indo-U.S. Economic Dialogue, with 
the other pillars being trade, investment, commerce and the 
environment. This enabled the implementation of the President's 
National Energy Policy Plan's recommendation that the Department of 
Energy work with India's Ministry of Petroleum and Natural Gas to 
enhance domestic oil and gas supply.

                     U.S.-INDIA ENERGY COOPERATION

    Growing concerns about energy security prompted the U.S. and India 
to launch a new energy dialogue in 2005 that reflects the transformed 
strategic relationship between the world's two largest democracies. The 
United States and India recognize their mutual interests are best 
served by working together in a collaborative fashion to ensure 
stability in global energy markets. Adequate and reliable supplies of 
clean energy at reasonable cost are essential to fuel India's rapidly 
growing economy. Both the U.S. and India are increasingly reliant upon 
global oil and natural gas markets to satisfy their energy needs. Both 
nations depend heavily upon domestic supplies of coal for electric 
power generation and seek to increase their utilization of natural gas, 
renewable energy and nuclear power, as well as pursue energy efficient 
practices to ensure a balanced and sustainable energy economy that 
helps preserve a clean environment.
    In addition to our bilateral work, the United States and India 
joined with Australia, China, Japan, and South Korea to launch the 
Asia-Pacific Partnership on Clean Development and Climate in January. 
This results-oriented, pro-growth initiative will help Partner 
countries to focus on steps that will create new investment 
opportunities, build local capacity, and remove barriers to the 
introduction of clean, more efficient technologies. This partnership, 
pursued in close collaboration with the private sector, will help each 
member meet the challenges of improving energy security, reducing 
pollution, and addressing the long-term challenge of climate change. We 
look forward to India's active participation in this critical 
initiative.

                       U.S.-INDIA ENERGY DIALOGUE

    President Bush has called for a transformed Indo-U.S. relationship 
premised upon a new strategic partnership under which energy security 
and energy cooperation are key factors. This relationship was reflected 
in the launch of the new U.S.-India Energy Dialogue on May 31, 2005 
chaired by Secretary Bodman and Deputy Chairman of India's Planning 
Commission Montek Singh Ahluwalia. It established five Working Groups 
along with a Steering Committee to provide oversight and direction. The 
goal of the Dialogue is to identify concrete actions that the two 
countries can take to help India address its energy challenges. The 
underlying strategy is to address these challenges through increased 
trade and investment in cleaner domestic energy production, energy 
efficiency and diversified imports of energy. Building upon the broad 
range of existing cooperation, this effort will help mobilize secure, 
clean, reliable, and affordable sources of energy.
    The five Working Groups are: Oil and Gas, Coal, Power and Energy 
Efficiency, New Technologies and Renewable Energy, and Civil Nuclear. 
These Working Groups have launched activities designed to increase the 
development of domestic resources, promote the deployment of clean 
energy technologies and fuels, support reforms in the power sector, 
enhance India's awareness of steps it needs to take to attract foreign 
investment in the energy sector, and bolster India's energy security. 
The Department of Energy co-chairs each of these Working Groups with 
the appropriate Government of India counterparts and we convene experts 
from a variety of U.S. Government agencies to participate in the 
projects.

              DEVELOPING INDIA'S DOMESTIC ENERGY RESOURCES

    The Department of Energy, in partnership with several other U.S. 
Government agencies, has been working with the Government of India on 
several projects that will increase the use of India's domestic 
resources.

More Efficient Utilization of Coal Resources
    The Department of Energy is undertaking a number of steps to 
support the most efficient development of coal resources. In April 
2006, India became a partner in the FutureGen international partnership 
which will work to create a zero-emissions coal-fired power plant that 
will produce hydrogen and sequester carbon dioxide underground, 
enabling greater use of coal in an environmentally sustainable way. 
Successfully demonstrating and adopting this technology will allow 
India to reduce the intensity of future greenhouse gas emissions from 
the burning of their abundant coal resources. India became the first 
country to join the United States on the FutureGen Government Steering 
Committee and plans to participate in the FutureGen Industry Alliance. 
The Government of India will contribute a total of $10 million to the 
project to join the government steering committee, $2.2 million of 
which has already been contributed.
    The Coal Working Group has recently identified several high 
priority projects that will be pursued by our two countries over the 
next 2 years, including pursuing investment opportunities and 
information exchanges in the areas of coal mining and processing, coal 
mine safety, coal mine methane, and in situ coal gasification. The U.S. 
Trade and Development Agency has provided a $360,000 for a feasibility 
study grant for the Neyveli coal mine expansion project. Technical 
exchanges and visits are underway between the U.S. and India to examine 
the potential for pilot projects in India in the areas of underground 
coal gasification and coal beneficiation/coal washeries.
    Finally, a Memorandum of Understanding, or MOU, between the U.S. 
Minerals Management Service and India's Oil Industry Safety Directorate 
is expected to be signed in July 2006 in Washington, D.C. The MOU will 
deal primarily with operational safety, inspection issues and accident 
investigations of offshore oil and gas operations related to both 
drilling and production.
    In the area of coal-based power generation, a proposed strategic 
partnership has been established between India's National Thermal Power 
Corporation and the U.S. Department of Energy's National Energy 
Technology Laboratory to collaborate on advanced research and 
development of clean and efficient power generation. A workshop is 
planned in India for September 2006 to discuss the results of a study 
on the feasibility of Integrated Gas Combined Cycle power plants in 
India.

Promoting Natural Gas Development
    The promotion and development of clean coal technologies and carbon 
sequestration efforts associated with power generation remain a focus 
of current U.S. initiatives with India.
    The Department of Energy has been working with India to help them 
develop their domestic natural gas resources that can offer near-term 
alternatives. India has discovered a significant reserve of natural gas 
off its east coast but lacks an adequate infrastructure to move this 
gas to major national markets. We recently held a joint conference on 
natural gas that included representatives from government and the 
private sector to review the potential for natural gas development and 
to assist the Government of India in shaping the regulatory environment 
necessary to attract the investment needed to move this gas to market.
    Another important area for future domestic natural gas production 
is from coal bed methane (CBM). India is believed to have significant 
resources of CBM that could make important contributions to meeting 
future energy needs. This is an opportunity for the U.S. private 
sector, which has extensive experience in the area of CBM development, 
to engage in this key energy source. The Ministry of Coal and Ministry 
of Petroleum and Natural Gas with the U.S. Trade and Development Agency 
(USTDA) and the U.S. Environmental Protection Agency are working 
together to establish a CBM Clearinghouse Information Center, an 
initiative under the Methane to Markets Partnership. This Center would 
promote the development of CBM projects and CBM resources by collecting 
data, conducting training, facilitating technology transfer, and 
providing consulting services. USTDA plans to support a kickoff event 
such as a workshop or conference showcasing U.S. technologies, and the 
Environmental Protection Agency plans to provide financial assistance, 
technical training, and other support to the organization. In addition 
USTDA is providing a $506,000 grant to Reliance Industries Limited to 
partially fund the cost of technical assistance to develop CBM 
resources at Reliance's Sohagpur field.
    The U.S. Department of Energy is also working with India on ongoing 
research and development of the first hydrate drilling offshore India; 
this research is expected to accelerate efforts to develop methane 
production from hydrates in both countries, potentially providing a 
significant increase in the quantity of domestic natural gas available 
to the Indian market. The ocean research ship Joides Resolution is 
currently drilling and coring hydrate-bearing sediments offshore India. 
DOE has provided specialized equipment and research scientists to 
detect and evaluate gas hydrates in cores. DOE and the Directorate 
General for Hydrocarbons are in discussions to develop an MOU to 
exchange information and analyses, conduct joint studies and projects, 
and exchange scientific and technical personnel in order to increase 
understanding of the geologic occurrence and the potential for methane 
production from natural gas hydrates in both India and the United 
States.

              ACCELERATING ENERGY SECTOR REGULATORY REFORM

    In order to meet India's growing demand for energy, significant new 
investment is needed and the necessary legal and regulatory framework 
must be in place to attract the needed capital. Recently, the two 
governments conducted a workshop on natural gas regulation held at the 
Ministry of Petroleum and Natural Gas. India has recently enacted a 
Petroleum and Natural Gas Regulatory Board Act which seeks to promote 
competition, open access and greater transparency in gas pipeline 
transportation. The meeting addressed a number of regulatory issues and 
processes that India will have to address to develop a regulatory 
scheme that will be attractive to potential investors. The meeting was 
attended by various U.S. Government officials (from the U.S. Department 
of Energy, U.S. Department of Commerce, U.S. Trade and Development 
Agency, and U.S. Embassy in India); and a senior official of New York 
State's regulatory body for natural gas who is an expert on both U.S. 
federal and state regulation. The Indian representatives at this 
meeting included the Ministry of Petroleum and Natural Gas, and its 
Petroleum Planning Analysis Cell, as well as the Gas Authority of India 
(GAIL). The effort to establish an appropriate regulatory regime is 
also being supported by a USTDA grant to the Government of India for a 
limited feasibility study of a national pipeline grid and to explore 
the possibility of providing further technical assistance in the area 
of gas sector regulation.

                DATA COLLECTION AND INFORMATION EXCHANGE

    A key element of a fully functioning energy market is the 
availability of timely and accurate information. To help support 
India's efforts to develop much better data and information, the U.S. 
Energy Information Administration and India's Ministry of Petroleum and 
Natural Gas have initiated activities to help develop Indian data 
systems. The initial work has focused on techniques for collecting 
hydrocarbon data in India and the United States and methods to improve 
data collection in India.

                      IMPROVING ENERGY EFFICIENCY

    One of the most important areas of cooperation between the U.S. 
Government and the Government of India is improving energy efficiency. 
Energy efficiency investments could make a major contribution to 
shaping the future demand for energy in India. Much of the recent 
cooperation between DOE and India has focused on facilitating the 
development and deployment of energy efficient technologies and 
practices, including those directed at the industrial, residential, and 
transportation sector. Building on much of the work of the U.S. Agency 
for International Development mission in India, the Power and Energy 
Efficiency working group has engaged in several projects designed to 
decrease energy demand and improve power generation infrastructure in 
India.
    A U.S.-India Energy Efficiency Technology Cooperation Conference, 
jointly organized by DOE and India's Ministry of Power, was held on May 
2nd and 3rd, 2006 in New Delhi with technical support from USAID and 
sponsorship by several Indian and U.S. industry groups. The focus of 
the conference was on industrial and building energy efficiency. Among 
the key recommendations that came from the event was the establishment 
of five regional centers of excellence in energy efficiency in India as 
well as a collaborative program of assistance in developing macro-
economic energy efficiency indicators. Following the conference, USAID 
in technical partnership with the State Government of Karnataka and the 
Ministry of Power, announced the establishment of a center of 
excellence for efficient lighting technologies and products, to be 
called the ``Lights Museum and Energy Centre'' in Bangalore. 
Cooperation is also continuing on energy efficient buildings and on the 
development of building codes, and a U.S. team conducted training in 
India in May 2006.
    Major strides have been made towards rural electrification as well. 
USAID recently launched a public-private partnership with the General 
Electric Company to increase access to clean and affordable energy 
services in rural communities in India. The partnership will span a 
two-year period and provide up to four communities in India with access 
to clean energy. The Distribution Reform Upgrades and Management 
program under USAID has also completed detailed project reports on four 
model projects on efficient power distribution in the states of 
Karnataka, Maharashtra, Gujarat and Delhi.

       INCREASE USE OF ALTERNATIVE AND RENEWABLE ENERGY RESOURCES

    U.S.-India energy cooperation has also focused on the fostering of 
reliable sources of fuels, including development, deployment, and 
commercialization of technologies for sustainable, renewable fuels. 
This work includes creating public-private sector partnerships, as well 
as the promotion of investment, trade, and technology cooperation in 
the development of renewable resources such as solar, wind, hydro, and 
biomass. The Minister of Non-Conventional Energy Sources recently met 
with experts at DOE's National Renewable Energy Lab to discuss 
potential areas of collaboration in hydrogen and biofuels research.

                    CIVIL NUCLEAR ENERGY COOPERATION

    Nuclear energy will also be an important part of India's energy 
future. To that end, the Department of Energy held a joint technical 
workshop earlier this year in Mumbai to advance dialogue and 
cooperation on technical issues associated with civilian nuclear energy 
use. Initial preparations are underway for a second workshop to take 
place this fall in the United States. However, any meaningful 
collaboration in this area is contingent on modification of our legal 
framework as proposed under the U.S.-India Civil Nuclear Cooperation 
Initiative.
    Looking longer term, the U.S. and its ITER partners, the European 
Union, Russia, Japan, Republic of Korea and China, have invited India 
to participate as a full partner in the international research project 
which aims to demonstrate the feasibility of fusion power. U.S. support 
was instrumental in ensuring this final agreement. The partnership 
represents the first tangible and concrete step towards greater 
cooperation between the U.S. and India in the area of civil nuclear 
energy.

       IMPROVED BUSINESS CLIMATE AND MOBILIZE PRIVATE INVESTMENT

    Private sector investment in all parts of the energy supply chain 
is critical to fostering energy security. We have made it a priority to 
include the participation of U.S. business in aspects of all of the 
working groups under the U.S.-India Energy Dialogue, which we have 
encouraged on the Indian side as well, and we have consistently made an 
effort to encourage the Government of India to take the necessary steps 
to improve the investment climate and attract U.S. companies.
    This past March, the Department of Energy, with the Department of 
Commerce and USTDA, organized a CEO-roundtable event for the Ministry 
of Petroleum and Natural Gas in Houston. This event was held in 
conjunction with the roadshow for the sixth round of New Exploration 
Licensing Program and third Coal Bed Methane bid round. The meeting was 
designed to be a forum for U.S. companies to discuss their potential 
investment and voice any concerns they may have about the oil and gas 
sector in India.
    In addition, the Department of Energy and the U.S.-India Business 
Council jointly organized a meeting in January of this year with the 
purpose of soliciting industry views on key commercial issues and 
building private sector participation in the Energy Dialogue and to 
promote increased U.S. trade and investment in India's energy sector.
    The Coal Working group is also establishing a Coal Business Council 
consisting of representatives from business, industry, academia and 
other non-governmental organizations to serve as a resource to the 
Working Group.

                 DEVELOPING CRISIS RESPONSE MECHANISMS

    The Department of Energy has been working closely with India for 
some time to help develop its emergency response capability and its 
strategic stocks. India is developing a 5 million ton (approximately 
36.5 million barrels) strategic crude oil reserve, with several 
locations near Mangalore on the east coast being considered. The 
Department of Energy has hosted study tours for Indian officials to 
visit U.S. Strategic Petroleum Reserve sites and speak with U.S. 
experts in these areas. Indian officials have also participated in 
international oil stockpile conferences we have held in the U.S. We 
have also invited Indian representatives to visit with the 
International Energy Agency (IEA) to better understand how the IEA 
members plan for and respond to a severe supply disruption.
    As such, the Department of Energy has been actively improving 
relations with senior Indian officials in energy policy-making. In 
order to ensure a coordinated response in an emergency or crisis 
situation, we must continue to develop close relations at the highest 
levels of government. In recent months we have had several high level 
meetings and exchanges between senior Department of Energy and Indian 
government officials.

                               CONCLUSION

    Mr. Chairman and members of the Committee let me conclude by 
emphasizing that the economic growth that India is experiencing today 
will lift many people out of poverty and it is in our mutual interest 
to see that growth continue. Therefore, it is in our mutual interest to 
help India meet its energy needs and become a more efficient user of 
energy, both that which is available domestically and that which it 
imports.
    The U.S. is leading by example and making needed investments in 
technologies that will fundamentally transform how we produce and 
consume energy in the future. We have embarked on an ambitious agenda 
through the President's Advanced Energy Initiative. We can share these 
bold ideas and our experiences with India. We are convinced that 
bilateral and multilateral energy cooperation maximizes everyone's 
energy security. Thank you, Mr. Chairman, for the opportunity to 
address the Committee on this important subject and I am happy to take 
any questions you or the Members may have.

    The Chairman. Thank you very much. We will have some 
questions.
    Mr. Simons.

   STATEMENT OF PAUL SIMONS, DEPUTY ASSISTANT SECRETARY FOR 
       ECONOMIC AND BUSINESS AFFAIRS, DEPARTMENT OF STATE

    Mr. Simons. Thank you, Mr. Chairman. From the perspective 
of the State Department, we very much appreciate the interest 
of this committee in the U.S./India energy relationship. Let me 
ask that my full statement be entered for the record and I'd 
just like to focus on three brief points in my opening 
statement.
    The Chairman. It will be made a part of the record and we 
thank you for doing that. Please proceed.
    Mr. Simons. Thank you. Let me focus on three very brief 
points this morning in my opening statement. First, Mr. 
Chairman, as you pointed out, we have an evolving strategic 
relationship with India and as the Secretary stated in her 
speech on July 10, 2006, we do consider strengthening and 
expanding and deepening this U.S./India relationship to be one 
of the President's signature foreign policy achievements. India 
is the world's largest democracy. It is a natural partner for 
the United States. Its society is open and free and transparent 
and stable and multi-ethnic and multi-religious. India's 
democracy is characterized by individual freedom by Rule of Law 
and by civilian control of the military, all aspects that we 
very much support and want to reinforce. India will soon become 
the world's most populous Nation as well as one of the five 
largest economies of the world and of course, as a rising 
global power, India can be a pillar of stability in a rapidly 
changing Asia and a strategic partner for the United States as 
we meet many of the broad challenges of the 21st century. We 
have invested the necessary capital to build a global 
partnership with India. This partnership is founded on 
strategic success and strategic interests, common democratic 
ideals and this partnership will advance the cause of peace and 
freedom and the opportunity in the new century. So we 
definitely agree, Mr. Chairman, with your support for this 
evolving strategic partnership with India.
    The second point is that from our perspective and again, as 
Secretary Rice noted last week, a key to unlocking the full 
promise of this partnership is the very Civil Nuclear 
Cooperation Initiative that President Bush and Prime Minister 
Singh put forth last July. By addressing India's unique 
situation creatively and responsibly, we believe that our civil 
and nuclear initiative will elevate our partnership to this new 
strategic position that we all seek. The Secretary noted that 
this is the first benefit of the Civil Nuclear Agreement. She 
also noted four other improvements.
    First, the initiative, as several of the Senators have 
pointed out, will enhance energy security. Second, it will 
benefit the environment. Third, it will create opportunities 
for American jobs and finally, it will add to stability and 
security of the world and in fact, be a net gain for the cause 
of nonproliferation worldwide.
    The third point I'd like to stress is the role of nuclear 
energy in acting as a critical element in building a portfolio 
of technologies that will bring the world onto a more 
sustainable energy path. This concept of a portfolio of 
technologies was laid out in a recent report issued by the IEA, 
the International Energy Agency. For the first time, they 
conducted a survey out to the year 2050, to try to take a look 
at what a sustainable, global energy future would look like. 
And their conclusions are very similar to the conclusions that 
have been arrived at by the Bush administration and which 
basically frame our overall approach to global energy security, 
which is that we need work simultaneously in a number of key 
areas, technology-related areas, to assure this sustainable 
future and nuclear energy is clearly one of those. It is an 
important component. Other areas are clean coal, including the 
incorporation of carbon capture and steward's technology. A 
third area is increased use of biofuels for road transport and 
a fourth area is a strong focus on energy efficiency. I point 
this out because, as Mr. Pumphrey pointed out, we have an 
energy partnership now with India and I think it is important 
to note that we are focusing on all four of these areas in our 
energy partnership and they are very much consistent with the 
analysis of the IEA and the administration's analysis, in terms 
of what is necessary to lead towards a sustainable energy 
future.
    Thank you, Mr. Chairman and I look forward to your 
questions.
    [The prepared statement of Mr. Simons follows:]

   Prepared Statement of Paul Simons, Deputy Assistant Secretary for 
           Economic and Business Affairs, Department of State

    Mr. Chairman, distinguished Committee members, I am pleased to be 
here today, with Department of Energy Deputy Assistant Secretary David 
Pumphrey to discuss Indian energy issues. As the world's largest 
democracy and an important emerging energy consumer, India surely 
warrants the extra attention.

                         U.S.-INDIA PARTNERSHIP

    During the visit of President Bush to New Delhi last March, he 
proclaimed that ``India in the 21st century is a natural partner of the 
United States.'' It is this natural partnership that has led to our 
ongoing U.S. India Economic dialogue since 2000 and led to the 
launching of the U.S.-India Energy dialogue prior to the Prime 
Minister's visit in July 2005.
    The U.S.-India economic relationship has become stronger. We are 
working with India on a full agenda of economic issues through our 
Embassy in New Delhi, the many cabinet-level visits to the sub-
continent, and the four policy forums of the Economic Dialogue--the 
Trade Policy Forum, the Financial and Economic Forum, the Environment 
Dialogue, and the Commercial Dialogue--as well as two cross-cutting 
forums focused on biotechnology and information technology. We also 
established a CEO Forum last year composed of 10 chief executives from 
each country. Their input will help the United States and India make 
progress on key issues that will enhance economic growth and job 
creation and promote bilateral trade and investment by harnessing the 
energy and expertise of private sector leaders.
    India is increasingly becoming a major U.S. trading partner. From 
just $16 billion in two-way trade in 1998, U.S.-India trade has grown 
to $26 billion in 2005. U.S. exports (of goods), now at approximately 
$8 billion, grew almost 30 percent last year and we expect continued 
strong growth. In the past year, we have taken steps that are opening 
many new opportunities for both India and the U.S. We negotiated a 
comprehensive open skies agreement that has brought momentum to the 
aviation sector. Since then Boeing has sold almost $15 billion in new 
aircraft to India and two U.S. airlines have opened non-stop routes to 
India. Airport privatization is underway and the air transport market 
has grown by close to 40 percent in the past year.

                          ECONOMIC CHALLENGES

    There are a number of mutually beneficial strategic reforms that 
could contribute significantly to India's progress and encourage 
American business to invest in India's future. Private enterprise and 
free markets are key to long-term progress. Effective public-private 
cooperation will address economic growth and development challenges far 
more effectively than micro-management by governments. Business 
activity and people-to-people engagement will be critical to the 
transformation of U.S.-India relations. Nevertheless, governments play 
an important role in setting the ground rules for much business 
activity. Prime Minister Singh has put economic reform at the top of 
India's agenda. We recognize that these reforms must be politically 
viable to survive. There are a number of mutually beneficial strategic 
reforms that could contribute significantly to India's progress and 
encourage American business to invest in India's future.
    The most prominent challenge is world-class infrastructure, which 
India must provide as a platform for higher sustained growth to enable 
India to achieve its vision of becoming a world power. Infrastructure 
is now a national priority, but bringing together federal/state 
authorities and public/private players is just beginning, and remains a 
tall order. Infrastructure challenges are complicated by the fact that 
India's federal/state fiscal deficits severely restrict necessary 
finances for development. India must invigorate private sources to 
finance long-term project development. This means that the regulatory 
environment and attitudes towards private investment in infrastructure 
at the federal and state level must change. Opening up sectors of the 
economy where private investment is now restricted, such as retailing, 
real estate, food processing, small-scale industry, and 
telecommunications will improve rural connectivity and help generate 
the growth and revenue streams necessary to provide positive returns to 
infrastructure investment.
    Investors need greater confidence to undertake infrastructure 
investments, especially in the power sector, where our U.S.-India 
Energy Dialogue promotes increased trade and investment, including in 
civilian nuclear power. Transparent market structures and commercial 
practices help to open markets. They enable foreign investors to better 
understand and negotiate on a level playing field. These are essential 
for realizing the energy security objectives of India as well as other 
countries in the South Asian region. Market structures will be critical 
for nations as they seek to increase access to global energy markets 
and strive to meet the needs of their growing economies.

            U.S.-INDIA CIVIL NUCLEAR COOPERATION INITIATIVE

    One of the most important aspects of our strategic partnership with 
India is, of course, the U.S.-India Civil Nuclear Cooperation 
Initiative. As Secretary Rice said during her Senate hearing, this 
initiative is an historic strategic achievement that will advance 
energy security, further environmental protection, foster economic and 
technological development in both of our countries, bolster 
international security, and strengthen the global nonproliferation 
regime.
    The significance of this initiative should not be underestimated. 
India has pledged, for the first time, to submit its entire civil 
nuclear program to international inspection and to take on significant 
new nonproliferation commitments in exchange for full civil nuclear 
cooperation with the international community. With this initiative, the 
world expects India to be a full partner in nonproliferation, and India 
expects the world to help it meet its growing energy needs. We will 
continue to work with India on a range of nonproliferation issues as it 
implements its Joint Statement commitments and our strategic 
partnership further unfolds.
    Implementing this Initiative is a top priority for both the United 
States and India. We continue to engage our Indian counterparts on a 
daily basis as we both move forward. In doing so, we look to Congress 
as a full partner in this endeavor. We are thankful for the support of 
the Senate Foreign Relations Committee and the House International 
Relations Committee in favorably reporting legislation on this 
initiative by overwhelming bipartisan margins. Your support for this is 
crucial and we look forward to continuing to work closely with you to 
ensure that we grasp this important opportunity by passing the enabling 
legislation by the full bodies of both houses.

                           ENERGY CHALLENGES

    Another top priority for India is found in ensuring energy security 
to maintain its strong economic growth. India's growing appetite for 
energy has been fueled by urbanization, economic development, 
population growth, expanding industrial production, and increased motor 
vehicle ownership. Between 1980 and 2001, demand increased by 208 
percent. By contrast, China, often thought of as the next big energy 
consumer, saw a 130 percent increase over the same period according to 
the U.S. EIA (Energy Information Administration). India ranked fifth in 
the world in total energy consumption in 2004, only behind the United 
States, China, Russia, and Japan. India's energy needs are expected to 
double by 2025.
    India has experienced very strong growth in energy demand, growth 
that threatens to outstrip supply and lead to energy shortages around 
the country. This is a serious challenge for the country, but we need 
to keep in mind that this is the result of strong economic growth, 
which is good news. We should also understand that India is not the 
only country facing this challenge. For oil importing countries, the 
rise in the cost of oil and refined products has added to trade 
deficits and in some cases, created balance of payments problems. Many 
developing countries, whether in Asia, Africa or Latin America, are 
also facing challenges meeting growing electricity demands, resulting 
in brownouts and blackouts.

                        ENERGY OPTIONS AVAILABLE

    While these are enormous challenges, I believe that India has more 
options than many other countries in meeting them. In order to meet 
these challenges, it needs to pursue a policy of energy security 
through diversification of supply and resources.
    India relies on the following principal sources of energy:
    Coal is the dominant energy source in India. Currently, over 50 
percent of India's total energy, and 70 percent of India's electric 
power generation, is derived from coal. India is the world's third 
largest coal producer (after China and the United States), so domestic 
supplies satisfy most of the country's coal demand. One major drawback 
is that Indian coal is extremely energy inefficient. It produces about 
twice as much ash and particulate matter as American coal. Coal 
consumption is projected in the International Energy Outlook 2005 to 
increase to 544 million short tons (Mmst) in 2010, up from 431 million 
short tons (Mmst) in 2003.
    Oil demand in India grew by over 6% annually during the past 
decade, more than three times the world average, while at the same time 
oil production rose barely at all. This has led to a widening of the 
demand-supply gap and in an increased dependency on imports. The EIA 
says that future oil consumption in India is expected to grow rapidly 
from 2.2 million barrels per day in 2003 to 2.8 million barrels per day 
in 2010. At current rates of economic growth this figure is likely to 
rise to over 5 million barrels per day by the year 2030 according to 
the IEA (International Energy Agency). Unless India obtains or develops 
alternative sources of energy, in 15 years it will have to import close 
to 90 percent of its petroleum needs. India is trying to limit its 
dependence on oil imports by expanding domestic oil exploration and 
production and by diversifying to other energy sources where possible. 
Much will depend on India's ability to locate and use existing domestic 
oil reserves.
    Natural gas is an increasingly important fuel as India strives to 
meet growing energy needs by diversifying its fuel supply, with the 
recent focus on development of gas-fired electric power plants in 
coastal areas. India's domestic natural gas is unlikely to keep up with 
demand, and the country will have to import much of its natural gas, 
either via pipeline or as liquefied natural gas (LNG). Potential for 
gas use in India's growing economy is large and has so far mainly been 
constrained by insufficient supplies. India became a gas importer in 
February 2004 with the arrival of the first LNG tanker at the Dahej 
terminal. India needs to almost triple its existing pipeline capacity 
over the next five years to accommodate LNG imports and growing 
domestic consumption. Construction of a ``National Gas Grid'' is one of 
the major national priorities and plans for the construction of over 
7,000 km of pipelines for a cost of about $4.5 billion by 2008 have 
been announced. India also currently lacks a coherent natural gas 
policy and regulatory framework. The price of natural gas also remains 
regulated, reducing incentives for energy companies in the Indian 
market.
    Electricity: India's installed power generating capacity on 31 
January 2005 was 115,545 MW reflecting a 44 percent increase in 
capacity in the decade between 1993 and 2002. India currently relies on 
coal for nearly 70% of its electricity generation and forecasts 
indicate that coal will remain the backbone of the country's power 
sector for many decades. To meet its mounting power demands, the Indian 
government plans to double its capacity to produce electricity within 
the next eight years. The government of India has set an ambitious 
target of adding 100,000 MW of new capacity by 2012.
    Nuclear energy currently only comprises approximately two percent 
of India's total power generation. In comparison, the United States, 
receives over 20 percent of its power from nuclear energy, Japan 
derives 30 percent, and France roughly 78 percent. India's operating 
civil nuclear power plants currently have approximately 3,310 megawatts 
of installed capacity. If given the opportunity under the U.S.-India 
civilian nuclear initiative, India plans to invest quickly in 
additional civil nuclear reactors so that, by 2030, its capacity to 
produce electricity from clean nuclear technology would reach 40,000 
megawatts--a twelve-fold increase, according to India's Atomic Energy 
Commission. Under this plan and further long-term objectives, the 
Indian government has indicated that approximately 20 percent of 
India's total power production would eventually be met by nuclear 
technology, thus significantly decreasing the growth in its reliance on 
fossil fuels.
    India's power generation resources are unevenly distributed and far 
away from major load centers. Two-thirds of India's population lacks 
access to electricity, and those who are connected to the power grid 
have to live with frequent power disruptions. State Electricity Boards 
(SEBs) are responsible for the production and distribution of 
electricity in all but 3 of India's 28 states. Old equipment, 
subsidized electricity rates, and bloated payrolls mean that reform of 
the Indian power sector is necessary to maximize economic growth.
    Renewable Energy: India has a modest renewable-energy program, and 
the plans for its expansion are ambitious. According to the 
government's Policy Statement on Renewable Energy, India hopes to 
obtain as much as 10 percent of its new power capacity from renewable 
sources--wind, biomass, hydroelectric, and solar--by 2012. If the 
country even hopes to approximate this goal, however, it will require 
both external funding and technological expertise. US companies, which 
have considerable expertise in the development of alternative and 
renewable energy sources, could play a vital role in energizing the 
Indian market.

                         EXTERNAL ENERGY POLICY

    India has increased its energy diplomacy with states in the South 
Asia region as well as states in Central Asia, Russia, the Middle East, 
Latin America and Africa. The Indian state-owned Oil and Natural Gas 
Company (ONGC) has invested $3.5 billion in overseas exploration since 
2000. It has invested in gas fields in Vietnam, as well as energy 
projects in Algeria, Kazakhstan, Indonesia, Venezuela, Libya and Syria. 
Indian private sector firms have pursued projects in the Middle East 
and in Africa.
    Gas Pipelines involving Iran, Turkmenistan, Burma and Bangladesh 
have also been considered in recent years. Each of these proposals has 
serious geopolitical problems and the outlook for pipeline supplies 
will depend on resolving key regional geopolitical rivalries and 
constraints. The Iran-Pakistan-India pipeline has been in discussion 
since the early 1990's. A meeting earlier this year reached no 
consensus on gas price and project framework. The U.S. government 
continues to make clear our concerns about the pipeline, based on long-
standing U.S. policy and law. We encourage India to look to non-Iranian 
sources for their gas supplies. The proposed Burma-Bangladesh-India has 
also seen little progress due to opposition in Bangladesh. Instead, a 
longer and more costly route directly from Burma through India's 
northeast is being considered. In 2006, India agreed to join the 
Turkmenistan-Afghanistan-Pakistan (TAP) pipeline project.

       U.S.-INDIA ENERGY COOPERATION ON INDIAN ENERGY CHALLENGES

    Diversifying India's energy sector will help to alleviate the 
competition among India, the United States, and other rapidly expanding 
economies for scarce carbon-based energy resources, thereby lessening 
pressure on global energy prices. At the same time, increased energy 
efficiency can have significant environmental gains. An India that can 
meet its energy needs efficiently and rationally ultimately strengthens 
global and U.S. energy security.
    Our cooperation with India in its energy sector goes back to the 
1960's through a variety of initiatives. More recently, we have 
continued this cooperation through the U.S.-India Energy Dialogue. The 
U.S. and India are cooperating on energy initiatives through five 
working groups: The Civil Nuclear Working Group, the Coal Working 
Group, the Power and Energy Efficiency Working Group, the Oil and Gas 
Working Group, and the New Technology and Renewable Energy Working 
Group. These DOE-led groups have been actively meeting since the 
formation of the U.S.-India Energy Dialogue in May 2005, and plan a 
full range of activities in the near term.
    National Gas Grid: These groups are allowing us to work with India 
on key areas of concern in the energy sector. A key example is our 
support of a national gas grid. Through the support of the USTDA (U.S. 
Trade and Development Agency), the Indian Ministry of Petroleum and 
Natural Gas, is exploring the feasibility of a national gas grid for 
reaching all major energy consuming areas in India. Expanded access to, 
and utilization of, natural gas is expected to facilitate economic 
growth and maintain sufficient energy supplies to avoid potential 
shortages as India's energy demand grows. This represents an example of 
the U.S.-Indian private and public sector cooperative efforts underway 
as a part of the U.S.-India Energy Dialogue.
    Power Sector: There are many other challenges that both our 
countries face in the energy sector. As the IEA noted in a report 
several years ago, reform of India's electricity supply sector is 
important in order to maintain its level of economic growth. The 
demand-supply gap will grow unless more market mechanisms are 
introduced while taking into account goals of electricity access, 
environmental protection and economic growth. State Electricity Boards 
are heavily dependent on government subsidies, which have reached the 
point where their impact on state and national fiscal operations could 
threaten India's overarching development objectives. Power utilities 
lose almost $7 billion per year, and this figure is growing at 15 to 20 
percent each year.
    The U.S. government has worked closely with the Indian government 
to promote best practices in the power sector, expand electrification 
to rural areas, and to enhance billing and tariff collection systems 
through USAID's new Distribution Reform, Upgrades, and Management (or 
``DRUM'') activity. In April of this year, USAID launched a public 
private partnership with General Electric Company in association with 
Winrock International India to bring energy to rural areas in India 
that currently lack access to electricity by establishing several pilot 
projects. Such partnerships with the private sector help to introduce 
new technologies and management expertise and provide access to 
financing.
    Electricity Imports: In addition to reforming the power sector, 
another option is exporting electricity from Central Asia to South 
Asia. The World Bank has done some work in this area, and the U.S. 
hosted a conference in Istanbul in June to bring together officials 
from the region to look at this. Transporting power across borders 
offers a number of advantages that simply cannot be achieved otherwise: 
In addition to providing supplies to South Asia, it can provide new 
markets for countries like Tajikistan and Kyrgyzstan. The U.S. believes 
that regional cooperation and integration are key elements of long-term 
energy security in this region. We support regional integration because 
we are confident that it will benefit the economy and security of all 
South Asian countries. It will create stronger partners and bring 
member countries closer together. Through USAID's South Asia Regional 
Initiative for Energy (SARI/Energy), we have focused on regional 
approaches to meet South Asia's energy security needs through increased 
trade, investment and access to clean energy. Energy linkages between 
South Asia and Central Asia can strengthen the energy security of both 
regions.
    Clean Coal: India's dependence on its domestically-produced coal 
raises many other environmental concerns. Power plants are also the 
main source of Indian emissions of carbon dioxide, the most important 
greenhouse gas. These high emissions, along with emissions from other 
sources, have made all four of India's largest cities--New Delhi, 
Mumbai, Chennai and Kolkata--among the most polluted in the world 
leading to serious health consequences for inhabitants. The Coal 
Working Group has been meeting since July 2005 with several key goals: 
increased collaboration on clean fossil energy technologies; creating 
an attractive investment climate for domestic and foreign investment in 
the energy sector; and developing an efficient and environmentally 
sound energy infrastructure.
    India's agreement to take part in the FutureGen Project is 
important since the project will create the technology to produce a 
near-zero emissions coal-fired power plant that will produce hydrogen 
and sequester carbon dioxide underground, enabling greater use of coal 
in an environmentally sustainable way when the technology is eventually 
used in other coal-fired power plants. We strongly support the IEA's 
Clean Coal Center and their work with India. In May 2006, the IEA and 
the World Coal Institute co-hosted a workshop, ``Coal for Sustainable 
Energy: Clean Development and Climate Change'' in New Delhi, India. To 
the extent that India expands its use of cleaner energy technology, the 
result will be reduced air pollution locally, regionally, and globally. 
We have also encouraged by the IEA's efforts to work with India on 
developing a strategic petroleum reserve.
    During Indian Prime Minister Singh's visit last year, President 
Bush stated that ``the United States and India have built a 
relationship of great potential as we face this century's challenges.'' 
Among those challenges is that of ensuring energy security. The U.S. 
and India are working together to address this crucial challenge.
    Thank you for the opportunity to testify today.

    The Chairman. Thank you very much.
    Senator Bingaman, would you like to proceed first?
    Senator Bingaman. Thank you very much, Mr. Chairman and let 
me focus on the set of issues that I think are probably the 
most controversial in connection with this Indian/American 
proposal, and do so by reference to an article that was in the 
Washington Post in March of this year, where it said--it was 
quoting our former colleague, Senator Sam Nunn, as saying, ``If 
I were still in Congress, I would be skeptical and looking at 
conditions that could be attached,'' in connection with this 
agreement. It says he was briefed by the State Department, said 
that he is concerned that it could lead to the spread of 
weapons-grade nuclear material, unleash a regional arms race 
with China and Pakistan, and make it more difficult for the 
United States to win support for sanctions against nuclear 
renegades, such as Iran and North Korea. Then it says that Nunn 
is a board member of General Electric. It also states in this 
article, the Bush administration originally sought a plan that 
would have allowed India to continue producing material for 6-
10 weapons each year but the new plan would allow India enough 
fissile material for as many as 50 weapons a year. Then it goes 
on to quote Senator Nunn as saying, ``The current agreement 
certainly does not curb in any way the proliferation of 
weapons-grade nuclear materials.'' I'd ask Mr. Simons, as the 
spokesman for the State Department, what your response is to 
Senator Nunn's concerns.
    Mr. Simons. Thank you, Senator, for that question. I think 
the important point here and it has been pointed out by 
Secretary Rice as well as a number of other administration 
officials in their various testimonies, is that our initiative 
essentially brings India into the tent. It makes India a 
partner for the first time in more than 30 years, in global 
nonproliferation. So this is the point the administration has 
been stressing in support of this initiative: basically, it 
gives us an opportunity to work with the Indians to bring them 
in as a player, as a contributor to future solutions as opposed 
to as an outlier and India really has been an outlier for the 
past 30 years. I think that the chairman made a good point in 
his. I believe he wrote a response back to the Wall Street 
Journal addressing some of these points and we would endorse 
some of the same arguments that the chairman made in his 
article back, which is that we do focus now on transparency for 
the first time. We have a window into India's nuclear problem 
for the first time, into its program. And we do think that by 
creating this type of partnership, we are more likely to see 
successful results more broadly in terms of our global 
nonproliferation policy.
    Senator Bingaman. Let me ask about one other aspect of 
Senator Nunn's criticism. He says that among the conditions he 
would attach to the legislation is the requirement that it 
could not take effect until the President certifies that India 
pledges not to produce nuclear material such as plutonium and 
highly enriched uranium for weapons. The current agreement, 
certainly does not curb in any way the proliferation of 
weapons-grade nuclear material,'' Nunn says. And then he goes 
on to say, ``India was a lot better negotiator than we were,'' 
Nunn asserted, while the administration has said it has no 
intention of aiding India's nuclear weapons program, ``the 
reality could be the opposite,'' he said. ``The administration 
has a high burden to explain this.'' How do you explain the 
conclusion that Senator Nunn has, that this agreement will, in 
fact, aid India's nuclear weapons program and allow them to 
produce substantially more weapons than they otherwise would be 
able to?
    Mr. Simons. Senator, I think part of this question I'll 
need to consult with my nonproliferation colleagues and give 
you a more detailed answer for the record but as a general 
point, I think it is important to stress that by separating its 
civilian and its military nuclear components and by providing 
access, full access by the IEA, to its civilian components, we 
really do bring India into the tent. We engage them as a 
partner and we've already started to see some benefits from 
that in terms of India working with us and working with the 
IAEA more closely with respect to the Iranian nuclear question. 
I think it would be useful to question whether that type of 
cooperation would have been possible in the absence of the 
U.S./India Nuclear Agreement.
    Senator Bingaman. My time has expired, Mr. Chairman. Thank 
you.
    The Chairman. Thank you for the questions, Senator 
Bingaman. I might add that I did write an in-depth letter in 
response. It is not here. I can give it to you for your perusal 
but it even goes one step further, having a recall that I wrote 
that letter. Since then, the United States has put on the table 
a fissile material cut-off treaty to curb the production of 
fissile material and it is interesting that a member of that 
team, working on that is India, which I'm not sure we would 
have had working for that goal, had India not been party to 
this agreement with us, what we have. I'd like to ask, to move 
ahead on some other issues. On April 4, the Climate Conference 
sponsored by the Energy and Natural Resources Committee, 
panelists noted that action by major developing countries like 
China and India is critical to address climate change. What 
role will energy cooperation agreements play in providing 
options to expand greenhouse gas emission-free energy, Mr. 
Pumphrey?
    Mr. Pumphrey. Thank you, Mr. Chairman. The activities that 
we have undertaken in the energy dialogue are very much focused 
on moving towards cleaner technologies, energy efficiency and 
renewable energy. We believe that all of these efforts will 
support having India move to a less greenhouse gas intensive 
framework and a less greenhouse intensive future. Currently, 
they are very dependent on coal and coal that is burned in 
older powerplants, so we are working with them on newer coal-
burning technologies as well as looking at the introduction of 
natural gas in areas that it can then take the place of coal, 
as well as moving ahead on renewables. I should mention that 
India is also an active member of the Asian/Pacific 
Partnership, which is a new, multi-lateral group that is 
looking at innovative ways to move new technologies into the 
marketplace to help address our concerns about greenhouse gas 
emissions.
    The Chairman. I have a number of questions but I'm going to 
hold here now, because there are a number of Senators. So let 
me proceed and see what we can do with working our way through 
them getting questions out.
    Senators Bunning, Thomas, Craig and Salazar.
    Senator Bunning. Thank you, Mr. Chairman. Either can answer 
this. It is for both of you. What is, with the strong alliance 
and strong reliance on foreign oil, what measures has India 
pursued to diversity its energy policy, what initiatives are 
being taken in India within its own five energy bureaus, to 
ensure a comprehensive energy policy is implemented? Either or.
    Mr. Pumphrey. Senator, I'll be glad to start and then----
    The Chairman. But please, we have a devil of a time hearing 
you.
    Mr. Pumphrey. I'm sorry. Okay. Let me get up closer then. 
India has been making efforts in many areas to reduce this 
dependence on oil. One of the most significant has been the 
introduction of compressed natural gas into its vehicle fleet 
in New Delhi. They have one of the highest penetration rates 
for gas--and this is directly backing out gasoline and diesel 
fuel. They are also looking at ways, as I mentioned in my 
opening statement, to bring even greater volumes of natural gas 
in the marketplace and make those available. We have begun 
discussions with them on the possibility of increased use of 
biofuels for the transport sector, so there are a number of 
areas in which they are beginning to operate. The other area 
that I mentioned that we think is very important is that 
recognizing their reliance on imported oil, they are taking 
steps to increase their stockpiles, to start stockpiling oil in 
case of emergencies, to guard against the disruptions that may 
take place. So they are looking at it from both ends in terms 
of diversifying away from the role of oil as well as guarding 
against their vulnerability to----
    Senator Bunning. Is it a comprehensive plan? In other 
words, are they looking to taking coal and making liquid fuels 
out of it and other synthetic-type energy products?
    Mr. Pumphrey. There have been discussions on looking at 
ways to incorporate coal liquefaction technologies. But I think 
you raise a very important point that within India, 
traditionally there have been the five different groups that 
have had responsibilities in the energy sector. Our 
understanding is that the Planning Commission is working very 
hard to try to bring together those elements to come up with a 
comprehensive crosscutting energy policy.
    Senator Bunning. In other words, they do not have one 
presently?
    Mr. Pumphrey. They have come up with an initial plan but 
again, it is a problem that I think we've wrestled with 
ourselves in terms of coming up with a comprehensive plan.
    Senator Bunning. In your testimonies, both of you said that 
the government of India is shaping the regulatory environment 
necessary to attract international investments. What 
specifically is being done by the Indian Congress and Prime 
Minister at this time?
    Mr. Pumphrey. In one particular area, they are looking at 
coming up with a framework for investment in a natural gas 
pipeline infrastructure. They have recently passed a new 
pipeline act that allows for the creation of a regulatory body 
to develop the Rules for Investment so that they can bring in 
foreign investment in that sector. So that is one of the very 
real time areas that we are having conversations with them 
about and lending our experience.
    Senator Bunning. Let me ask the last question I will on 
this round. Could you describe the benefits of India's 
participation in the FutureGen alliance?
    The Chairman. Well, that's a good one.
    Mr. Pumphrey. We see the FutureGen alliance as a very 
important step forward in demonstrating technologies for 
utilizing coal. We believe that their presence not only in 
helping to fund the activities through their participation in 
the Steering Committee but also bringing some of their 
expertise to the table, will bring an important dimension of a 
major coal-burning country to the table in the design and 
understanding of the operation of this and hopefully the 
transfer of these approaches to carbon sequestration back to 
their own economy.
    Senator Bunning. In other words, you think that their 
scientists are online and up to speed in this technology?
    Mr. Pumphrey. I would actually prefer to consult with my 
experts in fossil energy on that in more detail but----
    Senator Bunning. Would you give us a written response then?
    Mr. Pumphrey. I would certainly be glad to.
    [The information follows:]

    India's scientific and technology communities are very 
interested in the FutureGen technology and science associated 
with sequestration. They also recognize the potential of this 
technology for their country in terms of using their coal 
resources to meet their growing energy needs while mitigating 
the impacts on climate change. However, in general, their 
scientists and engineers do not have extensive experience with 
the primary technology upon which FutureGen is based, namely, 
advanced coal gasification to produce power and hydrogen. By 
its involvement in FutureGen, India can gain the engineering 
and technical experience on FutureGen technology that they can 
extrapolate and apply to their own needs. Participation by 
India and other countries is important to gaining an 
understanding and acceptance of the FutureGen ``near-zero 
atmospheric emission'' coal concept, and in so doing, make this 
technology broadly available to address environmental and 
climate change issues associated with the use of coal, a 
strategic and globally diverse energy resource.

    Senator Bunning. Thank you very much. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, Senator. Senator, I think your 
questions are right on, exactly what we need to know about. It 
doesn't do us any good to just keep hearing about these great 
potential relationships. It is what is actually going to happen 
to exchange with the United States so that we can both improve. 
We from them, them from us. That's the whole purpose. We ought 
to hear more about that from the next panel, I hope. Thank you 
for your questions. Let's see, the next one we have is Senator 
Thomas. It is your turn, please.
    Senator Thomas. Thank you, Sir. I think it is very 
important that we are working with India in terms of the 
economic growth and the relationship there. Why is nuclear 
power--or is it--the highest priority in terms of energy for 
India? Either of you.
    Mr. Simons. We think nuclear power is going to be one very 
important component of India's energy future. All the other 
major Asian-emerging countries have large nuclear programs, 
which are growing. They have all decided--China, Korea, Japan--
that nuclear must be an important component of their energy 
futures but those other countries are much farther ahead than 
India in terms of making nuclear a big part of their energy 
equation. Japan has about 30 percent of its electricity in 
nuclear, Korea about 35 percent. Now of course, these countries 
are more advanced, also, economically. But India's isolation 
also--and its inability to cooperate on civilian nuclear 
issues, has also held back and retarded the growth of nuclear 
in India. So when the Indian government puts forward a forecast 
and says that in 20 years, they'd like to get up to about 20 
percent of their total electricity production in nuclear, I 
think that demonstrates that nuclear is going to be a very 
important component----
    Senator Thomas. Let me interrupt.
    Mr. Simons. It's not the only answer.
    Senator Thomas. You said they haven't made much progress in 
terms of nuclear negotiations. They haven't signed a nuclear 
treaty, a nonproliferation treaty.
    Mr. Simons. Essentially they have been cut off from 
civilian nuclear cooperation from a lot of countries because 
they've been outside of the mainstream. So, I bring them into 
the mainstream----
    Senator Thomas. But they still are not interested in doing 
that now? I mean, isn't that what the nuclear nonproliferation 
is about, so that you can go ahead with energy development 
without being concerned about the defense aspect of it?
    Mr. Simons. That's right, but India, of course, chose a 
different path 30 years ago and so they isolated themselves 
from what would perhaps have been a more rapid development of 
their civilian nuclear side. Now, with this agreement with the 
United States, assuming that it goes through, we will have the 
opportunity, to some extent, to jumpstart that nuclear 
cooperation and to make sure that nuclear plays a similar, 
important part in India's energy future, as it does in say, the 
energy future of the United States, France, Japan, and the 
other Asian countries that have decided that they need to have 
a large nuclear program.
    Senator Thomas. Yes, I understand that. I guess sometimes I 
wonder why we would have a different arrangement on 
nonproliferation with them than we do with anyone else. There 
is nothing wrong with suggesting that if you can go into the 
nuclear, that you ought to understand that it is for energy and 
not for other purposes. What is India's level of consumption of 
energy, in terms of other countries and so on, Mr. Pumphrey?
    Mr. Pumphrey. The most recent review that we have done 
through the Energy Information Administration, they rank about 
fifth in the world in terms of energy consumption. Last year, I 
believe they were sixth, so they are moving sort of upwards 
relative to other major countries. They have passed Germany in 
this past year, in terms of their energy consumption.
    Senator Thomas. You mentioned that they are working on 
FutureGen and other coals and that they have a fairly high 
supply of coal, is that right?
    Mr. Pumphrey. That's correct. They have very large supplies 
of coal.
    Senator Thomas. But they are working at ways of conversion 
of coal as well?
    Mr. Pumphrey. Into other fuels in terms of--yes.
    Senator Thomas. Gas?
    Mr. Pumphrey. Yes, or liquids, right.
    Senator Thomas. Diesel or whatever?
    Mr. Pumphrey. There is great interest in doing that. 
Perhaps there has been interest expressed in technologies such 
as in-situ gasification of coal as well.
    Senator Thomas. Okay. Are we working with them then, on 
cooperating with other energy development as well as nuclear? 
Or are we just focusing on nuclear?
    Mr. Pumphrey. We have approached the dialogue in a very 
broad basis. We feel that as Mr. Simons had mentioned, that you 
need a portfolio approach to how you solve your long term 
energy problems. Diversity is a key for energy security 
solutions. So while the public debate has been on nuclear, 
we've pushed very hard in areas of coal development, gas 
development.
    Senator Thomas. Why is there public debate on nuclear?
    Mr. Pumphrey. The issues concerning the new arrangements 
under the agreement.
    Senator Thomas. Yes, I understand. That is part of the 
problem. Thank you.
    The Chairman. Thank you, Senator.
    Senator Craig.
    Senator Craig. Thank you very much, Mr. Chairman. I think 
bringing India into the fold is extremely important. The 
Senator from Montana questioned appropriately why they are now 
just coming, because they did choose a different path early on 
and then I believe during the Clinton years, as a result of the 
explosion of some nuclear devices, we put them out on a shelf 
and really kept them there for a time. This initiative in 
bringing them onboard is extremely important in the long-term. 
I think all of us are concerned about the growth of nuclear 
communities and what it means and how waste or the by-products 
are controlled and managed. Mr. Simons, do you see a risk that 
the U.S./India civil nuclear cooperation deal could lead to a 
nuclear arms race in South Asia?
    Mr. Simons. We support this deal because we do believe it 
will actually help to counter global proliferation. We believe 
it will have a positive, a net positive impact in terms of our 
global nonproliferation strategy. So the answer is no.
    Senator Craig. Could the absence of it result in that?
    Mr. Simons. Well, once again, we do see this as a very, 
very important opportunity to establish a different type of 
strategic relationship with India, one that will help bring 
India into the fold.
    Senator Craig. Mr. Chairman, I'm certainly no Indian expert 
but I did have the privilege of going there a spring ago on a 
different issue. It was just prior to our Secretary of State 
being there. Efforts were well underway toward bringing us to 
where we are today and I think for any of us who failed to 
recognize what India is and what India could be and our 
relationships with them miss a great opportunity, not only for 
ourselves but for the rest of the world as it relates to their 
potential. Obviously, they are technological abilities, our 
involvement with them in high-tech, what they hope to 
accomplish for their own nation, many of us have been concerned 
about moving ahead in climate change without bringing India and 
China along and why we rejected Kyoto because of that, in part 
not in total and why they rejected it, obviously, was that they 
needed to grow and they needed to feed their people and succeed 
and I think this relationship is extremely important from what 
I understand of it.
    My last question, Mr. Pumphrey. A strategic partnership has 
been proposed between DOE's National Energy Technological 
Laboratory and India's National Funnel Power Corporation as 
well as discussions about potential collaboration between DOE's 
National Renewable Energy Laboratory and India's Minister of 
Non-conventional Energy Sources and with the India Oil 
Corporation. I believe collaborative efforts between these 
laboratories are extremely important. How broad do you see this 
for our total laboratory complex and I'll let my bias show and 
for our lead nuclear lab in Idaho?
    [Laughter.]
    Mr. Pumphrey. Thank you, Senator. There has been long-
standing cooperation between those two laboratories leading up 
to the time of this new and enhanced dialogue. The NETL has 
been working with NTPC on coal combustion issues. We are now 
looking at and discussing the possibility of developing what 
you described as a new strategic relationship. Those 
discussions are ongoing so I don't really have the knowledge to 
be able to tell you exactly how those will be defined and where 
they will be but certainly, I'd be glad to get back to you. 
With the National Renewable Energy Laboratory, again they've 
been working closely with NMES in some areas and they are just 
initiating new discussions of areas of collaboration. In terms 
of looking at the rest of the laboratory complex, we are still 
evaluating the types of science cooperation that we can have in 
place. There is a new science and technology agreement in 
place, which the lack of that agreement used to be a hurdle to 
these collaborative efforts and so, our Office of Science is 
beginning the effort to look at areas for future collaboration.
    Senator Craig. Thank you. Thank you, Mr. Chairman.
    The Chairman. Thank you very much, Senator. I hope your 
relationship between your lab and them grows and flourishes and 
multiplies, Senator.
    Senator Craig. Mr. Chairman, the great hurdle we have and I 
think we've accomplished in part through EPAct but we've got to 
work with DOE, and their ability to outreach and bring in and 
incorporate within their formal agreements and their financial 
arrangements, outside interests. Because the work we do today 
at our laboratories, while it is national, it is international 
in scope but we've held it awfully close to chest for so long, 
thinking the Federal Government could finance it all. Now we 
have a great opportunity to both private and publicly finance 
some of these new technologies but we've got to figure out how 
we design those relationships and we are well behind in that 
design instead of ahead of it. That's my concern.
    The Chairman. Well, whatever questions I had of the two of 
you, I'm going to submit them in writing. We'll yield now to 
the two on this side who came late but they want to ask 
questions. But I just want to say that what I'm least impressed 
with about today is the lack of a significant discussion about 
the interplay between American companies and American 
institutions and American research and India with reference to 
diversification of their energy sources and I just would talk 
particularly about nuclear. We're clearly, when you look at 
what they've got, it is a very, very ancient and old-fashioned 
approach to nuclear power, saying that with no sense of 
pejorative-ness attached, if you just look at it. It is 
obviously--it's not going to stay there. It's obvious it is not 
going to stay there and it would seem to me that you all and 
America and maybe us, have to get a little bit more anxious 
about making sure we enter this play, this foray, to get some 
development of technology and the development of business 
relationships.
    India is going to go and prosper and as you look at the 
make-up, I'm hopeful that their projections are way off because 
their projections for nuclear in the future are way too small 
because they are predicated upon an India that starts with a 
nuclear that is behind schedule. If you start with that as your 
baseline and keep off of it, 25 years from now, you're still--
unless somebody there has built with a lot of hope and said, 
``let's change what we're doing,'' and I think that's our role 
as Americans and maybe even this committee. Maybe we should do 
what Senator Lugar did and maybe we should explore the idea of 
doing something specifically as a Nation on the exchange of 
technology and business in the fields of energy with them 
unless that is happening and I think I will ask--if Senator 
Bingaman wants to join me, I'll ask him to ask Secretary Bodman 
what he thinks about what I'm just saying and is there 
something that he thinks we ought to be doing that maybe we're 
not doing. With that, I'm going to now yield to Senator Salazar 
and Senator Dorgan, in that order.
    Senator Salazar.
    Senator Salazar. Thank you very much, Mr. Chairman and 
thank you Senator Bingaman, for holding this hearing. Two quick 
questions. The first is on coal gasification. When I look at 
what is happening in the United States, China and India and the 
amount of coal that we have in those three countries and what 
we're doing to burn coal for our energy needs, can you, Mr. 
Pumphrey, comment on what it is that India is doing relative to 
exploring technologies on coal gasification? We've described in 
this committee that coal for us is like oil is to Saudi Arabia. 
What is it that India is doing on that front?
    The Chairman. Very good.
    Mr. Pumphrey. Senator, I think at this point I should 
really get back to you on that question. I need to go back and 
consult with the specialists we have rather than giving you 
information that I'm not sure of myself. But I'd be certainly 
glad to provide that for you.
    [The information follows:]

                           COAL GASIFICATION

    There are several integrated gasification combined cycle (IGCC) 
activities planned or being discussed with India including:
    (1) The U.S. Agency for International Development (USAID) has 
contracted with Nexant (San Francisco, CA), under its Greenhouse Gas 
Pollution Prevention (GEP) Project to conduct a $2-million feasibility 
study on IGCC power generation technology. India is interested in this 
clean coal technology to increase generation efficiency, protect the 
environment, and reduce CO2 emissions. The Department of 
Energy's National Energy Technology Laboratory is providing technical 
assistance to USAID in managing the project.
    This study is being carried out in three phases. In Phase A, IGCC 
technologies were surveyed and compared with conventional and advanced 
pulverized coal (i.e., subcritical and supercritical PC), circulating 
fluidized bed combustion (CFBC), and pressurized fluidized bed 
combustion (PFBC) technologies to confirm the economics, efficiency 
advantages, environmental benefits, and other salient features of IGCC 
technology under Indian conditions, particularly in using high-ash 
Indian coals. In Phase B, the three most promising gasifiers were 
selected for pilot plant coal testing. Based on the tests results, a 
further screening analysis of the three gasifiers was conducted. A 
system optimization was also conducted to select the best process 
configuration to provide the basis for a detailed design and cost 
estimate of a 100-MWe IGCC demonstration plant in Phase C. Project 
financing sources and a roadmap to commercialize the IGCC technology in 
India will also be explored in Phase C. Nexant plans to complete the 
Phase C study in September 2006. An IGCC workshop is being planned in 
New Delhi on September 19, 2006, with the National Thermal Power 
Corporation (NTPC), the Ministry of Power, and other interested 
organizations to disseminate the study results and to discuss 
implementation of the planned 100-MW demonstration plant.
    (2) India has joined the FutureGen international partnership to 
create a near-zero atmospheric emissions coal-fired power plant that 
will produce hydrogen and sequester carbon dioxide below ground.
    (3) Under the Asia Pacific Partnership (APP), we are discussing the 
possibility of workshops and site visits on IGCC with India (and China) 
under both the Power Generation & Transmission and the Cleaner Fossil 
Energy Task Forces. The first proposed event is during meetings on zero 
emissions coal technologies, (such as IGCC and carbon capture & 
storage), during Japan's Clean Coal Days in early September. This would 
be the first official activity under the Cleaner Fossil Energy Task 
Force. India will be invited to participate.
    (4) Underground Coal Gasification (UCG) has several important 
economic and environmental benefits relevant to India's energy goals. 
This area of energy exploitation would require solutions to numerous 
technical issues. At least two technical issues first have to be 
resolved: research is needed to ensure that proper site selection 
provides both the desired conditions for suitable UCG processes and 
that usable groundwater resources are not adversely impacted. Several 
activities to discuss exploitation of UCG are planned under the U.S.-
India Energy Dialogue Coal Working Group and the APP Coal Mining Task 
Force, including plans for a UCG Workshop in India during November that 
will examine these technical issues. The U.S. and India will co-sponsor 
this workshop with the other APP countries invited to participate.

    Senator Salazar. I think it would be important because I 
think as we looked at both India and China, we are making steps 
here in the broad portfolio of energy development that this 
committee has been pushing and certainly coal gasification is 
part of that. It would be very interesting to see what it is 
that India is doing, so I would ask you to do that. May I ask 
you the same question with respect to biofuels? You are part of 
the International Energy Cooperation. Many of us on this 
committee have been pushing very hard for a whole new chapter 
of renewables, based on biofuels across America. Can you 
comment, Mr. Pumphrey or Mr. Simons, on what you know is 
happening in biofuels in India?
    Mr. Pumphrey. On the question of biofuels, we are just 
beginning to engage in that discussion with the Indians about 
their research. We know that the Indian Oil Corporation has 
research activities that are underway and we have scheduled 
this week a meeting of our oil and gas Working Group, one of 
the five Working Groups, which has a more in-depth discussion 
of biofuels as one of the topics and to look at collaboration 
on biofuels for the future. So again, on the specifics, I would 
have to respond to you later, perhaps after we've gotten a 
better understanding. But we see it as a very important area to 
work collaboratively with India on how to move biofuels into 
the marketplace.
    [The following was received for the record:]

                                BIOFUELS

    The Government of India (GOI) is expected to announce a 
comprehensive policy for use of 20 percent bio-diesel for the entire 
country by early next year. The Planning Commission has already 
submitted its report to the Ministry of Rural Development, which will 
now work on presenting the proposal before the cabinet. According to a 
GOI official, ``the use of bio-diesel will result in a savings of $4.6 
billion annually on imports of crude oil. The GOI is planning to 
produce 13 million tons of alternative fuel every year. This will 
require 11 million hectares of land and create 11 million jobs.'' 
During a July 2006 visit to DOE's National Renewable Energy Laboratory 
(NREL), a delegation from India discussed several potential areas of 
cooperation in bioenergy. The Indian Oil Corporation (IOC) is seeking 
collaboration on the following proposed topics:

   Biorefinery studies to ethanol and biodiesel
   Life cycle assessments of biofuels
   Biochemical processing of petroleum for nitrogen, sulfur and 
        metal removal as well as biocracking, and bio de-waxing.

    In addition, various DOE and NREL officials visited the IOC 
Research Center outside New Delhi in the first half of 2006 at which 
biodiesel was discussed. The Ministry of Petroleum and Natural Gas 
(MOPNG) has a policy to purchase Biodiesel, which is based on an Indian 
adaptation of the ASTM D6751 standard for 100% biodiesel to be used as 
a blending agent up to 20% in high speed diesel (HSD). There is an 
additional standard for B-5 HSD. Other research activities have been on 
the properties of ethanol blends in Indian light duty vehicles.
    The IOC's R&D Center has planned programs to examine the value 
chain of biodiesel from plantation, production, and utilization to 
environmental assessment. It has been using a laboratory scale plant of 
100 kg/day capacity for trans-esterification, with design of larger 
capacity plants in the offing. These large scale plants are useful for 
centralized production of biodiesel. Production of biodiesel in smaller 
plants (e.g., 5 to 20 kg/day) may also be started at decentralized 
level in villages.
    A bio-diesel blend from IOC is being used in buses in Mumbai as 
well as in Rewari, and in Haryana, on a trial basis. Twenty buses are 
being run on 5% biodiesel--diesel blends and their smoke, fuel 
efficiency and drivability is being compared with another set of twenty 
reference buses. Encouraged by these results, the Haryana Roadways has 
requested IOC to extend trials on all the 180 buses of Gurgaon depot. 
The IOC has also entered into a MOU with Indian Railways to study the 
complete value chain of biodiesel. In line with that, the IOC has 
planted about fifty thousand saplings of Jatropha on 62 hectares of 
railway land at Surendranagar in Gujarat. This project is the only one 
of its kind in India, where every aspect of Jatropha Biodiesel would be 
studied.

    Senator Salazar. Mr. Simons, do you have anything to add to 
either one of those two questions?
    Mr. Simons. I have nothing to add, Senator.
    Senator Salazar. I would just say this, Mr. Chairman. I 
think that given the global competitiveness that we're dealing 
with, with both China and with India, the billion people in 
India, the billion-three in China, that having a good 
understanding of what is happening in those two countries 
relative to energy development would something that would be 
very useful for all us. So I would hope that is information 
that can be developed, both by DOE and the International 
Working Group that you're on, Mr. Pumphrey as well you, Mr. 
Simons. Thank you very much, Mr. Chairman.
    The Chairman. Thank you.
    Senator Dorgan.
    Senator Dorgan. Mr. Chairman, I came late and have to leave 
early because of other obligations so I will not take the 
committee's time. I do want to say----
    The Chairman. You're welcome.
    Senator Dorgan. No, I do just want to say that while I 
think our relationship with India is very, very important, I 
have great misgivings about anything that I believe will 
undermine the issues of nonproliferation, stopping the spread 
of nuclear weapons is, I believe, one of the most important 
things that is ahead of us and I think a good many people have 
raised significant questions about this agreement relative to 
our ability to stop the spread of nuclear weapons. So I thank 
you for holding this hearing, Mr. Chairman. I regret I can't be 
here for all of it.
    The Chairman. Thank you. With that, gentlemen, you have 
heard that we are interested in things you don't know enough 
about, to put it mildly and that's no aspersions, that's just 
the truth. So if you can dig some of it up and respond so 
Senator Salazar will get it, even if you didn't appear, if the 
person didn't appear, you can get it from your Department and 
submit it so we'll know. I think that will be helpful. With 
that, we thank you for giving us your morning and you will get 
home in time for lunch. Thank you very much.
    The next panel consists of three different people. They 
might shed a light on some of the subjects, Senator Salazar, 
that you raised and others. One of them is Dr. David Victor, 
director of the program of energy and sustainable development, 
Stanford University and the other is Mr. Michael Gadbaw, vice 
president of international law and policy, General Electric 
Company, Washington, D.C. and the other is Mr. Daniel Poneman, 
Principal with the Scowcroft Group, Washington, D.C. So we're 
going to start as I started. It doesn't make any difference 
which way we go but we're going to start with Dr. David Victor. 
Would you please make sure that you talk right into the mic so 
we can hear you, sir? And talk loud, if you don't mind.

 STATEMENT OF DR. DAVID G. VICTOR, DIRECTOR, PROGRAM OF ENERGY 
        AND SUSTAINABLE DEVELOPMENT, STANFORD UNIVERSITY

    Dr. Victor. Thank you very much, Mr. Chairman and thank you 
for the opportunity to testify in front of your committee. With 
your permission, I'd like to put my full written testimony.
    The Chairman. It's in.
    Dr. Victor. I will just concentrate on three points. I 
think the first and most important point for us to have in mind 
when we look at this arrangement is the context for this deal, 
which is that in the energy business, there aren't any easy 
choices. All of the options for supplying energy have trade-
offs, pluses and minuses. Furthermore, we're talking about an 
arrangement by through which we are trying to affect choices 
that are made in other countries. Over those choices, we have 
very, very limited leverage. So it is in this context where we 
have pluses and minuses for all major energy sources, where we 
have limited leverage over the choices of other countries, that 
I think we should look at this nuclear arrangement. In that 
light, I think this is an extraordinary opportunity. I'd like 
to say a little bit about India's interests in this and then a 
little bit about the United States' interests.
    Concerning India's interests, the single most important 
thing here is the demand for electricity and India is rising 
exponentially. I don't think anybody knows how rapidly it will 
rise in the coming two decades but India's enormous success 
with its economic reforms, along with its considerable success 
in reforming its electric power market means the demand for 
electricity is rising at least as rapidly as the Indian economy 
is rising and there is some evidence that demand for power is 
rising even faster than the economy. Right now, as several of 
the panelists will remark, coal is king in the Indian electric 
power system and actually I think the position of coal in the 
power system in India is getting much stronger. That's because 
almost all of the other options for power supply are much less 
attractive economically than coal. In particular, natural gas--
there is enormous promise for natural gas but natural gas 
prices have been rising sharply in India. Several people have 
commented on the new natural gas finds but they are in the 
distant future and the situation today is that the real price 
of natural gas in India, as in the United States, has risen to 
something like three times the level it was previously.
    The other thing that has happened in the Indian power 
sector is there have been large reforms in the coal sector and 
those reforms have encouraged private business and they in 
particular have encouraged private business to invest 
disproportionately in coal. This sets up India's interests on 
power sector reform and on this deal, which is that India would 
like to remain dependent on coal and that's an extremely 
important part of India's power system but they are very 
concerned about excessive reliance on coal. They are investing 
in advanced coal, as we've heard from the previous panel and 
they are also looking very carefully at the non-coal options. 
This deal, in particular, makes the nuclear part of the non-
coal options much more attractive. I think it is fair to say 
that it would be impossible for India to expand significantly 
its nuclear power sector without some kind of cooperative 
arrangement such as the one we are talking about today.
    The third point I would like to make, very briefly, is the 
implications of all this for the United States. In my written 
testimony, I've done some simple calculations on the 
implications for global warming. Put very simply, this deal 
makes it possible to save something on the order of 100 million 
tons of carbon dioxide per year by the year 2020, possibly much 
more, possibly less but that's the scale of the problem. To put 
that number into perspective, that is almost as large as the 
entire European Union's efforts to implement the Kyoto 
Protocol. The reason the number is so large is because the 
Indian power sector is growing exponentially and because it is 
dominated by coal. So we're talking about replacing the most 
carbon intensive fuel with the least carbon intensive.
    The Chairman. You say this deal. Which deal?
    Dr. Victor. This is the partnership between the United 
States and India and in particular, the aspects of the 
partnership that relate to nuclear fuel and a nuclear 
technology.
    The last point I would like to make about this is that I 
think we should look at this arrangement not only in terms of 
the potential carbon savings for this particular arrangement 
but also because if this is successful, this creates a new 
model for engaging with developing countries because our 
efforts under the Kyoto Protocol to engage the developing 
countries in controlling their emissions of greenhouse gases 
have been largely a failure, because those countries 
understandably will not accept caps on their emissions. This 
arrangement shows a different way of doing things, which is to 
identify areas that are already in these countries' interests, 
in this case, cleaner power, rebalancing away from coal and 
also in our interests. The savings here are on the order of 100 
million tons per year. The savings from similar kinds of deals 
in the clean coal part of India weren't gas in China or nuclear 
in China, could offer similar savings and be dramatically more 
effective than what we have seen to date. Thank you, Mr. 
Chairman.
    [The prepared statement of Dr. Victor follows:]

Prepared Statement of David G. Victor, Director, Program on Energy and 
              Sustainable Development, Stanford University

                              INTRODUCTION

    The debate over the India nuclear deal has been too one-
dimensional. Nearly all commentary has focused on whether this proposal 
would undermine efforts to contain the proliferation of nuclear 
weapons. Dissent along these lines has been based on a series of 
largely overblown claims. And the singular focus on proliferation has 
allowed the debate to lose sight of other ways that this deal is in the 
interests of the United States and India alike.
    Chief among those other reasons is environmental. The fuller use of 
commercial nuclear power, if done to exacting standards of safety and 
protection against proliferation, can play an important role as part of 
a larger strategy to slow the growth in emissions of the gases that 
cause global warming. That's because nuclear power emits essentially no 
carbon dioxide (CO2), the most prevalent of these so-called 
``greenhouse gases.'' While this benefit is hardly the chief reason for 
initiating this deal, with time it will become one of the main benefits 
from the arrangement. The nuclear deal probably will lead India to emit 
substantially less CO2 than it would if the country were not 
able to build such a large commercial nuclear fleet. The annual 
reductions by the year 2020 alone will be on the scale of all of the 
European Union's efforts to meet its Kyoto Protocol commitments. In 
addition, if this arrangement is successful it will offer a model 
framework for a more effective way to engage developing countries in 
the global effort to manage the problem of climate change. No 
arrangement to manage climate change can be adequately successful 
without these countries' participation; to date the existing schemes 
for encouraging these countries to make an effort have failed; a better 
approach is urgently needed.

       ECONOMIC GROWTH, ELECTRIC POWER AND THE OPTIONS FOR SUPPLY

    Evaluating the environmental benefits of this deal requires, first, 
understanding the basic factors that affect investment in the Indian 
electric power market. From the 1970s through much of the 1990s India's 
economy was famous for its low rate of growth; with low growth came low 
demand for electricity. A series of economic reforms, initially 
introduced in the wake of a financial crisis in 1991 but strengthened 
over the many years since, has changed that situation dramatically. 
India's economy enjoyed an average annual growth rate of around 7% from 
1994-2004. Most analysts expect growth to be sustained at 8% over the 
next few years if not longer. India's population is young; and an 
important fraction is well-educated and increasingly engaged with the 
world economy. To be sure, the Indian economy has many deep flaws. 
India has made no progress in solving the development problem in the 
rural areas where most Indians live, and India's democracy is notorious 
for its political gridlock. All that said, there is palpable evidence 
that India's economic reforms have finally taken hold.
    Higher growth has led directly to higher demand for electricity. 
While the exact future needs for power remain uncertain, there is 
considerable evidence that electric demand will grow at roughly the 
same rate as the economy. Some factors will tend to dampen the growth 
in demand for power. For example, economic growth is expected to cause 
a shift in the Indian economy away from energy-intensive manufacturing 
and also engender investments that make the economy more efficient in 
its use of energy. But other factors will cause demand for electricity 
to accelerate. Among them is an improvement in power quality that is 
likely to accompany the extensive efforts to reform India's electric 
power system that have been under way for 15 years. While reformers 
have found it difficult to make progress, these reforms are beginning 
to take effect in some parts of the country. Those effects are evident 
not only in the improved performance of some of the country's power 
utilities, but also in the rising role for privately owned (and 
generally more reliable) power plants. In industry, for example, 
reliable power is essential; many companies are taking matters into 
their own hands and building their own plants. And where electricity is 
more reliable, Indians will consume more of it.
    There are many projections for total demand for electricity. In 
Figure 1,* I show the International Energy Agency's projections, which 
envision a doubling of power demand from the present to 2020. Barring 
an economic catastrophe, I would be surprised if demand for electric 
power were dramatically lower than these projections. And it is 
possible that demand could be higher if India discovered, as China has 
in recent years, that demand for electricity rises even faster than 
economic output. For now, let's use these projections to illustrate the 
stakes.
---------------------------------------------------------------------------
    * Figures 1-3 have been retained in committee files.
---------------------------------------------------------------------------
    At present, the total size of India's electric power system is 124 
GW. Of that, coal comprises 55%, hydroelectric 26%, natural gas 10%, 
renewables 5%, and nuclear makes up only 3% of total installed 
capacity. Looking to the future, India has five main options for 
providing the bulk of its electric needs:
    Hydroelectric. Official Indian plans call for much greater use of 
hydro, but in practice, India has found this option increasingly 
difficult to deploy due to local opposition to dams. This pattern is 
evident in all large democracies and there is no evidence that it will 
become significantly easier to site domestic hydro facilities in the 
future. While there are possibilities of hydro imports from Bhutan and 
Nepal, such international projects are invariably fraught with 
political uncertainty. Overall, hydro will probably play a declining 
role in the future Indian system; projections that claim otherwise are 
probably wishful thinking and unlikely to be realized.
    Renewables. India makes extensive use of biomass digesters in rural 
areas and wind and solar energy in a few states. Given India's 
aggressive and expanding renewable energy program, particularly in wind 
power, the projection shown in Figure 1 (about 6 GW of installed 
renewable electricity generation capacity by 2020) is certainly too 
low. However, even assuming India were to continue its aggressive push 
on renewable energy, renewables are not likely to represent more than 
10% of installed capacity by 2020. More importantly, renewable power 
generators, notably wind turbines, are intermittent. They are available 
less frequently than conventional power plants, contributing to the 
unlikelihood that renewables will supply more than 5% of India's total 
electricity by 2020 even given optimistic assumptions.
    Natural gas. Until recently, most analyses of the Indian power 
sector envisioned that gas would play a much larger role in the future. 
Gas is attractive because it is the cleanest of the fossil fuels and 
because the capital cost of gas plants is much lower than for all the 
other main rivals such as nuclear, coal, and hydro. Thus, gas plants 
have been especially attractive to private investors who are wary of 
sinking large amounts of capital into projects where regulatory rules 
are in flux. Indeed, nearly all foreign-owned private power plants in 
India are fired with gas. (In other developing countries, most 
privately-owned power plants are gas fired). However, the price of gas 
has risen sharply in the last four years. For two decades gas prices 
were regulated at approximately $3/mmbtu and supplies were controlled 
by the state transmission and marketing monopoly. Over the last decade 
a private gas market has emerged, with prices much higher than those in 
the historic government-managed market. India has built three terminals 
to import LNG as a supplement to its own domestic gas supplies, and has 
plans to build several others. The workings of that gas market are the 
best indicator of the real price of gas in India. The most recent large 
transaction, in which India purchased a spot cargo of LNG from 
Algeria's Sonatrach, put delivered prices at above $10/mmbtu. Our group 
at Stanford is heavily involved in analyzing this gas market, and we 
expect delivered gas prices will remain high--perhaps not as high as 
$10, but probably in the range of $7-$8/mmbtu.\1\
---------------------------------------------------------------------------
    \1\ Jackson, Mike (2006). ``India: challenges to growth,'' in 
Fundamentals of the World Gas Industry, 2006. Petroleum Economist.
---------------------------------------------------------------------------
    Nuclear. Until now, nuclear power has been controlled by the 
central government, mainly for non-energy purposes (namely weapons), 
and has not been exposed to commercial accountability. In addition, 
India's domestic uranium reserves are quite meager--the Atomic Energy 
Commission estimates that domestic resources could support only 10 GW 
of installed nuclear capacity.\2\ Thus, not surprisingly, nuclear 
energy has played only a small role in the power sector. Whether and 
how that could change is at stake in this deal.
---------------------------------------------------------------------------
    \2\ Presentation by Kakodkar, Anil: Chairman, Atomic Energy 
Commission (2005). ``Energy in India for the Coming Decades.''
---------------------------------------------------------------------------
    The India nuclear deal would provide for ``full'' civil nuclear 
cooperation between the U.S. and India. By enabling India to import 
modern nuclear energy technology, as well as uranium, a properly 
regulated deal would in effect alleviate the historical restrictions 
placed on civilian Indian nuclear power.
    Coal. In the past and in the foreseeable future coal is expected to 
provide most of India's electricity. In fact, coal has not met its full 
market potential in the last decade because coal supplies are 
unreliable (partly because the railroad network is badly in need of 
investment) and of notoriously low quality. Both those impediments to 
coal sector growth are being alleviated. India has begun to encourage 
private investment into coal mines and pithead power plants that will 
send the coal ``by wire'' to the national electric grid rather than via 
railcars. In addition, the country has adopted favorable rules to 
encourage investment in the inter-state power grid, enabling the grid 
to move much larger quantities of electricity.\3\ At the same time, 
changes in import tariffs are making it easier to import high quality 
coal from other countries; those imports, in turn, are inducing India's 
domestic coal industry to perform better. These reforms are set to have 
a huge impact on growth in coal-fired capacity. India is soliciting 
bids for five new 4 GW coal-fired power projects (known as the ``ultra 
mega power projects'')--two of which will produce electricity at coal 
pitheads in the interior of the country and three coastal plants that 
will import foreign coal supplies.
---------------------------------------------------------------------------
    \3\ In fact, India's power regulations indirectly encourage 
projects that transmit power long distances across state lines because 
such inter-state investments are governed by federal regulators and can 
be managed more reliably than projects that are exposed to the whims of 
state regulators.
---------------------------------------------------------------------------
    In this context, the question for the India's energy future centers 
on the rivals to coal. Where alternative fuels can be successful, the 
share left to coal will decline. All the rivals have problems. For 
hydro and renewables those problems are severe, and the United States, 
in any case, has no ability to influence them. For gas the severity of 
the problems created by high gas prices are not yet known. On the one 
hand, high prices have discouraged (but not stopped) investment in 
plants that use gas. Indeed, some investors who would have built gas-
fired power plants are now looking closely at coal. On the other hand, 
barely a month passes without the announcement of new gas discoveries 
in India (in particular the large resources discovered off the 
country's east cost). These new gas supplies may eventually help to 
lower the price of gas, which in turn will allow for a much larger gas-
fired generation capacity.
    For nuclear, the future is really wide open. So long as India's 
nuclear industry remains isolated, it is hard to see that India will 
build more than the occasional reactor as the cost basis for nuclear 
equipment will be too high and fuel needed for such reactors will not 
be available. Some critics have claimed that allowing exports of fuel 
for use in Indian commercial reactors will free up domestic fuel 
supplies for use in the nuclear weapons program. The more likely 
outcome is that India simply will not expand its commercial reactor 
fleet so that the military program can obtain the fuel it needs.
    It is hard to predict with certainty how the costs of the different 
options will unfold. In Table 1, I focus on the main contenders: 
nuclear, coal, and natural gas. I show estimates for nuclear power 
drawn from a study by a group at MIT evaluating nuclear power in 
developed countries (``high'' and ``medium cost'' estimates) and also 
from a study that focuses on nuclear power options in the Indian 
context (``low cost'') but used a notably low capital cost estimate. 
The coal numbers provide an approximation for costs of a new pulverized 
coal plant--technology widely available in India--for a plant that 
meets U.S. environmental standards, as well as a conventional plant in 
India. The estimates for gas are based on the Indian experience and 
levelized costs are shown at different prices--from the low price for 
public gas (which is essentially unavailable for new power plants) to 
various feasible private gas prices.

           Table 1.--CARBON IMPLICATIONS OF INDIA NUCLEAR DEAL
------------------------------------------------------------------------
                    Generation options                      US cents/kWh
------------------------------------------------------------------------
Nuclear--Light Water Reactor
    High Cost \1\........................................        6.7
    Medium Cost \1\......................................        4.2
    Low Cost \2\.........................................        3.8
Pulverized Coal
    U.S. Context \1\ *...................................        4.2
    Indian Context \3\ *.................................        3.9
Natural Gas
    Public Supplier ($2.86/mmbtu) \3\....................        4.6
    Private Supplier ($5/mmbtu) \3\......................        6.9
    Private Supplier ($8/mmbtu) \3\......................       10.1
------------------------------------------------------------------------
\1\ Massachusetts Institute of Technology (2003). The Future of Nuclear
  Power: An Interdisciplinary MIT Study.
\2\ Bharadwaj, Anshu, Rahul Tongia, and V.S. Arunachalam (2006).
  ``Whither Nuclear Power?'' Economic and Political Weekly 41(12): 1203-
  1212.
\3\ Adapted from Shukla, P.R., et al. (2004). Electricity Reforms in
  India: Firm Choices and Emerging Generation Markets
* Both coal calculations based on assumed delivered cost of US$1.20/
  mmbtu.

    Three things are clear from Table 1. First, at the high gas prices 
typical of today's market, gas-fired electricity is extremely 
expensive. Second, while there are many uncertainties--especially for 
nuclear power--the cost of coal and nuclear are comparable. Third, the 
costs noted in Table 1 may exaggerate the cost advantage of coal 
because coal-fired electricity has larger environmental consequences. 
(The ``U.S. Context'' number is for a plant capable of meeting current 
U.S. environmental standards; the ``Indian Context'' number includes 
some particulate control but only monitoring of other pollutants). If 
these are taken into account, nuclear power would be even more 
competitive with coal.

                CO2 AND GLOBAL CLIMATE CHANGE

    While there remains some divergence in opinion in the United States 
about the causes of global changes in climate and the severity of the 
global climate problem, the risk of unacceptable changes in climate 
will undoubtedly rise with increasing atmospheric concentrations of 
CO2 and other greenhouse gases. It is impossible to predict 
the outcomes from climate change with complete certainty. (Indeed, the 
most worrisome possible changes are the least certain, such as possible 
catastrophic rise in sea level, a change in ocean currents, or the 
destruction of vast ecosystems like the Amazonian rainforest). Looking 
at the totality of the evidence, however, it is hard to escape the 
conclusion that a prudent and risk-averse policy strategy toward the 
threat of global climate change must include a substantial effort to 
control emissions. And because those emissions emanate globally, such a 
strategy must be pursued globally.
    The CO2 savings implications of replacing coal with a 
range of installed nuclear capacities are provided in Figure 2 above. 
Because there is considerable uncertainty as to the exact amount of new 
nuclear capacity likely to arise from the deal, Figure 2 shows a line 
rather than any particular point. India's track record of installing 
power plants, combined with the difficulties that are likely to arise 
in a shift to a truly commercial nuclear power program, suggest to me 
that new nuclear capacity could be in the range of 10-20GW by 2020. The 
State Department has proposed that 20GW of new nuclear capacity could 
be built by 2020--this represents a middle-of-the-road estimate 
provided by Secretary of State Condoleezza Rice in her April 5th 
remarks to the Senate Foreign Relations Committee. Under this scenario, 
by displacing 20GW of capacity that would otherwise be coal-fired, the 
new nuclear capacity would save 145 million tonnes of CO2 
per year.\4\ Indian Prime Minister Manmohan Singh has recently 
suggested that the India nuclear deal could have even larger 
implications, arguing that it might lead India to install up to 40GW of 
new nuclear capacity by 2015.
---------------------------------------------------------------------------
    \4\ Jackson, Mike, et al. (2006). ``Greenhouse Gas Implications in 
Large Infrastructure Investments in Developing Countries: Examples from 
China and India'' (working paper, Program on Energy and Sustainable 
Development, Stanford University).
---------------------------------------------------------------------------
    In Figure 3, I put the CO2 savings from a 20 GW buildout 
of nuclear power into perspective by comparing it with other relevant 
emission estimates. The annual savings from the Indian deal could be 
nearly as large as the entire commitment of the 25 EU nations to 
reducing emissions under the Kyoto Protocol. This single arrangement in 
India would exceed the total carbon savings from the 100 largest 
developing country projects under the Kyoto Protocol's Clean 
Development Mechanism (CDM). At present, the CDM is the only mechanism 
for engaging developing countries in the effort to control greenhouse 
gas emissions.

              BEYOND INDIA: ENGAGING DEVELOPING COUNTRIES

    Until now, developing countries have adamantly refused to limit 
their emissions of greenhouse gases. These countries are wary that the 
possible high costs of climate change mitigation will jeopardize their 
development goals. The result of that opposition is the CDM--a system 
that compensates developing countries for the full extra cost of any 
policies to control emissions. The CDM was a good idea in principle, 
but in practice it is not working well. The scheme has become mired in 
red tape as countries and investors try to establish their baseline 
levels of emissions and the reduction in emissions from each project. 
(The difference between the baseline and the reduced level is the key 
to the CDM concept--that difference becomes a credit that can be used 
to offset emission obligations elsewhere in the world, such as in 
Europe's emission trading system). The problems have encouraged gaming 
and they have caused CDM investors to focus on activities that are easy 
to quantify and which are marginal in nature. Indeed, energy projects 
account for just 17% of the CDM pipeline. Almost none of the energy 
projects are of the type that will lead to fundamental changes in 
countries' energy systems.\5\
---------------------------------------------------------------------------
    \5\ Wara, Michael (Forthcoming, 2006). Measuring the Clean 
Development Mechanism's Performance and Potential.
---------------------------------------------------------------------------
    If the India nuclear deal is successful, it will frame a new 
approach to engaging developing countries in a climate strategy. This 
approach would focus on finding game-changing policies that align with 
reluctant countries' interests.\6\ Rather than involving hundreds of 
small and marginal projects, this style of engagement would focus on 
just a handful of large pivotal actions involving just a few critical 
countries. This concept is incidentally at the core of the Asia-Pacific 
Partnership on Clean Development and Climate, whose six members, 
including India and the U.S., account for half the world's greenhouse 
gas emissions. That Partnership has promise, but it remains young. 
Success with this nuclear deal could offer a credible example of 
practical actions that the Partnership could encourage.
---------------------------------------------------------------------------
    \6\ See T.C. Heller and P.R. Shukla (2003). ``Development and 
Climate: Engaging Developing Countries'' in: J.E. Aldy et al., Beyond 
Kyoto: Advancing the International Effort Against Climate Change. Pew 
Center on Global Climate Change.
---------------------------------------------------------------------------
           PROLIFERATION, INDIAN POLITICS AND THE FUEL CYCLE

    My brief in this testimony is to focus on the possible 
environmental benefits of the India nuclear deal. I close, though, with 
a brief word on proliferation.\7\
---------------------------------------------------------------------------
    \7\ I am mindful that many others have written much more 
extensively on these subjects. Notably, Levi, Michael A., and Charles 
D. Ferguson (2006). ``U.S.-India Nuclear Cooperation: A Strategy for 
Moving Forward,'' Council on Foreign Relations, CSR No. 16. and 
Squassoni, Sharon (2006). ``U.S. Nuclear Cooperation With India: Issues 
for Congress,'' CRS Report for Congress. Congressional Research 
Service.
---------------------------------------------------------------------------
    My sense is that the claims about proliferation risks stemming from 
this deal have been overblown for three reasons. One is that many 
observers are reluctant to treat India differently from other states 
that have acquired nuclear weapons. Yet that argument is not 
sustainable. India--in contrast with Pakistan, among others--has not 
been the locus for proliferation of weapons technologies to other 
states and possibly terrorists. Nor has India taken the kind of 
aggressive stance with its nuclear weapons program that has been 
evident in Iran or North Korea.
    A second reason for these hyperbolic claims about proliferation is 
critics have imagined the world as they would like it--a world before 
India's nuclear test and when the NPT was intact and functioning--
rather than the world as it really is. Both these reasons have been 
covered extensively and I will say no more on them.
    The third reason is that critics have imagined that the U.S. 
somehow got hoodwinked by India--for example, the list of facilities 
that are exempt from external scrutiny is longer than most U.S. 
analysts would like. This is a valid concern, but I think it misses the 
point because it imagines the India nuclear deal as a construct 
entirely of U.S. interests when, in fact, it is the product of a 
nascent cooperation between two democracies that must pay attention to 
how the deal plays locally. It is striking how much hostility the deal 
has engendered in the Indian press, as Indian nationalists portray this 
as an erosion of India's sovereign prerogative to sustain a nuclear 
weapons program. In such settings I think it is imperative that we give 
extensive deference to those who were able to negotiate a deal that 
(probably) has navigated these contours of Indian domestic politics 
while also delivering what is most essential for the U.S. to gain from 
the arrangement.
    The world is in the early stages of recrafting the fuel cycle. 
Among the proposals is the Administration's Global Nuclear Energy 
Partnership (GNEP). The IAEA has a proposal. A tailored proposal is 
emerging as the logical solution to the troubles with Iran's nuclear 
program--with off-site fuel production and storage. Similarly, success 
with the India nuclear deal can establish a practical framework for a 
new fuel cycle for India. Many in the anti-proliferation community have 
been uneasy about this shift in fuel cycles, but such a shift strikes 
me as inevitable. And a practical demonstration with a responsible 
country could go a long way to making these visions a practical reality 
with adequate protections against proliferation.

    The Chairman. Thank you very much.
    Mr. Poneman.

 STATEMENT OF DANIEL B. PONEMAN, PRINCIPAL, THE SCOWCROFT GROUP

    Mr. Poneman. Thank you, Mr. Chairman. It is an honor to 
appear before the committee and I also would just submit my 
written testimony for the record and summarize here.
    The Chairman. It's done.
    Mr. Poneman. I would also note that I am speaking in my 
personal capacity and not as a member of any institution or 
organization. I would also like to just focus on three basic 
points. No. 1, I do believe that U.S. interests are best served 
by a wide-ranging, deep and broad cooperation with India in 
energy. I cannot improve upon the comments of our 
administration colleagues on the panel before or Dr. Victor. I 
think it is clear that across the full range of diverse energy 
sources, be it biomass synthetic fuels, clean coal or 
whatever--we need to and Mr. Chairman, you noted it in your 
remarks--we need to deepen and strengthen that cooperation and 
indeed, this forms only a part of a much broader degree of 
strategic engagement the United States, I think, must have with 
India, given that we are the world's two most populous 
democracies, we have coherent interests across a broad array of 
international security interests and we are clearly much the 
better for being able to work very cooperatively with India.
    My second point. Nuclear power can play an indispensable 
role in meeting the growing need for the large amounts of 
electricity that the world needs without aggravating greenhouse 
gas emissions. Once again, Dr. Victor, I think, provided some 
very stunning statistics in this degree but I would note that I 
have been working in these issues for 30 years, over 30 years, 
starting as an intern in the Senate, after the first Indian 
nuclear test in 1974, and it is remarkable to witness, as we 
have in the last few years, how public perceptions of nuclear 
have evolved in a remarkable direction. We're not there yet but 
we are now seeing large increases in deployed nuclear power 
being considered in India, in China, in Russia, indeed in this 
country. It is critical, it seems to me, that as part of any 
coherent strategy, to minimize greenhouse gas emissions, that 
we pursue with all vigor, all sources of energy, certainly 
including nuclear.
    This brings me to my third point. We must, it seems to me, 
pursue that nuclear option in a way that minimizes the threats 
of nuclear weapons proliferation. Just consider. If you look at 
the MIT study of a few years back, merely to maintain the 
current share of deployed nuclear power as a source of 
electricity, at about 17 percent of global supplies, could 
imply, at the growth rates that we've already heard of energy 
consumptions, the deployment of something like 1,000 nuclear 
powerplants by mid-century. If you associate with that 
expansion of nuclear power, a similar expansion of nuclear fuel 
facilities, of enrichment capabilities and reprocessing 
capabilities, and if you consider the nuclear weapons threats 
to those facilities entail, in terms of providing possible 
access to weapons-grade uranium and weapons-grade plutonium, we 
face a critical national security threat. That is why I have 
supported President Bush's proposals in February 2004, to 
minimize the spread of enrichment and reprocessing facilities, 
that is why I believe that the Global Nuclear Energy 
Partnership the President promoted earlier this year and its 
reliable fuel assurance, are critical contributors to that 
nonproliferation effort.
    In that respect, I would like to note that I think that it 
may well be that India, once it is engaged in nuclear 
cooperation with the United States, based on the agreement for 
cooperation and the safeguard agreements, which we are all now 
anticipating will go through, India may be in a position to 
make a single contribution to the reduction of nuclear 
proliferation risks. I would note that in the July 18 Joint 
Statement between President Bush and Prime Minister Singh, 
Prime Minister Singh committed to refrain and I quote, ``from 
transfer of enrichment and reprocessing technologies to stats 
that do not have them and to supporting international efforts 
to limit their spread.'' Now, there have been a number of 
proposals from President Bush, from President Putin, from the 
International Atomic Energy Agency, Mr. El Baradei, the 
Director General there, on how one might do that. But I would 
like to suggest, for the consideration of the committee, one 
possibility that may be worthy of consideration. It is expected 
as it has been noted here today, that India will purchase a 
number of nuclear reactors from foreign suppliers. I would 
certainly hope that these would include U.S. reactors, all of 
which require enriched uranium fuel as do many of the foreign 
suppliers of reactors as well. India could, for example, offer 
to lease nuclear fuel from the suppliers of the nuclear 
reactors and other existing nuclear fuel suppliers. Suppliers 
would then retain title to that material and that material 
would never fall by legal title, into the hands of the user of 
the fuel. The spent fuel extracted from the reactor could 
either be stored in India or exported for storage in another 
country. Either way, the material would remain safeguarded and 
India would claim no right to extract or access the plutonium 
contained in the spent fuel. The IAEA could guarantee a back-up 
fuel supply to reassure the Indian government against the risk 
of an arbitrary cut-off of leased fuel. I emphasize this is a 
voluntary concept.
    By voluntarily refraining from enriched uranium or 
reprocessing plutonium for its civilian program, India would 
show international leadership, it would kick-start 
international efforts to provide fuel assurances in exchange 
for country pledges to refrain from enrichment and reprocessing 
and by offering an economical, reliable nuclear fuel solution 
to countries like Iran and Brazil, nuclear fuel leasing would 
reduce any justification for engaging in fuel cycle activities 
that would support nuclear weapons development. Nuclear fuel 
leasing would imbed the emerging U.S./Indian cooperation and 
civil nuclear energy into the warp and woof of global 
nonproliferation efforts. Moreover, it would not erode the NPT 
bargain, since India would show greater restraint than the 
treaty requires by voluntarily refraining from enrichment and 
reprocessing, neither of which are expressly prohibited by the 
treaty. Obviously, this is no panacea but I do believe it is an 
idea worthy of consideration and I would note that all of our 
best aspirations for a large-scale rapid deployment of new 
nuclear power will be jeopardized, critically perhaps, if we 
don't find some way, as the power expands, to limit the access 
to the critical enrichment and reprocessing technologies that 
bring with them the nuclear weapons threat that we have been 
fighting so hard and so long to avoid. Thank you, Mr. Chairman 
and members of the Committee.
    [The prepared statement of Mr. Poneman follows:]

Prepared Statement of Daniel B. Poneman, Principal, The Scowcroft Group

    Mr. Chairman, it is an honor to appear before the Committee on 
Energy and Natural Resources to discuss the prospects for energy 
cooperation between the United States and India, with particular focus 
on the role nuclear power can play in meeting those needs.
    I will focus my remarks on three aspects of this issue: the U.S.-
Indian energy relationship, the role of nuclear power in our energy 
future, and the need to ensure that our nuclear future minimizes the 
threat of the spread of nuclear weapons. Now that the Senate has acted 
on the U.S.-Indian civil nuclear cooperation initiative, and the 
Executive Branch has taken up the issue for negotiations with the 
Government of India and consultations in the Nuclear Suppliers Group, I 
do not propose to address that subject. Instead, I will base my 
comments on the assumption of a U.S.-Indian agreement for cooperation 
in the peaceful uses of nuclear energy, and of all requisite safeguards 
and approvals having been obtained from the International Atomic Energy 
Agency and the Nuclear Suppliers Group.
    I would like to offer three perspectives for the Committee's 
consideration. First, U.S. interests would be best served by a wide-
ranging, robust relationship promoting energy cooperation in all 
aspects. There is broad and deep consensus in our country in favor of 
strengthening relations between India and the United States. As the 
world's most populous democracies, we have much in common: our 
dedication to promote democracy and freedom, our commitment to promote 
human rights and fight terror, our efforts to increase trade and 
investment between our two nations, our cooperation to improve public 
health and to provide energy for our people while protecting our 
environment. We can do much together to promote the security of each of 
our nations and that of the international community.
    In the energy arena, the initiatives announced by President Bush 
and Prime Minister Singh this past March represent an important step in 
building the U.S.-Indian energy relationship. These include India's 
participation in the FutureGen international partnership to create a 
zero-emissions coal-fired power plant, its membership in the 
International Thermonuclear Experimental Reactor (ITER), and its work 
with the United States and other Asian nations in the Asia-Pacific 
Partnership on Clean Development and Climate. It would be in our 
national interest to see these efforts prosper, and to strengthen 
cooperation across the full range of fossil and renewable energy 
technologies not only at the government-to-government level but also at 
the business-to-business level. Expanding bilateral commercial 
relations between our two countries will help strengthen the political 
ties that bind us, thereby facilitating effective cooperation in 
tackling difficult political and security issues.
    Second, nuclear power can play an indispensable role in meeting the 
growing need for large amounts of electricity without aggravating 
greenhouse gas emissions. I have been working on nuclear energy issues 
for over thirty years. The years since then have witnessed many trials 
and tribulations for nuclear power. In addition to the concern that 
nuclear energy programs might be misused to,help develop nuclear 
weapons, the Three Mile Island and Chernobyl accidents reduced public 
confidence in the safety of nuclear power. Further, the chronic 
unresolved question of how ultimately to dispose of nuclear wastes in 
this and many other nations has also dogged efforts to rebuild public 
confidence in nuclear power.
    But attitudes toward nuclear power are changing. In part, the 
increased public support for nuclear power has reflected the intensive 
efforts of the nuclear industry to address the issues of public 
concern, including through the development of new and improved nuclear 
reactor designs of greater safety and efficiency. In addition, the 
citizens of the world are increasingly and properly concerned about the 
growing impact of global warming, rooted in the inexorable increase of 
global energy demand and the alarming growth of greenhouse gas 
emissions should the world rely excessively on fossil fuels to meet 
that demand.
    But it is not enough to chronicle changes in public attitude. Given 
the rate of projected increases in energy consumption over the coming 
decades, according to the 2003 MIT Study on the Future of Nuclear 
Power, the world will need to exercise all of its options--increased 
efficiency in electricity generation and use, expanded use of renewable 
energy sources, capture and sequestration of carbon dioxide emissions 
from fossil-fueled plants, and increased use of nuclear power--in order 
to make a significant impact on global warming. The MIT Study further 
concluded that, for nuclear power simply to maintain its current share 
of about 17 percent of total installed electricity generating capacity, 
it will need to grow from about 366 reactors today to 1000 or more 
reactors of 1000MWe capacity. India--with its size, its population, its 
growth rates, and its existing commitment to nuclear power--is likely 
to comprise a key component in the global nuclear energy scene for the 
rest of this century.
    Third, the promise of nuclear power can only be fully realized fwe 
take aggressive measures to combat the spread of nuclear weapons. It 
may be, as I have just suggested, that the world is on the verge of a 
major expansion in the fleet of nuclear reactors providing electricity 
in India and, indeed, around the world. But this future will only be 
realized if nuclear power is successful in addressing all relevant 
concerns: cost, safety, waste management, and proliferation risks. For 
the balance of my remarks, I will focus on managing the proliferation 
risks.
    Even as we envisage the possibility of a major expansion of nuclear 
power around the world, we are also confronting serious challenges in 
combating the spread of nuclear weapons, most notably in Iran and North 
Korea. While nuclear reactors themselves are not the central problem in 
promoting weapons proliferation, a massive expansion of nuclear power 
could be accompanied by a commensurate expansion of fuel cycle 
facilities capable of enriching uranium to use as nuclear power fuel 
and of processing spent fuel to separate out the plutonium from uranium 
and fission products. Those fuel cycle technologies can also be used to 
produce nuclear weapon-grade uranium and plutonium, and therefore do 
pose a significant proliferation risk. If the product of any fuel cycle 
plants are, in fact, diverted from peaceful to explosive purposes, it 
could not only lead to nuclear weapons possession by terrorists or 
other adversaries, but also abruptly destroy the public confidence 
critical to the survival of nuclear as a viable energy source.
    It is therefore critical, as we seek to promote the expansion of 
nuclear power, that we pay equal attention to preventing the 
proliferation of nuclear weapon capabilities. That is why President 
Bush was correct, in my view, in proposing in February 2004 that we 
take steps to minimize the spread of enrichment and reprocessing 
facilities, and why his proposal earlier this year under the Global 
Nuclear Energy Partnership to provide for a reliable fuel assurance 
also should be pursued with vigor.
    And in this respect, it may well be that India, once it is engaged 
in civil nuclear cooperation with the United States, may be in a 
position to make a signal contribution to the reduction of nuclear 
proliferation risks. In the July 18, 2005, Joint Statement by President 
Bush and Prime Minister Singh, the Prime Minister committed to refrain 
``from transfer of enrichment and reprocessing technologies to states 
that do not have them and [to] supporting international efforts to 
limit their spread.'' There have been a number of suggestions and 
proposals regarding how the international community might effectively 
limit the spread of enrichment and reprocessing technologies. Proposals 
in this arena have come from people in and out of government, from 
leaders including President Bush and President Putin, as well as from 
the Director General of the International Atomic Energy Agency, Mohamed 
ElBaradei.
    How could India support these efforts, as pledged in the July 18 
joint statement? It is expected that India will decide to purchase a 
number of nuclear reactors from foreign suppliers. I would certainly 
hope that these would include U.S. reactors, all of which require 
enriched uranium fuel. India could offer to lease nuclear fuel from 
abroad. Suppliers would lease enriched uranium fuel to Indian reactors, 
but title to the material would never pass. The spent fuel extracted 
from the reactor could either be stored in India or exported for 
storage in another country. Either way the material would remain 
safeguarded, and India would claim no right to extract or access the 
plutonium contained in the spent fuel. The IAEA could guarantee a back-
up fuel supply to reassure the Indian Government against the risk of an 
arbitrary cut-off of leased fuel.
    By voluntarily refraining from enriching uranium or reprocessing 
plutonium for its civilian program, India would show international 
leadership. It would kick-start international efforts to provide fuel 
assurances in exchange for country pledges to refrain from enrichment 
and reprocessing. By offering an economical, reliable nuclear fuel 
solution to countries like Iran and Brazil, nuclear fuel leasing would 
reduce any justification for engaging in fuel-cycle activities that 
would support nuclear weapons development.
    Nuclear fuel leasing would embed the emerging U.S.-Indian 
cooperation in civil nuclear energy into the warp and woof of global 
nonproliferation efforts. Moreover, it would not erode the NPT bargain, 
since India would show greater restraint than the treaty requires by 
voluntarily refraining from enrichment and reprocessing, neither or 
which are expressly prohibited by the treaty.
    Nuclear fuel leasing is no panacea. It would not purport to prevent 
all clandestine efforts to divert civilian nuclear programs to 
explosive purposes, or to block dedicated bomb builders who are 
pursuing purely military programs. It would, however, help reduce the 
risk that the global growth of atomic energy will lead to nuclear 
catastrophe. And for that India would justly earn the world's lasting 
gratitude.
    I would be happy to respond to any questions the Committee may 
have.

    The Chairman. Thank you very much.
    Mr. Gadbaw.

   STATEMENT OF R. MICHAEL GADBAW, VICE PRESIDENT AND SENIOR 
               COUNSEL, GENERAL ELECTRIC COMPANY

    Mr. Gadbaw. Mr. Chairman and members of the committee, 
thank you for the opportunity to provide a perspective on the 
role of commercial nuclear energy in the U.S./India strategic 
cooperation. I'd like to ask that my full testimony be put in 
the record and I will summarize.
    The Chairman. It will be made part of the record.
    Mr. Gadbaw. The growing partnership between the United 
States and India has profound implications for a wide range of 
issues that play into America's enduring national interests. 
Among them, Asian stability, global nonproliferation, Indian 
economic development and the renaissance of the nuclear 
industry.
    GE supports the implementation of this historic agreement, 
because we believe the strategic partnership that it will 
advance will serve the interests of both our countries in 
promoting global peace, security, nonproliferation and economic 
development.
    GE has had a unique vantage point from which to observe the 
evolution of this relationship and I have personally had 
occasion to travel extensively in India, most recently in March 
after the agreement was signed, when I had a chance to talk to 
the Department of Atomic Energy and other private sector and 
government officials about this agreement. We believe in the 
vision that President Bush and Prime Minister Manmohan Singh 
articulated in their Joint Statement in March regarding the 
role the United States and India must play together in 
addressing the challenges facing the world in this century. We 
have seen how the economic reforms launched by Manmohan Singh 
as Finance Minister in 1991 have committed India to a course of 
development through open markets, global trade, and investment.
    Together with many U.S. and Indian companies, GE has 
participated directly in the benefits of this evolving economic 
and political relationship. As economic reforms have stimulated 
unprecedented Indian economic growth, we have seen an 
increasing demand for U.S. products and technology, in 
aviation, power generation, rail, healthcare, and advanced 
materials benefiting the workers and suppliers. The opening of 
the civilian nuclear relationship will deepen the support for 
American jobs. For every order we receive for a 1\1/2\ gigawatt 
powerplant, we anticipate U.S. exports in the neighborhood of 
$1 billion, which would equate to supporting around 10,000 U.S. 
jobs.
    As you evaluate the policies needed to ensure the success 
of this agreement, I encourage you to look at how these 
policies work together. No longer can we divide policy into 
distinct compartments, separating security from economics, 
public policy from private commerce. Government officials and 
the private sector must work together to fully integrate the 
commercial and national security dimensions of government 
policies.
    Leading U.S. companies like General Electric, will play a 
crucial role in translating the strategic vision of U.S./Indian 
energy cooperation into a reality. Take for example, America's 
interests in revitalizing the nonproliferation regime to 
include a responsible nuclear India. As they do business in 
India, U.S. companies will bring global standards of compliance 
and processes to safeguard the international legal regime 
controlling nuclear technologies. Moreover, nuclear cooperation 
will require intense and ongoing interaction among governments, 
local energy providers, and U.S. nuclear suppliers, which will 
help to increase the transparency of Indian's nuclear program 
while tightening the relationships between the U.S. and Indian 
energy sectors.
    India's economy is growing dramatically with the potential 
to lift hundreds of millions out of poverty. To sustain its 
current growth trajectory, India will have to increase its 
energy consumption by around 4 percent annually.
    Although coal, oil and natural gas dominate India's current 
energy mix, India's future will increasingly rely on nuclear 
energy. This is partly due to resource constraints. Nuclear 
power has long-term advantages for India's development. India 
has large reserves of coal but its high ash content poses 
significant environmental problems. Nuclear energy is a cleaner 
resource. Further, unlike imported gas, oil and LNG, nuclear 
power would improve India's energy security and lessen its 
geopolitical anxiety over foreign energy sources. The Indian 
government has set an ambitious target for its nuclear 
expansion. It hopes to achieve a nuclear capacity of around 
10,000 megawatts by 2011, 2012 and it has recently announced a 
doubling of its need by 2020, to 40,000 megawatts.
    Given India's desire to expand its nuclear capacity so 
quickly and significantly, U.S. nuclear suppliers have an 
excellent opportunity to participate in India's energy 
development and expanding the energy supply will also require 
broader improvements in India's infrastructure, creating even 
more opportunities for American companies.
    U.S. companies can help the United States become an 
integral partner in India's economic development. As the last 
U.S. owned nuclear technology company, GE is committed to do 
its part. ABWR--Advanced Boiling Water Reactor--is the most 
modern and advanced design ever built with installations in 
Japan and Taiwan. ABWR has already received NRC certification. 
Looking to the future, GE's ESBWR, the economic-simplified 
boiling water reactor is cheaper and safer than existing 
reactor technologies.
    France and Russia started early in cultivating political 
channels into India's nuclear market but American companies 
have the capability to take a leading position as India seeks 
new reactors. GE not only has great technology but also a 
history of a successful partnership in India.
    U.S. nuclear suppliers can thrive in the Indian market but 
government policies must enable them to act rapidly and 
effectively. This means that U.S. policy-makers must be 
sensitive to the link between security and economics. It is not 
enough to focus only on formal nonproliferation agreements 
between India and the United States, i.e., IAEA or NSG, the 
nuclear suppliers group. The U.S. Government must think broadly 
about a range of policies that counts for the needs of 
commerce.
    One pressing example is nuclear compensation and liability. 
The International Atomic Energy Agency's convention on 
supplementary compensation for nuclear damage establishes an 
updated global system for compensation in the event of a 
nuclear incident outside the United States. We are pleased that 
Senate consent to ratify was approved in May by the Senate 
Foreign Relations Committee and is ready for action by the full 
Senate. We hope that your committee will work promptly on any 
necessary implementing legislation. This initiative is vital if 
U.S. companies are to engage in foreign nuclear markets.
    The U.S./Indian strategic alliance driven by nuclear energy 
cooperation opens an array of opportunities for U.S. companies. 
General Electric is ready to support this endeavor. We are 
confident that with appropriate government policy and advocacy 
support, U.S. companies can take a leading role in developing 
India's energy capabilities. In the end, American commerce 
underpins the national security goals that animate the U.S./
India deal and give substance to the deal's domestic 
aspiration, the renaissance of America's civilian nuclear 
industry. Thank you.
    [The prepared statement of Mr. Gadbaw follows:]

  Prepared Statement of R. Michael Gadbaw, Vice President and Senior 
                   Counsel, General Electric Company

    Mr. Chairman and Members of the Committee, thank you for the 
opportunity today to provide a perspective on the role of commercial 
nuclear energy in U.S.-India strategic cooperation. The burgeoning 
partnership between the United States and India has profound 
implications for a wide range of issues--Asian stability, global non-
proliferation, Indian economic development, and the renaissance of the 
nuclear industry--that play into America's enduring national interests.
    GE supports the implementation of this historic agreement, because 
we believe the strategic-partnership that it will advance will serve 
the interests of both our countries in promoting global peace, 
security, non-proliferation, and economic development.
    GE has had a unique vantage point from which to observe the 
evolution of this relationship. We believe in the vision that President 
Bush and Prime Minister Manmohan Singh articulated in their joint 
statement of March 1, 2006, regarding the role the United States and 
India must play together in addressing the challenges facing the world 
in this century. We have seen how the economic reforms launched by 
Manmohan Singh as Finance Minister in 1991 have committed India to a 
course of development through open markets, global trade, and 
investment. Ratified and affirmed through a series of democratic 
elections and successive governments, these policies have created 
political, economic, and commercial linkages and understandings between 
our two countries on ways to increase our mutual security and address 
the threats we face from intolerance, terrorism, and the spread of 
weapons of mass destruction.
    Together with many U.S. and Indian companies, GE has participated 
directly in the benefits of this evolving economic and political 
relationship. As economic reforms have stimulated unprecedented Indian 
economic growth, we have seen the increasing demand for U.S. products 
and technology in aviation, power generation, rail, healthcare, and 
advanced materials benefiting our workers and suppliers. The opening of 
the civilian nuclear relationship will deepen this support for American 
jobs. For every order we receive for a 1.5 GW power plant, we 
anticipate U.S. exports in the neighborhood of $1 billion, which would 
equate to supporting about 10,000 U.S. jobs.

          THE COMMERCIAL ROLE IN STRATEGIC ENERGY COOPERATION

    As you evaluate the policies needed to ensure the success of this 
agreement, I encourage you to took at how these policies work together. 
No longer can we divide nuclear policy into distinct compartments, 
separating security from economics, public policy from private 
commerce. Consequently, government officials and the private sector 
must work together to fully integrate the commercial and national 
security dimensions of government policies.
    Secretary of State Condoleezza Rice recognized in her July 10, 
2006, speech that

        there is a new spirit of partnership between India and the 
        United States and that spirit of partnership arises, first and 
        foremost, from our people, from deep ties and shared 
        aspirations that bind our democratic societies. . . . The 
        relations between our people 'point a way forward for 
        cooperation between our governments.

    The U.S.-India relationship will be cemented through social and 
especially economic exchange. Government policy should be designed to 
encourage and expand those channels of private activity--nowhere more 
than the nuclear energy sector, where international security, national 
economic development, and commercial innovation come together.
    Leading U.S. companies like General Electric will play a crucial 
role in translating the strategic vision of U.S.-Indian energy 
cooperation into a reality. Take America's interest in revitalizing the 
non-proliferation regime to include a responsible nuclear India. As 
they do business in India, U.S. companies will bring global standards 
of compliance and processes to safeguard the international legal regime 
controlling nuclear, technologies. Moreover, nuclear cooperation will 
require intense and ongoing interaction among governments, local energy 
providers, and U.S. nuclear suppliers, which will help to increase the 
transparency of India's nuclear program while tightening the 
relationships between the U.S. and Indian energy sectors.

                          INDIA'S ENERGY NEEDS

    India's economy is growing dramatically, with the potential to lift 
hundreds of millions out of poverty. But India needs a huge expansion 
of power generation to fuel its demand for energy. India currently 
produces over 139 GWe of electricity, some 2 percent of which is 
nuclear (2.7 GWe).\1\ To sustain its current growth trajectory, India 
will have to increase its energy consumption by around 4 percent 
annually.\2\
---------------------------------------------------------------------------
    \1\ Report on Growth of Nuclear Energy in India, Department of 
Atomic Energy, 2004.
    \2\ Sumit Ganguty, Testimony before the Committee on Foreign 
Relations, U.S. Senate, ``Energy Trends in China and India: 
Implications for the United States,'' July 26, 2005.
---------------------------------------------------------------------------
    Although coal, oil, and natural gas dominate India's current energy 
mix (constituting roughly 52, 34, and 7 percent of India's energy 
consumption, respectively),\3\ India's future will increasingly rely on 
nuclear energy. This is partly due to resource constraints. A study by 
the Nuclear Power Corporation of India Limited, which is owned by the 
Indian government, analyzes the power generation potential of India's 
resource base. Whereas India's 38 billion tons of coat could produce 
7,614 GWe-years of electricity, and its 12 billion tons of oil and 
natural gas could produce 5,833 GWe-years, it has enough thorium 
(225,000 tons) to produce more than 155,502 GWe-years.\4\ Moreover, 
importing uranium to augment its indigenous supply of 61,000 tons costs 
less per unit of electricity generated than importing coat, oil, or 
gas.\5\ Nuclear energy also becomes important due to India's strategy 
for economic growth. Nuclear power has long-term advantages for India's 
development: India has large reserves of coal, but its high ash-content 
poses significant environmental problems; nuclear energy is a cleaner 
resource. Further, unlike imported gas, oil, and LNG, nuclear power, 
would improve India's energy security and lessen its geopolitical 
anxiety over foreign energy sources.
---------------------------------------------------------------------------
    \3\ ``India,'' Country Analysis Briefs, U.S. Energy Information 
Administration, http://www.eia.doe.gov/emeu/cabs/India/Full.html (as of 
December 2005).
    \4\ ``India's Vision: Nuclear Energy,'' Nuclear Power Corporation 
of India, Ltd. (NPCIL), presentation by S. Vedmoorthy to the India 
Energy Symposium, March 2, 2006.
    \5\ ``A Strategy for Growth of Electrical Energy in India, 
Department of Atomic Energy, http://www.dae.gov.in/publ/doc10/index.htm 
(as of July 17, 2006). Other sources estimate India's uranium supply to 
be as high as 78,000 tons. See Ashley J. Tellis, Atoms for War? U.S.-
Indian Civilian Nuclear Cooperation and India's Nuclear Arsenal, 
Carnegie Endowment for International Peace, June 2006, http://
www.carnegieendowment.org/files/atomsforwarrevised1.pdf.
---------------------------------------------------------------------------
    The Indian government has set ambitious targets for India's nuclear 
expansion. It hopes to achieve a nuclear capacity of about 10,000 MWe 
by 2011-12 and 40,000 MWe by 2020.\6\ By 2052, according to India's 
Department of Atomic Energy, India hopes to have a nuclear capacity of 
275 GWe, with nuclear technologies providing 20 percent of India's 
overall fuel mix (up from 2 percent today). Coal, by contrast, will go 
from constituting more than half of India's installed electrical 
capacity to about 46 percent by 2052, oil and gas from 24 percent to 15 
percent.\7\
---------------------------------------------------------------------------
    \6\ NPCIL, 2006. Originally, the 2020 target was 20,000 MWe; the 
Indian government recently doubled it.
    \7\ Department of Atomic Energy, 2004.
---------------------------------------------------------------------------
    Given India's desire to expand its nuclear capacity so quickly and 
significantly, U.S. nuclear suppliers have an excellent opportunity to 
participate in India's energy development. And expanding the energy 
supply will also require broader improvements in India's 
infrastructure, creating even more opportunities for American 
companies.

                OPPORTUNITIES FOR U.S. NUCLEAR SUPPLIERS

    U.S. companies can help the United States to become an integral 
partner in India's economic development. As the last U.S.-owned nuclear 
technology company, GE is committed to do its part. GE's ABWR (Advanced 
Boiling Water Reactor) is the most modern and advanced design ever 
built, with installations in Japan and Taiwan. ABWR has already 
received NRC certification. Looking to the future, GE's ESBWR (Economic 
Simplified Boiling Water Reactor) is cheaper and safer than existing 
reactor technologies.
    France and Russia started early in cultivating political channels 
into India's nuclear market. But American companies have the capability 
to take a leading position as India seeks new reactors. GE not only has 
great technology, but also a history of successful partnerships in 
India. The Indians know this from their experience with the Tarapur BWR 
site, built by GE, which is the lowest-cost source of energy in India 
according to officials of the Indian Department of Atomic Energy.
    Furthermore, India recognizes the political importance of America's 
decision to draw closer to it. America has enabled India to enter the 
nuclear fold. The Indian government understands the inconsistency, 
then, of excluding competitive American companies from participating in 
India's new commercial opportunities.
   u.s. government policies--understanding the security-commerce link
    U.S. nuclear suppliers can thrive in the Indian market, but 
government policies must enable them to act rapidly and effectively. 
And the U.S. government must make clear its expectation that U.S. 
companies will succeed in India as they have succeeded elsewhere. 
Government engagement and advocacy are essential.
    Again, this means that U.S. policymakers must be sensitive to the 
link between security and economics. Commerce between America and India 
creates the linkages, the transparency, and the safeguards that advance 
our national security--but commerce requires a conducive policy 
environment. Although crucial, it is not enough to focus only on formal 
non-proliferation agreements between India and the United States, IAEA, 
or NSG. The U.S. government must think broadly about a range of 
policies that accounts for the needs of commerce.
    One pressing example is nuclear liability: The International Atomic 
Energy Agency's Convention on Supplementary Compensation for Nuclear 
Damage (CSC) establishes an updated, global system for compensation in 
the event of a nuclear incident outside the United States. We are 
pleased that Senate consent to ratify was approved in May by the Senate 
Foreign Relations Committee and is ready for action by the full Senate. 
We hope that the Senate Energy and Natural Resources Committee will 
work promptly on any necessary implementing legislation. This 
initiative is vital if U.S. companies are to engage foreign nuclear 
markets. Without a system ensuring compensation and nuclear liability 
protection, U.S. companies will find the risks of doing business 
prohibitive. Moreover, key states--like Japan, South Korea, Canada, 
Ukraine, China, and not least India--are waiting for America to take 
the lead in joining the CSC, which the United States promoted and was 
the first country to sign in 1997. They could be persuaded to join if 
America does so first. The CSC would then reflect a global standard for 
nuclear liability that could be used to structure legal arrangements 
with others as well. If America fails to take the lead, however, the 
CSC will lose momentum and the opportunity could be lost to establish a 
global standard for compensation and dealing with legal liabilities in 
this important area.

                               CONCLUSION

    The U.S.-Indian rapprochement, driven by nuclear-energy 
cooperation, opens an array of opportunities for U.S. companies. 
General Electric is ready to support this endeavor. We are confident 
that, with appropriate government policy and advocacy support, U.S. 
companies can take a leading role in developing India's energy 
capabilities. in the end, American commerce underpins the national 
security goals that animate the U.S.-India deal, and gives substance to 
the deal's domestic aspiration: the renaissance of America's civilian 
nuclear industry.
    Thank you for your time and attention.

    The Chairman. Thank you very much.
    Senator Bingaman.
    Senator Bingaman. Thank you all for being here. Let me ask, 
first of all, Mr. Poneman, ask you about your suggestion. I 
think it is a constructive suggestion that perhaps India could 
be persuaded to lease the nuclear fuel that they need in new 
reactors from abroad. But is there anything in the works or 
anything that has occurred that would lead us to believe they 
might be willing to do that? I'm just not aware of it. I mean, 
I like the idea but it just strikes me that now that they have 
negotiated the agreement that they negotiated with us, there is 
no incentive for them to do anything like that. It is the kind 
of thing that might have been part of a negotiation but it was 
not.
    Mr. Poneman. Thank you very much for the question, Senator. 
I think this is on. I'd make, I guess, a couple of comments. I 
think I would certainly, as a tactical negotiating matter, I 
cannot get to the point that you just made in the sense that if 
one were to make this as part of a deal, one's leverage would 
have been greater earlier. There is no question about that. 
That having been said, the watch word that we have always heard 
from the Indian government is something that is asked of them 
cannot go beyond the July 18 Joint Statement from last year 
between the Prime Minister and the President. And when I first 
mentioned this concept to an Indian colleague, my attention was 
invited to that line in the Joint Statement, which I quoted in 
my prepared statement, which said that India agrees not to 
export these enrichment or reprocessing facilities and to 
support international efforts to prevent their spread. So I 
think if you couch it in terms of the July 18th Joint 
Statement--A--and B, make sure that it is framed as an 
opportunity and an option, which having gotten through the 
gates of the safeguards agreement and the 123 Agreement and the 
rest, that they could voluntarily do, I think there is a 
chance. I think that it is better to light one candle than 
curse the darkness. I'm not under any illusions that it is 
something that would be rapidly and warmly embraced today by 
the Indians. But I think under those other circumstances it 
might be possible.
    Senator Bingaman. Are you under the impression that this is 
something that our own administration would advance to the 
Indians as an initiative they might consider?
    Mr. Poneman. Well, having served on the National Security 
Council for 6 years, I am cautious about speaking for a 
government I'm no longer a member of. I have discussed this 
idea with members in the administration. I have found, I think, 
generally positive reactions to the idea, whether they would 
choose to put it forward in a negotiation with the Indians, I 
would not presume on their behalf.
    Senator Bingaman. Mr. Gadbaw, let me ask you. In your 
statement, you make the general statement here, toward the 
beginning of your testimony, General Electric supports the 
implementation of this historic agreement because we believe 
the strategic partnership that it will advance will serve the 
interests of both our countries in promoting, and then you have 
a variety of things it is going to promote, one of which is 
nonproliferation. How do you see that? How do you reach the 
conclusion that this agreement will promote nonproliferation?
    Mr. Gadbaw. Senator, that really comes from a judgment 
looking at this relationship over quite a number of years. I, 
in my role in General Electric, got involved with India, really 
in the early nineties and I have seen that country--at that 
time, coming to the United States and came to GE and 
representatives asking why is India not even on the radar here 
in the United States. A lot of things have happened over the 
last 15 years that have brought our two countries much closer 
together. As we as a company look out over the next 10 years, 
we see India as a country that will be the kind of allay that 
the United States wants. So it is really about our alignment of 
interests in the broadest sense of the term. I think this 
agreement is one step in that longer process. I don't think it 
freezes in time our mutual interests. So I think in a broad 
sense, it brings those interests together around 
nonproliferation and brings India into cooperation with us, 
particularly in this civilian nuclear area. In that particular 
area, in the scope of this agreement, I think American 
companies being part of that market, bringing their approach to 
compliance with the export control laws, both in the United 
States and with India, working with our suppliers to create an 
understanding of how to implement and enforce those rules, will 
actually set a standard that will enhance the ability to 
control the proliferation of this technology and advance our 
mutual interests. So I see both in a macro sense and in a micro 
sense, this alignment of interests working towards what I think 
are both countries' interests in controlling the proliferation 
of nuclear weapons. India has had a great track record in that 
regard, despite the fact that it is in a neighborhood that is a 
very difficult one.
    Senator Bingaman. My time is up, Mr. Chairman. Thank you.
    The Chairman. Well, Senator Bingaman, you got right to the 
point. One of the most important things we discuss here today 
is obviously this issue. Question. How do you test the waters? 
How do you see it will move? It would seem to me and I would 
just put this to one of you, perhaps Mr. Poneman first. It 
would seem to be that if I were them, I wouldn't be very 
interested unless it was a broader-scoped agreement that 
involved a number of countries, not just India. I mean, India 
would say, what are you doing talking about us as if we are in 
some way most apt to be violative of this process. We are 
cleaner than most. We would be more apt to be okay without any 
of this agreement. We probably are not going to be 
proliferators, which I think is a fair statement. They could 
make that not offend me, based on their performance. So answer 
with me whether this should be a broader-based agreement and 
how does that happen and is it happening?
    Mr. Poneman. Senator, I could not agree more. I am looking 
at this as a global issue.
    The Chairman. Okay.
    Mr. Poneman. I am thinking of this in terms, for example, 
of President Bush's initiative in February 2004, to minimize 
those states around the world that are engaged in the 
commercial enrichment of uranium and reprocessing of plutonium 
from spent fuel. My suggestion is that--and of course, we now 
have the G8 having considered this and President Putin having 
his initiative. I think what is very, very important is to 
drain the notion of singling out a Nation as part of this 
equation. If it is to work, it must be voluntary, it must be 
consensual. Very few countries will simply knuckle under and 
say, I'm going to do this because you want me to do this. But 
when you think of aircraft, when you think of automobiles, when 
you think of a number of commodities, there is a very rich vein 
and history about leading. I think there is a very attractive 
proposition, an attractive may I say commercial proposition to 
be put to a number of nations that says, hey look, rather than 
mining the uranium, milling, converting, enriching, fabricating 
the fuel, going through all those headaches and being saddled 
with a bunch of spent fuel you don't know what to do with, why 
don't you lease it from this company? We'll give you a good 
price. We'll give you a 10-year guarantee. Discounts could be 
applied. You could have assurances of supply and backstopping 
arrangements from the IAEA. My suggestion is to really echo a 
couple of points, one from you, Mr. Chairman, that if we are to 
make this a meaningful relationship, it can't be just the 
rhetoric, it's got to be practical and I think this is 
practical and then to echo my colleague, Mr. Gadbaw, when he 
talks about getting commercial interests to align with our 
national security interests. If we can get this whole 
discussion in that context and at the same time, talk about it, 
yes, more broadly, I think India could play a leadership role 
in having something like this become an effective mechanism.
    The Chairman. Who is taking the lead in this idea of 
leasing?
    Mr. Poneman. Well, there have been a number of governments 
that have discussed it. I think you will recall that when Prime 
Minister Howard was visiting President Bush just a few weeks 
ago, there was some discussion in the run-up to that visit in 
Australia about nuclear fuel leasing. I have, with a number of 
my colleagues, many of whom are well known to this committee, 
published an article that proposed an idea like this. It is an 
idea that, I think, is certainly waiting to receive more public 
support but I'm just trying to see if it might engender some 
support.
    The Chairman. Hasn't Russia thought about it, too?
    Mr. Poneman. Absolutely and we had a very, I think, 
constructive visit a few weeks ago from Mr. Karnataka, the head 
of Atom Prom as it has now been renamed and I think that 
their--now that we have discussions that have begun between the 
United States and Russia about the possibility of peaceful 
nuclear cooperation. I think this is a very ripe subject for 
discussion in that channel, Sir.
    The Chairman. Mr. Gadbaw, as a member of GE, you've spoken 
here about great potential for commerce in exchange for ideas 
that would cause growth in India and in other countries that 
are partners with India and you're assuming in that regard that 
we would be their friends and would make, would have some 
potential for working with them. Could you talk a little bit on 
the record with this committee about how you see that 
atmosphere at this point?
    Mr. Gadbaw. I think the atmosphere is quite positive for 
working commercially with India and it has really developed, 
evolved over again, the last 15 years, as our interests have 
converged. I see in India growth across a whole range, 
particularly in the infrastructure area. We've seen their 
airlines go out and lease and purchase U.S. planes. We've seen 
more of our generation equipment sold there, whether it is work 
being done in the coal gasification area and the natural gas 
area, in the rural electricification area. We are seeing work 
with the railways, the Indian railways, to improve their 
efficiency, whether it is with new equipment or in signaling 
devices and in the healthcare business. We have a very active 
healthcare business in India. This is true across the entire 
Indian subcontinent. That is, in every part of India, this 
dynamism that has been unleashed by these economic reforms is 
demonstrating itself.
    So we have a chance now to step up as India is asking us 
for help in its most critical area of need that is in bridging 
this energy gap that they have. I think unfortunately, 
neglected over the years. Nuclear will be a piece of that and 
this agreement will ensure that everything we do in the 
civilian nuclear sector will be subject to the strike controls 
of the IAEA but it will also, I think, create an understanding 
between the two countries about how we need to work together in 
these commercial areas and it says to India that we, the United 
States, want to work with them to serve their needs and in 
return, we want to talk to them about how we can work together 
to address some of these pressing global issues.
    The Chairman. Might I just close by asking any or all of 
you to just comment with some closing remarks with reference to 
how you see us as a committee--you know what our jurisdiction 
is to pass laws that would put the United States in the 
position of stating a policy toward another country or create a 
policy that would be an enhancement, enhancing of a certain 
kind of activity. Do you see anything we ought to be doing in 
light of the new openness and of the fact of us proceeding so 
far so fast with India? Should we be doing something that we 
are not doing? Let's start on your end with you, Mr. Gadbaw.
    Mr. Gadbaw. Well, as I mentioned in my testimony, I hope 
that the committee will look carefully at the Convention on 
Supplementary Compensation.
    The Chairman. Yes.
    Mr. Gadbaw. Which is not just relevant to India but 
actually is relevant to every country where we are trying to 
sell nuclear equipment, including places like Canada, where 
U.S. companies have had to forego sales because of the absence 
of a international regime. That will require possibly 
implementing legislation and we would hope that the committee 
would look at that. Thank you.
    The Chairman. Okay, we will take a look at that. One or two 
things from you, Sir?
    Mr. Poneman. Mr. Chairman, first I would echo my 
colleague's support of prompt Senate action on the 
supplementary funding convention because I believe not just in 
this instance but for the whole industry. The second point I 
would make is that I think with the full range of energies that 
you have heard discussed today and really, the opening of a new 
chapter in the U.S./Indian relationship, that perhaps there may 
be some channels that you could pursue as a committee and as 
individual members in terms of reaching out to our Indian 
colleagues so that they fully and deeply appreciate the 
opportunities that this relationship presents. I would 
certainly hope that the United States' industry is able to 
quickly take advantage of this critical new opening and I think 
that with your stature and leadership, you can make a signal 
contribution there. Thank you.
    The Chairman. Thank you.
    Dr. Victor.
    Dr. Victor. My impression is that the country is in urgent 
need of a strategy to deal with the global warming problem and 
I know this committee has spent much time on that issue and all 
that I would urge is that it lay down a marker that this 
particular arrangement with India can be part of an overseas 
element of the nation's global warming strategy. I would also 
urge that we have some discussions, not only about this in the 
context of India, which has happened somewhat accidentally 
because of the larger discussions about the U.S./India 
relationship on nuclear power, but also very similar kinds of 
arrangements could exist for China, where emissions of carbon 
dioxide are growing even more rapidly.
    The Chairman. Senator Bingaman, did you have anything to 
wrap up? Thank you very much, gentlemen. It has been a pleasure 
having you and you've really contributed here today. We 
appreciate it.
    [Whereupon, at 11:40 a.m., the hearing was adjourned.]


                                APPENDIX

                   Responses to Additional Questions

                              ----------                              

     Responses of David Pumphrey to Questions From Senator Domenici

                           ENERGY EFFICIENCY

    Question 1a. The DOE has initiated an ``energy dialogue'' with 
India through working groups that address energy efficiency, civil 
nuclear power, coal, and renewables among other topics. In your 
testimony, you highlight the importance of improved energy efficiency.
    How will improved energy efficiency shape the future demand for 
energy in India?
    Answer. How India pursues the energy efficiency options it has in 
each of its consuming sectors will determine the pace of growth in 
future energy demand. It has been estimated by the Renewable Energy & 
Energy Efficiency Partnership (an international NGO, funded by a number 
of governments including: Australia, Austria, Canada, Ireland, Italy, 
Spain, the Netherlands, the United Kingdom, the United States and the 
European Commission) that the Indian economy could reduce its energy 
consumption by as much as 23% from current levels. The industrial 
sector accounts for about 48% of India's commercial energy consumption, 
but energy savings of up to 30% have been estimated through 
retrofitting in this sector. In the power sector, which is plagued by 
high transmission and distribution losses, nearly 25,000 MW equivalent 
of capacity creation could be achieved through improved efficiency. In 
the commercial sector, the use of heat pumps, load management systems & 
control, refrigeration systems/freezers, high-efficiency boilers, 
building control, insulation, window coating & films, power factor 
correction systems and combined heat & power plants could help achieve 
energy savings. A number of steps could also be taken to reduce energy 
demand in the transportation sector.

                        INDUSTRY INFRASTRUCTURE

    Question 1b. How will India achieve the necessary investments to 
fund industry infrastructure?
    Answer. India will need to improve its investment climate if it is 
to attract the private foreign capital it needs to build the 
infrastructure its energy sector requires. This will require action by 
the national and state governments to address various investor concerns 
such as sanctity of contracts, tariff reform, transparency and a level 
playing field. Recently we have seen progress on key investor issues 
and believe over time India will begin to attract much of the 
infrastructure investment it requires.

     Responses of David Pumphrey to Questions From Senator Bingaman

                                STAFFING

    Question 1. Does the Department of Energy directly fund any staff 
positions at the U.S. Embassy in India to monitor energy and science 
issues?
    Answer. No, the Department of Energy does not currently fund any 
staff positions at the U.S. Embassy in India.

                          RENEWABLE ENERGY MOU

    Question 2. What is the status of the agreement between the 
National Renewable Energy Laboratory or the DOE and India's Ministry of 
non-conventional resource in for renewable energy, particularly solar?
    Answer. The National Renewable Energy Laboratory (NREL) had two 
Memoranda of Agreement with India's Solar Energy Center, which later 
became part of the Ministry of Nonconventional Energy Sources (MNES). 
The latest one expired in March, 2005, and there is not currently an 
MOU in place. The Minister of Non-Conventional Energy Sources (MNES) 
recently met with experts at the National Renewable Energy Lab to 
discuss potential areas of collaboration. These areas include solar 
thermal power generation, low wind speed technology research & 
development, renewable energy resource assessment and the use of 
resource data in relevant analysis tools. DOE's EERE and Office of 
Policy and International Affairs are working with MNES officials 
currently under the U.S.-India energy dialogue.

                          SCIENTIFIC EXCHANGE

    Question 3. Has the Department considered exchanges of scientific 
personnel between our national laboratories and the equivalent Indian 
scientific laboratories funded through the Council of Scientific and 
Industrial Research or the Ministry of Atomic Energy?
    Answer. To our knowledge there has been no scientific exchange 
between DOE laboratories and the Counsel of Scientific and Industrial 
Research (CSIR) or the Ministry of Atomic Energy. However, the new 
Science Counselor at the U.S. Embassy in New Delhi has recently made a 
proposal to Dr. Mashelkar, the Director of the CSIR, to open a dialogue 
between the DOE national labs and the CSIR labs. One of the outcomes 
could be an exchange of scientific personnel.

                        SCIENTIFIC COLLABORATION

    Question 4. My understanding is that the Department of State has 
finalized the master S&T agreement between the U.S. and India, 
particularly with respect to intellectual property, has the DOE taken 
action(s) to implement scientific collaboration now that this umbrella 
agreement is in place?
    Answer. The Office of Science of the U.S. Department of Energy 
(DOE) is interested in starting a dialogue with appropriate 
counterparts in India as a follow-on to several initiatives that have 
begun relative to increasing scientific collaboration between our two 
countries. The U.S. side has interest in high energy physics, nuclear 
physics and fusion energy sciences while India's interests include 
collaboration in biotechnology, nanotechnology, climate research, and 
other areas. Collaboration already exists in high energy physics and 
nuclear physics on a lab-to-lab basis.

                       NANOSCIENCE/NANOTECHNOLOGY

    Question 5. In my visit to the Indian Institute of Technology, 
their Cal. Tech., I was briefed by their international projects office 
who were actively collaborating with countries such as France to 
develop joint advances in the areas of nanoscience and biomass to 
methane conversion. They indicated no such collaboration existed with 
the U.S. much less the DOE. Now that the master S&T agreement is in 
place would the DOE please reach out to this world class institution?
    Answer. Nanosciences/nanotechnology will be a strategic focus area 
in the new S&T agreement. As part of the Indo-U.S. S&T Forum 
(established in 2000), there have been several meetings and workshops 
on nanosciences/nanotechnology. A nanotechnology conclave was hosted in 
collaboration with Confederation of Indian Industry (CII) in February 
of 2006. There has also been an ongoing collaboration between the 
Jawaharlal Nehru Center in Bangalore and UC Santa Barbara. The DOE will 
continue to collaborate on these technologies under the auspices of the 
S&T agreement.

                              FORECASTING

    Question 6. What are we doing to help India better forecast its 
future energy demands? (The ministries in India are organized by fuel 
and basically no one is charged with doing an aggregate forecast.)
    Answer. India understands the significance of the forecasting 
information as it goes directly into government planning. The closest 
counterpart to DOE's Energy Information Administration (ETA) is India's 
Petroleum, Planning, and Analysis Cell (PPAC). An Energy Information 
Exchange MOU was signed in February 2006 between the EIA and PPAC at 
the Ministry of Petroleum and Natural Gas. The agreement seeks to 
improve Indian energy analysis and forecasting. The parties jointly 
determined at their first meeting in June 2006 that the first step is 
to improve the quality of Indian energy data. Unlike the companies 
operating in the U.S., companies operating in India are not required 
through legislation to report energy data to the government, causing 
some difficulty. This challenge to national data collection will grow 
as private sector participation in Indian grows. Therefore, the next 
step for the Energy Information Exchange MOU will involve a technical 
workshop about improving the quality of Indian energy data. The timing 
and location for this workshop will be determined over the coming 
months. After data quality issues have been addressed, EIA and PPAC 
intend to focus more specifically on forecasting issues. Continuing an 
exchange of ideas in the areas of data forecasting and statistical 
accuracy is an essential part of the ongoing U.S.-India Energy 
Dialogue.

                                  IEA

    Question 7. How are we helping India to participate in the IEA?
    Answer. DOE has been actively encouraging India to participate in 
IEA activities. India's formal participation in IEA activities dates 
back to April 1998 when an agreement was signed to establish 
cooperation. India designated its Ministry of Power to be the nodal 
agency for this cooperation which has since included a series of energy 
policy data workshops: the January 2004 IEA-India Workshop on Indian 
Emergency Oil Stocks; Indian participation in the October 2004 IEA 
Emergency Response Exercise for IEA non-member countries; the October 
2004 workshop on Energy Efficiency Standards and Labeling; a range of 
informal contacts and ad hoc Indian participation at IEA events; and 
participation in the IEA Committee on Non-Member countries. We want to 
continue to develop a closer relationship between the IEA and India by 
expanding the engagement to all areas of the Agency's work.
                                 ______
                                 
      Responses of David Victor to Questions From Senator Domenici

    Question 1. In your testimony, you analyze the potential climate 
implications and conclude that impact on greenhouse gases will ``become 
one of the main benefits from the arrangement.'' You state that 
``annual savings from the Indian deal could be nearly as large as the 
entire commitment of the 25 EU nations to reducing emissions under the 
Kyoto Protocol.'' You also discuss the potential for a framework 
emerging from the Asia-Pacific Partnership that would apply to U.S. 
engagement with developing countries on climate strategy. What steps 
should the U.S. take to encourage such engagement with India and 
developing countries?
    Answer. The United States must show tangible progress from this 
alternative framework--such as from the Asia Pacific Partnership (APP) 
that is presently taking shape. However, the framework will work only 
if it truly demonstrates a path that is complementary to what has 
emerged within the Kyoto Protocol. The major developing countries are 
seeing substantial resources flow into Kyoto projects under a scheme 
known as the Clean Development Mechanism (CDM). Nearly 1,000 projects 
are in the CDM pipeline right now. Many of those projects are of 
dubious quality, but the CDM is nonetheless a real entity that is 
producing real investment. So far, the APP is not. The developing 
countries will be wary of any scheme to reduce carbon emissions that 
delivers many meetings but no action. The APP is a good idea, as I 
outlined in my testimony, but the fact that there has been trouble even 
getting the money needed for meetings has been interpreted as a warning 
signal that the very governments whose participation is essential are 
not committed to the process.
    Moreover, the framework I propose--whether through the APP or some 
alternative institution--would work by engaging the industrial 
ministries, power companies, gas companies, and other institutions that 
are actually responsible for building and operating the energy 
infrastructure. Unlike Kyoto and many other diplomatic institutions, 
this framework would not focus solely on the diplomatic and 
environmental regulatory apparatus, but also on the factors that drive 
performance in the energy industry. The businesses and institutions 
that actually build energy infrastructure rarely focus on international 
diplomatic activities. They will be wary of wasting their time if the 
effort does not yield practical outcomes.
    I am deeply concerned that the United States is on the edge of 
destroying its credibility within the APP due to the lack of tangible 
progress. The funding fiasco earlier this summer resonated around the 
world. At the very least, the United States should demonstrate its 
commitment to the process of the APP by reliably meeting its basic 
funding obligations without signaling disarray to the outside world.
    As for particular projects, I strongly suggest that the United 
States focus on a few large efforts that demonstrate clear progress 
rather than a multitude of peripheral activities of limited impact. The 
U.S.-India nuclear framework could be one such large project.\1\ 
Advanced coal combustion technology represents another opportunity for 
the United States to engage China or India through cooperative 
development and testing of technology--to date, the technology has 
advanced further in China and the prospects are better there than in 
India. In my testimony, I also highlight the potential for the United 
States to lend its support to gas pipeline projects to deliver supplies 
to China and India, which could offset increased installation of coal-
fired generating capacity in these rapidly growing countries.\2\
---------------------------------------------------------------------------
    \1\ David G. Victor, ``Nuclear Power for India is Good for us 
All,'' International Herald Tribune (oped, March 17th 2006).
    \2\ See generally, Jackson et al., ``Greenhouse Gas Implications in 
Large Scale Infrastructure Investments: Examples from China and 
India,'' PESD Working paper, Stanford University (http://
iisdb.stanford.edu/pubs/21061/
China_and_India_Infrastructure_Deals.pdf).
---------------------------------------------------------------------------
      Responses of David Victor to Questions From Senator Bingaman

    Question 1. Your paper explains that the carbon reduction benefit 
from nuclear power is based on 20,000 MW or about 20 additional 1000 MW 
reactors being built by 2020 with enough carbon savings as the entire 
commitment of 25 EU nations under the Kyoto protocol--what do you 
estimate the total cost of such a project and do you think 20 reactors 
could be built in India in the next 14 years?
    Answer. The costs are unknown with precision but they are probably 
in the range of $26-40 billion current dollars. The low figures, which 
are implausible but not impossible, reflect the lowest credible numbers 
that have emerged from analysts of the Indian power sector ($1300/kW 
capacity; see citations in my testimony). The high number reflects the 
most likely cost (approximately $2000/kw) for the current new 
generation of light water reactors, although those numbers are likely 
to decline with experience.
    It is feasible, but difficult, to build 20 reactors in 14 years. 
The effort would begin with perhaps a few orders for foreign reactors 
as well as a few Indian projects; in parallel, diligent efforts would 
be needed by the Indians to streamline licensing procedures (akin to 
the new build/operate licensing scheme devised in the United States), 
and new units realistically might come online by about 2015 with a 
couple new reactors per year thereafter. In that framework, it will be 
hard to reach 20 but an aggressive program could deliver that number. 
Much higher numbers have been suggested, but I doubt those are 
feasible. India's interest in very large coal-fired power projects also 
makes it less likely that they will build fewer reactors unless nuclear 
proves to be highly competitive.
    Question 2. As compared to their coal reserves, does India have 
sufficient stocks of uranium to operate 20 reactors or would they have 
to import it?
    Answer. They will need to import fuel, and the United States should 
welcome that fact because import dependence will allow the U.S., 
working with other countries and with the IAEA, to frame a new 
multilateral fuel cycle. The ideas surrounding such a fuel cycle--in 
which supplies of fuel and fuel services would be controlled by a 
limited consortium of countries--have been discussed for some time but 
practical steps to implementation have been few. Potential fuel 
importers are wary; a successful scheme must allay their fears, and 
there is no better place to start than with a country that must import 
and which is prone to work toward a new fuel cycle in a diligent 
manner.
    Some analysts have claimed that imports of fissile material for 
India's commercial nuclear reactor program will allow India to divert 
domestic supplies into weapons production. I do not agree and think 
that argument is based on a false comparison. If India can't create a 
viable commercial reactor program (which includes imports of fuel) then 
it won't build many new commercial reactors (if any). The ore and 
fissile material it has will be devoted to weapons and there won't be a 
competition between military and commercial nuclear power. Outsiders 
won't have much influence on the trajectory of the military program. 
What is at stake here is just the commercial enterprise, and the fuel, 
more or less, is not fungible between the two.
    Question 3. What would be the incentive for India to build 
Integrated Gasification Combined Cycle plants based on their coal 
reserves as compared to importing uranium fuel?
    Answer. Right now there are few incentives for commercial power 
companies in India--including the state-controlled NTPC (which is the 
largest operator of coal plants in the country)--to pursue IGCC. There 
are some discussions about IGCC in India and some small cooperative 
programs (notably with the U.S.). But IGCC can't compete with 
supercritical technologies for coal. Supercritical technologies are 
proven and they boost fuel efficiency by a large margin; IGCC is still 
seen as risky and distant, especially when utilized in the context of 
India's low grade coals. (There are some IGCC technologies that work 
with low grade coals, and there have been some tests using Indian coal; 
but small scale tests are quite different from operational commercial 
plants in the Indian context.)
    Implicit in the question is the thought that India will favor coal 
because it is available domestically and, by the same logic, it will be 
wary of nuclear reactors because they will require fuel imports. I 
don't think that is the right way to analyze the Indian policy choices 
today. If the U.S. and other countries are successful in creating a 
viable multilateral fuel cycle, then fears about fuel insecurity will 
abate. Moreover, India is already adopting policies to become dependent 
upon imported coal--especially in western India where coal-fired power 
plants are located far from India's coal fields (which are 
predominantly in the northeast of the country) and it is relatively 
easy to import coal by ship from reliable and low-cost suppliers such 
as South Africa and Australia. In short, both the coal and nuclear 
futures imply dependence on imported fuel and the Indian government has 
equally good prospects in making both fuel supplies equally secure. For 
coal, that security will come from the world market where coal is 
increasingly a fungible commodity. For nuclear, that security would 
come from a viable multilateral fuel cycle.
                                 ______
                                 
    Response of R. Michael Gadbaw to Question From Senator Domenici

    Question 1. In the area of nuclear technologies, what opportunities 
exist for U.S. industry versus countries such as Russia and France that 
appear poised to exploit Nuclear Suppliers Group provisions allowing 
cooperation with India?
    Answer. India originally planned to build eight new reactors. 
Reportedly, the Indian cabinet has already approved six for 
construction: four by the Russians and two by the French. Moreover, the 
French may well be positioned to obtain the remaining two contracts as 
well.
    Nevertheless, India recently announced another string of reactor 
projects beyond the original eight, and we understand that U.S. and 
Canadian suppliers would be invited to compete for them. The Indian 
government understands the importance of American companies being able 
to compete fairly for opportunities in India. As S.K. Jain, chairman 
and managing director of the state-run Nuclear Power Corporation of 
India, Ltd. (NPCIL), noted in June 2006, India is interested in having 
a significant American supplier presence, and is considering American 
technologies like the Advanced Boiling Water Reactor (ABWR).\1\
---------------------------------------------------------------------------
    \1\ T.S. Subramanian, ``Working to a Plan,'' Frontline, 23:11, June 
3-16, 2006.
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    As soon as permitted under U.S. law and regulations, General 
Electric is committed to playing a major role in India's construction 
of new civilian nuclear power plants. GE's state of the art boiling 
water reactor (BWR) designs offer significant cost and safety 
advantages, and India has a wealth of positive experience with GE's 
earlier generation BWR reactor at Tarapur. This experience and the 
quality of GE's technology open the opportunity for the United States 
to supply a significant portion of the 40,000 MW of nuclear power India 
would like to build by 2020.
    Nevertheless, the French and Russian governments and their 
associated nuclear companies are clearly working hard to capture large 
shares of the Indian nuclear market. The most important requirement for 
U.S. commercial participation in that market will be to ensure that all 
governmentally related barriers are addressed in a coordinated and 
timely manner. The United States might consider a formal approach to 
the governments of France, Japan, and Russia to ensure that no 
government jumps the gun by allowing its companies to exchange 
prohibited technology with India. At the same time, the United States 
government should work with the U.S. industry to identify all actions 
that must be taken to allow U.S. exports of civilian nuclear technology 
to India, and should develop a plan for coordinating the efforts of the 
U.S. and Indian governments to allow U.S. suppliers to obtain necessary 
licenses at the earliest possible time.
    Most immediately, the United States should ratify the Convention on 
Supplementary Compensation for Nuclear Damage (of which it is a 
signatory and prime mover) and pass any necessary implementing 
legislation. U.S. leadership will put us in the strongest position to 
ensure that India and other countries that currently lack nuclear 
liability and compensation regimes will join the Convention. As 
signatories, they would be required to adopt appropriate liability and 
compensation legislation, and participate with the United States in 
this multilateral regime. The treaty creates an insurance system to 
protect nuclear suppliers from unlimited liability, while also ensuring 
compensation for those injured in the very unlikely event of a nuclear 
incident. The liability issue is critical for U.S. suppliers, which do 
not enjoy the protection provided by state ownership. This is in sharp 
contrast to French and Russian suppliers, which--underwritten by their 
governments--are proceeding to do business in China and India despite 
the absence of nuclear liability regimes there. Without effective 
protection against liability, however, U.S. nuclear companies will not 
be able to engage those foreign markets.

   Responses of R. Michael Gadbaw to Questions From Senator Bingaman

    Question 1. GE has a very long history in India, not just nuclear, 
but everything from consumer goods to advanced R&D conducted at your 
Jack Welch center in Bangalore. Given your experience at the Tarapur 
reactors with the know-how for reactor design transferred to the 
Indians, how will GE protect a similar technology transfer for their 
advanced boiling water reactors especially under the Indian Atomic 
Energy Act's disclosure and inspection provisions?
    Answer. It is unclear how much India is focusing on technology 
transfer. After 1974, India was cut off from foreign technology 
support, and was forced to move forward on its own, developing its 
pressurized heavy water reactor (PHWR) technology indigenously. It is 
proud of that technology, and considers it internationally 
competitive--more advanced, in India's view, than the current Canadian 
technology. Rather, India's interest in foreign participation appears 
to relate more to capacity requirements: India would like to develop a 
40,000 MW capacity by 2020, but NPCIL, the national nuclear company, 
can only complete 12,000 MW of that goal; foreign involvement would 
help realize the remainder, and the Indians are unlikely to apply 
regulatory requirements that frustrate that objective.
    Nevertheless, maintaining safeguards on technology transfer remains 
an important consideration, and the U.S.-India deal allows for ample 
protections in this regard. Under this historic deal, India's civilian 
nuclear program will be more transparent than ever before, and put 
under IAEA safeguards, which will provide greater protection against 
illegal transfer and use of foreign technologies. India has a record of 
respecting such safeguards, as was the case with the Tarapur 1 and 2 
plants supplied in the 1960s.
    The 123, IAEA, and NSG agreements required under the U.S.-India 
deal are designed to ensure that the participation of U.S. companies in 
the Indian nuclear market will not lead to unauthorized use of American 
technologies. In the private sphere, moreover, the contracts we 
establish with the Indian government and other relevant entities will 
prohibit misuse and provide for compliance with the USG-GOI agreement. 
India has demonstrated that it will honor such commitments.
    GE is fully committed to compliance with U.S. trade control rules, 
including those administered by the Departments of Energy and Commerce 
and the Nuclear Regulatory Commission. Working with its businesses, 
employees, partners, and customers in India, GE will ensure that 
technology transfers to India accord with all applicable laws and 
regulations. In addition, we take measures to protect our valuable 
trade secrets and company proprietary information regardless of export 
control requirements. We require suppliers, partners, and contractors 
that have access to company proprietary information to protect such 
information.
    Question 2. One of the unknowns is the licensing of a large 1,000 
MW reactor by the Indian Atomic Energy Regulatory Board--Indian 
reactors typically are smaller in power, 200-500 MW, than the large 
reactors developed by GE which are 1,000 MW or more. Do you expect any 
licensing issues with your reactors?
    Answer. We do not expect any licensing problems with respect to the 
capacity of our reactors. GE will offer to supply reactors such as the 
ABWR, which has already been licensed in the United States, Japan, and 
Taiwan, and the ESBWR, which is in the process of being licensed in the 
United States. GE is confident that these advanced designs will meet 
Indian regulatory requirements or can be modified if necessary to do 
so. Reportedly, India's Atomic Energy Regulatory Board has already 
begun to work with the U.S. Nuclear Regulatory Commission in order to 
facilitate potential licensing of these designs in India.
    We note also that Russia is already in the process of constructing 
two pressurized water reactors of 1,000 MW each at Koodankulam, Tamil 
Nadu. NPCIL has made explicit its willingness to authorize at least ten 
reactors of 1,000 MW each. Influential Indian companies expect to build 
nuclear plants with even greater capacity. Vedanta Resources plans to 
build a 2,400 MW reactor, Reliance Energy a 2,000 MW reactor; Tata 
Energy may enter the arena as well. All are seeking international 
partners. Altogether, this signals that the Indian government accepts 
and supports a major advance in the capability of India's nuclear 
plants, and welcomes foreign participation in that process.
                                 ______
                                 
    [Responses to the following questions were not received at 
the time the hearing went to press:]

           Questions for Daniel Poneman From Senator Bingaman
    Question 1. Many have said that aiding India's civilian nuclear 
program, even under IAEA safeguards, will only free up fuel to make 
plutonium for their unsafe guarded weapons program--do you find that 
statement to be true?
    Question 2. Unlike the U.S., India integrated their civilian R&D 
program with their military nuclear program, how hard will it be to 
separate civilian facilities not only physically local to a military 
one but the people as well?
    Question 3. Do you think the Indians will be receptive to U.S. 
embassy led end-use inspections of nuclear equipment exported to their 
facilities to ensure they are not re-exported elsewhere?
    Question 4. Your proposal of fuel leasing goes back to the 
Eisenhower Atoms for Peace program--but the central flaw of the program 
is it denies India any indigenous capability for self sufficiency in 
nuclear fuel production--they are reliant on other nations. India has a 
long tradition of non-alignment--do you think they will be receptive to 
such a tying arrangement?
                                 ______
                                 
             Question for Paul Simons From Senator Domenici
    Question 1. Without nuclear power, how will India meet its energy-
mix needs?

            Questions for Paul Simons From Senator Bingaman
    Question 1. The 1978 Nuclear Nonproliferation Act amended the 
Atomic Energy Act to provide enhanced safeguard measures and sanctions 
for non-nuclear weapons states that violate criteria with respect to 
proliferation or militarizing nuclear energy. In each case the 
President has the ability to exempt a non-nuclear weapon state that 
violates the conditions set forth in the Act, by submitting to Congress 
a waiver and having the Congress enact a resolution accepting the 
waiver as it pertains to a cooperation agreement or enacting a 
resolution of disapproval as it pertains to an exempted export. This 
process actually works--the Congress failed to reject to exports of 
fuel to the Indian Tarapur reactors in 1979 and 1980. Why do we need to 
enact new legislation to exempt India from law which has worked in the 
past?
    Question 2. The Global Nuclear Energy Partnership involves 
reprocessing spent nuclear fuel and fast breeder reactors, it is my 
understanding that India's Fast Breeder Reactor and some reprocessing 
facilities will stay on the military facilities list--do you recommend 
extending the program to India?
    Question 3. Do you have a nuclear cooperation agreement in place 
with India? If not why are we enacting legislation when we have not 
seen such an agreement?
    Question 4. The principal avenue by which we collaborated with 
India in R&D was through loan repayment funds deposited in India 
accounts under the ``P.L. 480'' program. My understanding is those 
funds are now long gone. Would it be advantageous to set up a fund 
similar to the Israel--U.S. Bi-national Industrial Research and 
Development Fund where revenue from supported projects is used to repay 
the R&D grant?

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