[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



              CLIMATE CHANGE: PERSPECTIVES OF UTILITY CEOS

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON ENERGY AND AIR QUALITY

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 20, 2007

                               __________

                           Serial No. 110-22


      Printed for the use of the Committee on Energy and Commerce
                        energycommerce.house.gov
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                    COMMITTEE ON ENERGY AND COMMERCE

    JOHN D. DINGELL, Michigan, Chairman

HENRY A. WAXMAN, California            JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts            Ranking Member
RICK BOUCHER, Virginia                 RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York               J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey         FRED UPTON, Michigan
BART GORDON, Tennessee                 CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois                NATHAN DEAL, Georgia
ANNA G. ESHOO, California              ED WHITFIELD, Kentucky
BART STUPAK, Michigan                  BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York               JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland               HEATHER WILSON, New Mexico
GENE GREEN, Texas                      JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado                CHARLES W. ``CHIP'' PICKERING, 
    Vice Chairman                          Mississippi
LOIS CAPPS, California                 VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania               STEVE BUYER, Indiana
JANE HARMAN, California                GEORGE RADANOVICH, California
TOM ALLEN, Maine                       JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois               MARY BONO, California
HILDA L. SOLIS, California             GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas             LEE TERRY, Nebraska
JAY INSLEE, Washington                 MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin               MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                    SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon                 JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York            TIM MURPHY, Pennsylvania
JIM MATHESON, Utah                     MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina       MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana            
JOHN BARROW, Georgia                   
BARON P. HILL, Indiana               
                                   ----
                           Professional Staff

                  Dennis B. Fitzgibbons, Chief of Staff
                   Gregg A. Rothschild, Chief Counsel
                      Sharon E. Davis, Chief Clerk
                  Bud Albright, Minority Staff Director

                                  (ii)
                 Subcommittee on Energy and Air Quality

                    RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina     J. DENNIS HASTERT, Illinois,
    Vice Chairman                         Ranking Member
CHARLIE MELANCON, Louisiana          RALPH M. HALL, Texas
JOHN BARROW, Georgia                 FRED UPTON, Michigan
HENRY A. WAXMAN, California          ED WHITFIELD, Kentucky
EDWARD J. MARKEY, Massachusetts      JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland             JOHN B. SHADEGG, Arizona
MIKE DOYLE, Pennsylvania             CHARLES W. ``CHIP'' PICKERING, 
JANE HARMAN, California                  Mississippi
TOM ALLEN, Maine                     STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas           MARY BONO, California
JAY INSLEE, Washington               GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin             MIKE ROGERS, Michigan
MIKE ROSS, Arkansas                  SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon               JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York          MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah                   JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex 
    officio)
                                 ------                                

                           Professional Staff

                     Sue D. Sheridan, Chief Counsel
                        John W. Jimison, Counsel
                  David J. McCarthy, Minority Counsel
               Christopher A. Treanor, Legislative Clerk












                             C O N T E N T S

                              ----------                              
                                                                   Page
 Hon. Rick Boucher, a Representative in Congress from the 
  Commonwealth of Virginia, opening statement....................     1
Hon. J. Dennis Hastert, a Representative in Congress from the 
  State of Illinois, opening statement...........................     2
Hon. Mike Doyle, a Representative in Congress from the 
  Commonwealth of Pennsylvania, opening statement................     4
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, opening statement.......................................     5
    Prepared statement...........................................     6
 Hon. Charles A. Gonzalez, a Representative in Congress from the 
  State of Texas, opening statement..............................     7
Hon. Ralph M. Hall, a Representative in Congress from the State 
  of Texas, opening statement....................................     8
Hon. Tammy Baldwin, a Representative in Congress from the State 
  of Wisconsin, opening statement................................     8
Hon. John Shimkus, a Representative in Congress from the State of 
  Illinois, opening statement....................................     9
Hon. John D. Dingell, a Representative in Congress from the State 
  of Michigan, opening statement.................................    10
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, opening statement..............................    11
Hon. Jane Harman, a Representative in Congress from the State of 
  California, opening statement..................................    12
Hon. John B. Shadegg, a Representative in Congress from the State 
  of Arizona, opening statement..................................    13

                               Witnesses

Jeffry E. Sterba, chairman, president, and chief executive 
  officer, PNM Resources, Incorporated, Albuquerque, NM..........    14
    Prepared statement...........................................   153
James E. Rogers, president, and chief executive officer, Duke 
  Energy Corporation, Charlotte, NC..............................    16
    Prepared statement...........................................   113
David Sokol, president, and chief executive officer, MidAmerican 
  Corporation, Omaha, ND.........................................    18
    Prepared statement...........................................   131
Michael G. Morris, chairman, president, and chief executive 
  officer, American Electric Power, Columbus, OH.................    20
    Prepared statement...........................................    76
Jackson E. Reasor, president, and chief executive officer, Old 
  Dominion Cooperative, Glen Allen, VA...........................    22
    Prepared statement...........................................    95
Milton B. Lee, general manager, and chief executive officer, CPS 
  Energy, San Antonio, TX........................................    24
    Prepared statement...........................................    66

 
              CLIMATE CHANGE: PERSPECTIVES OF UTILITY CEOs

                              ----------                              


                        TUESDAY, MARCH 20, 2007

                  House of Representatives,
            Subcommittee on Energy and Air Quality,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:08 a.m., in 
room 2123 of the Rayburn House Office Building, Hon. Rick 
Boucher, chairman, presiding.
    Members present: Representatives Barrow, Waxman, Markey, 
Doyle, Harman, Gonzalez, Inslee, Baldwin, Matheson, Dingell, 
Hastert, Hall, Upton, Shimkus, Shadegg, Buyer, Walden, Myrick, 
Sullivan, Burgess, and Barton.
    Also present: Representative Hill.
    Staff present: Sue Sheridan, Bruce Harris, John Jimison, 
Lorie Schmidt, Laura Vaught, Chris Treanor, Margaret Horn, C.H. 
Bud Albright, David McCarthy, Tom Hassenboehler, and Matthew 
Johnson.

  OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF VIRGINIA

    Mr. Boucher. The subcommittee will come to order. This 
morning, our climate change hearing focuses on the Nation's 
electric utility industry, as we welcome to the subcommittee 
the chief executive officers of some leading coal-fired 
electricity generators. As we draft a greenhouse gas control 
measure, it is essential that we preserve the ability of 
electric utilities to utilize coal, our Nation's most 
affordable and abundant energy resource with a 250-year 
reserve.
    If that ability is not adequately preserved, and in lieu of 
coal, utilities rely to a greater extent on natural gas, the 
resulting increases in natural gas prices would substantially 
harm the entire American economy. We are already losing tens of 
thousands of manufacturing jobs, notably in the chemical 
industry, but in other industries as well, to countries that 
have lower and more stable natural gas prices. Significant gas 
price increases would only worsen that job flight from the 
United States to other lands.
    One-half of all homes in the United States are heated with 
natural gas, and the elevated prices that have occurred, 
largely because so many gas-fired electricity generators are 
now in use, has placed severe stress on the family budgets for 
tens of millions of Americans. For the sake of those who heat 
with natural gas, we also must avoid placing greater stress on 
natural gas prices.
    Much of American industry, from agriculture to the smelting 
of aluminum, is natural gas dependent and would suffer 
adversity if prices escalate. The key to avoiding those 
consequences is to draft our greenhouse gas control measure, so 
as to ensure that utilities that desire to do so may continue 
to use coal, to do so in the volumes in which they're using it 
today, and to preserve the opportunity for market for coal as a 
component of the overall fuel mix for electricity generation.
    I look forward to the advice of today's witnesses about how 
the legislation should be structured in order to achieve those 
ends. I would also note that, with the leadership of today's 
witnesses, the trade association representing investor-owned 
utilities has announced the industry's intention to work with 
the subcommittee in drafting a control program of economy-wide 
application that does not dislocate any economic sector. I want 
to thank our witnesses for their role in developing that 
industry position, and I will look forward to working with each 
of you in order to achieve the result that is embodied within 
that position.
    We are particularly interested this morning in the views of 
our witnesses regarding the potential for carbon capture and 
storage technologies to enable electric utilities to continue 
to rely on coal as the predominant fuel for electricity 
generation.
    Several questions will be prominent in our discussion 
today. What do we need to do to provide, by way of Federal 
resources, sufficient funds to enable early deployment of 
affordable and reliable technologies? How much additional money 
for grants, for loan guarantees, for direct expenditures on 
research, development, and demonstration of these technologies 
will be required and over what time period?
    Should we draft the schedule for the implementation of 
carbon controls to coincide with the arrival of reliable and 
affordable control technology? What do we need to do about the 
liability with respect to CO\2\ that is injected into permanent 
storage in the event that it migrates beyond where it is 
supposed to be or escapes again into the atmosphere, or if 
other problems that might result in legal liability are 
encountered associated with that injection and storage? What 
other core concerns should we be aware of as we begin the 
exercise to draft this legislation during the latter part of 
the spring of this year?
    I want to thank our witnesses for joining us this morning, 
and I look forward to their answers to these and other 
questions that will be propounded to them.
    I am now pleased to recognize the ranking Republican member 
of the Energy and Air Quality Subcommittee, the gentleman from 
Illinois, Mr. Hastert, for an opening statement of 5 minutes.

 OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE 
             IN CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Hastert. I thank the chairman, and Mr. Boucher, I also 
thank you for your leadership in this area. You called this 
meeting this morning to learn. It is crucial that we get the 
perspectives of industry that will be most affected by any 
climate change legislation. Last week, we heard from the 
automakers.
    This week, electric utilities, and over the course of these 
hearings, I hope we hear from other industries as well: the 
cement industry, the fertilizer industry, oil and gas, and 
other industries that will likely be affected by any action 
that we take here. Their perspectives are critical if we are to 
understand the consequences of legislation of any type that 
aims to reduce greenhouse gas emissions.
    Electricity generation in this country is largely about 
coal. Nationally, 50 percent of our electricity comes from 
coal. In the Midwest and some other regions of the country, 
this percentage is much higher. But when we look at some where 
it is lower, we see the east coast where it depends on fuel oil 
coming from abroad or liquid natural gas from abroad where some 
country or some despot could turn the handle and cut that 
supply completely off.
    Though we talk about energy independence, I believe it is 
important for us to remember that the United States is 
currently energy independent in one sector: the generation of 
electricity. Our abundant coal resources make this possible. 
Any plan that seeks to control CO\2\ emissions must account for 
this reality. Failure to do so would make the U.S. dependent 
upon foreign sources of energy, namely LNG for getting electric 
power done.
    This committee has heard testimony about the coal 
combustion and carbon capture and sequestration technologies 
that would be employed to reduce CO\2\ emissions. And what did 
we learn? That carbon capture and sequestration technology 
probably wouldn't be widely commercially available or deployed 
for at least 30 years.
    Of course, the technologies come with a price tag that is 
as yet unknown since no one is actually using them on a coal-
fired power plant today. It is therefore important to get an 
assessment from the utility industry about their views on how 
they plan to meet future generation needs, the importance of 
maintaining a robust fuel mix, and the economic feasibility of 
deployment of carbon capture and sequestration technologies. We 
need to hear from them when they plan to deploy such 
technologies and how much this is going to cost the consumers.
    Some of the witnesses before us today support cap-and-trade 
legislation. Of course, the prerequisite for such a plan to 
work is that we are able to cap. Now, I am personally convinced 
that I think the testimony presented to this committee bears 
this out, that we will develop over the next 20 years the 
technologies and capacities to economically capture and 
sequester CO\2\ on a large enough scale to make a difference. 
In order to legislate rationally, we need to recognize the 
critical fact that this and related technologies will take time 
to develop and mature.
    If we do not, cap-and-trade becomes cap-and-pray. I might 
say that ``pray'' might be spelled p-r-e-y. A plan whereby we 
cap carbon before it is technologically feasible to do so and 
pray it doesn't cost the consumers or the economy too much. A 
cap-and-trade scheme put in place before we had the technology 
capacity to control CO\2\ emissions is simply a tax on the 
generation of electricity and will do nothing to reduce the 
Earth's average temperature.
    Finally, I am interested in our witnesses' view on the 
necessity for the participation of developing countries, like 
China and India, in any global emissions reduction plan. China, 
for example, is building the equivalent of a 500-megawatt coal-
fired plant every week. China very soon will become the world's 
largest emitter of greenhouse gas emissions. I personally do 
not see how a cap that doesn't include these countries will do 
much to limit world trade, greenhouse gas emissions, or lower 
the Earth's average temperature.
    There are many things we can do that would help. We can 
push development of carbon control technologies. We can advance 
the use of biofuels. We can develop clean coal and coal-to-
liquids technology, and we can ensure that these technologies 
are made available to the developing world. We cannot, however, 
wave a magic wand and make these technologies appear overnight. 
I think the bottom line is we want to make this country and 
this world a better and healthier place to live.
    We also need to keep jobs and production and manufacturing 
in this Nation. If we push out the ability to manufacture, to 
create jobs, for our people and send them to China or India 
where they continue to build dirty plants, then we have no jobs 
and a worse ecology in this world to deal with.
    Mr. Chairman, I thank you for the time, and I thank you for 
holding this hearing today.
    Mr. Boucher. Well, Mr. Hastert, thank you very much for a 
truly thoughtful statement.
     The gentleman from Georgia, Mr. Barrow, is recognized for 
3 minutes.
     The gentleman from Georgia waives.
    I would note that pursuant to the rules of the committee, 
any member who waives the time allotted for an opening 
statement will have those minutes added to the time for 
questioning witnesses. The gentleman from California, Mr. 
Waxman.
    Mr. Waxman. Mr. Chairman, I welcome our witnesses today, 
and I also waive my opening statement.
    Mr. Boucher. Gentleman waives his opening statement. The 
gentleman from Pennsylvania, Mr. Doyle.

   OPENING STATEMENT OF HON. MIKE DOYLE A REPRESENTATIVE IN 
         CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA

    Mr. Doyle. Thank you, Mr. Chairman. I would like to welcome 
each of you to the committee, as we all look forward to hearing 
your testimony regarding what your companies can do to join us 
in the fight against global warming.
    As I have stated at previous hearings, we are long past the 
point of dueling scientists where, for every expert who 
testifies that global warming is real and manmade, another one 
is brought out to say the studies are inconclusive. We are at a 
point where we know what the problem is. We know what causes 
it, and we are beginning to discuss solutions that we can craft 
to correct.
    A discussion of that solution has brought each of here to 
this committee. Each of you find yourself in a unique position 
when compared to other aspects of our American economy. On the 
one hand, your companies contribute to global warming. On the 
other hand, your companies provide the energy backbone that 
allows our entire economy to prosper.
    As a result, the question before us today is not if you are 
going to reduce your carbon dioxide emissions but how you are 
going to achieve this goal. In addition to your testimony about 
carbon sequestration and other pollution controls, I am 
particularly interested in your thoughts about a renewed 
national policy that would encourage the building of next 
generation nuclear capacity. Seems to me that because this is a 
discussion about emissions and the effect of greenhouse gases 
into our atmosphere, we must also have a frank discussion 
regarding the benefits of nuclear energy, an energy source that 
does not release greenhouse gases.
    While nuclear energy does pose some other significant 
environmental questions, the fact that global warming is caused 
by gases being trapped in our atmosphere makes it relevant to 
this discussion. Simply stated, if the release of these gases 
is a cause, then a form of energy that does not release them is 
certainly a part of the solution. I look forward to hearing 
each of your testimonies.
    I hope that we will hear some concrete, real-world 
suggestions as to how we can work together to reduce the impact 
of global warming. Two things are certain. Congress will act, 
and your industries will be among the industries most affected. 
I sincerely hope that we can work together to achieve the right 
mix of reductions, incentive, and innovation to achieve our 
common goal. I thank you, Mr. Chairman, and I yield back.
    Mr. Boucher. Thank you very much, Mr. Doyle. The gentleman 
from Texas, the ranking member on the full Energy and Commerce 
Committee, Mr. Barton, is recognized for 5 minutes.

   OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Barton. Thank you, Mr. Chairman. I went upstairs. I 
thought this hearing was upstairs, so I have got my exercise 
for the day. I have a prepared statement, but I want to at 
least show, or maybe state, for the record my last two power 
bills. This one is from TXU Energy down in Texas. And down here 
at the bottom in tiny, tiny, tiny, tiny print, in fact you have 
to have a magnifying glass to read, it says ``The average price 
you paid for electric service this month was 16.56 cents per 
kilowatt hour.'' 16.56.
    I just got this. I opened my mailbox in Arlington, 
Virginia. I have a little condo. This in my Dominion Power 
bill, and in print that is a lot bigger for some reason, it 
says ``The price to compare 5.96 cents.'' OK, now, Texas 16.56, 
Virginia 5.96. Which of these would you rather pay? Obviously 
the 5.96.
    Now, the difference between those is that Texas has built 
almost every new power plant it has built in the last 20 years 
uses natural gas. Natural gas prices got up to about $14, 1,000 
cubic feet last year. Now, they have come back down to about 
$8. TXU has yet to see fit to lower its price, but that is a 
whole other story.
    But Texas became too dependent on natural gas and 
consumers' pain. Dominion, probably thanks to the good work of 
Chairman Boucher, who is now the chairman of this subcommittee, 
has got a diversified power mix. But they produce over, I 
think, about 60 to 70 percent of their power from coal.
    Right now, the differential between coal and natural gas is 
about 4 to 1. Natural gas is about four times expensive as 
coal. What relevance does that have to this hearing? We are in 
a frenzy to put a carbon tax on or regulate CO\2\ or come up 
with some mandatory cap-and-trade system for carbon dioxide. 
And unless our future project works, which we won't know for 
another 8 or 9 years, if you burn coal, you are going to create 
CO\2\.
    If you tax CO\2\, if you regulate CO\2\, if you put a cap 
on it, it is going to be a lot more expensive. Now, in the 
European Union in Germany, their utility prices at wholesale 
went up 30 to 40 percent when the Europeans adopted their 
carbon cap-and-trade system, 30 to 40 percent. In our 
technology hearing last week, when we had all of the folks come 
in to talk about the new technology for using coal, the average 
price increase for the carbon sequestration and capture 
methods, the minimum was 25 percent. The average was over 50, 
and one was 100 percent.
    Ladies and gentleman, unless everyone wants to pay 16.5 
cents or 20 or 25 cents like they are paying in Hawaii and San 
Francisco, we need to tread very lightly on these mandatory 
systems for carbon capture and various other of these mandatory 
systems.
    So I have a prepared statement, Mr. Chairman, that I will 
put in the record. Suffice it to say I am very pleased to have 
this panel. I honestly can say I know most of these gentlemen 
on a first-name basis. They are all fine Americans, patriots, 
and they have differences of opinion. And we are going to hear 
that, but that is what democracy is all about.
    But I think it is a very important hearing today. The 
people that would have to implement some of these systems, to 
hear what they say about them. With that, Mr. Chairman, I yield 
back.
    [The prepared testimony of Mr. Barton follows:]

  Prepared Statement of Hon. Joe Barton, a Representative in Congress 
                        from the State of Texas

     Thank you, Chairman Boucher, for holding this hearing 
today on utility perspectives on global warming. This is an 
important hearing because any global warming legislation that 
proposes to cut CO\2\ levels will do it on the backs of the 
utility industry and its ratepayers. Particularly vulnerable 
will be the homeowners whose electricity comes from coal, even 
the ones who get power produced by the latest clean-coal 
technology.
    We have a responsibility to the people who work for a 
living and pay their electric bills. Part of our responsibility 
is to guard against laws that would make electricity so 
expensive that cooking and heating become a luxury. And when 
our colleagues propose legislation that will produce no 
discernable environmental benefit, but will surely cost working 
people their jobs, it's our job to say no.
    Today we have more representatives of the USCAP group. We 
heard from three members of this group at our first hearing 
several weeks ago. At that hearing, the Pew Center seemed to be 
the stand-in for the electric utility industry. I'm glad we 
will hear from the industry directly today.
    I also want to welcome CPS Energy from San Antonio. CPS 
Energy is a municipal utility that makes no profit and is 
directly accountable to its ratepayers, rather than its 
shareholders. It relies heavily on coal to generate its 
electricity. That perspective is important for us to hear.
    This committee is embarked on a fact-based exploration of 
global warming issues.
     Much of the call today for global warming legislation 
includes a mandatory cap on CO\2\ emissions and a complex 
trading scheme for CO\2\ emissions allowances. Allegedly, this 
will make compliance somehow cheaper. So far, we have not heard 
any hard facts to support this claim. Proponents have given us 
hypotheticals with no hard numbers. They did agree that it 
would not be free.
    The only hard numbers based on real-world experience that 
we have heard was the German experience with the European 
Emissions Trading Scheme. There, wholesale electric rates went 
up by 40 percent after the trading scheme was implemented. I'm 
not sure that there will be any environmental benefit from the 
European system because most European nations are going to 
exceed their CO\2\ caps, and China, India and other non-OECD 
nations will exceed Europe. The evidence so far is not 
promising that a cap-and-trade scheme is worthwhile. Perhaps 
that is one reason that Speaker Pelosi has acknowledged that we 
won't we doing a cap-and-trade by the 4th of July, after all.
     I see a lot of industries now lining up behind a cap-and-
trade system, despite the evidence from the European 
experience. I think they believe there is money to be made in 
CO\2\ trading. In fact, I've heard that argument in this room.
     Here's some other news that shows what the future in 
America might be like under a cap-and-trade system. After 
requiring companies to cap-and-trade, the governments of Sweden 
and Finland are both dabbling with windfall profits taxes on 
companies that did what they were told, but just a little too 
well. I guess no good deed goes unpunished. You can bet that if 
U.S. companies start to make profits on CO\2\ trading, the same 
Members of this Congress who called for windfall profits taxes 
on oil company profits will call for new taxes on CO\2\ 
trading. They raised taxes and fees on domestic oil production 
already, so the pattern is clear.
    I hope today's witnesses will be able to tell us what they 
think a cap-and-trade system will mean for their ratepayers and 
shareholders. Who gets the benefits? Is the technology for 
CO\2\ reduction available? When and at what cost? What are the 
environmental benefits, particularly if China and India are not 
participants in any international cap-and-trade system? These 
are the hard facts and numbers we need before we legislate on 
any global warming legislation. I hope we get some answers 
today.
     Thank you, Mr. Chairman.

    Mr. Boucher. Thank you very much, Mr. Barton. The gentleman 
from Texas, Mr. Gonzalez, is recognized for 3 minutes.

OPENING STATEMENT OF HON. CHARLES A. GONZALEZ, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Gonzalez. Thank you very much, Mr. Chairman. First of 
all, as we attempt to craft some sort of legislation, and we 
don't know to what degree or extent we are going to have 
something ready in the next few months, my concern, of course, 
is that we do it with the reality that faces us.
    And what is that backdrop when it comes to coal-fired 
plants? The reality is, of course, we have got one that is 
coming online as we speak, and I was reading an article the 
other day. And it represented that you will have 40 new coal-
fired plants within 5 years and 150 new coal-fired plants by 
2030. That is the reality. That is the backdrop, and whatever 
we do, how is that going to impact the construction of these 
particular coal-fired plants and their ability to provide 
energy to, obviously, our constituents.
    We have had many different witnesses as we have this 
accelerated, expedited schedule that represent different 
stakeholders. We don't really hear from the consumer. They are 
not organized. They don't really have advocacy groups and so 
on, but that is truly our job up here as representatives of our 
individual districts.
    Keeping that in mind, what I wanted also, with the 
indulgence of the chair and of course using up my own time, I 
wanted to welcome one of our witnesses, which obviously is 
someone locally from San Antonio and the general manager and 
CEO of City Public Service Energy, Milton Lee. I wanted to 
welcome him this morning. I appreciate the fact that he made 
himself available to testify, which is a brave thing to do, 
Milton, when you think in terms of the questions that you are 
going to be fielding.
    Hopefully, he will lend some real insight as to the San 
Antonio experience, and, of course, the plans to build the new 
coal-fired plant, but also the expertise that you have brought 
in the past 6 years. You were at Austin Energy previous to your 
service in San Antonio, and that expertise is reflected by a 
very efficiently-run, publicly-owned municipal utility and the 
diversification, as far as sources of energy, which I hope that 
you will touch on in your testimony. Welcome, and with that, I 
yield back.
    Mr. Boucher. Thank you, Mr. Gonzalez. The gentleman from 
Texas, Mr. Hall, is recognized for 3 minutes.

 OPENING STATEMENT OF HON. RALPH M. HALL, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Hall. Mr. Chairman, I will just be very brief. I think 
I am not telling this fine array of members of Energy Committee 
that today we are observing a major attack on energy, period. 
And to me, other than the word prayer, the word energy is 
probably the most important word in the dictionary for our 
children and our grandchildren, who we'll send overseas to take 
some energy away from people, when if we could just use energy 
we have right here at home, could prevent a war for them.
    And that is what it is all about, and I remember in boxing, 
you have always heard boxing managers and promoters say kill 
the stomach, and the head will die. Well, all of these punches 
are stomach punches, and they are trying to kill the stomach 
now. And the head is global warming, and for the global warming 
to work, a lot of people's brain has to die because nobody is 
talking about anything that has to do with what it costs and 
what it will take and how we will send jobs to the worst 
polluter in the world, who is going to pay absolutely nothing.
    Mr. Vice President, what about China? What about Russia? 
What about Mexico? What about India? Who is going to pay for 
this mass array of funds for something that we don't know if 
going to happen? We are not positive it is going to happen. 
Major people who are much more intelligent than I am and made 
20 grade points in college have an idea about it, and not a 
small minority of them have different ideas.
    Thank you for giving us your side of it. I am anxious to 
hear it, and I yield back my time. But remember there is a 
major assault in this country by people who want a plaque on 
the wall. No, they are not going to get a bill against energy. 
I yield back.
    Mr. Boucher. Thank you very much, Mr. Hall. The gentleman 
from Washington State, Mr. Inslee, is recognized for 3 minutes.
    Mr. Inslee. I will waive, Mr. Chairman.
    Mr. Boucher. Gentleman from Washington waives. The gentle 
lady from Wisconsin, Ms. Baldwin, is recognized for 3 minutes.

 OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Ms. Baldwin. Thank you, Mr. Chairman. Today's hearing 
focuses on one of the main components of our debate on climate 
change, the electricity sector. As has been echoed numerous 
times, our Nation's electric utilities release a large portion 
of the total carbon dioxide emissions released in the 
atmosphere, with coal representing the largest single source of 
carbon dioxide emissions.
    As Americans, we are dependent on the electricity our 
Nation's utilities provide. We are accustomed to expect 
reliable, affordable service on demand. As such, it is clear 
that the companies represented before us today play an 
important role in our everyday lives, but the question remains: 
What role will you play in our future for generations to come?
    Scientists have told us loudly and clearly that the Earth 
is warming at an unprecedented rate and that human activities 
are largely the cause. The scientists have sounded the alarm 
that we must act now to slow, stop, and reverse the growth of 
greenhouse gas emissions. And the electricity industry will 
have to be a large part of our response.
    Now, I agree that we must reconcile the demand for 
affordable and reliable service with the goal of reducing 
greenhouse gas emissions from electricity generation. And I 
believe it is possible for us to take such action without worry 
that the lights will turn out but only if we commit to smart, 
aggressive initiatives that protect our constituents, our 
Nation, and our planet from the harmful effects of global 
climate change.
    In my home State of Wisconsin, we face real challenges when 
it comes to addressing our power supply. We are increasingly 
dependent on coal, and as a result, emit greenhouse gases at a 
rate that is about one-third higher than the national average. 
The people of Wisconsin understand the consequences of that 
dependence, and as a result, they are willing to meet the 
challenges of reducing our impact on the world.
    For instance, Wisconsinites supported our State's renewable 
portfolio standard that requires our utilities to use renewable 
energy to meet part of its electricity demand. And as a result 
of this action, by 2015, Wisconsin will avoid emitting about 
5.5 million tons of greenhouse gas pollution.
    On a national level, we have a very difficult task ahead of 
enacting meaningful legislation that will push the envelope in 
terms of creating efficient, effective, and environmentally-
friendly climate change programs. But it can be done, and with 
your cooperation, your ingenuity, and willingness to take bold 
action, we can bring about change.
    Thank you, Mr. Chairman. I yield back the balance of my 
time.
    Mr. Boucher. Thank you very much, Ms. Baldwin. The 
gentleman from Michigan, Mr. Upton, is recognized for 3 
minutes.
    Mr. Upton. I am going to defer, Mr. Chairman.
    Mr. Boucher. Gentleman from Michigan waives his opening 
statement. The gentleman from Illinois, Mr. Shimkus, is 
recognized for 3 minutes.

  OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    Mr. Shimkus. Thank you, Mr. Chairman. I will try to be 
brief also. Last night, I had a tele-townhall meeting where we 
try to contact over thousands of my constituents. We actually 
ended up over 500 folks on the line, and I took questions for 
about an hour. Not one question on global warming or climate 
change.
    However, Chairman Barton and Mr. Gonzalez, I did get 
numerous questions about electricity prices and energy bills, 
especially from Illinois, where we have moved to ``a 
competitive market'' and we have seen anywhere from 50 to 100 
percent to 300 percent increase in energy costs.
    I will submit to you that once consumers start receiving 
the bill, consumers will talk to us. And whether it is any 
venue, it will not be a pleasant conversation because it will 
be lost jobs. It will be higher prices. It will be slow 
economic growth, and it will be devastation for this country.
    Make no mistake. We are talking about major costs being 
passed on, either through a tax increase, which the UK just 
did, and that is not good enough. Or it is going to be 
increased costs of the price of doing business. You can't cap 
this depiction on how much we rely on coal to meet our energy 
demands because our energy demands are not going down. They are 
going up. So the laws of supply and demand would say that we 
are in deep trouble on this cap-and-trade.
    The more I attend these hearings, the more I understand, 
and I am very quizzical that we human beings think we can 
affect world climate. If you are an evolutionist, the world has 
swung through climate changes 33 different times in the 
evolution of this planet. Thousands and thousands of those 
years, man was not here and had no effect, either a glacier age 
or a warming. Some would argue this planet is carbon-starved if 
you really go to the science.
    Now, if that is the premise, if you really talk about the 
evolution--I'm a creationist. So I believe God is in control. I 
don't care what we do, but if you are in the evolutionary 
scientific model, the planet balances itself out. Man cannot 
balance this. We are not going to have the impact on this 
effort, and the issue will be at what cost. And I think the 
cost will be devastating.
    Thank you, Mr. Chairman. I yield back.
    Mr. Boucher. Thank you very much, Mr. Shimkus. The 
gentleman from Massachusetts, Mr. Markey. Mr. Markey waives his 
opening statement.
    The gentleman from Michigan, the chairman of the full 
committee, Mr. Dingell, is now recognized for 5 minutes.

OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Dingell.  Mr. Chairman, I thank you. I also commend you 
for the vigor and diligence with which you are addressing the 
problem that is before the committee. To our witnesses, thank 
you for being here. I hope you feel welcome, and I would 
observe that each of your companies has a significant stake in 
the business of producing and providing to its customer 
electricity produced from our country's most abundant 
generation source: coal.
    As we have learned in the subcommittee's hearing today, 
coal accounts for nearly 50 percent of the Nation's electricity 
mix and is thus, critical to our energy security and 
independence. The U.S. has heavily relied on coal, and no one 
seriously argues that we will not continue to need this fuel 
source to meet our future needs.
    Yet it is equally clear that coal faces challenges as the 
U.S. searches for ways to reduce carbon emissions. The 
subcommittee's March 6, 2007, hearing examines some of the 
difficulties and the opportunities for using coal more cleanly, 
and nearly every week, a new study on the topic comes forth.
    The subcommittee is fortunate to have among today's 
witnesses a number of companies that rely on coal and are 
seeking answers to the same questions that we seek, and that is 
how to maintain and improve the service to customers while at 
the same time, being good stewards of the environment.
    The witnesses today include chairmen of companies that have 
called for legislation to limit carbon emissions, a goal that 
you, Mr. Chairman, and I are working towards. Others are still 
formulating their positions, and we will be indeed welcoming 
their testimony as to the questions they confront and how they 
plan to limit the production of greenhouse gases.
    I note that yesterday was the date on which you, Mr. 
Chairman, and I requested responses to a letter we sent last 
month asking questions about greenhouse gas legislation. The 
responses, I note, are now coming in, and I want to thank our 
witnesses and the organizations to which they belong for the 
hard work which they put into these submissions. I am sure that 
the information will be very helpful to the committee in its 
future deliberations.
    With that, Mr. Chairman, I thank you for your recognition. 
I welcome our witnesses, and I look forward to their testimony. 
Thank you, gentleman. I yield back the balance of my time.
    Mr. Boucher. Thank you very much, Chairman Dingell. The 
gentleman from Oregon, Mr. Walden, is recognized for 3 minutes.
    Mr. Walden. Mr. Chairman, I intend to waive and take my 
time in the questions.
    Mr. Boucher. The gentleman from Oregon waives his opening 
statement. The gentleman from Texas, Mr. Burgess, is recognized 
for 3 minutes.

OPENING STATEMENT OF HON. MICHAEL C. BURGESS, A REPRESENTATIVE 
              IN CONGRESS FROM THE STATE OF TEXAS

    Mr. Burgess. Thank you, Mr. Chairman. I, too, want to thank 
you for holding this hearing today, and Mr. Lee from San 
Antonio, you are not my part of the State, but any part of 
Texas is good to see on this panel. You know the challenge we 
have ahead of us as so many Yankees move to our State, and we 
have got to keep them cool in the summertime. So what you guys 
do is critically important.
    Well, 2 weeks ago, this subcommittee held a hearing on 
carbon capture and sequestration. We heard from a variety of 
witnesses regarding the status of the technology and what steps 
must be taken for full-scale deployment. And we also heard 
about the potential costs. Last week, the Massachusetts 
Institute of Technology released a report entitled ``The Future 
of Coal'' which examined the role of coal in a carbon-
constrained world. Much of the report focused on the 
technological, regulatory, and infrastructure challenges that 
stand in the way of commercial deployment of carbon capture and 
sequestration.
    I had hoped that our subcommittee would hold the carbon 
sequestration hearing after the report had been released so 
that we might have had the benefit of their expertise during 
the hearing. But nevertheless, and never constrained as before, 
I am pleased to have the CEOs of many of our country's leading 
electricity companies before us here today to share their 
perspective.
    One question that I would like to hear answered by our 
group in front of us is what would happen if carbon dioxide 
emissions were capped and affordable carbon capture and 
sequestration technology was not available. In their written 
statements, most of our witnesses emphasized the importance of 
having carbon capture and sequestration technology commercially 
available in order for a cap-and-trade policy to work.
    As we have already learned, we are not at that point right 
now. Carbon capture and sequestration technology won't be 
widely available for another 40 years. That is a long time to 
trade credits before there is a technological alternative to 
credits. Since most of our witnesses today expressed support 
for mandatory cap-and-trade system, I look forward to hearing 
how they reconcile their support with the current state of our 
technology.
    And, Mr. Chairman, I am going to yield back a full minute.
    Mr. Boucher. Thank you very much, Mr. Burgess. The chair 
greatly appreciates that gesture. And now recognizes the gentle 
lady from California, Ms. Harman, for 3 minutes.

  OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Ms. Harman. Thank you, Mr. Chairman, and welcome to our 
witnesses. I want to also join the chorus about coal. It is a 
form of energy we need in our future, but obviously we need to 
drive technology so that we can find the way to produce truly 
clean coal.
    The utility companies represented here today are caught in 
a catch-22 it seems to me. On one hand, power production is 
responsible for the lion's share of our Nation's greenhouse gas 
emissions, approximately 40 percent. On the other hand, your 
businesses sell power, and the more you sell, that is at least 
using the most current technology, the more carbon you emit, 
the more money you make.
    The solution is not to tell you how much money you can or 
cannot make. The solution is to create adequate incentives for 
your companies to invest in energy efficiency and to produce 
efficient and clean energy for our Nation's needs. In 
California, we have been doing this for decades with a short, 
ill-fated experiment in deregulation. And that is because power 
companies' profits in my home State are not tied to how much 
energy Californians use. As a result of this decoupling, energy 
producers investments in efficiency pay dividends. And this 
investment is far cheaper than planning and building new power 
plants.
    Now, I am not suggesting that decoupling is a magic answer, 
but it does work in California, and the results are telling. 
The average American uses 12,000 kilowatts of energy per year, 
but the average Californian uses 7,000. This latter figure has 
held constant over 30 years, while energy usage among average 
Americans has increased by 50 percent. Best of all, we 
Californians emit 30 percent less carbon dioxide, per capita, 
than we did back then. Efficiency is paramount.
    I recently introduced a bill to drive technology in 
producing efficient light bulbs. Clearly that is a smaller 
topic, and the light bulb producers are all welcoming this kind 
of push. So our goal here, Mr. Chairman, I think is to figure 
out how we can reach a common cause in driving your efficiency, 
push you to cleaner and cleaner energy production, and find a 
solution not just for America but for this huge problem that 
the world faces.
    Thank you, and I yield back.
    Mr. Boucher. Thank you very much, Ms. Harman. The gentleman 
from Indiana, Mr. Buyer, is recognized for 3 minutes.
    Mr. Buyer. I will waive.
    Mr. Boucher. Gentleman waives his opening statement. The 
gentleman from Arizona, Mr. Shadegg, is recognized for 3 
minutes.

OPENING STATEMENT OF HON. JOHN B. SHADEGG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    Mr. Shadegg. Thank you, Mr. Chairman, and thank you for 
holding this important hearing. I look forward to the testimony 
of our witnesses. I am extremely pleased to see David Sokol and 
to have mentioned in his prepared remarks the theme I think we 
need to hit upon, which is nuclear energy. I recently note that 
Senator McCain of my State says he doesn't like following the 
French in many things, but he thinks with regard to energy 
production, perhaps they have it right.
    As we look at the challenges of climate change and of the 
emissions of greenhouse gases, I believe nuclear has to be a 
part of the equation, and I think it is important that we get 
started with that effort as quickly as possible.
    I also agree with you, however, Mr. Chairman, and with the 
previous speaker that coal remains an important part of our 
overall future. And I am very anxious to hear what the 
executives who are with us today propose to do with regard to 
continuing our reliance on coal and our use of coal but doing 
it in the clean and appropriate manner that the previous 
speaker just mentioned.
    I believe that too many people are discussing the notion of 
cap-and-trade as the only viable solution of trying to limit 
greenhouse emissions. I do not believe that it holds that 
potential. I think the experience in Europe has demonstrated 
that cap-and-trade may, in fact, not work at all and that 
creating such a market may be more challenging and may in fact 
appear to solve the problem without really doing so. I believe 
that this is a very important challenge for us as a Nation. I 
look forward to hearing the testimony of our witnesses and hope 
they will bring us encouraging news on what they hope to do. 
But I would reemphasize that I believe nuclear has to be part 
of the solution
    With that, Mr. Chairman, I yield back.
    Mr. Boucher. Thank you very much, Mr. Shadegg. The 
gentleman from Utah, Mr. Matheson, is recognized for 3 minutes. 
And the gentleman waives his opening statement.
    I believe all members have now been recognized for opening 
statements except for the gentleman from Oklahoma, Mr. 
Sullivan, who just arrived. The gentleman is recognized.
    Mr. Sullivan. I'll waive.
    Mr. Boucher. The gentleman waives his opening statement. 
The gentleman from Indiana, Mr. Hill, who is a member of the 
full committee but not a member of the subcommittee has joined 
us for the hearing. And we would be happy to entertain an 
opening statement from you, Mr. Hill.
    Mr. Hill. Well, I don't have an opening statement so I 
won't take much of your time other than to acknowledge Jim 
Rogers who is here with Duke Energy. He and I had a very good 
discussion about this very important issue that you are 
addressing here this morning. I am glad to welcome Mr. Rogers 
here to this hearing.
    Mr. Boucher. Thank you very much, Mr. Hill, and we are 
pleased to have you participate in our hearing this morning. We 
have a very distinguished panel of witnesses who will inform 
the subcommittee this morning about their views, and I want to 
welcome each of them to the subcommittee and let you know how 
much we are looking forward to your testimony. I will introduce 
briefly each witness, and we will then proceed, beginning with 
Mr. Sterba, to receive testimony. Mr. Jeffry Sterba, is the 
chairman, president, and chief executive officer of PNM 
Resources in New Mexico. James Rogers is the president and 
chief executive officer of Duke Energy Company. Mr. David Sokol 
is chairman and chief executive officer of the MidAmerican 
Corporation. Michael Morris is chairman, president, and chief 
executive officer of American Electric Power. Jack Reasor, who 
I am pleased to note is a former constituent of mine and a 
former member of the Virginia State Senate, is the president 
and chief executive officer of Old Dominion Electric 
Cooperative, a major electric utility generator of electricity 
in Glen Allen, Virginia. And Mr. Milton Lee is the general 
manager and chief executive officer of CPS Energy Company in 
San Antonio, Texas.
    I want to say a welcome to each of our witnesses and note 
in this introduction that each is a major user of coal and a 
principle coal-fired electric utility. Many of our witnesses 
also took a leadership role in developing the position of the 
Edison Electric Institute, the trade association for investor-
owned utilities in support of working with this subcommittee as 
we seek to structure an American response to the challenge of 
climate change. We appreciate that position. We appreciate your 
being here with us this morning.
    Without objection, your prepared statement will be made a 
part of the record, and we would welcome your oral summary of 
approximately 5 minutes. Mr. Sterba, we will be pleased to 
begin with you.

 STATEMENT OF JEFFRY E. STERBA, CHAIRMAN, PRESIDENT, AND CHIEF 
EXECUTIVE OFFICER, PNM RESOURCES, INCORPORATED, ALBUQUERQUE, NM

    Mr. Sterba. Good morning, Chairman Boucher, Congressman 
Hastert, and members of the subcommittee. Based on your 
leadership, I almost wanted to say I waive, but I won't do 
that.
    In 2004, the electric power sector reported 282 million 
metric tons of CO\2\ equivalent emission reductions. This 
represented over 63 percent of all reported voluntary 
reductions in that year. While our industry's voluntary 
programs have achieved meaningful reductions, I believe it is 
time to do more to address climate change, at least as an 
insurance policy for the future.
    We need Federal legislation that is environmentally 
effective, economically sustainable, and fair. And we cannot 
make significant long-term reductions without seriously 
addressing the need to fund and advance technology that can 
provide a robust and diverse portfolio of carbon-friendly 
alternatives. This needs to include energy efficiency, advanced 
coal, renewables, nuclear, carbon capture and storage, and 
plug-in hybrids. The removal of any one of these options 
impacts our ability to be serious about the challenge.
    Federal legislation should engage all sectors of the 
economy and provide leadership globally. The current path, 
which seems to be one of State action, is unsatisfactory 
because it will create a patchwork quilt of inconsistent and 
conflicting elements.
    We need to aggressively fund research, development, 
demonstration, and deployment so that we can bring carbon 
capture and sequestration technologies online as soon as 
possible. It is not just technology availability, but the 
necessary policy facilitation. This includes addressing 
licensing, citing, and reliability issues.
    And not just the storage facilities themselves, but also 
the transportation infrastructure to get the material from 
where the generation is located to where it must be placed 
underground. And if mandatory emission reduction targets and 
timelines are not in sync with the commercial timeline and 
construction and permitting of these technologies, we risk 
massive switching to natural gas and associated increase in gas 
prices that greater demand will create.
    I am not saying that we need to wait to begin reducing our 
carbon footprint until these technologies are fully deployed. 
There are a number of things, what you would call low-hanging 
fruit, that can be done now. Energy efficiency measures are at 
the top of this list and can achieve significant reductions 
immediately and cost-effectively. And they can also save 
Americans money.
    For example, if every American home replaced just one light 
bulb with a compact fluorescent, we would save enough energy to 
light more than two and a half million homes for a year and 
prevent greenhouses gases equivalent to the emissions of nearly 
800,000 vehicles.
    We can also modify existing plants to be more efficient and 
increase their capacity with virtually no additional fuel 
input, effectively creating very low emission generation. But 
certain environmental regulations, the new source review for 
example, may need to be modified to enable these improvements.
    I would ask this subcommittee to consider an overall 
architecture for a comprehensive climate change bill, which, 
one, accounts for the global dimension of climate change 
through U.S. participation in negotiations for a post-2012 
international framework. Two, provides for policy initiatives 
that will fundamentally change the way we produce and use 
energy. This will require us to establish a national technology 
roadmap that includes an aggressive research development, 
demonstration, and deployment program targeting a full suite of 
carbon-friendly breakthrough technologies and long-term stable 
funding that is not subject to the vagaries of annual 
appropriations. Three, to be cost-effective and allow for 
economic growth while achieving meaningful emissions 
reductions. Both objectives can be achieved through an economy-
wide Federal cap-and-trade program that sets mandatory 
emissions reduction targets but must allow a slow, stop, and 
reduce strategy over the next 50 to 100 years. I believe it 
also must include cost control mechanisms that do not undermine 
ultimate environmental goals but prevent adverse economic 
impact during the initial transition and enable a long-term 
price signal for major capital projects, such as a safety 
valve. When I am making a technology decision about a new 
resource, I don't care what the carbon price is today. What 
matters is what is it 10 years from now, 15 years from now, on 
the basis of the technology that I will be installing. And so 
if we have an unconstrained carbon price in the near term, when 
we don't have this technology, the only thing that will happen 
is I and my customers will pay more and probably make the wrong 
decisions for the long term.
    Further, legislation should not create winners and losers 
among generation resources, particularly with respect to 
existing resources, but rather promote all types of fuel 
sources and recognize the disproportionate impact mandatory 
reductions will have on certain regions and existing resources.
    Ultimately, the goal should be to create an economically 
sustainable and environmentally appropriate addressing of the 
climate change issues. With that, Mr. Chairman, I end my 
comments.
    [The prepared statement of Mr. Sterba appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Sterba. Mr. Rogers, 
we will be pleased to hear from you.

  STATEMENT OF JAMES E. ROGERS, PRESIDENT AND CHIEF EXECUTIVE 
          OFFICER, DUKE ENERGY COMPANY, CHARLOTTE, NC

    Mr. Rogers. Chairman Boucher, Congressman Hastert, and 
members of the committee, I would like to thank you all for 
inviting us here today to share our thoughts on how to design a 
fair effective greenhouse gas bill that puts us on a path of 
decarbonizing of our economy without causing economic 
dislocation, particularly in the regions so dependent on coal.
    My name is Jim Rogers. I am CEO of Duke Energy, Charlotte, 
North Carolina. We are the third largest investor-owned utility 
in the United States. We serve nearly 4 million customers in 
five States: Indiana, North Carolina, South Carolina, Ohio, and 
Kentucky. And almost 98 percent of our electricity comes from 
coal and nuclear plants. We are the third largest consumer of 
coal, so I speak as a representative of a company with much at 
stake in this debate.
    I am struck today by the common threads that run through 
the testimony you have seen and heard from the power industry. 
We are engaged and ready to work with you. We want the same 
things you want. Like you, we are concerned about what kind of 
planet we are leaving for our children and for our 
grandchildren. And like you, we seek a policy that inspires 
innovation and efficiency but does not place too heavy a burden 
on our customers and our economy. All of us agree on an 
economy-wide approach.
    I know this sentiment is shared by every economist I have 
seen who has commented on this issue. And importantly, just 
last week, the auto industry, which represents a third of our 
Nation's emissions said the same thing. All of us favor a 
system that uses market-based principles that establish a 
moderate price signal.
    As we look back to 1990 and the history since then, no one 
can deny the success of a cap-and-trade system in reducing 
sulfur dioxide and nitrogen oxides economically and fairly. In 
my judgment, an economy-wide cap-and-trade system would 
establish a single price signal for carbon, providing the 
framework for economic compliance decisions and driving the 
development of new technologies.
    We all have emphasized the need for our industry to employ 
the full range of options available to reduce our carbon 
footprint. They include renewables, nuclear, energy efficiency, 
and clean coal. We must work together to remove the regulatory 
roadblocks that have impeded the full potential of these 
technologies, especially with respect to energy efficiency.
    Finally, there is a sense of urgency at this table focused 
on the need for a real, sustained commitment to developing and 
deploying new clean coal technologies. We look to Congress to 
accelerate the research and development of low to zero-emission 
technologies and to partner with the private sector in 
addressing risks as we move to deploy.
    Everyone here agrees it is critical to our Nation's long-
term energy security goals to keep coal in the Nation's 
generation mix for decades to come.
    As this map shows, wide regions of the country, including 
much of the manufacturing belt of the Midwest, the fast growing 
Southeast and Southwest, and the farm belt depend on coal for 
their electricity needs. Customers in all these States will 
bear the deepest and most costly reductions, a disproportionate 
burden that Congress can address as it did with SO\2\ and The 
Clean Air Act amendments of 1990.
    And the politics of this issue is really embedded in that 
map. If you look at the States who are dependent on coal and 
those that are not, that gives you, in my judgment, an insight 
into this issue as it unfolds. We have urged you to remember 
climate change is a long-term challenge and that the emissions 
reduction path you propose should be based on a slow, stop, 
reverse strategy that saves the deepest reductions for later. 
Let me underscore this--saves the deepest reductions for later 
when technology is available.
    This is not a retreat from our commitment. It is a 
reflection of our view that we ought to do what is possible now 
and not set goals that feel good, but are unachievable. We need 
to set goals that are achievable.
    You all have a big job ahead of you. There is no 
environmental question more important than climate change, and 
no answer more complicated. While we all hope you find 
consensus in this Congress, we understand your decision will 
have a great bearing on the economy, and you need to be sure.
    I would urge you however to do something. If a cap-and-
trade is not right today, seek consensus on some first steps. 
Consider a carbon registry. Provide for credits for early 
action. Find ways to speed up development in new clean coal 
technology, especially carbon capture and storage. We need 
clarity as to rules and regulation for the storage of CO\2\. It 
could take a long time to develop the legal obligations and 
liabilities associated with the transportation and storage of 
CO\2\.
    Encourage the States to move on regulatory reforms to spur 
energy efficiency and the adoption of renewable portfolio 
standards, and the States are well on the way with 22 States 
having adopted renewable portfolio standards. Look carefully at 
some of the specific policy tools and measures in Jeff Sterba's 
testimony and David Sokol's testimony. They really kind of 
focus on things we can do up front.
    Lastly and in conclusion, I would say our climate challenge 
is heightened by the fact that as we look out, we are 
projecting a 40 percent increase in the demand for electricity 
in the U.S. by 2030. We must meet this challenge with 
available, affordable, reliable, and a clean supply of 
electricity. This is job one for me as CEO of Duke, and it is 
job one for our industry.
    I look forward to your questions today, and I look forward 
to working with each of you all in the months ahead. Thank you 
all very much.
    [The prepared statement of Mr. Rogers appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Rogers. Mr. Sokol, we 
will be pleased to hear from you.

STATEMENT OF DAVID SOKOL, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, 
               MIDAMERICAN CORPORATION, OMAHA, ND

    Mr. Sokol. Thank you, Mr. Chairman. I am Dave Sokol, 
chairman and CEO of MidAmerican Energy Holdings Company which 
has energy assets in 20 U.S. States and around the world 
serving 7 million end-use customers. Our highly diverse 
generating mix includes one of the largest renewable energy 
portfolios in the country, as well as coal, hydro, nuclear, and 
natural gas-fired assets. Additionally, we have already reduced 
our carbon intensity by 9 percent since 2000.
    I commend you for the series of vigorous hearings that you 
have scheduled. No one should underestimate the challenge of 
developing a strategy for effectively decarbonizing an economy 
that has relied on carbon-based fuels to drive more than two 
centuries of economic growth. Let us not kid ourselves. It is 
going to cost a great deal to move to a low-carbon world, and 
those costs will fall squarely on utility customers from family 
on fixed income, to small business and industrial customers.
    And it is essential to understand that the devil is clearly 
in the details. If you adopt a plan that fails to take 
technology development into account, but instead imposes 
arbitrary timelines with unknown economic impacts, you will 
place upon every American the largest unfounded mandate in U.S. 
history.
    Well, how then can we move forward? We believe that a 
phased-in technology and policy-driven approach provides the 
tools necessary to successfully reduce long-term global 
greenhouse gases while minimizing the cost and the risks to our 
country. Transitioning to a low-carbon economy cannot take 
place overnight, but there are measures we can undertake now 
that will place us on the right path.
    In the first phase, we suggest technology development and 
market transformation activities. Specifically in the 
electricity sector, we propose the following: adoptions of a 
flexible, renewable and clean technology portfolio standard, 
more stringent energy efficiency mandates, policies to 
encourage efficiency improvements at existing facilities, a 10-
year multibillion dollar public/private research and 
development program for emissions reduction, removal of the 
legal and regulatory barriers to the deployment of new 
technology, such as carbon sequestration and new nuclear 
development, and lastly, tax policies to support these 
programs, such as the long-term extension of renewable tax 
credits.
    In the second phase, as technologies become widely 
available, we suggest a hybrid system of phased-in emissions 
reductions based on carbon intensity targets, together with 
trading and safety valve pricing mechanisms. With this design, 
we will begin to gain certainty around the emissions reductions 
available, while the safety valve will provide the necessary 
certainty regarding cost.
    Any allowance allocation scheme must be based on historical 
emissions. Providing allowances to non-emitters based on the 
so-called output-based methodology will simply create large and 
distorted wealth transfers unrelated to the overall goal of 
emissions reduction. By using this transitional glide path, the 
U.S. should be poised for dramatic reductions in the third 
phase beginning around 2030. A mandatory domestic program must 
also include flexibility measures allowing future congresses 
and presidents to adjust requirements based on periodic reviews 
of climate science, technology development, economic impacts, 
and international cooperation.
    If I may, let me leave you with five clear messages. First, 
don't pick winners and losers. Our country's fuel mix today is 
based on decades of economically rational decisions approved by 
State public utility commissions and municipal utility boards. 
No one should be penalized for past actions that were deemed 
both lawful and prudent at the time.
    Second, funding technology research and development is 
absolutely essential. President John F. Kennedy told a joint 
session of Congress in May of 1961 that America should commit 
itself to the goal, before that decade was out, of landing a 
man on the moon. Does this analogy apply to our global climate 
change challenge? Well, in 1961, President Kennedy had a space 
program, rockets, and a Congress committed to fund necessary 
technology. Today, we have neither. Federal spending on energy 
R&D has decreased 85 percent since the 1980s.
    Third, failing to take technology development timelines 
into account could result in enormous unintended consequence 
such as fuel shifting from coal to natural gas, which already 
faces tight supply/demand imbalance and deliverability 
constraints. And further would promote emission shifting 
through industry relocation to countries without carbon 
controls.
    Fourth, the end consumer, our customer, your voter, must be 
thoughtfully protected in this debate because it is they who 
will pay the price of such legislation through their heating 
and electric bills at the gas station and through virtually 
every expenditure they make.
    Lastly, I would like to raise a cautionary note about the 
cap-and-trade concept. It is a regulatory mechanism that 
mandates reductions, and it says essentially let the market 
figure it out. Cap-and-trade can be a useful tool, but it is 
not a panacea. It does not supply emissions-free power. It does 
not develop nor bring new technologies online. It does not 
reduce prices for renewable energy resources. It merely raises 
the price for carbon-based emissions.
    The SO\2\ trading system created by the 1990 Clean Air Act 
amendments is rightly viewed as a success. But reducing carbon 
dioxide emissions, as I explained in my written testimony, is 
far more complex. A detailed legislative outline of our 
proposals included in our written testimony, which I hope will 
prove useful to the committee. And we would be pleased to 
answer any questions at the end of the comments.
    [The prepared statement of Mr. Sokol appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Sokol. Mr. Morris, we 
will be happy to hear from you.

 STATEMENT OF MICHAEL G. MORRIS, CHAIRMAN, PRESIDENT AND CHIEF 
    EXECUTIVE OFFICER, AMERICAN ELECTRIC POWER, COLUMBUS, OH

    Mr. Morris. Thank you, Mr. Chairman and Mr. Hastert and 
other distinguished members of the subcommittee, particularly 
my good friend Joe Barton from the great State of Texas, Fred 
Upton from the great State of Michigan, and others who I have 
known well, including you, Mr. Chairman. Thanks for the 
opportunity to be here with you.
    Since we are all talking a bit about who we are, I might 
share with the panelists who aren't familiar with American 
Electric Power that we are, in fact, the largest burner of coal 
in the western hemisphere. We serve customers in the north from 
Michigan, to the south in Texas, in the east of Virginia, and 
the west to Oklahoma. There are 5.1 million customers in that 
11-State footprint.
    Seventy percent of our 38,000 plus megawatts of generation 
capacity are fired by coal. We think it is essential that we 
have the opportunity to share with you some of the challenges 
that we see and some of the processes that we believe can be 
implemented to address the very important challenge that you 
all spoke to in your introductory remarks.
    Let me make three particular points. First, the dual nature 
of the global warming challenge. Second, the true technology 
challenges are in front of all of us as an industry and as a 
country. And lastly, the ultimate implementation process and 
the significance that it has on many of us who struggle with 
this challenge as we go forward.
    By the dual nature of global warming, I mean to speak first 
to the environmental issue. It is global warming. It is not 
American Electric Power warming. It is not U.S. warming. It is 
clearly global warming, and to the comments that many of you 
made in your own opening statements, we need to see to it that 
other nations join us in this endeavor if we hope to be 
successful. Clearly, if the developing countries of China, 
India, Brazil, and others do not join in this endeavor, we will 
have had no impact on the environmental aspects of global 
warming.
    Let me move now for just a moment then to the economic 
impact. When we think of this issue, we are looking here at a 
trade issue. We are looking at a jobs issue. What I hope this 
committee doesn't do, with the help of many of us who are 
trying to be helpful, is to create the jobs elimination bill of 
2007-08. We simply can't visit that upon ourselves.
    We believe there are two unique ways to approach that 
issue. As some of you may have seen, Ed Hill, who is the 
president of the International Brotherhood of Electrical 
Workers, thousands of blue-collar jobs, relatively high-paying, 
joined me in an op-ed not long ago on the issue of the 
potential to implement a tariff on countries who bring products 
into our Nation in a competitive sense without any 
environmental costs because they have chosen not to do anything 
about the issue in their homeland. We think that this is one 
way that we might be able to do that.
    Another is to learn from our friends in the European Union 
who most recently spoke to the issue of setting a target with a 
timeline and a commitment, which would be reduced and the 
target line extended if other nations didn't join the European 
Union in that endeavor. We think that both of those are 
meritorious steps to take when you consider the economic side 
of the issue of global warming.
    Second, the technological challenges that are in front of 
us are real. Those technological challenges have been addressed 
by panels prior to us, and I am one to take a bit of a contest 
with the notion that we can't get the carbon capture and 
storage in a 40-year timeline. I believe that is quite an 
extended timeline. We hope that we don't get there.
    Our company has joined in the belief that Chairman Boucher 
mentioned 2 weeks ago, and I hate to reflect back on a 
Budweiser commercial, but you said it all. If, in fact, this 
technology and the timelines that you set for us don't join 
together, then we will accomplish very little short of a nice, 
political sound bite.
    The facts remain that we have to address this issue both in 
a pre-combustion and a post-combustion undertaking. At American 
Electric Power where we have led the industry in technological 
breakthroughs for over 100 years, we have announced two pre-
combustion technologies. One, integrated gas combined cycle, 
which we would hope to build either in Ohio, West Virginia, or 
maybe Kentucky.
    Second, ultra-super-critical coal technologies which we 
hope to deploy in Arkansas and Oklahoma. One of the other 
things that we are working on in a pre-combustion sense is an 
oxy-fueled undertaking with the Babcock and Wilcox Company, 
which we hope to put in place at our northeastern plant in 
Oologah, Oklahoma on a 450-megawatt sized facility for the 
ultimate taking of that resource for enhanced oil recovery 
opportunities. We believe that is very important.
    On a post-combustion activity, we have every intent to go 
forward with our partner Olstrum by putting a demonstration and 
verification project at our mountaineer station in West 
Virginia at the 30-megawatt level and then ultimately moving 
that up to the 450-megawatt level to capture and utilize gas 
for underground storage in the West Virginia environment and, 
as I said, enhanced oil recovery out west.
    We believe that these things can be done. Those are really 
not research but in fact are demonstration verification 
deployment technologies. The sooner we get about that business, 
the quicker we will have some answers to this challenge. On the 
research side for CO\2\, we really should, as a country, 
embrace the notion of researching some multiple and beneficial 
use of CO\2\ once it has been captured rather than simply 
storing. Our friends in Japan today have a heat pump that 
utilizes CO\2\ as its fuel source.
    Some years ago when we implemented the post-combustion 
technologies for SOx and NOx control, we had a byproduct that 
we used to put to landfills. Today I am proud to tell you that 
this industry, our company, and many of my colleagues, now 
provide that byproduct to the wallboard industry to make what 
we call in the Midwest drywall, which some of us call in the 
rest of the country wallboard. I believe that there is where we 
should put our research efforts rather than continuing to say 
that capture and storage is a science project. It doesn't need 
to be. Both pre- and post-combustion can be handled.
    Last, let me mention a moment about the implementation. 
Both my colleagues Jim Rogers and David Sokol raised this issue 
for you, but as you go forward with a cap-and-trade program if, 
in fact, that is the way that we go, the allocation of the 
credits is substantially important to all of us who will be 
involved with the real challenge to get this work done. We 
would be strong proponents for taking the road map that you 
have used once before where 95 percent of the credits that were 
created by the enabling legislation were, in fact, allocated to 
those of us who were going to face the technological and 
financial challenge to get it done.
    I firmly believe that if we go to a massive auction 
undertaking, it is simply a matter of economics for those who 
would buy the credits because they wouldn't buy them unless 
they intended to sell them at a profit. An allocation to non-
emitting sources is exactly the same thing: a chance for profit 
taking rather than giving those credits to us who are trying to 
make a difference.
    I thank you for your time, your attention. I look forward 
to your questions and answers.
    [The prepared statement of Mr. Morris appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Morris.
    Mr. Morris. You're welcome.
    Mr. Boucher. Mr. Reasor, we will be happy to hear from you.

 STATEMENT OF JACKSON E. REASOR, PRESIDENT AND CHIEF EXECUTIVE 
   OFFICER, OLD DOMINION ELECTRIC COOPERATIVE, GLEN ALLEN, VA

    Mr. Reasor. Good morning, Mr. Chairman and members of the 
subcommittee. My name is Jack Reasor, and as president and CEO 
of Old Dominion Electric Cooperative, ODEC, headquartered just 
outside Richmond, Virginia, it is a pleasure to be here today 
and to share our views of this important topic of global 
climate change.
    After listening to Mr. Morris, I must confess to you that 
the footprint of ODEC is rather small, but I can assure you 
that the 500,000-plus consumers that own us and depend upon us 
for their power supply are vitally interested in this question 
as well. ODEC has tried over the years to provide a diverse 
generation source for our members. We depend primarily on coal, 
but also have a small ownership interest in a nuclear plant, 
and we have also built gas and oil peaking units as well. And 
we find this mix very, very important for us.
    We have also worked toward finding some renewables, and 
that has been very difficult for us. The availability of 
renewables in our area is very limited, but we have begun to 
work in this area. And we do generate or purchase from some 
renewable sources a small amount of energy today.
    But we have also worked with our members over the past 
years. We have 12 distribution electric cooperatives throughout 
Virginia, Maryland, and Delaware that depend upon us for their 
power supply. In working with them through demand-side 
management programs, we have been able to reduce about 10 
percent of our peak load through that opportunity.
    But today we face a challenge because of the fact that our 
members are growing at a very rapid rate, not only population 
wise, but in their use of electricity. And we are in a position 
that we are already behind the curve in providing new and 
additional generation. We are required to purchase more and 
more of our energy needs on the open market. Majority of that 
through the PJM system is also coal generated as well, but we 
need to have more control over our own assets and over the 
assets of the generation that we provide our members.
    ODEC is also part of a larger organization, the electric 
cooperatives all across the country. Electric cooperatives 
serve about 75 percent of the landmass of this country, and we 
serve about 12 percent of the consumers in the United States. 
But when you look at who we serve and where we are located, we 
are usually in very low-density areas of the country.
    As an example, generally the typical electric cooperative 
in the United States has 7 customers per mile, 7. That compares 
to the investor-owned utilities at about 35 customers per mile, 
and municipal systems at about 47 customers per mile. We also 
find that on average our member consumers are at a lower income 
level. As a matter of fact, the average utility electric 
cooperative consumer's income is about 16 percent below the 
national income average.
    And when you look at the electric cooperatives and the 
G&Ts, such as ODEC, who provide the power to these rural areas 
and to these consumer owners, you will find a couple of factors 
about us that are very important in this process.
    One, because of the fact that we are consumer-owned and we 
return any excess funds back to the consumer, we have very low 
equity ratios. Second, due to the fact that we are consumer-
owned, we do not have stockholders. Therefore we basically are 
always debt financing. With low equity ratios, always debt 
financing, it puts us in a very difficult position.
    And as I move to my first point, Mr. Chairman, and that is 
that technology is very important. I will not repeat a great 
deal of what has been said by my colleagues because I endorse 
what they are saying as well, that it is very important that 
the technology be developed to address the issues that we face 
today. I would caution you please do not let the legislation 
get ahead of the technology.
    But as electric cooperatives, we find it very difficult for 
us to be the first to try new technologies. We want to support 
all the technologies that are available and that can be 
developed, and we are confident the answers will be found in 
that new technology. But electric cooperatives are not in a 
position to be on the frontline of developing those new 
technologies.
    Second, as you move down this road of requirements and 
moving all of us toward a cleaner environment, which we want to 
be a part of as well, we would ask that as you provide certain 
incentives, and you will be required to provide those 
incentives, that you would also be sure that those incentives 
will also work for not-for-profit electric cooperatives as 
well. If you will do that, I can assure you that we will take 
advantage of those opportunities and also work toward the 
development of these new technologies.
    And, Mr. Chairman, my final point would be if this 
committee moves in the direction of a cap-and-trade program, we 
would like to have the opportunity to work with the 
subcommittee in developing that program. And I would ask two 
particular points be considered in that process. One, we think 
under a cap-and-trade program that the allowances should be 
allocated and not auctioned. We think that is very important.
    Second, we also feel that these allocations should be based 
on fuel input. It is very important that they go toward the 
source of where they are needed, and that generally will be 
fossil fuels. And I say that as president of a company who also 
has a small ownership interest in a nuclear facility, but I 
would ask that you would consider these proposals and think 
about them as you move toward this process.
    Mr. Chairman, I appreciate the opportunity to be here, and 
we look forward to answering questions and also working with 
the subcommittee as you make your decisions.
    [The prepared statement of Mr. Reasor appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Reasor. We are 
delighted to have you here this morning. Mr. Lee, we will be 
happy to hear from you.

STATEMENT OF MILTON B. LEE, GENERAL MANAGER AND CHIEF EXECUTIVE 
          OFFICER, CPS ENERGY COMPANY, SAN ANTONIO, TX

    Mr. Lee. Thank you, Mr. Chairman. Good morning and to the 
distinguished members of the subcommittee also. My name is 
Milton Lee, and I am general manager and CEO of CPS Energy in 
San Antonio, Texas. I appreciate the opportunity to address you 
today, and I hope my remarks will assist you in your 
deliberations.
    CPS Energy is the Nation's largest municipally-owned energy 
company providing both natural gas and electric service. And as 
a municipal utility, CPS Energy belongs to a class of utilities 
termed public power utilities. Our owners are the citizens of 
our communities, and they expect their public power utilities 
to provide reliable, affordable power in an environmentally 
sensitive manner.
    Public power utilities are governed either by elected 
public officials, such as city councils or by boards or 
appointed or elected officials. It is truly local governed, 
subject to open meetings and open records requirements that 
assures local issues are adequately addressed.
    Public power makes no profit. Our prices are set not at 
what the market will bear but at the level sufficient to cover 
our costs and sustain a reasonable reserve for repairs and 
replacement of our capital equipment. CPS Energy recently began 
construction of a new coal-fired power plant near San Antonio, 
a plant that was subject to the most rigorous public 
involvement process ever. Many of the issues now being dealt 
with this committee were at issue during our public involvement 
process of our coal-fired power plant.
    As a result, our engineers and consultants have given 
careful thought to these matters, and they have relied upon the 
most current information available in forming their opinions. 
The research conducted by CPS Energy over the past several 
years gives us an opportunity to express a few opinions 
regarding the current discussions of a greenhouse gas policy 
and how it relates to the utility sector.
    Please permit me to summarize those opinions and 
recommendations now. First, given the extreme complexity and 
seriousness of the issues at hand, the committee should 
undertake its deliberations with all due consideration and 
without regard to artificially imposed or impractical deadlines 
or timelines. Improperly done, this legislation could adversely 
impact the economic health of the United States and yet have no 
positive impact on climate change. Proceed, but proceed with 
caution.
    Global climate change policy and regulations should include 
all greenhouse gases. Greenhouse climate change should include 
all members of the global community also, and they should be 
expected to commit to a program of greenhouse gas emissions 
reductions. In the event other significant emitters fail to 
meet goals and objectives, legislation should provide a safety 
valve to protect against economic harm.
    Any legislation must be applicable to all sectors of the 
economy, not just the electric utility industry itself. Current 
technology for carbon capture and sequestration for fossil fuel 
generation does not adequately support the effective 
implementation of a cap-and-trade program for CO\2\ at this 
present time. Legislation should not limit our flexibility to 
rely on the most abundant domestic fuel source, coal.
    Legislation should be based upon a phased approach to 
solving this problem. Congress should develop a reasonable 
timeline for these phases based upon the objectives of 
preserving economic growth, developing the technologies needed 
to accomplish these goals, and allowing time to deploy these 
technologies.
    Public power and private utilities have different 
government structures that have lead to the discrepancies in 
the availability of certain Federal incentives. Whatever 
Federal incentives are utilized to promote private investment, 
all sectors should share in equal access.
    Mr. Chairman, this concludes my prepared remarks. Thank you 
again for the opportunity to address this committee.
    [The prepared statement of Mr. Lee appears at the 
conclusion of the hearing.]
    Mr. Boucher. Thank you very much, Mr. Lee. And thanks to 
each of our witnesses for your very thoughtful testimony here 
this morning. I am going to recognize myself for a 5-minute 
round of questions, and I will begin by propounding to each of 
you the same question that we propounded to the chief executive 
officers of the automobile manufacturers when they were before 
the subcommittee last week. I would note that each of them 
answered this question in the affirmative. I will just note 
that, and we will look forward to your answers as well.
    We are in the process of considering legislation that would 
be mandatory in nature, that would fashion a United States 
response to the challenge of climate change. It would have 
economy-wide application. It would not be something that 
controls only the electric utility sector but would apply to 
the entire economy. Our goal would be to prevent any sector of 
the economy from being dislocated and to prevent any 
disproportionate burden from falling on any sector of the 
economy as compared to the balance of the economy.
    We would certainly preserve your ability to continue to use 
coal, and I have duly noted that comment in virtually all of 
your statements. It also would be a measure that would assure 
in some fashion that we have international participation from 
the developing world as we go forward with the mandatory 
program for the United States.
    I should say that while we certainly are considering cap-
and-trade as one approach to achieving this result, we have not 
made policy decisions about what mode we would have for 
establishing a mandatory program in this country. And so this 
question is not specific to cap-and-trade; although, that 
certainly is one major candidate for our consideration.
    If we fashion legislation that has these components and 
these characteristics, will each of you work with the 
subcommittee in drafting the bill, in making sure that these 
goals are met, and in helping to fashion a United States 
response for the challenge that we are confronting? Mr. Sterba, 
let me begin with you.
    Mr. Sterba. I will be brief. Yes. And we look forward to 
the opportunity.
    Mr. Boucher. Thank you, Mr. Sterba. Mr. Rogers?
    Mr. Rogers. Jeff set a good example. My answer would be 
yes, and we look forward to the opportunity to work with you to 
make it happen.
    Mr. Boucher. Thank you, Mr. Rogers. Mr. Sokol?
    Mr. Sokol. Yes, Mr. Chairman, we would be pleased to.
    Mr. Boucher. Thank you, Mr. Sokol. Mr. Morris?
    Mr. Morris. Yes, sir.
    Mr. Boucher. Thank you, Mr. Morris. Mr. Reasor?
    Mr. Reasor. Yes, sir, we look forward to it.
    Mr. Boucher. Thank you, Mr. Reasor. Mr. Lee?
    Mr. Lee. Yes, sir.
    Mr. Boucher. That was just a great set of answers. I want 
to thank you for those responses.
    One of the objectives that we have, as I think you have 
indicated in your statements and we have indicated here in ours 
is not in any way to disable the ability of coal-fired 
utilities to continue to use coal, to do so at current volumes 
and preserve the opportunity for coal's share of the 
electricity generation market to grow. I think it is noteworthy 
that EEI has suggested that under current trends, by the year 
2030, coal's share of the market would grow from 51 percent 
today to 57 or 58 percent, and we would want to preserve that 
opportunity for coal to occupy that greater market share if it 
is your desire for that to happen. For that to happen, we will 
have to have technology available that in a carbon-constrained 
environment enables carbon capture and permanent storage. And 
so my question to you is what is the appropriate government 
role at this point to accelerate the availability of that 
technology? Should we provide financial incentives to electric 
utilities? Should we be providing research and development 
funding? I should say research, development, and demonstration 
funding in order to accelerate the arrival of that technology. 
And assuming that the answer to that question is yes, and more 
dollars are going to be required, can you give us a sense of 
the scope of what those expenditures should be, and is there a 
schedule that you have in mind for the expenditure of those 
funds? Mr. Sterba, would you like to comment?
    Mr. Sterba. Yes, sir. There are a number of things that 
need to be done, and they are not all just associated with 
funding. Let me touch on those first, and then I will touch 
briefly on funding. One of the biggest challenges that we have 
is the era of uncertainty. We don't have certainty over what 
the licensing, siting, or liability requirements may be, 
particularly licensing and siting. Those still have to be 
defined, and it is very difficult to go forward on a commercial 
basis until they are.
    And it is not just with respect to the storage facilities 
themselves. It is all of the pipeline and other infrastructure 
that will be necessary to move the material from where it is 
going to be coming from out of a coal-fired plant to where it 
is going to be located. That has got to be job one, and the 
difficulty is that frankly could be fraught with litigation and 
opposition, and so I would urge that that get moved on very 
quickly.
    Relative to the RDDD, and it really is, as you rightfully 
pointed out, it is more on the DDD, development and deployment 
and demonstration than it is on the pure research side. Yes, 
there is additional funding that is necessary. I believe in the 
revised budget, there is $100 million being put forward in this 
proposed budget from the administration. That is probably off 
by a factor of five to six times in terms of what is necessary 
on both the capture and storage end of the game. And that is 
probably an average over the next 10 years. We cannot afford to 
be in a position that we can't by 2020, 2025, be able to 
implement capture and storage. But to do that, we have got to 
accelerate the pace of the demonstration and development a 
number of large-scale projects, a million or more tons each, in 
different geologies across the country.
    Mr. Boucher. Thank you, Mr. Sterba, for that very thorough 
answer. Would other witnesses care to comment on that question? 
Mr. Sokol.
    Mr. Sokol. Mr. Chairman, I think the other piece of this--
and Jeff hit on a very important piece, but that is just the 
regulatory side needs to be emphasized. The MIT study that was 
referenced earlier in this discussion points out that if we are 
just to capture and store 60 percent of existing coal-fired 
CO\2\ generation, we have to replicate one-third of the 
pipeline capacity of the existing natural gas system in 
America, just to move it. That has to be sited, the siting of 
transmission lines today for electricity are well known to all 
of you is the difficulty of doing that. Natural gas is a 
separate commodity than CO\2\. Those types of issues have to be 
focused upon in these timelines for not only research, but also 
the development.
    And second, if we are sincere about moving to a carbon 
severely constrained environment, we have got to spend more 
money on the nuclear side of this equation as well because coal 
has to play a major role. Nuclear will have to play a major 
role as well.
    Mr. Boucher. Thank you very much, Mr. Sokol. Would anyone 
else care to comment? Mr. Lee.
    Mr. Lee. Yes, Mr. Chairman, one other consideration could 
be that a user fee could be supplementing any Federal 
incentives that would come forward and which all coal users 
could participate in that process with the restriction though 
that that funding would be placed for a little ``r'' and big 
``D'' for technology to move forward. And the latest that we 
have seen via EPRI, the Electrical Power Research Institute, is 
that they think technology could be available as soon as 2020 
if appropriate funding was provided at this current time.
    Mr. Boucher. I think the pace of the deployment really will 
depend on the pace of the funding between now and the time it 
is ready. Well, thank you very much. I appreciate those 
answers, and my time is expired. The gentleman from Illinois, 
Mr. Hastert, is recognized for 5 minutes.
    Mr. Hastert. Thank you, gentlemen. It's interesting if you 
will look on that map that was put up on the board. My State of 
Illinois only has about 45, 48 percent coal utility. I had the 
dubious honor of chairing a select committee to rewrite the 
Public Utility Act in 1983 and 1984. After Three Mile Island, 
we had 14 nuclear plants coming online at that time, and 
nuclear was supposed to be too cheap to meter. A $400 million 
nuclear plant ended up costing $5 billion. Of course, that was 
passed onto the ratepayers, as Mr. Barton noted, that those 
increasing costs do. So I made a rash prediction back then that 
probably we wouldn't cite another nuclear plant in this Nation 
for 20 years. Well, it has been 20 years, and it is time to 
review this and look at it. I think nuclear has to develop. We 
have to find the best and safest ways to develop nuclear.
    In my district that has a huge nuclear use, there are 40 
coal trains, 130 cars a piece, that move through my district 
every day to fire up and light up the greater metropolitan area 
of Chicago. I have to explain: 20 going and 20 leaving. But 
they are there. And how do we make sure then that that coal 
utility can keep operating, can stay efficient and bring a fair 
cost to the consumer?
    At the same time, we see, when I was here in 1992, and we 
looked to see how do we need to develop energy. And we decided 
that natural gas, there was such an abundance of natural gas in 
this country that it was an unlimited commodity. So every power 
plant that we build basically since 1992 has been a gas-fired 
or gas-peak plant. Well, we find out that all of a sudden, 
there is an end to natural gas and there is a cost to natural 
gas. And that too then has become suspect.
    Here are the alternatives. You say you are going to 
sequester and cap. That is one technology. That is one idea. If 
we are going to gasify coal or liquidize coal, there is more 
energy under the city of Gillette, Wyoming than there is of all 
Saudi Arabia if it was used in an effective manner. How do you 
determine or how should we determine what are the best ways? 
Let us not just go down one road. Let us look at all the 
alternatives. Mr. Sterba, what is the best way in your opinion, 
just quickly?
    Mr. Sterba. It is to use all of those sources. We cannot 
make the assumption that there is a single answer. It has got 
to be the entire portfolio, and every time we eliminate one for 
political or other reasons, our ability to accomplish the 
objective is impacted.
    Mr. Hastert. Mr. Rogers.
    Mr. Rogers. The portfolio approach to creating a generation 
fleet is really critical. In the period you talked about in the 
1990s, there has been no time in our history of our country 
have we been so dependent on one fuel, where 90 percent of the 
generation was gas-fired. And that is the new generation.
    That is really the answer. We need coal. From an energy 
security standpoint, we need to find a way to use it. We need 
nuclear, and we shouldn't be addressing this issue of climate 
without addressing in a straightforward way the nuclear issues. 
Today, 24 reactors are being built around the world, and not a 
single one is built in the United States today.
    Mr. Hastert. Mr. Sokol?
    Mr. Sokol. Yes, Congressman, I think you are hitting on a 
point that is very important, and that is that we need all of 
the above. This subcommittee and the Congress needs to deal 
with this issue, even the magnitude of the issue, in a holistic 
way. We have got to blend energy policy, environmental policy, 
and economic policy because in the past what we have done is 
focused on natural gas or nuclear in energy policy or coal. We 
then dealt with pieces of environmental policy, and we largely 
ignored the economic effects. This is a wholesale change. If 
global climate change is to be addressed in the way it is being 
discussed, a wholesale change in how we utilize and develop 
energy in this country, and that can't be done with any single 
technology. It has to be a holistic approach.
    Mr. Hastert. Mr. Morris.
    Mr. Morris. One of the things that we can lose sight of, 
Mr. Hastert, is that all of these decisions are really State 
decisions. I think Tip O'Neill said it best. All utility rates 
are local. The fact remains that if I want to build an 
integrated gas plant in Ohio, which I do because I think that 
technology is important for pre-combustion capture and storage 
of carbon and global warming gases, that is up to the public 
utility commission of Ohio, not to the Congress of the United 
States. And we all have to face that issue, so going to the 
portfolio, allowing those who want to build new nuclear are 
going forward, allowing those who want to build clean coal, 
either pre- or post-combustion go forward. But it is always a 
State's issue at the rate regulator in the States where we are 
still regulated, which still is the dominant regulatory process 
here in the country. So my colleagues are right. The portfolio 
is important, but this is a State's issue as to how we decide 
what plant will be built and how the costs incurred in building 
that plant are doled out to our customers in the charges that 
we have.
    Mr. Hastert. Well, sometimes I think maybe this committee 
may want to usurp or some committees may want to usurp State 
regulation. I don't have time to ask the rest of the gentlemen. 
I would really like to hear your comments later. Mr. Chairman, 
thank you for your indulgence.
    Mr. Boucher. Thank you very much, Mr. Hastert. The 
gentleman from Michigan, Mr. Dingell, chairman of the full 
committee, is recognized for 5 minutes.
    Mr. Dingell. As chairman, you are most courteous. Thank 
you. Gentlemen, thank you for being at the committee today. It 
is a pleasure to see many old friends down there again, and I 
want you to know that I appreciate your testimony. You have 
given us some very good testimony. You have told us what you 
think should be done, but you have not told us who should be 
the one to do it. Mr. Rogers, what kind of regulatory agency or 
to whom should these matters be suggested?
    Mr. Rogers. Well I think first and foremost is I look back 
to the success that we have had with cap-and-trade and SO\2\ 
that really grew out of 1990 Clean Air Act amendments. As I 
look forward, that kind of regulatory regime makes sense 
because it is both a push and pull to get it right in terms of 
the market price with respect to technologies as well----
    Mr. Dingell. But to whom do we assign this? This is going 
to be a fine mess. Who is going to be the lucky guy that gets 
it?
    Mr. Rogers. Well, I think at the end of the day, in terms 
of setting it, it is really with respect to the--I would say 
the EPA would be the one in terms of having the jurisdiction 
over this long term.
    Mr. Dingell. Gentlemen, I would appreciate it if each of 
you would submit for the record to whom you think this 
responsibility should be allocated for administration. Sir?
    Mr. Morris. Chairman Dingell, if I might add a comment to 
Mr. Rogers' answer, I think it is important when we look back 
at the implementation of new source review and the on-again-
off-again, never ending debate over what those words mean, I 
would hope that this committee, in its drafting of this 
legislation, would be somewhat prescriptive so that we don't 
leave a great deal open to debate. As I learned at the Detroit 
College of Law some years ago, words are extremely important, 
and they have very deep and broad meaning. So the more clarity 
that your committee can put into legislation, whichever form it 
takes, will help all of us in the end trying to accomplish 
these goals, which we all jointly believe in and clearly do 
support.
    Mr. Dingell. Now, I have heard the suggestion that we 
should have essentially a two-phase program. One is we should 
have an allocations allowance system for a certain period of 
time which should be phased out gradually in favor of an 
auction system. And, Mr. Rogers, I am going to stick you with 
this question again. How long should the allocation phase last, 
and who would make a decision as to when and how this system 
would be phased out in favor of the auction system?
    Mr. Rogers. Chairman Dingell, my judgment would be is that 
it would be three phases actually. I think there ought to be a 
5-year waiting period, as we had with the Clean Air Act 
amendments of 1990 first. Second, we then go into the phase 
where we do the allocation of allowances, and allow that to be 
for a period that is--and this is an important point. It needs 
to be timed with the availability of the technology that 
actually allows us to remove the carbon. And that is an 
important part. Whether it is 10 years, 15 years, 20 years, to 
me, it needs to be tied to the availability of technology. That 
has to be the determining point. And then the auction period 
comes in after that period.
    Mr. Dingell. All right, now, Mr. Sterba, you urge that the 
U.S. account for the global dimension of climate change, and 
you suggest our leadership is essential and that the United 
States should not condition its own policies on equal actions 
by developing nations. How should the U.S. coordinate its 
domestic climate change actions with the participation in 
international negotiations? Each of these tasks is very 
difficult, and doing the two of them together will require 
enormous skill and care. How are we going to address that, and 
how will we do it?
    Mr. Sterba. Mr. Dingell, my suggestion would be that the 
U.S. should formulate its policy and what it believes makes 
sense but in the context of the global environment, and that it 
should not just be a policy of we won't do it until you do it. 
But I very much endorse the proposal that has been put forward 
by Mr. Morris and by our friends at IBEW that says if you don't 
do it, there is a cost to the goods that are imported into our 
country because you have not taken on that responsibility as 
our country has. So I believe that our continued engagement 
needs to be relative to the engagement of the rest of the 
countries, particularly those developing countries. But I don't 
think we can say we won't do it until you do it.
    Mr. Dingell. You are saying we should have an enforcement 
mechanism?
    Mr. Sterba. Absolutely.
    Mr. Dingell. Gentlemen, I look, and my time has expired. 
Mr. Chairman, I thank you for your courtesy. I would ask this, 
Mr. Chairman. I will have some questions that I would like to 
submit to the panel for the purposes of the record, and I would 
ask your courtesy in keeping the record open so that could be 
done. And, gentlemen, I would hope that when we send you a nice 
little letter that you would respond to us because we have some 
questions frankly on which we desperately need your assistance 
and advice. Thank you.
    Mr. Sterba. Thank you for the opportunity.
    Mr. Boucher. Thank you very much, Mr. Dingell. And without 
objection, the record of this hearing will remain open for the 
submission of questions by the members of the subcommittees to 
our witnesses. And we would ask for your expeditious response 
when they are received. The gentleman from Texas, Mr. Barton, 
the ranking member of the full committee, is recognized for 5 
minutes.
    Mr. Barton. Thank you, Mr. Chairman. And before I ask my 
questions, I think we should take time out to congratulate this 
panel and the industry that they represent. We have the most 
efficient, cleanest--with the exception of the French who are 
almost all nuclear-power generation and transmission system in 
the world. And it is in large measure thanks to the fact that 
we have allowed the decision making, as has been pointed out, 
to be done by the private sector in conjunction with our public 
utility commissions around the country. So I want to 
congratulate this group for making it possible to have the kind 
of economy and the industrial strength that we have in our 
Nation. I am sincere about that.
    My first question is I assume everybody on the panel thinks 
we should continue to use coal and even use more of it. 
Everybody that thinks coal should be a part of our future 
energy mix, please raise your hand.
    All right, I also, with the exception of maybe our public 
utility down from San Antonio, would assume that you all are 
all committed to trying to increase the use of nuclear power. 
If you do that, raise your hand.
    I see even our San Antonio gentleman, OK.
    Mr. Shimkus. Mr. Barton, would you make sure just for the 
record you will note that they all raised their hands?
    Mr. Barton. They have all so far.
    Mr. Shimkus. I mean I see it, but for the record.
    Mr. Barton. I am learning from Mr. Boucher. I am trying to 
come up with questions that they all agree to. Now, it gets a 
little bit tougher. Mr. Lee, you announced that your utility, 
which is a municipal utility, has just begun construction or 
got approval to begin construction of a new coal-fired power 
plant. Is that correct?
    Mr. Lee. That's correct. We got that permit from the Texas 
Commission of Environmental Quality about a year ago, and the 
unit has been under construction for about a year.
    Mr. Barton. OK, when it is in operation, can you tell us 
what the cost per kilowatt hour of its output is expected to 
be?
    Mr. Lee. Approximately 5 to 6 cents a kilowatt hour.
    Mr. Barton. Five to 6 cents, OK. Now, Mr. Rogers, you are 
the new president of EEI, and you just announced to this group 
the support for some sort of a cap-and-trade system. But if I 
heard you correctly, you don't want that to be implemented for 
about 20 years. Is that right?
    Mr. Rogers. No, I didn't say it that way. First of all, Mr. 
Barton, Tom Kuhn is president. I am just chairman of the board.
    Mr. Barton. Just chairman of the board. I apologize.
    Mr. Rogers. For a short period.
    Mr. Barton. Yes, I have a feeling he does what you and the 
board tell him to do, but I may be wrong. But no, I know Tom 
well, and he is----
    Mr. Rogers. We do a good job of listening to Tom.
    Mr. Barton. Right.
    Mr. Rogers. I think the way we look at it is that to 
implement cap-and-trade, which is not the position of EEI, but 
which is our company's position, and to do that appropriately, 
based on past precedent, you need a 5-year waiting period. And 
then you need a period where cap-and-trade goes into place 
because you start to work to get the most cost-effective 
offsets. But during that period you have allocations which are 
really critical to making the transition.
    Mr. Barton. But when in your scenario do you expect there 
to really be a cost that has to be incurred by the ratepayer or 
the stockholder or the taxpayer for this system? What is your 
first year that there is a real cost that kicks in?
    Mr. Rogers. It is 5 years after enactment, which is the 
waiting period.
    Mr. Barton. OK. Well, here is my problem. When I hear Mr. 
Boucher ask these questions and he gets everybody to say yes, 
the only thing that you are not agreeing to is a chicken in 
every pot and a mule in every barn. I mean he phrases it so 
everybody says yes, but we really don't talk about when it is 
going to happen and what is it going to cost when it does 
happen.
    My understanding is that our economy is growing each year, 
and a demand for electricity is somewhere in increase between 2 
and 3 percent a year. That is about one 500-megawatt power 
plant every week. Every week. What are we going to do next 
year? Are we going to build these new coal plants? And if you 
are going to build a coal plant, what kind of a technology are 
you going to use next year?
    I am fine for some system 50 years from now, but I am not 
fine with a system that kicks in next year if it means that 
everybody in America is going to pay 16.5 to 20 cents a 
kilowatt hour like I am paying down in Texas right now. That is 
my problem. What do we do next year and next year and next year 
while we are getting to this nirvana of zero cost carbon 
capture and sequestration while our economy is still growing 2 
to 3 percent a year? What do you do next year?
    Mr. Rogers. Mr. Barton, the reason for the waiting period, 
in my judgment, is to get prepared and start to, during that 
period, get credit for early action so you start to bank 
credits. You start to take action. You start to look for 
offsets. You start to plan for future generation. You look at 
replacing old coal plants with new coal plants that are more 
efficient. You take at least 10 years to build nuclear. You 
look at that. You look at renewables or investment in 
renewables. You look at energy efficiency because all of a 
sudden once you start to price carbon, you begin to get a clear 
picture of what the value of energy efficiency initiatives 
would be. So I think you do all these things going forward.
    Mr. Barton. Well, my time has expired, but I think we kind 
of got the nub of the problem. There is nothing we can do next 
year to build these new generation plants that is cost-free. 
That is the issue that at some point in time we have got to 
address in a serious way if we don't want to wreck our economy. 
With that, Mr. Chairman, I yield back.
    Mr. Boucher. Thank you very much, Mr. Barton. The gentleman 
from Pennsylvania, Mr. Doyle, is recognized for 5 minutes.
    Mr. Doyle. Thank you, Mr. Chairman. I want to thank the 
panelists for your very thoughtful testimony, and if we are 
going to get this done, we do have to work together. And, Mr. 
Barton, I think we all recognize this isn't something that is 
going to happen next year, and it isn't going to be without 
cost.
    I had a guy come in my office about 10 years ago, and he 
said to me Mike, remember two things. He says coal can never be 
clean, and nuclear can never be safe. There are probably still 
a lot of people that believe that today. I am certainly not one 
of them. I think that we understand that if we are going to 
address our energy needs of the future, one of the things we 
can't do is put all our eggs in one basket. When we put all our 
eggs in a natural gas basket and those prices went up, we all 
saw the ramifications of that.
    We have invested hundreds of millions of dollars in 
developing these next-generation nuclear power plants. The 
AP1000, Westinghouse, General Electric. We sell it everywhere 
but our own country. Everywhere but our own country. We fight 
every year on the House floor with Members of Congress who want 
to cut the R&D funding for clean coal technology programs.
    I noted in Mr. Sokol's testimony that the Federal budget 
for research and development has decreased 85 percent since 
1980. We are not putting our money where our mouth is either. 
If these are national priorities, if this is important for the 
future--if this is like when President Kennedy said let us put 
a man on the moon when nobody knew how to do that, but he 
doubled the NASA budget for the next 2, 3, 4 years until it got 
done, I think it is going to take the same kind of commitment 
on behalf of Congress to not just say this is a problem and not 
just say this is a challenge for the country, but to start to 
invest in the research and development and to provide the 
incentives in partnership with the private sector so that we 
can start moving down this path.
    Mr. Morris, I read your editorial with Mr. Hill. I think it 
is right on the money. We cannot consider climate change debate 
without considering our trade policy too. If this is just going 
to be about emission migration to countries that aren't 
participating, we are going to de-industrialize our country. 
And coming from western Pennsylvania, from Pittsburgh, I am not 
going to be party to that either.
    Mr. Morris. With no environmental benefit whatsoever 
worldwide.
    Mr. Doyle. Exactly. We are just shifting the emissions. We 
are not eliminating them.
    Mr. Morris. Absolutely.
    Mr. Doyle. So that has to be part of the debate too. But 
one thing is for certain. If the United States doesn't start 
doing something, nobody else is going to do anything either. So 
not doing anything isn't an option either. We have to start to 
take steps to address this problem. But then we have to make 
sure that others are taking steps to work with us because if 
they are not willing to do this--and that is where I think this 
situation comes in with the trade or with some sort of a safety 
valve, if you want to call it that, with any type of mandatory 
program that we put on our industries here in the United States 
that we will take some steps in that direction too. But if the 
world doesn't follow, then there is going to have to be some 
leveling of the playing field for those countries who don't 
participate in the form of disincentivizing technologies and 
companies to simply shift their resources over to these 
countries that don't participate.
    I just want to ask all of you in the minute and a half that 
I have left what you think we can be doing? Because this is 
going to be a partnership. We have done darn little, in my 
opinion, in terms of the investment we have made to this. What 
can we do? What current programs we are doing now or what new 
programs or what regulation-wise can we be doing to give you 
guys the biggest bang for your buck to address some of the 
concerns that Mr. Barton has? How do we start to bring some of 
these technologies, some of these strategies to deployment 
sooner rather than later? What can we do to help you do that? 
And just go right down from the beginning.
    Mr. Sterba. Let me start with three, Mr. Doyle. Number 1, 
appropriately and adequately fund the research, development, 
and demonstration endeavors that need to be undertaken at the 
Federal level. Number 2, resolve the nuclear spent fuel issue 
so that we can make nuclear a viable component in the future. 
And No. 3, ensure that the administration either has 
legislation or has the ability to develop the necessary siting 
and licensing and liability aspects from an administrative 
perspective associated with carbon storage.
    Mr. Doyle. Thank you.
    Mr. Rogers. My comment would be that everybody likes to 
talk about the devil being in the detail. I think God is in the 
details, and this committee needs to embrace the details. And 
the details are the funding, as Jeff talked about, RDDD. It is 
solving the nuclear spent fuel issue. It is encouraging States 
to really step up on energy efficiency and renewables, and it 
is also really about, during this waiting period, getting 
credit for early action. The most important point I can leave 
with you is if this problem is as it has been defined, and I 
believe it is, we need to go to work now. And waiting 5 years, 
10 years, 15 years, 20 years is not a good answer because the 
lowest cost solution for our customers and for our country will 
be action now, not delay.
    Mr. Sokol. Merge the Department of Environmental Protection 
into the Department of Energy and require them to deal with 
these issues on a combined basis.
    Mr. Morris. Interesting. To your comment earlier on, coal 
can be clean and nuclear can, in fact, be safe, but it will not 
be cheaper. And we can't continue to believe that that is part 
of the answer because it just isn't. We do need 24/7 base load 
power plants. We do not need any more peaking coal or peaking 
gas. An 18, 19 trillion foot supply, 22 trillion foot demand 
just gets worse if we head in that direction, so we need to do 
those things.
    What our company intends to do in 2008, we will have a 30-
megawatt capture and storage project on our mountaineer station 
in New Haven, West Virginia. By 2011, we will have a 450-
megawatt capture enhanced oil recovery project at our 
northeastern station in Oklahoma. It is time to quit talking, 
and it is time to begin acting. And American Electric Power 
intends to do that.
    To the extent that DOE will help fund that, that is 
important to my customers because ultimately, as I said to Mr. 
Hastert, the public utility commission in the State of Oklahoma 
will tell PSO what they can and cannot do. And the public 
utility commission in the State of West Virginia and Virginia 
will tell Appalachian Power what they can and cannot do in a 
financial sense.
    So again all of the things that we are talking about today 
are going to end up with an incredible timeline if the States 
aren't equally encouraged to follow through and allow us to put 
that capital to work to demonstrate that this does work.
    We keep talking about coal 50 percent of the capacity 
growing to 58 or 59 percent. That is capacity. That is not 
actual gigawatt hours production. It is much, much higher on 
gigawatt hours production because when you look at the overall 
capacity, renewables and other things fall in there. When you 
look at the actual gigawatt hours of produced energy for the 
economies of this country, there is a huge difference there. So 
this is a very important point. We cannot leave coal off of the 
agenda. We cannot leave our existing nuclear feet and the new 
potential nuclear plants not to come into play.
    Mr. Reasor. Mr. Doyle, three things quickly. One, the 
diversity of the types of fuels that are involved, and we do 
need all of those. And that is what the other gentlemen have 
said, and I agree with that absolutely.
    Second, the Department of Energy has had some excellent 
programs over the years in clean coal technology. That is not 
the only program, but the funding for those types of programs 
must be increased. And the private sector is prepared to step 
up and put money into those programs as well, but they need to 
be funded in a greater level from the Federal perspective. And 
then last, is to provide incentives. The electric cooperatives, 
while we might be small, if you take all of the electric 
cooperative generation across the country, that is 43,000 
megawatts. That is a lot of generation. It would make us one of 
the large utilities in the country. We are prepared to do our 
part in helping new development, but we do need incentives, and 
we do need programs that will apply to not-for-profit 
cooperatives.
    Mr. Doyle. Mr. Lee.
    Mr. Lee. And I will just finish by saying municipals are 
very similar to what Mr. Reasor just said on the cooperative 
side. We are not big into R&D, but we certainly are willing to 
work with you and this committee to move forward to do it. And 
I am certainly willing to give Jack a rate of return on his 
investment for the kind of investment that he is talking about 
doing in R&D.
    Mr. Doyle. Excellent. Mr. Chairman, thank you so much.
    Mr. Boucher. Thank you very much, Mr. Doyle. The gentleman 
from Michigan, Mr. Upton, is recognized for 8 minutes.
    Mr. Upton. Thank you, Mr. Chairman, and I certainly 
appreciate the testimony of all of you, and to follow Mr. 
Barton, Mr. Boucher, maybe just a quick show of hands, are all 
of you in support of more nuclear power? That is very good. I 
am not going to yield back. I am sorry, Mr. Shimkus. I think in 
the response to Mr. Hastert, one of you indicated that we have 
got 24 new nuclear plants on the books to be built around the 
world, and not one of them--not one--is in the United States. 
And Mr. Doyle made the very good point that Westinghouse and 
others, GE, have been very involved in new technology to make 
these even more efficient. Obviously continue the safety record 
that we have. But in that response to Mr. Hastert, Mr. Morris 
made the point that perhaps we need to look at overriding State 
regulatory bodies to try and get these in place in more States. 
And I would like you to expand on that and get comments from 
the other members of the panel as well.
    Mr. Morris. Mr. Hastert took that to overriding the State 
authority, Congressman Upton. I would not make such a 
suggestion because I am still regulated in all 11 jurisdictions 
by those State public utility committees for public service.
    Mr. Upton. But if we did it, you wouldn't be opposed to 
that?
    Mr. Morris. No, sir, if, in fact, we were able to shorten 
that timeline in the process. If you look at the certificate of 
operation and licensing, or COL, now at the NRC, it is a very, 
very productive, much more time respectful, and still very much 
a public endeavor as it goes forward.
    Mr. Upton. And we did that in the 2005 Act as I recall.
    Mr. Morris. We did do that in the 2005 Act. To Mr. Rogers' 
point, however, though I am not sure we will see a new nuclear 
station, a shovel in the ground, until 2018 or 2019 here 
because clearly the first COL that is actually issued and the 
first utility that clearly intends to go forward will have to 
have in-State financial regulatory approval to do that. If I 
wanted to expand the DC Cook Plant in Michigan, I would have to 
petition the Michigan Public Service Commission for the 
authority to do that before I put my capital to work.
    I don't suggest that Congress ought to overrule that or 
override that. Maybe enabling legislation that encourages a 
timeline shortening so we can do that. But all of that will 
also be challenged legally, and so we have to be realistic 
about what is in front of us. One of the critical things that 
we need to do in this process is something that the chair has 
said over, and that is to make certain the existing nuclear 
fleet doesn't get impacted. The existing coal fleet has a 
fighting chance to continue to participate in the generation of 
gigawatt hours, which are significant on a national basis.
    Mr. Upton. Other members wish to comment?
    Mr. Sokol. I would just make the comment that one of the 
single biggest issues with nuclear is the deposition of the 
final product, if you will, the spent fuel. United States 
Government took money from our customers and committed over 20 
years ago to resolve that issue. Today it is still not 
resolved. I would ask you, would you allow us to get away with 
that? To take money for something and then not do it? And 
second, until we resolve it, you are not going to see new 
nuclear because the financial risk that every State regulatory 
body looks at is what is going to happen there. And with the 
unknown--and that is just part of this bigger issue. I have got 
environmental groups opposing hydroelectric facilities that are 
operating today, opposing renewable resources when they are in 
their backyard, against new nuclear, and absolutely dead set 
against coal.
    Mr. Upton. And even wind. In the case of Massachusetts, 
even wind.
    Mr. Sokol. If it is in your backyard. And we are one of the 
largest renewable companies in the country, and the reality is 
we solve this long-term pending problem called global climate 
change by working together in a portfolio fashion that has to 
include each of these technologies.
    Mr. Morris. There is one more issue that we might want to 
think about when we talk about renewables, Congressman Upton, 
and I think that David just really brought it to light. We too 
are very large players in the renewable industry, particularly 
in the western Texas environment where wind blows 24/7. 
Unfortunately, no one lives in western Texas, so there is about 
a billion dollar transmission network that needs to be built to 
bring that wind from its point of origin to the actual load 
pocket where it might be used in central or eastern Texas.
    We still have a huge disjoint at the Federal State level on 
the permitting, the regulatory approval, and the cost recovery 
of the transmission build out. And I know in the 2005 Act, we 
addressed the issue of backup Federal eminent domain authority, 
and we may need to cede the FERC with more authority to see to 
it that legislation allows for the transmission to be built. It 
will, at the end of the day, be both an environmental bill and 
an economic bill. So it falls right into the work that this 
subcommittee is taking on.
    Mr. Upton. Mr. Morris, you talked a little bit about a 
couple of different technological breakthroughs that you are 
embarking on. I notice Michigan wasn't among the States. 
Illinois was not among the States either, and I know for 
Michigan, jobs is a very big issue. In fact, we have the 
highest unemployment rate in the Nation, and we are above the 
national average in terms of the coal share of total generation 
based on this chart at 58 percent, the national average being 
50 or 51. What were the costs to AEP for these new facilities 
that you are building?
    Mr. Morris. It looks as though the 30-megawatt endeavor at 
the mountaineer station will be something between $50 and $100 
million. And again that is a 30-megawatt demonstration 
verification of the Olstrum chilled ammonia technology as being 
a viable technology to capture carbon. We are blessed at that 
station that we have an underground storage complex that is 
more than capable of handling the carbon storage.
    Mr. Upton. How deep does it go?
    Mr. Morris. I am sorry. That is beyond my pay rate. I don't 
exactly know what the depth of it is, but we have done all of 
the geologic testing of that formation to feel comfortable 
about that.
    Mr. Upton. And what is the reduction in CO\2\?
    Mr. Morris. Well, you will be capturing in excess of 90 
percent of the CO\2\ out of the flue gas stream because that is 
really a post-combustion technology that we intend to use. In 
Oklahoma, our intent, at a 450-megawatt station, which is going 
to be considerably more expensive, is to capture the carbon 
there and put it into productive use in enhanced oil recovery. 
In some of the well played out fields in Oklahoma, we think 
that is the real plus for the energy process in the country, as 
well as for our customers in the State of Oklahoma. That might 
absorb a great deal of the cost of the actual carbon technology 
capture, but at our Northeastern section, we still need to, 
because of the implementation of the care rules, we will now 
need to invest in the FGDs and the SERS for SOx, NOx in 
mercury, which we intend to do.
    Mr. Upton. Mr. Rogers, in your combined role at EEI, do you 
all support the safety valve, make sure that other countries 
have to play as well?
    Mr. Rogers. I think the safety valve is really critical in 
two ways. One is it guarantees that we don't have an adverse 
impact on our economy, but also really allows us to get as much 
carbon reduction as we can at that price. So I think the safety 
valve is important. I also think a broader sort of provision 
with respect to reset is important. It could be tied to other 
developing countries stepping into the program. It could also 
be tied to the prospect of what if technology, for instance 
carbon capture and storage, doesn't evolve as we plan the 
timeline on the cap. I think it is very important to sync up, 
match up the reduction and our perception of when the 
technology will be available to allow us to actually remove 
carbon from our plants.
    Mr. Upton. And as my time expires, I just want to comment 
on Mr. Sterba's comment on more energy efficient light bulbs. 
It has been something that I have been looking at for a while 
now. I am looking forward to working with the chairman, Mr. 
Hastert, Mrs. Harman, on developing legislation so we can 
really make some advances forward. And I look forward to seeing 
that accomplishment this year. Thank you.
    Mr. Boucher. Thank you very much, Mr. Upton. The gentleman 
from Texas, Mr. Gonzalez, is recognized for 5 minutes.
    Mr. Gonzalez. Thank you very much, Mr. Chairman. One thing 
these hearings have been able to establish, and it should have 
been the obvious, is that we have coal. We are going to 
continue to depend on coal, and for anyone to go away from 
these hearings with some sort of an illusion that we are going 
to replace coal in the near future is just plain wrong.
    So the question then goes to how do we make it cleaner and 
such, and still expand on the other sources, such as nuclear, 
which we have problems there too with disposing of the waste 
and so on, the licensing. The information that is provided us 
here today is that U.S. power generation by energy source, coal 
nearly 50 percent United States. And I don't know how that 
compares in previous years if we fast-forward.
    I also cited from a ``Post'' article that in the next 5 
years we are probably going to have 40 more coal-fired plants 
in the making, established, completed, and by 2030, 150. Mr. 
Sokol, I think you have your plant coming on, and, Mr. Lee, you 
all have made a determination that you are going with coal. The 
question then comes to why did you not utilize the latest 
technology in the way of what, I guess, is referred to as 
gasification, Mr. Sokol?
    Mr. Sokol. That is a great question, Congressman. One brief 
moment just to remind everyone what it is we do because all of 
us here are essentially co-ops. There are regulated, profitable 
co-ops, and there are municipal and rural electric co-ops. We 
present to the regulator the options of fulfilling the State 
and Federal mandates that we have, which is to provide energy 
at the lowest cost available to the cooperative members, our 
customers.
    We are not a free market. Our customers don't get to buy a 
different SUV or a hybrid automobile. They buy power from us if 
they live in our region. And the State regulatory bodies direct 
us as to how we make decisions on the next round of technology. 
In our case, in 2000, we sat down with the Democratic governor 
of Iowa, the Republican and Democratic leaders of the House and 
the Senate, the consumer advocate groups, the major consumers, 
environmental groups, as well as the regulatory body, and said 
Iowa needs to make some decisions for the long haul.
    Over a 6-month period, a decision was made to increase 
renewables to about 12 percent of the overall portfolio, which 
we have now already done, add a new natural gas-fired facility 
of the modern technology, which was 550 megawatts, which is 
already added. And thirdly, add for our system's benefit, 500 
megawatts of super-critical coal which is this plant just 
online today, operating at super-critical technology, just came 
online beginning in January. It is an 800-megwatt plant of 
which we own 500 megawatts, and we have allowed the rural 
electric co-ops and municipal agencies in our State to buy the 
other 300 megawatts and own that of that facility.
    That decision was made by our State regulatory body along 
with us and along with all those municipal agencies on the 
basis that IGCC technology with sequestration is not a proven 
technology, nor one that the economics can be reasonably 
estimated at this time. We have gone out for bids of the major 
suppliers. We have not been able to get a fixed price bid from 
any of the major suppliers of IGCC technology, nor any 
meaningful guarantees as to their performance. It is a 
technology in development, and based on that, the regulatory 
bodies wouldn't allow us to go forward. But they did go forward 
with the energy efficiency, renewables, gas, and coal decision.
    Mr. Gonzalez. Mr. Lee?
    Mr. Lee. Let me follow up on that, Congressman. What we did 
is we made a thorough review of all the various technologies, 
and just like been mentioned before, we didn't see that the 
IGCC technology was ready for prime time. So what we decided to 
do was say until it is ready for prime time, and Mr. Morris 
already stated that they will be looking at a demonstration 
project of 30 megawatts, we decided to go with proven 
technology.
    But the difference for what we did was to ensure that the 
emissions systems on our publicized coal plant would be some of 
the lowest emission levels in the country. So if you take SOx, 
NOx, particular, and mercury and put them together and take a 
look at the emissions level, if this plant really doesn't meet 
the limits that we have in our permit, the systems or 
subsystems for those emission levels, we basically would have 
to shut down the plant.
    So there is little to no flexibility in the emission 
levels, and from studies that we have done in looking at IGCC, 
we believe that the emissions level today on this plant when it 
comes online in 2010 will either meet or beat those that are 
being proposed by IGCC.
    Mr. Gonzalez. Thank you very much. I yield back.
    Mr. Morris. If I could just take 1 minute to make sure the 
record reflects accurately, my good friend, Mr. Lee, made a 
mistake. On our 30-megawatt facility is a post-combustion 
capture demonstration. Now, an integrated gas combined cycle 
plans are for plants that will be 630 megawatts, which is 
considerably different.
    Mr. Lee. My correction. Thank you, Mr. Morris.
    Mr. Morris. You're welcome, Milton.
    Mr. Gonzalez. Thank you.
    Mr. Boucher. Thank you, Mr. Gonzalez. The gentleman from 
Illinois, Mr. Shimkus, is recognized for 5 minutes.
    Mr. Shimkus. Thank you, Mr. Chairman. I think this has been 
a great hearing, and I appreciate the comments. I had one of 
your colleagues, to be nameless, said we are in discussions 
because we would rather be shot in the arm than shot in the 
head. And I know some of you folks are here at the table out of 
that concern. So I am the skeptic at the table, and I think you 
need skeptics to continue to raise these issues so that this 
can be fully debated. Be careful of what, in your negotiations, 
the Federal Government promises you that it will do.
    Yucca Mountain is a perfect example of our inability to 
deliver. So as we negotiate, and the chairman of this committee 
knows that I have great respect for him, and I think he is an 
honest and fair broker. But I can't say that for how we 
deliver. Here in Washington, we continue to overpromise and 
underdeliver across the board.
    I don't know one example--maybe the landing on the moon, 
but there is a difference in this debate. Landing on the moon 
was Government funds, Government science. It wasn't private 
capital. Unless we want to take over the electricity generation 
business as a Federal responsibility, then correlating this to 
NASA and the moonwalk is, I think, a worthless exercise because 
you have to raise capital. You have to assume risks. I think 
that is what we just talked about with the research plant in 
why are you deploying what you are deploying? Here is my 
skepticism. Tell me how--and we fought this battle in this 
committee and this Congress now for years. How would 
alleviating the problems of new source review help in this 
debate? And you can be brief. It is a pretty simple question. 
Mr. Sterba?
    Mr. Sterba. It is the uncertainty of the language of NSR 
that creates interpretation capabilities about what may be 
imposed if you take certain actions. Specifically, there are 
many coal plants that exist in the United States today that 
could be upgraded through what is called a dense pack process. 
It is basically a reblading of the turbine with using new 
materials and new fitting such that you would be able to get 
more megawatts out of the same amount of energy that you put 
in.
    Mr. Shimkus. Thanks. Let me stop there for a second because 
I know my friend from Washington State is here, and he always 
talks about this company with new compression technology, and 
that would help us in this whole debate. Now, if this new 
compression technology was available to assist in power and 
electricity generation plants, could you deploy it without 
extremely additional cost?
    Mr. Sterba. We could deploy it without significant 
additional cost, but we may be faced with the risk of much 
higher costs, depending on the interpretation of NSR. If it 
triggers an NSR then I may be exposing my customers to a set of 
costs that are way beyond what I can justify.
    Mr. Shimkus. So if I could summarize. If we tried to bring 
some certainty to the new source review process, which would 
allow you to get more efficiencies, higher electricity 
generation, having the same emission ratio as you do now, that 
would be a positive public policy change in this debate. And 
you, Mr. Sterba, and I will do the same thing. Would that be a 
positive approach to trying to address some of these concerns?
    Mr. Sterba. Yes.
    Mr. Shimkus. For the record, I will note that every 
panelist raised their hands saying that if we successfully 
address new source review. And, Mr. Chairman, I am a skeptic, 
but I would submit that if you would have that as part of your 
legislative package, you might be able to start convincing me 
to be less of a skeptic as we move forward because the problem 
is those of us who have worked on new source review for years, 
it gets blocked every year by the environmental community in 
this town when it has all benefits, zero disadvantages to this 
whole debate. Not just on carbon, but NOx, SOx, particular 
matter, and mercury. So I would ask you to join me in that 
cause. Mr. Chairman, I will end and yield back.
    Mr. Boucher. Thank you very much, Mr. Shimkus. The chair 
appreciates that line of questioning. I am pleased now to 
recognize the gentleman from Washington State, Mr. Inslee, for 
8 minutes.
    Mr. Inslee. Thank you. How many of you believe it is 
appropriate for the United States to adopt some cap-and-trade 
system for CO\2\? Great. It is a start.
    Mr. Shimkus. For the record, only two raised their hands, 
Mr. Inslee.
    Mr. Inslee. Time will tell. That will change, Mr. Shimkus. 
Bear with me.
    Mr. Morris. Only because it had no definition other than a 
cap-and-trade program, which is clearly unvotable.
    Mr. Inslee. How many agree with Mr. Sterba's testimony 
that, just as the space race spawned today's information 
technology age, the clean energy race has the potential to 
launch the U.S. as a world leader and exporter of carbon-free 
technology? Raise your hand if you agree with that. OK, we have 
five. We have unanimity in that, Mr. Shimkus. We had a start. I 
think that is one of the most important things I have heard 
today, and the reason is that I believe that our response to 
this challenge is the greatest economic opportunity the United 
States has had to expand our economy since the invention of the 
Internet for sure.
    I was having breakfast with a longshoreman this morning 
talking about the fact that the ships come in from China low in 
the water, and when they go back, they are empty, and they are 
high in the water. We need to start putting our technology on 
the ships back to China, and what I want to see is this 
Congress to develop a policy so that we give an incentive to 
American economy to develop the technologies to sell to China 
to clean coal technology they are going to have to have. And 
they know they are going to have to have it because you can't 
see the flag of China in Tiananmen Square because it is too 
foggy right now. And I believe it is our destiny to sell that 
technology to them.
    Now, Mr. Shimkus made reference to this one compression 
technology. I hope you get to know the Ramgen Company. It is a 
little company in Tacoma, Washington that has developed a 
compression technology using sonic wave technology that can 
reduce the cost of compressing CO\2\ 30 to 40 percent and 
generating heat that you can use in the gasification process at 
less cost. And that is the kind of thing that I hope to 
incentivize.
    And I want to tell you I have seen a great epiphany here 
today in one thing. There is a lot of good reasons to have this 
hearing, but one of them is a great epiphany by my friends on 
the Republican side of the aisle because for years we tried to 
ask them to help us deal with spiraling energy costs when Enron 
was running rampant charging 1,000 percent increases in the 
West. Turned out the stoplights in California. We couldn't get 
them to raise a finger to help us. Now, I hope they will help 
us to develop a meaningful cap-and-trade system.
    I want to ask you gentlemen about the relationship between 
your use of coal and the potential coal-to-liquids fuel issue. 
Some advocate the United States should adopt a policy that will 
vastly expand a coal-to-liquids technology to use liquid fuel 
in our gas tanks. Now, I am concerned about that because my 
understanding of that technology is that it does not reduce 
CO\2\ emissions in the lifecycle of the technology. You might 
save some CO\2\ in the processing, but when you burn the 
liquid, you end up putting just almost as much, probably 94 
percent, at least as much CO\2\ in the air as you do a gallon 
of gasoline.
    So I want to ask you this. If we have two alternatives. If 
we have $100 for R&D for coal, and scenario A is to take that 
$100 and put it into clean coal technology to find out how to 
sequester CO\2\ in your industry in the production of 
electricity. Or we have scenario B where we only have $50 
available for you, and we take $50 and we give it to the coal-
to-liquification R&D, which one of those scenarios should the 
country adopt? Whoever wants to go first.
    Mr. Sokol. Congressman, if you have $100, I would keep it.
    Mr. Inslee. Right.
    Mr. Sokol. But let me try to put it--I am not an expert in 
the liquid side of it. That is not our field. I am familiar 
with gasification-to-liquids because it is often raised when we 
look at a gasifier for coal to make electricity. But our 
sector, it is estimated--and I think these numbers are not 
aggressive. They are actually probably understated. We need $5 
billion of our DDD dollars federally to actually make a 
meaningful impact in the technology development that we need as 
an energy sector, and that is for electricity-type involvement, 
whether it is the removal of CO\2\ out of gas streams, whether 
it is sequestration, or whether it is new technologies, nuclear 
and others. So $5 billion a year for 10 years to kind of get 
the level of technology capability that we could then export 
into China, et cetera.
    The important thing to recognize there is we don't develop 
technology. No one here sitting on this panel develops 
technology. We utilize it. What Mr. Morris is doing at AEP is 
terrific, and we are actually friends with them on a number of 
different undertakings. But they are using Olstrum technology. 
We are using other peoples' technology. Those folks can only 
develop it if there is a market for it and if there is 
cooperation with Government on some of these changes.
    And that is a really critical element is we are not a free 
market enterprise, as I said before. We are a cooperative, and 
so I think that is just an important piece.
    Mr. Inslee. Mr. Morris.
    Mr. Morris. I will try to comment on that issue that you 
raised, Congressman. I think when you talk to coal-to-liquids, 
you are talking about an energy independence issue, not 
necessarily an environmental plus issue. And Governor Manchin 
and Governor Strickland in the State of West Virginia and Ohio 
and our company are beginning to look at that much more 
aggressively in West Virginia. But that is really an energy 
independence as to a transportation fuel. That does have 
potential. There is no question about that, and we should 
continue to look at that. When you are talking about coal to 
gas to electricity, you are talking about an environmental 
benefit of the concept of capturing all of the gases, whether 
they are pollutants in a traditional sense or this global 
warming gases in a non-traditional sense. And I can support 
that we understand those two differences. As to your first 
point----
    Mr. Inslee. I want to make sure I let Mr. Rogers--could I 
get to Mr. Rogers' point just for a minute? Thank you.
    Mr. Morris. Sure.
    Mr. Inslee. Thank you.
    Mr. Rogers. Congressman, I would make the observation I 
would put all my money into the electricity side of this for a 
real clear reason. You have to have a vision in terms of where 
we are going. Today, 50 percent of our electricity comes from 
coal, and we are going to build additional plants in the 
future.
    The second point is if you want to have energy security and 
a vision, the right vision for the auto industry is really the 
idea of plug-in hybrids, and we see that on the horizon as the 
answer. So if I was picking between coal-to-liquids and plug-in 
hybrids, I would pick plug-in hybrids because I think it is 
near term and more likely. And it allows us at the same time to 
really put the money where it really needs to be with respect 
to the backbone of our economy, and that is our electric grid.
    Mr. Sterba. Mr. Inslee, I would make one other caveat to 
that, and that is that the most important piece is on the 
storage side. Because whether we use it out of the carbon that 
is coming from coal-fired gas generation or the liquifaction 
for the use of fuels, in both instances, you have got the 
storage question. And then I would second what Mr. Rogers said 
about plug-in hybrids.
    Mr. Inslee. Mr. Sterba, one of the questions my friends on 
the other side asked is what do we possibly do right now while 
we are waiting for this technology to develop, and I was 
impressed in your testimony about your evaluation of the New 
Mexico efficiency market where, I guess, you said that you 
could meet 40 percent of your new system growth at half the 
cost of conventional generation. Is that accurate, and how do 
you do that?
    Mr. Sterba. Yes, and there are a number of different 
elements to that program, but what we have to do in order to 
effect is we have got to change the business model so that 
energy efficiency is, in fact, a business so we are incented to 
do as much energy efficiency as we would be for building new 
power plants. But it is lighting. It is HVAC. It is all of the 
fundamental aspects that go into how customers use energy, and 
you can't do it by just changing your behavior. You have to do 
it by leveraging technology.
    Mr. Inslee. And that is decoupling?
    Mr. Sterba. Decoupling is certainly one of the tools. It is 
not the only one, but it is one of the tools.
    Mr. Inslee. Thank you, gentlemen.
    Mr. Boucher. Thank you very much, Mr. Inslee. The gentleman 
from Oregon, Mr. Walden, is recognized for 8 minutes.
    Mr. Walden. Thank you, Mr. Chairman. I want to thank our 
panelists who are here today. We have appreciated hearing your 
thoughts on this issue that is so important in America and I 
think across the globe today. I would ask a general question. 
The former chairman asked about how many new power plants are 
going to have to be built to keep up with demand, and I wonder 
if you each could tell me, from your perspective, how many new 
plants at what megawatt output do you anticipate need to be 
built in the United States from whatever generating source to 
keep pace with demand, Mr. Sterba?
    Mr. Sterba. Well, yes, sir, it represents about a 40 
percent increase, and if my memory serves me, there is about 
300,000, 320,000 megawatts within the United States today. So 
we are talking about somewhere around 150,000. The part that 
probably bothers me a little bit is something that I am not 
sure we have adequately taken into account. There is an 
estimate by CERA, Cambridge Energy Research, that says that 
there is another 150,000 megawatts of generation that will be 
required if, in fact, we have a 1\1/2\ to 2 degree increase in 
temperature by 2050.
    Mr. Walden. All right.
    Mr. Sterba. So that is another piece that frankly we have 
not taken into account in a lot of our planning.
    Mr. Walden. All right, anybody else want to comment or add 
to that? Then I guess the next question I would ask is what is 
the cost to consumers for some sort of CO\2\ capping and 
trading system? Can any of you identify for me today what your 
estimates would be? Mr. Sokol?
    Mr. Sokol. Congressman, let me try to estimate it because 
it depends on what it is you do. One of the reasons we are not 
in favor of a cap-and-trade system anywhere in the near future 
is merely because it will effectively merely in the electric 
sector be a tax on our consumers. Because since we don't have 
the alternatives available to us then whatever you charge us 
will get passed through to our customers. The SO\2\ system 
worked well once we had the technologies available so that an 
economic decision could be made that this is what it cost to do 
that. We spent over $1 billion in our company on SO\2\ NOx and 
mercury removal just in the last 10 years because those price 
signals were clear and the technology existed.
    If I am charged $30 a ton which translates basically 
through to a doubling of generation costs for coal-fired 
generation, the customer is going to pay that because we 
don't----
    Mr. Walden. But can anybody quantify what you think that 
will be? Mr. Morris, you talked about----
    Mr. Sokol. But our system would be doubling of their 
generational electric rates.
    Mr. Walden. Doubling of their rates in the Pacific--well, 
my part of the world the Pacific course system. Mr. Morris, you 
indicated this would be a job loss bill of some sort in your 
comments. Can you comment on this aspect of it?
    Mr. Morris. What I suggest was if we go about this in a 
wrong-headed fashion without making certain that the rest of 
the world joined us in one way, shape, or form, we could end up 
seeing a huge export of industrial manufacturing jobs. Our 
company serving the middle part of the country still has a 
tremendous manufacturing base in our customer account.
    To your question of the cost, it is unknown but not 
unknowable. And that is why we are trying to get some projects 
up and running, a, to verify that the technology works, b, to 
have a real understanding of the impact of those technologies.
    One of the biggest challenges with the greenhouse gas 
capture is the amount of parasitic impact it has on the 
megawatt hours available from a power plant. The chilled 
ammonia approach appears to be in the 10 or 12 plus percent 
range, which is to say if you had a 1,000-megawatt plant today, 
you'll have an 880-megawatt plant. That is a negative impact 
that we need to work on, but until we get those projects up and 
running, we won't know the answers to those questions.
    To David's point, there is no question it will be more 
expensive. No question it will be more expensive.
    Mr. Walden. Do you think it will double the rates?
    Mr. Morris. I don't know if it is that high because I just 
don't know what that will cost. I know this: that just like 
MidAmerican, we have spent over $4 billion on SOx, NOx, and 
mercury control. And because we have been able to change our 
fuel mix, higher sulfur coals, our overall cost production has 
actually stayed very level. I don't know if that will be the 
case with more carbon capture.
    Mr. Rogers. Congressman, may I make an observation?
    Mr. Walden. Yes, sure, quick.
    Mr. Rogers. We need to be careful here not to over or 
underestimate the impact of the future, and let me tell you why 
because it goes back to the God is in the details point.
    Mr. Walden. Right.
    Mr. Rogers. And that is if we do the cap right, if we phase 
it in consistent with the technology that we project to be 
available, if we really invest in energy efficiency--and we 
have had chronic underinvestment in energy efficiency in this 
country--if we invest in renewables, there is a series of 
things that we can do over a period of time that will allow us 
to do this without having adverse impact on our economy.
    Mr. Walden. I hope you are right, and I get that. And I 
realize that the devil is in the details. What I am trying to 
figure out is ratepayers in my region, what it will cost them 
if it isn't done correctly. And I will tell you, as much as I 
am a skier. I love snow in the mountains. I don't want the 
globe to adversely warm if we can prevent that if that is a 
good thing. But I have real trouble in going down this path 
when I know that India and China are going to put 450 coal 
burning plants online over the next few years. We already get 
their pollution in the Northwest. Whether there is a dust storm 
in the Gobi Desert to the noxious emissions out of their 
various industrial plants blow right over the Pacific and 
pollute our atmosphere. And I don't see why we ought to upend 
our economy if we don't have some sort of worldwide agreement 
on this because China and India will put more carbon into the 
atmosphere than the Kyoto Accords were designed to remove in 
the first place. Do any of you disagree with that?
    Mr. Morris. No, sir.
    Mr. Walden. Raise your hands if you disagree. Thank you. 
For the record, nobody raised their hand. Well, you don't. 
Well, then let me take it the other way. Do you think we ought 
to have a cap-and-trade system, the United States, on anything 
related to carbon that doesn't include other countries around 
the world? Should we go it alone?
    Mr. Morris. We should not. We can start it alone, but it 
has to have either one of two safety valves that I spoke to in 
my comment, either a tariff aspect on those products that would 
be imported without control in the home country, or as the 
European Union did, set a standard, have a timeline. If no one 
joins us, lower the standard, extend the timeline, have less of 
an impact on the economy, one of those two options.
    Mr. Walden. Let me ask a different question, and that is 
about renewable portfolio standards. Do all of you agree that 
energy producing sources that don't add to SOx, NOx, or CO\2\ 
in a measurable degree should be included in any renewable 
portfolio standard, either mandatory or voluntary? Should an 
energy source that doesn't produce that be included and 
counted. We are doing the raise the hand thing, I guess, today. 
Now, I come from the Northwest. It is no secret to you all we 
are predominantly hydro, and yet in most renewable energy 
portfolio standards hydro is dismissed as if it doesn't exist 
as a renewable energy source.
    Mr. Sterba. Well, I think what we have seen, and of course, 
I come from New Mexico, and the one thing we would like is your 
water because we don't have any. But I think in most of the 
renewable portfolio standards, we see new hydro being included, 
just not existing hydro.
    Mr. Walden. Well, yes, but I guess the point and a concern 
I have with cap-and-trade is those of us who are fortunate 
enough to live where we do that have power in our regions that 
don't produce noxious gases or CO\2\, I don't want us to get 
penalized for being good players when these systems are set up. 
I don't think that is right or fair. So with that, my time is 
expired. Thank you, Mr. Chairman. I thank the panelists.
    Mr. Boucher. Thank you very much, Mr. Walden. The gentleman 
from Massachusetts, Mr. Markey, is recognized for 8 minutes.
    Mr. Markey. Thank you, Mr. Chairman. Mr. Morris, in your 
testimony, you argue for having the Federal Government allocate 
greenhouse gas emission allowances to your company and other 
owners of coal plants based on historic emissions allowing 
``only a small number of the allowances, less than 5 percent to 
be auctioned or set aside for public benefit purposes.'' Now, 
according to the National Commission on Energy Policy, this is 
what they say. Because they do not bear the cost, allocating 
most allowances for free to energy producers creates the 
potential for large windfall profits. Why should utilities 
receive what amounts to a huge Government grant that can be 
worth many, many times the cost of compliance?
    Mr. Morris. Because they will actually incur the cost to 
implement the technology that would allow us to capture and 
store the carbon. Those who would advocate for allowance to 
them who incur no cost simply are in it for the money. We are 
in it to make a difference, Congressman.
    Mr. Markey. Well, as you know, many have criticized the 
European Union for allocating too many pollution credits to 
industry during the period between 2005 and 2007. A recent 
study on how the German government allocated credits reports 
that German utilities were set to make windfall profits of 
between 31 and 64 billion Euros until the end of 2012. If we 
follow your formula and allocate 95 percent of the credits to 
your company and other utility and non-utility generators of 
carbon and other emissions, I think we are just going to be 
handing over a similar windfall.
    Mr. Morris. Well, I would think that the mistakes that were 
made by the Germans in the European Union don't need to be 
repeated by us. We should learn by others' mistakes, not repeat 
them. The fact of the matter is that we allocated in the SOx 
and NOx and mercury process, those credits went to the very 
people who invested hundreds of millions. In our company, $5 
billion in the last 3 years on SOx, NOx, and mercury control. 
Those are real costs that were incurred. The credits go to the 
benefit of our customers while we are implementing those 
undertakings. There is no windfall profit in the regulated 
utility model. In the 11 States we serve, we are rate regulated 
in all but the State of Texas, except for our energy delivery 
piece.
    Mr. Markey. Well, let me turn to Mr. Rogers. Let me ask you 
a question, Mr. Rogers, and it is in the same subject area. In 
your testimony, I see that you seem to disagree somewhat with 
Mr. Morris's call for 95 percent of allowances to be allocated 
to utility and other generators for free, instead calling for 
allocations during a transition period, and then gradually 
phasing them out in favor of a full auction. What percentage, 
Mr. Rogers, of these allowances would you want to initially 
have allocated for free? What percentage would you have 
auctioned off? And how quickly would you phase out the free 
allocations and move to a full auction system?
    Mr. Rogers. Now, you are putting me in the position to be 
king of the world, and I love that. If I was king of the world, 
I would start out with 100 percent allocated to those who are 
going to incur a disproportionate burden of this, and it is 
primarily consumers who rely primarily on coal. And that is why 
we presented the map to show the 25 States where more than 50 
percent of electricity comes from coal. And then I would phase 
it out over time, and I would look to what we did with SO\2\.
    Mr. Markey. What period of time would you suggest?
    Mr. Rogers. I would tie it to when we see technologies 
coming online to allow us to capture carbon and store carbon or 
remove carbon from the stream. It is critical that we get the 
reduction.
    Mr. Markey. Who would select that? Should we select a 
timeframe, or would you allow it to the industry to select the 
timeframe?
    Mr. Rogers. I think that you all should be prescriptive 
with this, but leave a provision that says if the technologies 
are not online as expected, we take a look at what the cap 
should be and how the allocations are done. I think it is 
critical that we keep in mind this idea of reset because there 
is a lot of things that we don't know today but we may know 
better later.
    Mr. Markey. But you would move to a full auction 
eventually?
    Mr. Rogers. Eventually. Yes, sir.
    Mr. Markey. OK.
    Mr. Rogers. OK, may I make one point just quickly?
    Mr. Markey. Yes please.
    Mr. Rogers. There is a fundamental difference about what 
happened in Europe and what would happen in the United States. 
In Europe, they allocated the allowances to companies who did 
not reduce their rates. They actually charged them for the 
CO\2\ and didn't give the benefit to the customers. In the U.S. 
in every regulated jurisdiction, and certainly in all of ours, 
you would pass those zero allowances through to the customers, 
and the customers would get the benefit, not the companies or 
the investors in the company.
    Mr. Markey. OK. Now, how about if there is an unregulated 
area? Would we mandate that there be a pass through?
    Mr. Rogers. In the unregulated areas, it is primarily left 
to the market.
    Mr. Markey. No, should we mandate it in other words. You 
are saying that the regulated automatically pass on. Should we 
mandate a national mandate on the unregulated?
    Mr. Rogers. I think it is difficult to do that in a 
competitive market. Is it possible? Yes.
    Mr. Markey. So now we have your loophole, OK, so that is 
the problem. It would be an unregulated market. So if you can't 
force that it be passed on, then it is just a windfall profit.
    Mr. Sterba. Mr. Markey, I would encourage that you do that.
    Mr. Markey. OK, thank you. I appreciate that, sir. I 
appreciate it. Thank you. Mr. Morris, why shouldn't we allocate 
all of these greenhouse credits to auction them off, and use 
the resulting revenues for public benefit, such as accelerated 
R&D on new technologies, energy efficiency, or even reducing 
taxes for business or individual consumers that might be faced 
with higher energy prices? Why not use market mechanisms like 
an auction to efficiently price these credits rather than have 
politicians allocate most of the credits?
    Mr. Morris. Well, again, I think that because we have tried 
the allocation system and it works so well in SOx, NOx, and 
mercury, we should simply repeat that success and not try to do 
something that may or may not be beneficial. At the end of the 
day, if you do auction, I would argue that is exactly where the 
money should go. But, as our Congressman from Illinois said, 
money into the Federal coffers never seems to come back, and 
that is a very real world that we all live in. If you have an 
auction, the person who buys at auction is going to sell at a 
profit creating your very windfall profits that you spoke to. 
And they are not going to spend the money to make a difference, 
and that is what this is about.
    Mr. Markey. All right, Mr. Sokol, on page two of your 
testimony, you asked us the subcommittee ``to impose this new 
system in a way that does not proportionately burden any sector 
of the economy or consumers in any region of the country and 
one is that we should not try to pick winners and losers.'' If 
we are going to be allocating to the utility industry a 
potentially huge windfall profit in the form of free 
allowances, why doesn't that result in picking winners and 
losers? Why shouldn't we use market mechanisms, auctions, to 
the maximum extent possible to efficiently price these 
allowances?
    Mr. Sokol. Thank you, Congressman. I don't think you should 
allocate a windfall to the utility industry. We don't want it. 
We would specifically oppose it because in the methodology you 
are talking about, that is the reason we are opposed to cap-
and-trade at this point. The market can't deal with this issue 
because the technology to solve the problem isn't there.
    Congressman Shimkus made the point that President Kennedy 
and the analogy to the space program isn't direct. It is 
direct. President Kennedy was honest with the American people 
in that he said, I am going to take your tax dollars, and 
through NASA, we are going to put a man on the moon, and we are 
going to bring him back safely. And there will be benefits from 
that. Be as honest with the American people. Tax the American 
people to remove CO\2\ from our atmosphere, and tax the 
American people. And then you use those dollars to create the 
technologies to do it. That is all we are asking. We are not 
opposed to solving this problem. We have to have the 
technologies available to us to do it. Cap-and-trade doesn't 
bring them to us. It makes, perhaps, financiers wealthy, it may 
make marketers wealthy, but it will not solve the problem of 
reducing CO\2\ technology well, and so that is where the 
dollars need to be applied. We don't want them as windfall. We 
would reject them.
    Mr. Markey. I look forward to the day where Congressman 
Shimkus sounds like President Kennedy and says I want to tax 
the American people. I look forward to that day, and it is a 
day in the future that will probably be as likely to arrive 
as----
    Mr. Boucher. Thank you, Mr. Markey.
    Mr. Markey. Thank you.
    Mr. Boucher. The gentleman from Texas, Mr. Burgess, is 
recognized for 5 minutes.
    Mr. Burgess. Thank you, Mr. Chairman. Mr. Lee, back home in 
Texas, of course, San Antonio, you represent a municipal power 
company. In Denton, Texas, we similarly have a municipal power 
company that serves the citizens there, primarily natural gas 
derived and a lignite coal plant from which they derive their 
power. And as a consequence, when the natural gas prices went 
high, as you pointed out, you service a good number of citizens 
who are low income. The city of Denton has a good number of 
low-income citizens, and they were really hit hard with that. 
As someone pointed out, I heard from a lot of them. They were 
concerned about their bills. So with that in mind and the CO\2\ 
cap-and-trade system that we have already heard about will 
raise prices by, I think the technical assessment was a lot. 
Well, what do you think that we are going to do about this?
    Mr. Lee. I think it is a whole bunch. What we have done in 
San Antonio is roughly 20 percent of our population is at or 
below the poverty level, and if you assume poverty on an annual 
basis, for a family of four, is around $22,000 a year, you can 
see it doesn't go very far. What we have been able to do is to 
offer low-income consumers in our area some options to be able 
to help and assist them in paying their bills on the gas side 
and on the electric side both. In other words, we are actually 
contributing to funds within San Antonio, added revenues from 
CPS Energy that we get the city of San Antonio to administer 
for us. And we have made a commitment to them saying that that 
would continue to be available to them along with a lot of 
other Federal programs also.
    Mr. Burgess. So if there is a cap-and-trade system enacted, 
there will have to be some mechanism to protect the lower-
income ratepayer as part of that?
    Mr. Lee. Yes, sir. And we would still make a proposal to 
continue to assist them with the current processes we have in 
San Antonio.
    Mr. Burgess. Very good. Mr. Sokol, in light of your 
statement and your testimony that every dollar spent on 
reducing greenhouse gas emissions and avoiding potential impact 
of future climate change is one less dollar that can be 
invested in education or disease eradication or even other 
environmental programs that directly protect human health, we 
must weigh the risk and benefits carefully and spend our 
resources prudently. So with that in mind, how do you feel that 
Congress should focus on the issue of climate change and 
obviously, to some degree, the exclusion of other activities.
    Mr. Sokol. Thank you, Congressman. We agree with the 
comments that have been made by various people of a slow, stop, 
and reduce process. We are not, by any means, opposed or 
wanting to stick our head in the sand about is this an issue 
for the world to deal with. But we do have to make these 
tradeoffs. People have to pay real dollars for these decisions. 
As we have said, we have reduced our carbon intensity since 
2000, 9 percent fleetwide. And we are a relatively large 
company, not as big as some here. And those are from voluntary 
decisions that we have made since we have obviously recognized 
that the world cares about this issue. And it is important. 
This is an important distinction. Nobody at this table built 
power plants 20 years ago to try to avoid a CO\2\ issue. We 
didn't know it was an issue. We all breathe it, exhale it. We 
didn't know it was an issue. So we think we need a three-phased 
approach, spend time to reduce where we can, get to a point, we 
think, by 2030 perhaps to get back to where we were in 1990 
levels and stop the growth, and then have the technology 
available to us through that process to start making serious 
reductions in the future. That type of glide slope, our 
estimation is, is affordable. It is going to cost money. It is 
not free. We think that glide slope costs about a 50 percent 
increase in electricity cost in this country above the CPI. 
That is a significant price to pay, but one we can probably 
afford. If we try to shorten those timeframes without available 
technology, it can be multiples of that--and that is really our 
concern--are we then putting dollars to the best use.
    Mr. Burgess. And thank you for that very thoughtful answer. 
Mr. Rogers, in the limited time I have left, you provided us 
with a very colorful map, and you referenced the fact that 
politics might be involved in this process. I just wondered had 
you done a calculation of the electoral votes of the red and 
blue States versus the green States? Just wondering.
    Mr. Rogers. That is actually a great question because I 
really do believe the politics of this issue is driven not so 
much whether you are a Republican or a Democrat. They are 
really driven by what part of the country you are from and what 
resource you rely on. What that map does is illustrate that 25 
States have more than 50 percent of their electricity from 
coal, and it is critical to their standard of living and their 
economy. And so as we make these decisions, I want to make sure 
everybody in those States understands the implications of this 
on their States because it is pretty easy for people to say it 
will have a minimal impact across the country. But the reality 
is it is going to have a dramatic impact on some regions much 
more than others.
    Mr. Burgess. Thank you, Mr. Chairman. I will yield back.
    Mr. Matheson [presiding]. Well, thank you. And now the 
Chair will recognize himself for 8 minutes. First of all, I 
want to thank the panel. You are up almost 3 hours now being 
here, and I think this has been one of the more substantive 
discussions we have had of the different climate change 
hearings for this subcommittee. And I think that your written 
testimony provides a lot of detailed suggestions and ideas, and 
I just want to compliment all of you because I think it is what 
this committee wants.
    I want to make two quick comments, then ask some questions. 
First of all, Mr. Morris, you mentioned in response to a 
discussion with Mr. Upton the need for additional clarification 
beyond the 2005 Energy Act in siting of high-voltage 
transmission lines. And I encourage you to continue to advocate 
for that, and I think the subcommittee needs to take a look at 
that issue because I do think that there is still a level of 
uncertainty in the marketplace that creates a disincentive to 
invest in that infrastructure. And I think that is another 
energy issue this country needs to address.
    Mr. Morris. It truly is, and it is an environmental issue 
as well.
    Mr. Matheson. Absolutely, so I appreciate that. Second, I 
want to thank Mr. Shimkus for his discussion on the new source 
review issue and the panelists' discussion on that. I do think 
that is something that would be helpful for us to be talking 
about more and trying to make some incremental progress. I fear 
sometimes in pursuit of the perfect, we are not willing to take 
some incremental steps that make a lot more sense. And we ought 
to be doing that, and I look forward to working with you on 
that as well.
    Mr. Sokol, in your testimony, you mentioned the Epree study 
that had just come out recently, and you mentioned that you 
felt that it had some good recommendations in terms of how to 
move forward. You also included a draft outline of legislation 
with your testimony. The Epree study just came out recently, so 
is your draft outline pretty consistent with the Epree study? 
Do you want to take a look back at revising that with the Epree 
material having come out, or do you feel that is pretty 
consistent with that?
    Mr. Sokol. I think it is pretty consistent. There are some 
details, both from the Epree study and frankly the recent MIT 
study that we think might bring some additional thought to a 
couple segments. But I think on balance, it is pretty 
consistent with both.
    Mr. Matheson. And you mentioned a target amount for R&D of 
around $5 billion annually. Do you have a suggestion of how 
that ought to be deployed? Are there certain technologies we 
ought to be looking at? Or do you have guidance for the 
committee on how you would suggest that be spent?
    Mr. Sokol. Well, yes, in the sense that it should be--I am 
talking about only of generation of electricity.
    Mr. Matheson. Understood.
    Mr. Sokol. It needs to be across a number of fronts. 
Frankly, transmission being one. Coal gasification, the storage 
and transportation of sequestered CO\2\, nuclear, and frankly 
renewables in various categories, and the key element, I think, 
is in addition to the level of funding, and much of it would 
follow the Epree model that they have laid out. We think they 
have done an excellent job of identifying the areas, but also 
timeliness, put performance-based R&D dollars out there for 
industry to respond to rather than it getting gummed up in 
frankly Government bureaucracy. If we really want to move with 
due haste, we have got to have these technologies.
    Mr. Matheson. That may be something that would be helpful 
to have additional input from the panelists is that I think 
everybody up here at one level likes the notion of investment 
in basic research and development. It often becomes a dollar 
discussion, but there is a process discussion that ought to be 
had as well about how we go about implementing that. So I 
appreciate that.
    Mr. Rogers, you mentioned that it would be helpful if we 
could remove some regulatory roadblocks, and you mentioned 
especially for energy efficiency. Can you talk about what some 
of those roadblocks might be?
    Mr. Rogers. Sure. It is very important that on the State 
level there is almost a renaissance of rethinking. What used to 
be called demand-side management really focused on energy 
efficiency, and the important point here is that today, at the 
State level, in virtually almost all States, we are not 
compensated in the same way to produce a save-a-watt or we 
reduce energy compared to a megawatt. And I think it is going 
to be critical that we are allowed to invest and create save-a-
watts and earn off that at the State level, have the same 
incentives to do it as we have incentives today to meet the new 
demand with megawatts. And getting that right on the State 
level is going to lead to significant more investment in energy 
efficiency and fill the gap of chronic underinvestment that we 
have seen in this country over the last 20 to 30 years.
    Mr. Matheson. Do you think Congress has a role in making 
that happen?
    Mr. Rogers. I think Congress can encourage it. I think it 
still has to be done at the State level, but I think there is a 
series of things in terms of tax policy and other things that 
can be done to encourage that to happen. Another important 
aspect of this is I know we consider renewable portfolio 
standards. In the 22 States who have adopted them, three of the 
States actually count the creation of save-a-watts or energy 
efficiency as part of their goal on renewables. That concept is 
a very important concept to move forward because not all parts 
of our country have the ability to invest in renewables like 
wind. We certainly can in South Carolina and North Carolina 
like you could if you were in the upper Midwest or in west 
Texas. But being able to focus on energy efficiency is really 
critical.
    Mr. Matheson. That just triggered one other question I did 
want to ask. We haven't had a lot of discussion today about 
thoughts on setting mandates for renewable energy portfolios. 
There is a need for flexibility in my mind because different 
States and different geographical areas have different 
opportunities. If that issue is going to be addressed in 
Federal legislation, how could we incorporate that flexibility 
into the mix?
    Mr. Rogers. I think one approach would simply be to 
recognize that a lot of progress has been made. Twenty-two 
States have passed it. Nine are considering it. We really need 
to kind of get to the goal line where every State has a 
renewable portfolio standard, and I think it is not 
unreasonable for Congress to contemplate setting a timeline for 
States to adopt, but leave it to the States to adopt what makes 
the most sense in that State.
    Mr. Matheson. All right.
    Mr. Sokol. Congressman, and two comments there. One would 
be also allowing States that maybe don't access to renewable 
energy as plentifully as others to, if you will, buy down their 
requirement by energy efficiency or even new nuclear. And you 
raise a very important point that I would strongly urge is as 
you formulate legislation, the National Association of 
Regulatory Utility Commissioners needs to be an important 
player in your thoughts because what you legislate, they have 
to implement. And I think while you shouldn't necessarily, in 
all cases, direct them, their input as to how some of these 
things are done so that they can, in fact, implement policy 
that works, I think can be enormously helpful.
    Mr. Matheson. I think that is a good suggestion.
    Mr. Sterba. Mr. Chairman, if I could.
    Mr. Matheson. Sure.
    Mr. Sterba. One other quick thing that is, I think, very 
essential is we have to think about renewables as a market, and 
the worst thing that happens is when we have States that say 
well, it is only renewable if it is located in my State because 
we disadvantage the most economic resources as opposed to 
helping ensure that they can move on the basis of where the 
lowest costs are.
    Mr. Matheson. That is helpful. Mr. Sterba, in your 
comments, you mentioned that in the short term, we ought to go 
after some of the low-hanging fruit as you described with 
efficiency being one of the obvious ones that is in front of 
us. What is the Federal role for trying to help pursue that? Do 
you have suggestions on what we ought to be doing from the 
Federal perspective to help make that happen?
    Mr. Sterba. I think there is a couple of things, Mr. 
Chairman. The first is we had the conversation about new source 
review.
    Mr. Matheson. Right.
    Mr. Sterba. And there are things that can be done to 
improve the efficiency of existing facilities that need to be 
facilitated. So that is one. The second one is on the end-use 
energy efficiency, one is we need to really take a hard look 
and see if we can reinvigorate the standards setting process 
for efficiency standards for appliances. We have just gone 
through it with transformers, and I think the industry stood up 
tall and said we want to drive efficiency in transformers to 
their highest levels. And then the third one is the 
encouragement of States to change the regulatory business model 
such that utilities who are looked at as the energy experts can 
be effective in helping move energy efficiency into the home 
and into the business.
    Mr. Matheson. OK, thanks. I have used up all of my time. I 
would like to recognize Mr. Buyer for 8 minutes.
    Mr. Buyer. I will switch with Mr. Shadegg if that is OK 
with the Chair.
    Mr. Matheson. The Chair will recognize Mr. Shadegg for 5 
minutes.
    Mr. Shadegg. I am going to begin by yielding to Mr. 
Shimkus.
    Mr. Shimkus. Thank you. Just for clarification, there was a 
debate on coal-to-liquid technologies and plug-in hybrid. Coal-
to-liquid is only a technology--you guys are in the electricity 
generation--for diesel fuel and aviation fuel. So it really has 
no bearing on gasoline. So that the debate about plug-ins for 
the vehicles is not--that is why DOD is very excited about this 
application. I know my chairman would agree with that.
    Mr. Shadegg. Thank you very much, Mr. Chairman, for 
yielding. I want to compliment this panel. I think it has been 
a superb panel. There is obviously an immense amount of thought 
that has been given to this topic. I would also like to thank 
Mr. Buyer for yielding.
    I want to urge the panel, in addition to complementing 
them, to think through thoughtfully the major thrust of Mr. 
Shimkus's points, that is that this town overpromises and 
underdelivers, his discussion of the problems with Yucca. And I 
am going to illustrate some of those other problems that also 
the comments of the ranking member of the full committee, Mr. 
Barton, in terms of how difficult this is.
    It is easy to talk about solutions and create the 
impression that we are going to fix this thing very quickly, 
but there are no answers that fit for tomorrow. New source 
review, I appreciate the comments of Mr. Shimkus on new source 
review. I want to crystallize this. I would like each of you to 
raise your hand if you agree that the current new source review 
law is keeping the industry from achieving efficiencies which 
would, in fact, reduce greenhouse gases. Is that correct? 
Everybody agrees with that.
    Second, in both the 2003 bill and the 2005 bill, I inserted 
language which would have expedited the process for 
transmission siting. Everybody viewed that as evil. It didn't 
pass at all in the 2003 bill. It was softened dramatically in 
the 2005 bill. By softened, I meant actually toughened. We made 
the regulatory process worse rather than easier as I had tried 
in the 2005 bill. Let me ask the same question. Does everybody 
in this panel agree that if we could expedite transmission 
siting, we would enhance our ability to use alternative fuels? 
Yes, everybody agrees with that.
    Because Mr. Markey's questions go to a point I want to 
make. I take it everybody on this panel believes that the 
reason to allocate any credits, if we go to cap-and-trade--and 
I will tell you I have grave reservations about cap-and-trade. 
The reason to allocate them to current producers is because 
they are the ones having the burden, and because the goal isn't 
to create some third market out here that people can profiteer 
off of. The goal is to put the money into cleaning up the 
industry and reducing emissions. Does everybody agree with 
that?
    Mr. Morris. Yes, in order to make a difference, not to make 
a profit.
    Mr. Shadegg. And everybody raised their hand. Everybody 
agreed. I want to make a point about renewable fuels. I believe 
5 years ago and maybe longer than that, 8 years ago, in this 
committee, I brought in the hydrologic chart. I brought it in 
from, I think, a third or a fourth-grade text to show the 
committee that in point of face, the first renewable is hydro. 
And it showed water evaporating out of the ocean into the 
clouds, coming over the land mass, falling on the ground, and 
then going downhill. I did that because we were debating a 
bill, which had encouraging renewables in it and hydrology or 
hydrological power was not present at all. Do any of you know--
and it seems to me it is the ultimate, certainly was the 
original, renewable.
    There was some testimony here earlier that new hydro is in 
some of the States' renewable portfolios. Nobody here claims 
that it is in all of the States' renewables, do they? Let me 
ask how many of your companies are doing research on enhanced 
efficiency for hydrologic? That is it is my understanding that 
with today's technology, you can, instead of building a dam and 
putting a turbine on it, which creates a lake and causes all 
kinds of environmental problems, you can actually put a turbine 
in an in-stream flow. And that is have it produce electricity 
just by the movement of the water downhill without disturbing 
the environment by creating a dam. Are any of you looking into 
some of that technology? Mr. Sokol, you are? Could you explain 
briefly?
    Mr. Sokol. Well, we have actually built one just as you 
said, and we have a number of low-head hydros that could 
possibly be replaced with a similar type of technology. It 
works in some scenarios well. It is basically a run of the 
river structure so it can work in some areas well. It is not 
applicable for others.
    Mr. Shadegg. Right, I would encourage you all to take a 
look at that. We talked a little bit about nuclear, and in the 
time left, I want to talk about that. Do each of you believe--
and if you do, please raise your hand--that any plan to control 
carbon dioxide or to control greenhouse gases must include 
legislation that removes the current regulatory obstacles for 
nuclear power? Does everybody agree with that? Will you help 
push for that? The chairman of the committee asked if you would 
help push for legislation. Will you help push for that as well?
    Mr. Sokol. Yes, sir.
    Mr. Shadegg. Let me ask you just to then each of you answer 
this question as my final question. Do you believe the 
administration's current Yucca Mountain legislative proposal 
goes far enough to remove those obstacles against new nuclear, 
or do you believe Congress needs to go beyond what is in the 
administration's proposal? Mr. Sterba?
    Mr. Sterba. I don't believe it goes far enough. I think we 
need to both recognize the interim situation that we have got 
where we will not be able to get Yucca Mountain up, and we need 
to resolve the long term. So we have got to do both.
    Mr. Shadegg. To the extent that it goes beyond that, will 
you submit information to my office suggesting what else needs 
to be done?
    Mr. Sterba. To the best extent of our ability, yes.
    Mr. Shadegg. Thanks.
    Mr. Boucher [presiding]. Thank you, Mr. Shadegg.
    Mr. Shadegg. I think I asked each of them quickly.
    Mr. Boucher. Very quickly.
    Mr. Rogers. I agree with Jeff, and I will submit the 
information to you.
    Mr. Shadegg. Thank you.
    Mr. Sokol. I think it needs to go further.
    Mr. Morris. Same.
    Mr. Reasor. Same here.
    Mr. Lee. Same here, and we will submit some comments.
    Mr. Shadegg. Thank you all very much, and thank you, Mr. 
Chairman.
    Mr. Boucher. Thank you very much, Mr. Shadegg. The 
gentleman from Indiana, Mr. Buyer, is recognized for 8 minutes.
    Mr. Buyer. Thank you. Earlier there was a comment, and I 
think it came from one of the members of the subcommittee that 
utilities or companies are responsible for 40 percent of the 
greenhouse gases, and that number is bantering about. So I just 
want to hear from all of you whether or not----
    Mr. Morris. Thirty-two.
    Mr. Buyer. Thank you. And where do you get your number?
    Mr. Morris. From the generation statistics that are kept by 
the Federal Government.
    Mr. Sterba. And the number I have seen is 37, and I don't 
know if it is different years of measure or what.
    Mr. Buyer. OK, Mr. Rogers.
    Mr. Rogers. Sir, I don't see it as----
    Mr. Buyer. You have a number too?
    Mr. Rogers. One-third, 33.
    Mr. Sokol. I think the bulk of the numbers, if you plot 
them, run around 32 to 33 percent.
    Mr. Buyer. OK, that is interesting. I am glad we clarified 
that.
    Mr. Morris. We clarified that 40 isn't right.
    Mr. Sterba. Which year do you want?
    Mr. Buyer. Well, you know what? Eight percent is a big 
number though when you think about that. I think there is a 
reality that is in front of us, and that is a desire to 
rebalance our portfolio with regard to our sources of energy. 
And I think that is given. That is on the table.
    I also recognize that what happens here in Washington has a 
tremendous impact upon the marketplace because how it reacts to 
whatever policies we put in place coupled with the State 
regulatory regimes. So, Mr. Rogers, you had put up this map of 
the United States earlier, and as I looked at it, I mean I 
looked at that saying well, it tells a lot of history. That's 
the way I look at this map, Mr. Rogers, and say this is a 
country that got away from nuclear power and didn't use natural 
gas and build the infrastructure perhaps like it should have.
    But at the same time, we had regulatory policies, that 
doesn't permit access to that natural gas. So you can't drill 
off the West, can't drill off the East, you can't drill here, 
you can't drill on BLM land. But I tell you what. We will go 
ahead and we will drill an Alaskan pipeline and bring it down. 
So here in Washington in the environmental policies, we end up 
here in this town making this a mess. And you are then trying 
to provide power to a country.
    Now, all of a sudden, these same individuals, OK, who sort 
of let that go in place--the reason I say those same 
individuals, I came here in 1992 in the minority. Then when I 
came to the majority, those same forces here in this town that 
are an extreme environmental policy still prevented a 
Republican controlled Congress to even make changes in the 
rebalancing of our portfolio.
    Those forces are alive, well, and excited. So excited, we 
get to listen to an Academy award winner tomorrow, Al Gore. I 
just can't wait to hear from his sound public policies. So what 
we have now to do is we are going to rebalance it, what, by 
using a regulatory regime? I don't know. I am frightened. I 
just want you to know I am a little frightened for you. Mr. 
Rogers?
    Mr. Rogers. I go back to what job one is for us. Our job is 
to keep the lights on. Our job is, when you throw the switch, 
electricity is there. That is what our mission is. Now, the 
problem in the past is we sometimes have gotten confused 
because we made environmental policy, not recognizing the 
impact on the energy policy and vice versa.
    It is very important that when we make policy in the energy 
area or the environmental area we know of how those work 
together. And I think that is really critical to what you all 
are doing now with these hearings is seeing the interplay 
between energy policy and environmental policy.
    My other point about that map is that map is not only about 
history in terms of how we got here. But also it is a little 
bit about the future because if you look at those States and 
who has relied on coal, it is going to be the same States that 
are going to build the coal plants for the future because that 
is where the coal is. That is where it is abundant and 
available and easy to get to your plants. Like Indiana. I mean 
of all the States on there, Indiana has got the greatest 
dependency. Only two other States have a greater dependency on 
coal.
    So I think it is very important we get this right. We get 
the cap-and-trade right. We understand the interplay between 
energy and environmental policy, and the most important point, 
Congressman, I would leave with you is that we in this country, 
given the growth and demand for electricity at 40 percent by 
2030, we cannot afford to take anything out of the equation. We 
cannot take nuclear out. We can't take gas out, renewables or 
energy efficiency. We need them all, and we need a lot of all 
of them in order to do this.
    Mr. Buyer. Yes, but, Mr. Rogers, we can't say well, we want 
this fuel switching to occur. At the same time, we are not 
going to permit drilling.
    Mr. Rogers. I totally agree with that. In the 1990s, we had 
a policy in this country to build gas, and it was built in our 
environmental laws. It was built in a lot of different ways, 
and it was incentive to build gas. At the same time, we weren't 
allowing for the exploration in drilling to have the supply of 
gas. And that is why today we are sitting here saying how many 
LNG terminals can we build to meet the demand, and the fastest 
growing demand for gas is in power generation.
    And unless we come up with a way to incent the building of 
coal plants and nuclear plants, we will build more gas, and we 
will find that our grid is dependent on foreign sources, not 
local sources. And that raises an energy security question that 
is pretty dramatic for this country in light of our dependence 
on oil and where that is taking us today.
    Mr. Morris. I would argue we don't necessarily need to have 
incentives to build new coal plants. We just to have the 
opportunity to build them with regulation and legislation that 
provides for trying to make certain they are done in the 
cleanest potential way that we can. If we have accomplished 
anything today, we have heard many compliments from you all to 
us. I would like to compliment you back because what I believe 
my colleagues have been able to help establish is this is a 
very true technological challenge that has an acceptable 
timeline on it if we all begin to work on it.
    Mr. Rogers. More importantly, these are goals that we all 
support. There isn't a person on this side of the table who 
doesn't support a cleaner environment and better utilization of 
coal, and I am certain of that not only at this table but my 
colleagues in the industry, whether we are municipals, co-ops, 
or investor-owned utilities.
    But it is going to cost more, and we touched on that issue. 
Congressman Burgess from Texas brought that up. It is very 
important we understand that. We are all willing to take those 
steps.
    Mr. Buyer. All right, I have a limited amount of time. Who 
at the table, whether you can discuss right now or please let 
me know, are preparing to bring online or have in the plans 
increasing your nuclear capability?
    Mr. Rogers. We are.
    Mr. Buyer. We will go right down the line.
    Mr. Sterba. Longer-term plans, yes.
    Mr. Buyer. Define longer term.
    Mr. Sterba. Probably in the 18- to 20-year window.
    Mr. Buyer. OK.
    Mr. Rogers. In Cherokee County, South Carolina, we are 
planning to build a nuclear plant to bring online in 2017, 
2018.
    Mr. Sokol. We would like to. We don't know how to today.
    Mr. Morris. No plans to build new nuclear at this time.
    Mr. Reasor. We are working with a current owner of a 
nuclear facility, which we are part owner, to increase and add 
another unit to that facility, hopefully to come online by 2014 
or 2015.
    Mr. Lee. We own existing generation, including nuclear on 
the Gulf Coast, and we are evaluating and assessing it today to 
add to it approximately 2,500 megawatts if it makes sense to do 
so by 2020.
    Mr. Buyer. Keeping in the spirit of Chairman Boucher's 
opening statements, if you have recommendations to us on how to 
better incentivize the rebalancing of our portfolio resources 
and to assist you on the nuclear question, let us know please.
    Mr. Rogers. Congressman, can I qualify--I mean Mike picked 
up on it, but I think it might have missed the point. When I 
think of incentives for coal, I don't think of building a coal 
plant today, unless I am thinking about carbon capture and 
storage, given the future that I see in front of us. So when I 
talk about incentives, it is about carbon capture and storage. 
And it is not only incentives to get it done, but it is 
investment to allow for more research and development.
    Mr. Buyer. Thank you, Mr. Boucher.
    Mr. Boucher. Thank you very much, Mr. Buyer. The gentleman 
from Oklahoma, Mr. Sullivan, is recognized for 8 minutes.
    Mr. Sullivan. Thank you, Mr. Chairman, and I appreciate all 
of you being here today. One good thing about this job is that 
we get to have people like you come in front of us, and it is 
like the best university in the world to be at, and I 
appreciate you being here.
    This is a very exciting time for you to be in this 
business, isn't it?
    Mr. Morris. It truly is.
    Mr. Sullivan. Very complex issues out there, and that is 
why I was glad this--I guess recently Nancy Pelosi wanted to 
have a bill to address all these issues by June, and I thought 
that was pretty ambitious. And I think she has backed off of 
that a little bit, thank goodness, because I think it is going 
to require a lot more time and investigation and research to 
look at all the portfolio of all these different energy needs 
as we go forward.
    Mr. Morris, your company supplies power to the majority of 
my district.
    Mr. Morris. Yes, sir.
    Mr. Sullivan. And I am from Tulsa, Oklahoma and 
northeastern Oklahoma, and I think it is really neat what you 
are doing.
    Mr. Morris. Thank you.
    Mr. Sullivan. You have got a great sequestration program 
going on or just starting down in Nelagony, and I just wanted 
to ask a few questions about that like how are you going to get 
that into the old oil wells that have been played out, the 
enhanced oil recovery? Is it going to be piped in there? Did 
you have to build one, or are you using existing pipeline?
    Mr. Morris. The process, as you well know, in that part of 
the State, tremendous amount of existing underground pipeline 
network. We will simply build the pipe that is needed to come 
from the capture equipment to the pipeline grid. So it really 
is a cost-effective place. Now, remember northeastern Oklahoma, 
that area is blessed with an existing facility, and we think 
that we will come with a very important partner inside the 
State of Oklahoma who already has the wells, already has the 
need, and surely has the intent to join us in that undertaking. 
We think that is a very important point. To the points made by 
my colleagues, however, if you are distant, that is an added 
cost to the whole notion of using CO\2\ for an EOR process. But 
it is well-proven technology that it is a great EOR agent.
    Mr. Sullivan. And let us say an old well that has been 
played out, is there some type of percentage of the oil that 
can be recovered in those enhanced oil recoveries with CO\2\ 
because of the makeup of the molecular structure of it or----
    Mr. Morris. It would be better to ask a petroleum engineer 
rather than a biologist lawyer that, but fields that have been 
played out to the 60 percent range, now they think they can 
play them out to the 80 percent range. If you look at Chevron's 
statistics on the Bakersfield in California, which has been 
producing since the 1940s, I think the numbers are they went 
from 6,500 barrels a day to over 80,000 barrels a day with 
enhanced oil recovery technology so----
    Mr. Sullivan. Even after it has been water flooded?
    Mr. Morris. After it has been there forever.
     I am not exactly sure what they do, and those statistics 
are available to you.
    Mr. Sullivan. And is the reason you are doing this in 
Oklahoma is because of our pipeline infrastructure that we have 
in the State?
    Mr. Morris. Exactly.
    Mr. Sullivan. And because of the old wells that are 
abundant in Oklahoma?
    Mr. Morris. Exactly, as well as what we think is a very 
important asset to public service of Oklahoma and Oklahomans in 
general, and that is our northeastern station, which is going 
to be a large-scale application of capture and EOR technology 
use. Very important for not only our company, but I would say 
for everybody at this side of the table.
    Mr. Sullivan. And has your company looked at other ways 
to--you mentioned earlier, someone did on the panel, about 
getting the CO\2\, and I believe it might be you, Mr. Sterba. 
That you said that when you get this CO\2\, there needs to be a 
lot more research and development on it, and you said--I 
believe it was you--several million metric tons of it need to 
be stored in different formations around the country for a 
period of time to see, I guess, which ones will hold it the 
best? I heard that saline is pretty good, but others, there is 
a potential of migration of the CO\2\. Could you explain that?
    Mr. Sterba. Well, a single 500-megawatt unit will generate 
about a little over 4 million tons of CO\2\ per year. So that 
is the magnitude that you are talking about with a single unit. 
And because geology is different in different parts of the 
country, we need to have a couple, three, four, five minimum 
experiments with large scale, at least a million tons or more 
per year, of injection to make sure that we understand that 
what the geologists say is going to happen is actually going to 
happen.
    And I also agree with Mr. Morris's comment earlier, but we 
also have to look for, and this is where real research can come 
into play, how can we effectively utilize CO\2\? Is there a use 
for this material? I mean I come from a State, New Mexico, 
where we pump CO\2\ out of the ground and send it down to the 
Permian Basin for enhanced oil recovery. Seems to me there are 
other things that we can since we are already pulling it out of 
the ground today.
    Mr. Morris. Probably be cheaper than a pipeline from 
Alaska.
    Mr. Sullivan. Well, and also it was mentioned that if we 
captured 60 percent of the CO\2\, we would have to--I guess 
someone said that we need about the equivalent of what is used 
for natural gas pipelines in this country. And I guess CO\2\, 
just like any other kind of gas or jet fuel or oil, crude oil, 
can use the same pipeline infrastructure, couldn't they? We 
wouldn't really have to build out too much.
    Mr. Sterba. Well, that is true except that the natural gas 
pipeline system is pretty well stressed today.
    Mr. Sullivan. OK.
    Mr. Sterba. In many instances, there might be some 
opportunity.
    Mr. Sullivan. So what you are saying is that would have to 
be duplicated to actually do this on a widespread basis?
    Mr. Sokol. But make sure, Congressman, that you can't 
commingle CO\2\ and natural gas in the pipeline grid and then 
put it into your home, my home, or anyone else's. You would 
have to have the technology of batching a pipeline, which is 
more common on the liquid side where you might have pentane 
going down the pipe, and behind that, you might have a kerosene 
going down the pipe. There are batching technologies that are 
there, but not commingling of the gases.
    Mr. Sullivan. OK. Well, thank you very much. I yield back. 
Go ahead, sir.
    Mr. Sokol. Just one thing, Congressman, if I could. You 
talked about that this is going to take time.
    Mr. Sullivan. Yes.
    Mr. Sokol. And there is no question it is, though if there 
one thing I could urge the committee though is don't take time 
on the funding side. The slower we are to really put the 
funding behind technology development for R&D, the farther off 
the solutions are. So that is one that shouldn't wait.
    Mr. Sullivan. And I think someone else had an intriguing 
idea of merging EPA and DOE? Who said that?
    Mr. Sokol. Yes, I am definitely in favor of that. At least 
they have to look at these problems together instead of them 
constantly being dealt with as though we live on a different 
planet.
    Mr. Sullivan. That is interesting. I like that. Yes, sir.
    Mr. Reasor. Congressman, one of our electric cooperatives 
base, an electric cooperative in North Dakota has put in one of 
these pipelines and is actually transporting the CO\2\. It was 
about a 200-mile long pipeline. It cost over $250 million to 
put that in place. So it isn't an inexpensive part of the 
process.
    Mr. Morris. But that project--I happened to do the 
environmental work on that one. American Natural Resources 
built that plant. We thought it was great. We were churning 
lignite coal into natural gas, and it worked perfectly in an 
engineering gas. It made $8 into a $2 market. That became a bit 
troubling, but now that pipe actually paid for itself because 
the enhanced oil recovery the Canadians get out of that in 
their tar sands application has made that a cost break-even 
undertaking. But it was expensive.
    Mr. Sullivan. Also, Mr. Morris, I'd love to come out and 
see that when you----
    Mr. Morris. We would love to have you come out there, and I 
hope you know, as everyone else knows, that that is the great 
home of Will Rogers one of the great Oklahomans.
    Mr. Sullivan. That is good. Thank you very much. I 
appreciate it.
    Mr. Boucher. Thank you very much, Mr. Sullivan. I actually 
have just one basic question. It has two parts, and it is for 
the purpose of clarifying some answers that were previously 
provided by witnesses, not for the purpose of opening any new 
subject matter. And in view of the fact that our witnesses have 
been here now for more than 3 hours and have very patiently 
answered questions from across the committee, Mr. Barton and I 
have agreed that I will propound questions for 2 minutes, and 
then he will have an opportunity to propound questions for 2 
minutes.
    And I would like to ask unanimous consent that we proceed 
in that order.
    Mr. Barton. I thought it was 20 minutes for me and 2 
minutes for you. I will go 2 and 2.
    Mr. Boucher. So without objection, we will proceed in that 
fashion, and I will recognize myself for 2 minutes. We have 
not, as I indicated previously, made any decisions about the 
mode that we would use for establishing a mandatory program. We 
have decided to draft a mandatory program and process that 
through the Congress, but we are leaving to a later date 
decisions about exactly what the contents of that mandatory 
program would be. Obviously cap-and-trade is one of the 
candidates that we are considering.
    We want to keep all of our options open, and it was my 
general understanding that this was also the approach taken by 
EEI at the time that EEI passed its resolution. And so, Mr. 
Rogers, my first question is to you just for clarification 
purposes. When Mr. Barton asked you about your preference for 
an approach, I think you indicated that cap-and-trade was in 
fact Duke Energy's preference for an approach.
    Mr. Rogers. Yes, sir.
    Mr. Boucher. But you then said that is not EEI's position, 
and I wanted to clarify that what you really meant by that is 
that EEI has not endorsed cap-and-trade at this point but also 
has not announced opposition to that, has not taken that option 
off the table. Is that correct?
    Mr. Rogers. That is correct. Yes, sir.
    Mr. Boucher. Thank you very much. Then Mr. Inslee 
propounded the question about who on the panel favors cap-and-
trade, and at that point, Mr. Sterba raised his hand, and Mr. 
Rogers raised his hand, and no one else raised their hands. Mr. 
Morris said that the reason he had not raised his was because 
there was no specificity with regard to the details that would 
surround the cap-and-trade program. So my question to the panel 
is this. Can we assume, for purposes of our record today, that 
while Mr. Rogers and Mr. Sterba have endorsed cap-and-trade as 
the preferred approach, the other witnesses are not taking a 
position at the present time and simply waiting to see what the 
details are, but would consider cap-and-trade in the event that 
the details are appropriate. Would that be a fair way to 
characterize what the other witnesses' position is, or would 
you care to make some other statement?
    Mr. Reasor. Mr. Chairman, I would just say that I think 
your analysis is fairly correct. We are not necessarily 
supporting cap-and-trade. We are not necessarily opposed to it.
    Mr. Boucher. Thank you Mr. Reasor. That was a perfect 
statement.
    Mr. Reasor. We see that as one part of the entire package. 
So you would have to see what the entire package encompassed 
before you made a decision on any one part.
    Mr. Boucher. That's right. Mr. Sokol.
    Mr. Sokol. I can't eliminate nor include something that the 
details make all the difference, and so we would view it as an 
option out there if the details made sense in a broader 
package.
    Mr. Boucher. Thank you. Mr. Morris?
    Mr. Morris. Our position has been relatively clear, that 
that approach is acceptable to us so long as it is a reasoned 
and well thought through undertaking in that regard. And I 
don't think we have to wait until we get to a point where 
technology has proven to a certainly that we can take those 
steps. There are many things that we can do along the way, but 
like my colleague David Sokol, without the details around the 
process, it would be very hard for us to vote for it. And I am 
sure you wouldn't take anything out of this committee like 
that.
    Mr. Boucher. Thank you, Mr. Morris. That defines my view as 
well. Mr. Lee.
    Mr. Lee. The only other caveat I would say, Mr. Chairman, 
is that we have said we didn't think cap-and-trade was 
appropriate, but if this committee in its infinite wisdom 
decides to say that it is, we certainly want to be a part of 
that process to evaluate that with you and work with you to 
determine what it is.
    Mr. Boucher. Thank you very much, Mr. Lee. Thank you 
gentleman. Well, I have consumed 3\1/2\ minutes, and so Mr. 
Barton is recognized for 3\1/2\ minutes.
    Mr. Barton. Well, I will try to give you some time back. 
You didn't ask my opinion of cap-and-trade, Mr. Chairman, but 
put me down as opposed to mandatory cap-and-trade. And I 
actually have a vote on the committee, so that might be worth 
knowing.
    To try to show some positivism, are all the members of this 
panel supportive of the FutureGen project to find a way to 
develop the technology for mandatory carbon capture, 
sequestration or CO\2\? Are you all supportive of that?
    Mr. Morris. Well, not all of us are members of that. We 
might be supporting. Some of us are financial----
    Mr. Barton. How many are putting your money where your 
mouth is and have actually signed up in the FutureGen Alliance? 
We will let the record show that Mr. Morris. The rest are not, 
but you are supportive of the project?
    Mr. Sokol. Yes, Mike has put his money where several of our 
mouths are.
    Mr. Lee. And we also support the project coming to Texas.
    Mr. Sokol. We are putting money into something that can be 
brought online sooner, and that is IGCC in Edwardsport, 
Indiana.
    Mr. Barton. OK, I want to also put on the record that we 
have in current law in the Energy Policy Act a program that 
authorizes, I believe, $3 billion where the industry goes out 
in conjunction with the Department of Energy to retrofit 
existing coal-fired power plants with the newest available 
technology. And that has been authorized by the Act. It hasn't 
been funded by the Bush administration, but that would be 
another avenue that is currently in law that can help in this 
area.
    Mr. Sokol. And we have every intention to take advantage of 
that opportunity with the projects that I announced earlier, 
Congressman.
    Mr. Barton. OK, and I want to clarify an answer that Mr. 
Sokol gave while I was out of the room, but I was watching on 
my television set in my office. I believe that you told one of 
the other members of the committee that if we went to a 
mandatory cap-and-trade system for carbon immediately, it would 
double the retail price of electricity. Did I hear you 
correctly?
    Mr. Sokol. Not exactly. If $30 per ton was set as the cost 
of CO\2\ emissions, it would double the cost of generation in 
our----
    Mr. Barton. Double the cost of generation?
    Mr. Sokol. Right, which would--we are about 50 percent 
generation, 50 percent transmission/distribution is a rough 
breakdown of our cost. So it would have that 50 percent 
increase then in the delivered cost of electricity.
    Mr. Barton. OK. But there is not anybody on the panel that 
disputes that if we went to something fairly quickly with 
existing technology, the rates, the retail rate to the average 
consumer would go up considerably. Is that a fair statement?
    Mr. Sokol. Yes, sir.
    Mr. Barton. Everybody agrees with that? Well, I thank you, 
Mr. Chairman. I just have a question for Mr. Lee. Are the 
lights going to be on in the Alamodome, heated or cooled as the 
case may be, when the Fighting Texas Aggies beat the fool out 
of the Memphis whatever they are this Thursday down in the 
Alamodome?
    Mr. Lee. The answer is yes, Congressman.
    Mr. Barton. We will worry about the Buckeyes if we can get 
past Memphis.
    Mr. Lee. But the lights will be on, and the Alamodome will 
be very cool.
    Mr. Barton. Thank you, and I yield back, Mr. Chairman. 
Thank you.
    Mr. Boucher. Thank you very much, Mr. Barton, and let me 
say thank you once again to these witnesses. Your testimony 
today has been really excellent. We have heard comments from 
the members of this committee on both sides about how much they 
appreciate this hearing and appreciate what you have done to 
enlighten us regarding the views of the electric utility 
industry. And we look forward to working closely with you as we 
take further steps in this process. This hearing is adjourned.
    [Whereupon, at 1:35 p.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

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