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


 
             THE FUTURE OF COAL UNDER CARBON CAP AND TRADE 

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

                                HEARING

                               before the
                          SELECT COMMITTEE ON
                          ENERGY INDEPENDENCE
                           AND GLOBAL WARMING
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 6, 2007

                               __________

                           Serial No. 110-11


             Printed for the use of the Select Committee on
                 Energy Independence and Global Warming

                        globalwarming.house.gov

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                SELECT COMMITTEE ON ENERGY INDEPENDENCE
                           AND GLOBAL WARMING

               EDWARD J. MARKEY, Massachusetts, Chairman
EARL BLUMENAUER, Oregon              F. JERRY SENSENBRENNER, Jr.,
JAY INSLEE, Washington                 Wisconsin, Ranking Member
JOHN B. LARSON, Connecticut          JOHN B. SHADEGG, Arizona
HILDA L. SOLIS, California           GREG WALDEN, Oregon
STEPHANIE HERSETH SANDLIN,           CANDICE S. MILLER, Michigan
 South Dakota                        JOHN SULLIVAN, Oklahoma
EMANUEL CLEAVER, Missouri            MARSHA BLACKBURN, Tennessee
JOHN J. HALL, New York
JERRY McNERNEY, California
                                 ------                                

                           Professional Staff

                     David Moulton, Staff Director
                       Aliya Brodsky, Chief Clerk
                 Thomas Weimer, Minority Staff Director





















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Edward J. Markey, a Representative in Congress from the 
  Commonwealth of Massachusetts, opening statement...............     1
    Prepared statement...........................................     3
Hon. F. James Sensenbrenner, Jr. a Representative in Congress 
  from the State of Wisconsin, opening statement.................     5
Hon. Earl Blumenauer, a Representative in Congress from the State 
  of Oregon, opening statement...................................     6
Hon. John Shadegg, a Representative in Congress from the State of 
  Arizona, opening statement.....................................     6
Hon. Jay R. Inslee, a Representative in Congress from the State 
  of Washington, opening statement...............................     7
Hon. Candice Miller, a Representative in Congress from the State 
  of Michigan, opening statement.................................     8
Hon. John Larson, a Representative in Congress from the State of 
  Connecticut, opening statement.................................     8
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     8
Hon. Hilda Solis, a Representative in Congress from the State of 
  California, opening statement..................................     9
Hon. Marsha Blackburn, a Representative in Congress from the 
  State of Tennessee, opening statement..........................    10
Hon. Stephanie Herseth Sandlin, a Representative in Congress from 
  the State of South Dakota, opening statement...................    11
Hon. Emanuel Cleaver II, a Representative in Congress from the 
  State of Missouri, opening statement...........................    12
    Prepared statement...........................................    13
Hon. Jerry McNerney, a Representative in Congress from the State 
  of California, opening statement...............................    14
Hon. John Hall, a Representative in Congress from the State of 
  New York, opening statement....................................    14

                               Witnesses

Mr. Dave Freudenthal, Governor, Wyoming..........................    15
    Prepared statement...........................................    18
    Answers to submitted questions...............................   168
Mr. Michael Morris, Chairman and CEO, American Electric Power....    26
    Prepared statement...........................................    29
    Answers to submitted questions...............................   174
Mr. Carl Bauer, Director, Department of Energy's National Energy 
  Technology Laboratory..........................................    60
    Prepared statement...........................................    63
    Answers to submitted questions...............................   182
Mr. David Hawkins, Director, Natural Resources Defense Council's 
  Climate Center.................................................    74
    Prepared statement...........................................    76
    Answers to submitted questions...............................   227
Mr. Robert Sussman, Partner, Latham & Watkins, LLP...............   102
    Prepared statement...........................................   104
    Answers to submitted questions...............................   221
Mr. Stuart Dalton, Director, Generation Sector, Electric Power 
  Research Institute.............................................   122
    Prepared statement...........................................   124

                          Submitted Materials

Report from the Center for American Progress: Global Warming and 
  the Future of Coal: The Path to Carbon Capture and Storage, Ken 
  Berlin and Robert M. Sussman, May 2007.........................   234
Report from the Center for American Progress: The Path to Cleaner 
  Coal: Performance Standard More Effective Than Bonus 
  Allowances, Ken Berlin and Robert M. Sussman, August 2007......   297


             THE FUTURE OF COAL UNDER CARBON CAP AND TRADE

                              ----------                              


                      THURSDAY, SEPTEMBER 6, 2007

                  House of Representatives,
            Select Committee on Energy Independence
                                        and Global Warming,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 9:30 a.m., in room 
2172, Rayburn House Office Building, Hon. Edward Markey 
(chairman of the Committee) presiding.
    Present: Representatives Markey, Blumenauer, Inslee, 
Larson, Solis, Herseth Sandlin, Cleaver, Hall, McNerney, 
Sensenbrenner, Shadegg, Walden, Sullivan, Blackburn, and 
Miller.
    The Chairman. Good morning. In the fight against global 
warming the single greatest challenge we now face is how to 
reconcile our reliance on coal with the urgent need to reduce 
carbon dioxide emissions. Coal-fired plants supply half of all 
our electricity in the United States, and we have the largest 
coal reserves in the world. China and India, two of the largest 
and fastest-growing economies in the world, also have abundant 
reserves and are even more dependent on coal for electricity 
generation.
    But while coal is plentiful, and ostensibly cheap, it is 
also the leading source of global warming pollution. Coal-fired 
powerplants emit twice as much carbon dioxide per unit of 
electricity as gas-fired plants, and are responsible for over a 
quarter of all greenhouse gas emissions, both in the United 
States and globally.
    We are at a watershed moment in the history of electricity 
production, and the future of the planet hangs in the balance. 
By 2030, U.S. electricity demand is expected to increase by 
over 40 percent, and global demand is expected to double. As a 
result, the next two decades will bring the largest and fastest 
expansion in electricity generation in the history of the 
world.
    We must act now to level the playing field by requiring 
coal-fired plants to internalize the costs of their global 
warming pollution. If we fail to do so, all our efforts at 
expanding renewables and improving efficiency are likely to be 
drowned by a tidal wave of coal.
    There are over 150 new coal-fired powerplants on the boards 
in the United States, and, globally, it is predicted that 
something on the order of 3,000 such plants will be built by 
2030. These new plants alone would increase U.S. greenhouse 
emissions by 10 percent and global emissions by 30 percent. 
That would spell disaster for the planet.
    There is a growing consensus that to avoid dangerous global 
warming we need to reduce global greenhouse gas emissions by 50 
percent or more by 2050. The United States will need to reduce 
emissions by as much as 80 percent by 2050. These objectives, 
quite simply, will be impossible to achieve if we fail to move 
quickly to control carbon dioxide emissions from coal-fired 
powerplants.
    Fortunately, carbon capture and storage, or CCS, offers a 
path forward for coal and a bridge to a low-carbon future 
powered mainly by renewables. CCS involves capturing carbon 
dioxide emissions at the source and injecting those emissions 
into deep geological formations to isolate them from the 
atmosphere. All indications are that CCS is a viable interim 
solution to the coal problem, but current DOE projections 
suggest that CCS will not be commercially available until 2020 
or later, after most of the new coal-fired plants now on the 
boards, both here and in China, will already have been built.
    We must pick up the pace. This Congress is already taking 
steps to do so. The House and Senate energy bills each provide 
nearly $1.5 billion in funding over the next several years for 
CCS research, development, and deployment. But subsidies alone 
will not be enough. To unleash the private sector's vast 
resources and ingenuity, we need a regulatory driver. We must 
enact limits on carbon emissions now.
    The country is ready for action. While wind and other 
renewables are booming, public concern about global warming has 
virtually halted construction of new coal-fired powerplants in 
the United States. It is in everyone's best interest that 
Congress act now to require rapid deployment of CCS to provide 
a path forward for coal and to give utilities the certainty 
they need to make sound investment decisions.
    The policies we adopt will have global impacts. If we fail 
to bring CCS online in the near future, the fleet of coal-fired 
plants already being built in China and India will swamp 
whatever emissions reductions we achieve here or in Europe. 
But, instead, we now have a chance to blaze this new trail. The 
world will follow if we give the leadership, and we will reap 
the environmental and economic rewards of that leadership.
    The time for opening statement by the Chair has expired. I 
turn to recognize the Ranking Member, the gentleman from 
Wisconsin, Mr. Sensenbrenner.
    [The statement of Mr. Markey follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Sensenbrenner. Thank you very much, Mr. Chairman.
    Crisis. Catastrophe. Danger. These are the terms you often 
hear to describe global warming. In fact, former Vice President 
Al Gore once used all three of these terms in just one 
sentence.
    I prefer the terms ``opportunity'' and ``possibility.'' 
Perhaps nowhere is there greater opportunity for the United 
States than on the topic of today's hearing: the development of 
carbon capture and storage technology. Advancing technologies 
must be a key element to any global warming policy, and carbon 
capture and storage may be the most important and promising 
technology under development.
    Why? Effective and affordable carbon capture technologies 
give the United States an opportunity to fully use our most 
plentiful energy source--coal--while helping reduce carbon 
dioxide emissions at the same time. Coal powers nearly half of 
the electricity production in the United States, and it is 
estimated that we have a 250-year supply. No state produces 
more coal than Wyoming, and I am pleased that Governor 
Freudenthal is here to tell us more about this vital energy 
source. And I welcome him, even though he is on the other side 
of the aisle.
    It is estimated that electricity demand in the U.S. alone 
will grow by over 40 percent by 2030, just 23 years. And where 
will we get this energy? Coal is one of the most readily 
available energy sources we have, and it simply has to be a 
part of our energy future.
    Already we know that technology exists that can remove up 
to 90 percent of carbon emissions from coal. These kinds of 
results will produce tangible benefits for the environment, 
which must be another essential element of any global warming 
policy. I am encouraged that there are a variety of carbon 
capture technologies in development. The government should 
foster this competition, but under no circumstances should we 
let government decision who wins and who loses. That is what 
markets are for.
    One competitor in this race is located in my home State of 
Wisconsin. We Energies is conducting a first-of-its-kind carbon 
capture test at its Kenosha facility. We Energies is working 
with the Electric Power Research Institute on this project, and 
I welcome EPRI's Director of Generation, Stuart Dalton.
    American Electric Power is also in this race, and I am 
happy that Michael Morris, the company's Chairman, President, 
and CEO, is here to tell us more about the research his company 
is conducting.
    Global warming is not just a worldwide problem. It also 
provides worldwide opportunities for innovative companies like 
We Energies and American Electric Power. Coal provides for 79 
percent of China's electricity production and 68 percent of 
India's. China has already overtaken the United States in 
carbon emissions, and India's emissions growth continues to 
soar. If worldwide emissions are to be lowered, then China and 
India must be part of the solution.
    It appears that American researchers are well on their way 
to developing the technology to make carbon capture and storage 
an affordable reality for the entire world. Imagine a giant 
``Made in the USA'' sticker on future Chinese powerplants. What 
goes around comes back. And that is turning a crisis into an 
opportunity.
    Let me apologize for not being able to stay for most of 
this hearing today, because I do have another obligation that I 
had committed to before this hearing was set. But I will read 
the testimony, and I am certain this will be a constructive 
input into what the United States ought to do relative to 
solving this problem.
    I thank the Chair.
    The Chairman. I thank the gentleman.
    The Chair recognizes the gentleman from Oregon, Mr. 
Blumenauer.
    Mr. Blumenauer. Thank you, Mr. Chairman. And I appreciate 
this opportunity the hearing affords. As both you and the 
Ranking Member have made clear, this is perhaps the central 
environmental challenge we face. Coal is a reality, coal is an 
opportunity, coal is both a threat and a solution, and I look 
forward to the panel.
    I apologize in advance. We have a Ways and Means panel that 
is going on that our Chairman has labeled the ``Mother of All 
Hearings,'' which is a hint that I need to spend a little time 
there, and I will try and come back and forth. But I am keenly 
interested in the record that is being built and the offers 
that are coming forward. It is central to global warming, it is 
central to pollution, it is central to energy, not just for the 
United States, but, as has been referenced, China and India, 
which are even more dependent and greater users.
    The big questions about how to properly price carbon, how 
we can encourage and incent the technological developments, 
what is the appropriate regulatory framework--there will be 
some, there is some already, what adjustments need to be made--
are part of the important work of this Committee, and part that 
each of our witnesses can help us understand.
    And I do appreciate this, and I look forward to the results 
of the hearing. And I anticipate, Mr. Chairman, an opportunity 
for us to roll up our sleeves and spend much more time on this 
in the future.
    Thank you very much.
    The Chairman. I thank the gentleman.
    The Chair recognizes the gentleman from Arizona, Mr. 
Shadegg.
    Mr. Shadegg. Thank you, Mr. Chairman, and I want to thank 
you for holding today's hearing on the future of coal under a 
mandatory cap and trade program, and the possible technologies 
for carbon capture and sequestration.
    I want to welcome our witnesses and tell you each that I 
look forward anxiously to your testimony. I have reviewed your 
written testimony.
    I think everyone on this Committee understands the 
importance of this issue. Many of my colleagues who are from 
coal-producing states like to point out that we have vast 
resources of coal, and that coal has to play a part in our 
energy future. At the same time, there is a clear need to deal 
with what I will call the ultimate goal, and that is reducing 
carbon emissions and using energy more efficiently and 
productively.
    I think that with regard to a cap and trade system many 
have already rushed to embrace it as the right solution to this 
problem. I personally am not convinced of that. I am not 
convinced that a more transparent solution and a solution that 
might be able to be implemented on a global basis wouldn't be, 
at least to start with, a carbon tax.
    But put aside the mechanism. The more important thing is to 
focus on the goal, and that goal is to be able to use the 
energy we have, including the energy produced by coal, and at 
the same time reduce carbon emissions. Therefore, I am 
extremely interested in the testimony of these witnesses 
regarding the current technology surrounding carbon capture and 
sequestration regarding its economic viability, regarding what 
it will cost to our energy, and regarding how soon it can be 
implemented. I think those are serious questions.
    Over the August break, I went to Japan to look at nuclear 
power being developed there, and I also went to China to look 
at the energy situation there. China brings on, as you know, a 
new coal-fired powerplant every week--roughly a 250 megawatt 
plant--and, unfortunately, they are largely without any 
emissions controls at all, or at least not emissions controls 
that are currently being used. And they are clearly without any 
mechanism to capture the carbon which is emitted by those 
plants.
    The technical solutions that we are going to discuss here 
are vitally important to our future, and I again thank the 
witnesses for their testimony and thank you, Mr. Chairman, for 
the hearing.
    The Chairman. I thank the gentleman.
    The Chair recognizes the gentleman from Washington State, 
Mr. Inslee.
    Mr. Inslee. Thank you. First, I want to comment that I am 
heartened by Congressman Sensenbrenner's comments of seeing 
this issue we are talking about today as an economic 
opportunity. And I think this is one for us in the United 
States, and I am encouraged by prospects of it, and I look 
forward to testimony.
    There are a couple of things I hope the witnesses will 
address. One, I hope you will address what needs to occur short 
term to assure that we don't make a mistake of constructing 
what we will just call dirty coal plants now in the next decade 
and lock ourselves into really, really bad investments.
    What needs to happen short-term, namely in this Congress, 
to prevent those unwise investments from being made that we 
will rue in the future? So far there is some good news that 
they are not being made, because of some good, common-sense 
visionary decisions being made not to build those plants in 
local communities, but I would like to know your thoughts on 
that.
    Second, I hope you will give me--give us your view of what 
a regulatory structure should look like to regulate all issues 
regarding CO2 sequestration, including liability, 
including ownership, including the permitting process. I very 
much appreciate your advice about that and how do we think 
about that, and I will look forward to it.
    I learned about clean coal writing this book called 
Apollo's Fire with another fellow here this last year, and I 
just want to say that it was eye-opener, because before I wrote 
the book I really didn't see a lot of prospects for coal. But 
now, seeing the new technology coming on, it is something we 
have got to be aware of.
    I look forward to your testimony. Thank you.
    The Chairman. Thank you.
    The Chair recognizes the gentlelady from Michigan, Mrs. 
Miller.
    Mrs. Miller. Thank you, Mr. Chairman. Really, I have no 
opening statement. But coming from the State of Michigan, you 
mentioned that the average--national average is about 50 
percent of our electricity is produced by coal. Actually, in my 
State of Michigan, it is 68 percent, so I have a very big 
interest in the testimony of the witnesses today. I certainly 
want to thank the Chairman for having the hearing, and I look 
forward to the testimony.
    Thank you.
    The Chairman. Okay. The Chair recognizes the gentleman from 
Connecticut, Mr. Larson.
    Mr. Larson. Thank you, Mr. Chairman, and thank you again 
for holding this hearing. I, along with Congressman Blumenauer, 
have to leave to attend a Ways and Means hearing and what Mr. 
Blumenauer aptly pointed out our Chairman has called the 
``Mother of All Hearings.''
    But this certainly is a great hearing this morning and a 
great opportunity I think, as Mr. Sensenbrenner has pointed 
out. I am especially glad to see an old friend, Mike Morris, 
here who headed up Northeast Utilities for so many years, and 
an outstanding CEO. And I truly, you know, am interested in 
what a number of you have to say about a system of cap and 
trade.
    And, Governor, I understand that China's Foreign Minister 
was recently in Wyoming as well talking about coal, and echo 
the sentiments of Mr. Inslee, but I am equally interested in 
what you might think about a carbon tax specifically put in a 
trust fund that has an opportunity to focus on payroll 
deduction and shifting monies ultimately to the consumers where 
costs ultimately will be shifted to, and focused research and 
development that could come from that, and especially as we 
look down the path to dealing with juggernauts like India and 
China.
    My concern is one of transparency with the program and the 
need to have funding as we look down the path of dealing with 
major countries. I believe China is building a coal plant a 
day, and that raises some grave concerns in the urgency both 
for clean coal technology but also a system in which we can 
have the wherewithal to hopefully steer them towards 
alternatives that will do less harm to the environment.
    And I thank the Chairman for this opportunity.
    The Chairman. Great. The gentleman's time has expired.
    The Chair recognizes the gentleman from Oregon, Mr. Walden.
    Mr. Walden. Thank you very much, Mr. Chairman. I, too, am 
looking forward to hearing from the witnesses, especially with 
regard to this notion of a carbon tax--how high it might be to 
achieve the kind of results some people seek, the effect that 
might have on your industries or the consumers, because it 
seems to me that the consumers are the ones that are going to 
end up paying it. Even if it goes into a trust fund and comes 
back to them somewhere, my guess is the government is going to 
take its share out of that.
    The second is where we are in terms of carbon 
sequestration. This Select Committee made a trip to Europe. We 
looked around at various facilities, some of which are trying 
to make gains in this area. How far out are we on getting 
affordable and effective carbon sequestration available for 
coal-fired plants? And at what cost? If there is a cost per 
kilowatt hour, I would sure like to know that.
    And, certainly, this notion of cap and trade. It is one 
thing to apply to SO2 where we had an identified number of 
facilities with an identified and effective technology 
available to do the scrubbing. I am curious what you do when 
you apply it to carbon and how effective that will be, and, 
again, at what cost.
    There was sort of an I guess humorous report that came out 
while we were on Congressional District work period, I am told, 
that four moose belch as much carbon as one car per year. And 
so this is a pervasive problem across the entire globe, and we 
have got to do our part, certainly, but I think we have to be 
thoughtful about it and understand the potential impacts of the 
decisions we may make here, especially relative to their cost, 
costs on the economy, costs to the consumers, and whether or 
not the technology is actually available and whether it will 
work.
    And, finally, I would say that this has been another 
reckless summer in America's forests and grasslands, with 
unprecedented fires that release enormous amounts of greenhouse 
gases into the atmosphere. Catastrophically burned forests 
releases 100 tons per acre of greenhouse gases and emissions. A 
healthy green forest sequesters five to six tons per acre. I 
would sure like to see this Congress do something about better 
managing our forests and dealing with the whole issue of 
deforestation internationally as we let ours burn up here.
    I have got people that have lost their jobs this summer 
because the mills have closed, because we are at a record low 
level of harvest of federal forests. Meanwhile, they burn up in 
their backyards, and sometimes they burn up their backyards. 
Enough is enough. This Congress needs to step up and do 
something about better managing our forests, if you are serious 
at all about dealing with global climate change and greenhouse 
gas emissions.
    Thank you, Mr. Chairman.
    The Chairman. I thank the gentleman very much, and we will 
be looking at the forest issue. And I think on your 
recommendation we might be looking at moose-belching offset 
legislation as well. [Laughter.]
    And so those are two good suggestions.
    Let me turn and recognize the gentlelady from California, 
Ms. Solis.
    Ms. Solis. Thank you, Mr. Chairman, and I want to applaud 
you also for holding this hearing this morning. Yesterday, 
George Shultz, the former Secretary of State under President 
Reagan, wrote in The Washington Post that our nation and globe 
is at a golden moment, where if we choose wisely we can improve 
security and the environment while at the same time continuing 
economic growth.
    But we have to address two issues in my opinion. First, we 
have to address the use of energy without producing excess 
greenhouse gases. And then, second, we need to address the 
reduction and threat of national security because of our 
excessive dependence on oil. Today's hearing I think will be a 
good opportunity to discuss the future of coal in that context 
and how coal fits in an energy portfolio without producing 
greenhouse gases.
    This is going to be a challenge for us. Coal has a high 
carbon content, and coal-powered fire plants emit twice as much 
carbon per unit of electricity as natural gas-fired plants. In 
addition, coal-fired powerplants are responsible for a number 
of co-pollutants which are harmful to the health and well being 
of many of our constituents.
    In a district like mine, and other communities of color, 
5.5 million Latinos live within 15--within 10 miles of a coal-
fired powerplant, significantly affecting their health 
outcomes, developing asthma and other respiratory diseases. The 
potential for as many as 150 new coal-fired powerplants in the 
country is troublesome, especially in vulnerable communities--
communities of color--who can't defend themselves.
    So I am looking at how we can try to address that issue, 
looking at communities that have been disadvantaged in the 
past, and might be the easiest location to put these 
powerplants, and yet trying to have the government treat these 
communities with a fair and balanced approach. So I am looking 
forward to hearing from the witnesses today.
    And also, as you know, I represent a State that has been 
very progressive on this issue. In fact, with the passage of AB 
32, one of the major legislations that was supported by 
Governor Arnold Schwarzenegger, is having a tough time making 
its way through implementation. But I think we can learn a lot 
from that, and I hope that some of you will address that.
    I know some of our environmental groups have also 
challenged individual corporations who want to continue with 
building out these different types of powerplants, because they 
will be harmful to many communities of color that are going to 
be most vulnerable on the so-called food chain. So if you can 
help address that, that would be very important to me. Thank 
you.
    Thank you, Mr. Chairman.
    The Chairman. Great. The gentlelady's time has expired.
    The Chair recognizes the gentlelady from Tennessee, Mrs. 
Blackburn.
    Mrs. Blackburn. Thank you, Mr. Chairman, and thank you to 
our witnesses. As you have heard from everyone, we all are so 
interested in the carbon emissions, the sequestration storage 
capture technologies, and also the cap and trade system. I do 
have a couple of points that I am looking forward to hearing 
from you on.
    First of all, in my list of concerns is implementing a 
mandatory cap on carbon emissions and the burden that that 
would place on the American economy. And some estimates that I 
have read are that the cost of the cap would increase the cost 
of electricity to the consumer by as much as 45 percent. That 
is of tremendous concern to us, that we would see this type 
increase. And I can assure you to my constituents in Tennessee, 
and all throughout the Tennessee Valley, this is a point that 
has not been lost on them.
    And what we have read is that possibly Americans are not 
willing to spend that extra $40 a month when you look at trying 
to stop the release of carbon dioxide into the atmosphere. 
Second is that carbon capture technology may not be the most 
effective method to reduce and harness CO2 
emissions. Current technology already exists after all in an 
efficient form that enabled the industries to harness 
CO2 for other applications, and some of the reading 
we have had presented to us on that is really quite interesting 
and definitely innovative.
    Some use the technology to recover more oil from wells, and 
some are using it to capture CO2 from powerplants 
and car fumes, to grow algae, which in turn is used to produce 
biofuels. So I think we are looking forward to hearing your 
take on that.
    A couple of the members have referenced the trip we made to 
Europe to hold some meetings this year and to look at the cap 
and trade system. And I do have some serious concerns about the 
system. I have also had several concerns regarding the use of 
the carbon capture technology. Many are advocating that the 
Federal Government buy into the new technology despite what is 
a tenuous record at best.
    And I would say that one of the things we learned in Europe 
during our meetings that is very instructive is that we should 
look carefully and evaluate very carefully, both on the 
technologies and on the cap and trade system, before we leap 
into this. So we welcome you, and we look forward to hearing 
from you today.
    Thank you, and I yield back.
    The Chairman. Great. The gentlelady's time has expired.
    The Chair recognizes the gentlelady from South Dakota, Ms. 
Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. I thank you 
and the Ranking Member for this very important hearing. I am 
looking forward to the testimony of the witnesses today.
    As has already been stated, more than 50 percent of our 
nation's electricity comes from coal-fired powerplants today, 
and demand for energy continues to rise. So we must find ways 
to use this abundant domestically-produced resource in a way 
that is economically viable and environmentally sustainable.
    One way to do that is, as has already been mentioned in 
other opening statements of my colleagues, through capture and 
sequestration of greenhouse gases that are emitted as coal is 
burned, most specifically CO2. As I have indicated 
to the Committee before, the Dakotas, neighbors to the great 
State of Wyoming, have an impressive story to tell in this 
regard. Basin Electric is a large electricity generating 
cooperative headquartered in Bismarck, North Dakota, that 
serves much of the northern plains, including much of South 
Dakota. The vast majority of their power comes from burning 
locally-mined coal.
    It also owns a subsidiary, Great Plains Sinfuels, that 
turns coal into natural gas. In 1997, another of Basin 
Electric's subsidiaries, Dakota Gasification Company, agreed to 
send at least 95 million standard cubic feet of 96 percent 
carbon dioxide from its Great Plains Sinfuels plant through a 
205-mile wide pipeline to an oil field near Wayburn, 
Saskatchewan, Canada.
    Dakota Gas has been successfully capturing a portion of its 
CO2 emissions and transporting the gas to Canada 
since September of 2000. Today, Dakota Gas operates the largest 
carbon sequestration project in the world. Each day Dakota Gas 
ships approximately 115 million standard cubic feet or 6,000 
metric tons of CO2 to Canada. With the addition of 
another CO2 compressor in 2006, the capacity has 
been increased to 160 million standard cubic feet, or 8,000 
metric tons daily.
    All told, approximately six million metric tons of 
CO2 have been sequestered since the project began in 
October of 2000. The CO2 is expected to be 
permanently sequestered in the oil reservoir, which is 
monitored by the International Energy Agency. This successful 
project indicates that such technology is available, and we can 
make it feasible and economically viable.
    So I look forward to any thoughts that the witnesses have 
on that technology and familiarity with that project, and other 
issues related to geologic sequestration or other beneficial 
industrial uses of these gases, and also looking forward to 
continuing to share the opportunities that the Dakotas have 
seized as we deal with the issue of promoting energy 
independence and fighting global warming.
    And, Mr. Chairman, before I yield back, I am pleased to 
hear that we will be addressing in more detail the issue of 
forest management. Mr. Walden and I have worked on that issue 
in the past on the Natural Resources Committee, and think it is 
another area, particularly in rural parts of the country, where 
we can help find solutions to the issue of greenhouse gases.
    Thank you, and I yield back.
    The Chairman. I appreciate that. Thank you.
    The Chair recognizes the gentleman from Missouri, Mr. 
Cleaver.
    Mr. Cleaver. Thank you, Mr. Chairman.
    I am pretty much convinced that the legitimate epicenter 
for the War on Terror is in coal mines, that if we are serious 
about reducing our dependence on foreign oil we must hasten the 
development of the technology to produce clean coal.
    I was somewhat alarmed to discover that the capital 
powerplant burned 17,000 tons of coal each year, which produces 
about 60,000 tons of CO2. And I think following the 
leadership of our speaker, and the vision of our Chairman, Mr. 
Markey, we did pass H.R. 3221, which I think is revolutionary 
in that we are beginning to install technologies for the 
capture and storage of CO2.
    I am also, in connecting this with your testimony, 
concerned about something the President quite often mentions, 
which is this future gen powerplant. I am interested in how 
real it is, and if, in fact, it is real, what do those of you 
who I consider to be members of the coal intelligencia believe 
we can expect from this future gen powerplant.
    Thank you, Mr. Chairman.
    [The statement of Mr. Cleaver follows:]

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    The Chairman. Great. The gentleman's time has expired.
    The Chair recognizes the gentleman from California, Mr. 
McNerney.
    Mr. McNerney. Thank you, Mr. Chairman.
    This is a very difficult and interesting subject, and, as I 
said yesterday in our hearing on coal to liquid, that we need 
to keep an open mind on this. And I have to find myself in 
agreement with the Ranking Member in looking at this as a 
tremendous opportunity for our country and for many sectors of 
the economy that can take advantage of coal and use it in a way 
that does not impact the global warming issue.
    For example, I heard recently of an interesting study that 
took place in Canada that affects states like Wyoming that have 
a lot of wind and a lot of coal. If you put in a large wind 
powerplant, about 20 percent of that wind power can be 
considered to be base load, whereas the other 80 percent is 
intermittent and can be used to process coal to produce energy 
products and to produce construction materials.
    And so the coal and wind make a good partnership, which was 
quite surprising to me, because I am a wind power advocate and 
I spent my career in wind energy, so it was interesting to see 
that development. You would have expected coal and gas to make 
a good partner, but it doesn't because gas-powered plants 
require high operating performance. And when you turn them 
back, when wind comes up, they operate poorly.
    So coal and wind is the natural partnership. So I would 
like to see that kind of advancement, that kind of research, 
open up new opportunities for both renewable and the old fossil 
fuel types of power. So I am looking forward to your testimony. 
Thank you for coming in today, and I will reserve the balance 
of my time for questions.
    Thank you.
    The Chairman. Great. The gentleman's time has expired.
    The Chair recognizes the gentleman from New York, Mr. Hall.
    Mr. Hall. Thank you, Mr. Chairman, and welcome. I was going 
to call you the co-elite, but thanks to Mr. Cleaver I have 
changed that to co-intelligencia.
    Obviously, this is a question that we are considering today 
of great importance, because of the abundance of coal in our 
country and the need for our energy policy to change away from 
oil, but at the same time, as many have mentioned and as you 
all know, that getting the carbon emissions under control is 
critical to our dealing with global warming, which is the other 
mandate of this Committee.
    And so I am just hoping to hear from the panel, in addition 
to the expert testimony which is about to be given, about our 
ability to incorporate sequestration technology into new 
plants; whether we could be doing more to retrofit existing 
plants with post-combustion methods; the balance between or the 
choice between cap and trade and carbon tax, which is--they are 
talked about sometimes as alternatives and sometimes as 
complementary approaches; about the developing world and how 
the U.S. can be more of a leader than we are, and how we can 
take a more cooperative approach from the outset; whether any 
of our experts are aware of an intergovernmental or 
international scientific efforts to develop sequestration in 
cooperation with these other countries to help them deploy them 
faster; and the potential for direct technology transfer, once 
we develop better sequestration methods.
    I am also interested and hoping to hear ideas about 
incorporating carbon offsets into our trade agreements, and was 
wondering if Mr. Morris in particular could elaborate a little 
bit more on that possibility. Your testimony, sir, makes 
reference to administering a border tax. I am wondering if 
there is a possible way that this idea could be used to create 
a carbon tariff to use the market in driving countries like 
China to deal with emissions, and can we start incorporating 
these ideas now into our bilateral trade agreements without 
waiting for a new Kyoto.
    So there is plenty to discuss, and, Mr. Chairman, I thank 
you for holding this hearing. I yield back the balance of my 
time.
    The Chairman. Great. The gentleman's time has expired, and 
time for all opening statements from members has expired.
    We will now turn to our very distinguished panel, and we 
will welcome our very first witness, who is Wyoming Governor 
Dave Freudenthal. Wyoming is the largest coal-producing state 
in the United States, and it is also the largest energy 
exporting state overall in the United States. Governor 
Freudenthal has a very long and distinguished career in public 
service and in the private sector. And there is probably no one 
in elected office in the United States that knows more about 
coal than Governor Freudenthal, and we are very honored to have 
you with us here today, sir. Whenever you are ready, please 
begin.

  STATEMENTS OF DAVE FREUDENTHAL, GOVERNOR, WYOMING; MICHAEL 
  MORRIS, CEO, AMERICAN ELECTRIC POWER; CARL BAUER, DIRECTOR, 
   NATIONAL ENERGY TECH LABORATORY; DAVID HAWKINS, DIRECTOR, 
  CLIMATE CENTER, NATIONAL RESOURCES DEFENSE COUNCIL; ROBERT 
  SUSSMAN, PARTNER, LATHAM & WATKINS, LLP; AND STUART DALTON, 
    DIRECTOR, GENERATION, ELECTRIC POWER RESEARCH INSTITUTE

                 STATEMENT OF DAVE FREUDENTHAL

    Governor Freudenthal. Mr. Chairman, members of the 
Committee, thank you. First of all, Mr. Chairman, it is clear 
that neither you nor I are under oath when you refer to me as 
having any expertise, so I guess you can get away with that. I 
do not know as much as I would like to know about this.
    I am just going to fire through to try to deal with some of 
the questions. I think one of the things to understand about 
Wyoming in context was alluded to by the Chairman, which is 
that while we are the leading coal producer, natural gas 
production has actually eclipsed coal production in our State 
in terms of value to the economy. We are also--we produce half 
of the uranium that is in this country. We have an immense 
number of wind reserves, which are generally being tapped, but 
will be tapped more seriously as you get some powerlines.
    So from the point of view of Wyoming, whichever option you 
decide to pursue, we have an economic viability. What I am 
concerned about is that we are approaching coal, frankly, 
failing to understand its role in the energy mix. And I am 
pleased to hear the Committee acknowledge that no matter what 
we do we are going to be dealing with coal going forward.
    And it is an important element for us to focus on, and in 
that context I was perplexed that while the bills that were 
passed by the respective Senate and House talked about 
incentives and studies with regard to carbon capture and 
sequestration, they didn't talk about incentives for the coal 
technologies that are essential to have some carbon to capture.
    I mean, if you are going to capture it, transport it, and 
place it in the ground, you are going to have to be incenting 
coal plants that have the capacity for that stream of carbon to 
be captured, either through retrofit of the existing fleet or 
through underwriting some development of technologies and I 
think commercial demonstration of some of the new technologies 
that people are talking about, because we have bifurcated the 
issue.
    We have said, ``Let us talk about carbon capture and 
sequestration,'' but carbon capture is really tied to the 
technologies that we are going to encourage to develop, so that 
there is some carbon to capture, that you have the capacity to 
capture it, and then the capacity to move it and the capacity 
to inject it.
    The second point that I would make is you need to 
distinguish between carbon capture and sequestration and the 
utilization of carbon for enhanced oil recovery. Enhanced oil 
recovery is--it is a process by which you infuse the CO2 
into the ground, that breaks up the molecules, moves faster. 
That is not the same as carbon sequestration. That field that 
is amenable to that--and I think it is some of the low-hanging 
fruit for us as a country to get carbon sequestered, but that 
is--you are not sure it is going to stay there.
    And so until you have made some significant study or effort 
to assure yourself that that carbon is going to stay there, 
that you can cap all of those holes in that field, I would urge 
you to be careful about equating enhanced oil recovery with 
carbon sequestration, because they are not the same. Now, they 
may be able to be the same in the sense that the fields may be 
amenable.
    The other thing is that, be careful about thinking of 
natural gas as the automatic answer. In our State, we have an 
immense amount of gas produced. We also have processing plants 
which for every MCF of gas that is produced and shipped to 
California, two MCF of CO2 are thrown off either 
into the atmosphere or into enhanced oil recovery. So when you 
are talking about how blessed gas is--and I love natural gas, 
it is great for my State--but I will tell you, in the context 
of your environmental calculations, it is an answer, but it is 
not a perfect answer, and you need to be careful about going 
forward with that.
    With regard to sequestration, we have a lot of experience 
on enhanced oil recovery. We have found a number of formations 
which may be amenable to long-term sequestration, but the 
government, the Federal Government, needs to step up, fund 
those experiments, and make sure that it works. Don't mandate 
something without putting in place a pathway for us to get 
there, a pathway both for the states, the Federal Government, 
and, more importantly, for the private sector.
    One of the things that I was asked to comment on is the 
role of the states. I have made my career beating up on the 
Federal Government, and it pains me greatly to be here and 
suggest that we need a federal mandate and a federal road map 
to deal with this, because I don't believe that while Oliver 
Wendall Holmes was right, that states are the laboratories, 
ultimately the ground rules are going to have to be set by the 
Federal Government. And you see the individual state efforts 
and the individual accumulation of states in the northeast, in 
the west. All we are really doing is vulcanizing this economy.
    And if we don't come up with a serious set of ground rules 
that recognize that this is an interrelated economy throughout 
the United States, all you are going to do is leave individual 
states to make decisions and to give signals to the private 
sector which are contrary to the fact that these are all 
interrelated transmission grids, these are all interrelated 
systems, and I would encourage you that the Federal 
Government--none of the private money is going to move, none of 
the states are going to know realistically what to do until the 
Federal Government drops the other shoe, which is to say, ``How 
are we going to monetize carbon in some form?'' Be it a tax or 
a cap and trade.
    Mr. Chairman, I note that my time is up. I appreciate the 
opportunity to be here. A little more than you wanted to hear, 
but----
    [The prepared statement of Governor Freudenthal follows:]

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    The Chairman. No, no. Again, you know, Mark Twain used to 
say that an expert is anyone who lives more than 500 miles away 
from a problem. And you, of course, live in Wyoming, so it is a 
Congressional expert that is the oxymoron, like jumbo shrimp or 
Salt Lake City nightlife. I mean, there is no such thing. 
[Laughter.]
    So we need people like you, Governor, who come into town 
who actually are the experts to help us to understand these 
issues.
    I am pleased to introduce our second witness, Mr. Michael 
Morris. He is the Chairman and CEO of American Electric Power. 
AEP is the largest electric utility in the United States, 
serving over five million consumers in 11 states, and it is 
also the largest consumer of coal in the United States. Under 
Mr. Morris' leadership, AEP has been an industry leader in the 
development of carbon capture and storage technology.
    We welcome you, sir. Whenever you are ready, please begin.

                  STATEMENT OF MICHAEL MORRIS

    Mr. Morris. Thank you very much, Mr. Chairman, and thanks 
for the opportunity to be here. I am intrigued by the questions 
that you have all racked up for us in your various introductory 
statements, and I know that, given the time that we will have 
to give comments and thoughts back and forth, this will be an 
extremely meaningful session.
    I surely want to say hi to the Congresswoman from Michigan, 
who, while I was at Consumers Power for 12 years, had a lot of 
fun working with over the years, and you as well when I was at 
Northeast Utilities, Mr. Chairman.
    I see this challenge not unlike the Ranking Member. It is, 
in fact, an opportunity. In your introductory comments of me, 
you mentioned 5.1 million customers. I have an obligation to 
make certain that there is adequate energy supply for those men 
and women in those industries, in those commercial operations, 
24 hours a day, seven days a week, every day of the year. And 
for the most part, we do that. When weather intervenes, 
sometimes we aren't there when they want us, and that is very 
disturbing to them and understandably so.
    Coal, as the Governor said, is an essential part, as many 
of you said in your opening comments, to the overall equation 
of how we will satisfy that demand across this entire country. 
Doing that with the respect for the environment is essential as 
well. To that end, we filed testimony to touch on many of those 
points, but let me subset on a couple of the specific questions 
that were sent to me by the Committee and by you.
    The fact questions 3 and 4, ``What is my company doing 
about this challenge?''--and our testimony is full of those 
kinds of issues, but, secondarily, question number 4, ``When is 
a practical carbon capture and storage technology deployment 
going to be available for this country?''
    We would believe that in the timeline in the latter half of 
the next decade we will have validated concepts that are 
already out in the marketplace, yet not out of the laboratory 
in the marketplace, to show that in fact, just as other flu gas 
issues or prior burn issues can be removed from the stream of 
carbon--of the coal fuel, we will have a chance to do that.
    We intend, by 2009, at Appalachian Power in--that serves 
the states of West Virginia and Virginia--to do a 30-megawatt 
validation project on capture and storage there. We have worked 
with Battelle. We have subsurface storage actually at our 
Mountaineer site, and that would be our plan by 2009.
    By 2011/2012, we will move that validation project out to 
Rogers County, Oklahoma, where at one of our major northeastern 
Public Service of Oklahoma stations we will capture up to 200 
megawatts of carbon. There we will use it, as the Governor 
suggested, in enhanced oil recovery for the gas and oil fields 
in Oklahoma. We think that is an excellent way to go about 
doing that.
    For the new plants--and those are both retrofit 
opportunities, which is essential for us to continue to keep 
the fleet out there for all of us in this country. For new 
plants, integrated gas combined cycle technology, ultra-
supercritical technology, which we would hope to build also in 
Oklahoma with other partners, are part of the answer to use 
coal logically as we go forward.
    So to the validation projects and the integrated gas 
combined cycle, we believe by the middle of next decade to the 
beginning of 2020 that technology will be there for us, and we 
as an industry, we surely as a company, will begin to deploy 
that as fast as we can. I think it is important to the notion 
of 150 coal plants to be built in some very short period of 
time.
    The EIA unfortunately is always wrong in their forecast, 
and there is no way in the world we are going to build 30 or 40 
nuclear stations, no way in the world we are going to build 150 
coal-based generation stations in this country. Remember, in 
each and every of your states, we can't simply build whatever 
we would like. We can only build what the Public Utility 
Commission, Public Service Commission, or regulatory body will 
allow us to build.
    The coal plants need to be built, and they, in fact, will 
be built between now and then. As to the notion of putting 
technology out there, what everyone will build at least will be 
coal capture-ready stations, if not coal capture deployed 
technology, because it isn't there yet. This is a very 
different timeline than the one that we shared a few decades 
ago when my company and my industry were very strong in the 
notion of ``not now, not ever.''
    This is a willing industry, a willing company, a willing 
people, who simply want to have the timeline to allow the 
technology to develop, so that in fact we just don't get a 
political soundbyte but we get something that works.
    To the gentlewoman from the Dakotas, I was part of the 
environmental study that--at American Electric Power Company--
or, excuse me, at American Natural Resources when the 
gasification project was built. It has turned out to be an 
excellent idea. The day it came online it made gas for $8 a 
million BTUs into a $2 market, and everyone thought it was a 
terrible idea. Today, it does exactly as you suggest.
    In the '60s, '70s, '80s, and '90s, we have used more 
electricity in this country than ever before every decade. The 
air and the water have gotten cleaner in each of those decades. 
If we are logical about how we do this, we can find an answer.
    As to the global nature, it isn't U.S. warming, it is 
called global warming. We need to make certain that China, 
India, and other countries join us in this endeavor. What the 
unions and American Electric Power have put forward, and is 
being embraced at least at the principal committee in the 
House, and being embraced in writing in the Senate, is a 
concept that is WTO-compliant that ought to address that issue 
and cause them economically to want to do something.
    Mr. Markey, in your opening comments you mentioned a number 
of plants being built here. They will be carbon capture-ready. 
The plants that are being built in China are not. That is a 
huge difference. This is a global issue, and there is no sense 
saddling the U.S. economy without addressing that global 
nature.
    Thanks for the opportunity to be here. I look forward to 
the questions and answers.
    [The prepared statement of Mr. Morris follows:]

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    The Chairman. Thank you very much.
    Our next witness is Mr. Carl Bauer. He is the Director of 
the Department of Energy's National Energy Technology 
Laboratory. A nuclear engineer by training, Mr. Bauer oversees 
much of the Federal Government's research and development 
efforts on coal-fired generation technologies and carbon 
capture and storage. He is recognized as one of the leading 
experts in this field. We welcome you today, Mr. Bauer.

                    STATEMENT OF CARL BAUER

    Mr. Bauer. Thank you very much, Mr. Chairman, and members 
of the Committee. I appreciate the importance that this 
Committee has in addressing the future of the United States and 
the world from energy and the environmental impacts of its use 
and production.
    The economic prosperity of the United States over the past 
century has benefitted from the abundance of fossil fuels found 
in North America. These fuels are important to our energy 
security and the global economic competitiveness we experience. 
However, these concerns of climate change and air pollution 
challenge our ability to continue to take full advantage of 
these resources.
    Recently, countries like China have seen dramatic growth, 
as we have mentioned earlier and the Committee members have all 
recognized. But a point that you might not have seen just 
recently came forward. In the last quarter, China put online 30 
gigawatts of coal-fired power generation.
    That is four to five times more than we have built in this 
country in the last five years. That is a very important point. 
India is also putting things online, and we believe that the 
eastern European countries will also continue to depend on coal 
power generation as one of their mainstays. So this global 
climate change issue in CO2 from coal-fired and 
fossil-fired plants is extremely important.
    In 2004, the global anthropogenic CO2 emission 
amounted to 27 billion metric tons. By 2030, global 
CO2 emissions are projected at 43 billion metric 
tons per year. China and India and the other non-OECD Asian 
countries will contribute 57 percent of that. In comparison, 
the United States will--from coal-fired generation will 
contribute to 6.8 percent of that.
    Nevertheless, because of these concerns of global climate 
change and the need to stabilize greenhouse gas emissions, the 
U.S. must consider rolling back CO2 emissions to a 
level substantially below today's. Carbon capture and storage 
technologies offer a great opportunity to pursue these 
reductions, as the Committee has recognized in their opening 
statements.
    Fortunately, the U.S. and Canada are blessed with an 
abundance of geologic storage capacity. At the current rate of 
energy production use, we could potentially store all of the 
associated CO2 emissions in North America for a 
period of over several hundred years.
    One scenario that DOE has looked at in terms of 
accelerating commercial application of carbon capture 
technology is to couple CO2 capture from powerplants 
with enhanced oil recovery, as the Committee has recognized. 
This may represent the earliest and most economic--and I 
emphasize economic--project opportunities for a power company 
to address the technical and economic risks of investing in 
carbon capture technology.
    In today's world of global commerce, there is presently no 
significant business incentive to deploy carbon capture 
technology. In order for the marketplace to more aggressively 
address our nation's need for effective, safe, permanent, and 
economic carbon mitigation options, we must move forward 
towards the following, I would suggest--an established 
regulatory framework for industry and its financial partners in 
order that they may do an assessment of the risk and the 
financial investments required; the development of accurate 
methods to calculate the allocation of risk and potential 
financial consequences associated with long-term liability, not 
decades but hundreds of years; an international agreement on 
patent and intellectual property protections, so those who can 
come up with the best ideas feel they have a chance to realize 
a financial return on their investments of their intellectual 
and financial capital; and the development of advanced 
technologies needed to deliver an economic option.
    DOE's R&D program is aimed at providing the scientific and 
technological foundation for carbon capture and storage for 
both new and existing fossil fuel powerplants. And I say 
``fossil fuel''--as we move to more natural gas and more LNG, 
there is a recent study that just was released in Environmental 
and Energy Weekly that Carnegie Mellon has put forward.
    The study on LNG suggests that the CO2 related 
from the full production--and this is somewhat akin to what the 
Governor had mentioned about the production of natural gas even 
domestically--the release of CO2 into the production 
of natural gas conversion to LNG, shipping, and then turning it 
back into gas in a pipeline, may wind up being just as much 
when you bring in the powerplant and transport as a coal-fired 
plant does in a CO2 release.
    Now, that is one study. There has been a few other studies 
similarly, but that again puts us in an awkward spot as fuel 
shifting being the only solution. We have got to find a 
portfolio of opportunities.
    The program we are heading up with DOE is an opportunity 
that recently presented itself using coal and biomass and 
capturing and sequestering that. Recognizing that biomass is 
often considered as CO2 neutral, because of the 
short cycle of plant life and the ability to withdraw through 
photosynthesis CO2 from the atmosphere.
    However, if biomass and coal are used together, and the 
biomass and coal resulting CO2 are all captured and 
sequestered, you actually wind up with not only avoidance of 
release of CO2 from coal, but an actual effective 
withdrawal of CO2 from the inventory associated with 
the biological plant growth cycle.
    NETL systems engineers have modeled this, and we believe 
that by co-feeding 11 percent biomass by energy value, with 
coal, through integrated gasification combined cycle plant, 
which would employ 90 percent capture and sequestration--you 
might call this coal biomass and IGCC--the net greenhouse gas 
emissions would be zero or possibly even negative. A similar 
theory applies for coal biomass liquids production, with 
CO2 capture and sequestration.
    To put it as an example, a nominal 500 megawatt plant 
consuming 900 tons per day of switchgrass and 5,000 tons per 
day of coal, and capturing 12,000 tons per day of 
CO2, would yield a net zero life cycle carbon 
footprint, including not only the power generation but the 
upstream coal and biomass preparation and transport.
    DOE's carbon sequestration is addressing these challenges 
through applied research, proof of concept technology 
evaluation and pilot scale testing, large-scale deployments, 
stakeholder involvement, and public outreach. And those last 
two are also important as a technological--because it is going 
to be done locally.
    I realize I have taken my time, and I thank you for the 
opportunity, Mr. Chairman, and your patience with me.
    [The prepared statement of Mr. Bauer follows:]

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    The Chairman. Thank you. I appreciate it, Mr. Bauer, very 
much.
    Now I am pleased to welcome Mr. David Hawkins, who is the 
Director of the Natural Resources Defense Council's Climate 
Center. Mr. Hawkins is a former Assistant Administrator of the 
EPA and has over 30 years of experience on air quality, climate 
change, and energy policy issues.
    I have been a Congressman for 30 years. David Hawkins has 
been testifying on these issues for all 30 years up here. So 
there is nobody that knows more about this issue than you do.
    David, whenever you are ready, please begin.

                   STATEMENT OF DAVID HAWKINS

    Mr. Hawkins. Thank you very much, Mr. Chairman. I have 12 
points to make and 5 minutes to make them, so let me get 
started. The first is that coal use trends in the United States 
and globally, if continued, will make protecting the climate 
impossible. But coal is abundant and relatively low cost. So 
trying to convince world leaders to give up coal would take a 
long time, time that we do not have.
    So a critical need is to keep new coal plants from being 
built unless they actually capture their CO2. That 
is the only way we can reconcile these two imperatives. About 
3,000 coal plants are now on the drawing board, new coal 
plants, globally around the world between now and 2030. That is 
less than a 25-year investment period.
    Two-thirds of those are in plan for the developing world, 
and 40 percent of them are in China. Now, if these plants 
operate for 60 years, and they release all of their carbon 
dioxide to the atmosphere, the total cumulative emissions 
during that 60-year period would be 750 billion tons of carbon 
dioxide.
    How do we put that number in perspective? Well, it is 30 
percent more than all of the carbon dioxide released from coal 
use in human history, and that is from a 25-year period of 
investment from one technology. So we clearly have a problem 
that we need to address immediately.
    Fortunately, carbon capture and geologic disposal 
technologies are ready for use today. Unfortunately, they are 
not being used in the power sector. What we need, as has been 
observed, is a policy framework that assures that carbon 
capture and disposal systems are used for new coal plants and 
gradually get used on all coal plants.
    To do this we recommend a three-part policy package to 
assure that carbon capture and disposal gets deployed without 
additional delay. First, enactment of a comprehensive cap and 
trade system in the United States. We need a comprehensive 
system in order to get the cuts in greenhouse gas reductions 
that we need, and to provide the flexibility that will keep 
costs low.
    Second, enactment of a low carbon generation obligation 
that applies to coal plant operators. This provision would 
assure that an increasing fraction of America's coal-fired 
electricity uses carbon capture and disposal, and that fraction 
would increase over time. Now, by making this obligation 
tradeable, the provision would spread the additional costs of 
those first carbon capture and disposal plants over the entire 
customer base of the United States rather than the single 
customer base of the company that happens to build the first 
one or two plants. We think that is an important way of keeping 
costs low as this technology is deployed.
    Third, we recommend enactment of a new source performance 
standard for new coal plants. This will assure that we don't 
build any more new coal plants that release their carbon into 
the atmosphere. The first rule of holes is that when you are in 
one, stop digging. Well, building new coal plants that release 
their carbon into the atmosphere would just dig us deeper, and 
we can't afford that.
    So by combining the new source standard with a low carbon 
generation obligation, we think we can assure a smooth 
transition away from coal plants that each today emit millions 
of tons to the atmosphere every single year.
    We believe that Congress can and should act this year to 
pass legislation with features--with these features. And if you 
do this, we think that the world will take notice and that the 
opportunities that the Ranking Member Sensenbrenner spoke about 
will emerge, that we indeed can be a marketer of ideas and 
technology to the rest of the world. The world will follow. We 
have the power to change international practice in designing 
coal-fired powerplants. We don't have the time to wait.
    Thank you very much for your attention.
    [The prepared statement of Mr. Hawkins follows:]

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    The Chairman. I just want to note it is an unusual moment 
where a witness has given back 30 seconds. Just doesn't happen 
that often. I just wanted to take note of it.
    Let me recognize the next witness, Mr. Robert Sussman, who 
is a partner at the law firm of Latham & Watkins. Mr. Sussman 
is a former Deputy Administrator of the EPA during the Clinton 
administration, and is recognized as one of the leading 
environmental lawyers in the country.
    We welcome you, sir. Whenever you are ready, please begin.

                  STATEMENT OF ROBERT SUSSMAN

    Mr. Sussman. Thank you, Mr. Chairman. It is a pleasure to 
be here today. I am presenting my testimony on behalf of the 
Center for American Progress, a non-partisan research and 
educational institute dedicated to promoting a strong, just, 
and free America. The Center has recently published two reports 
on carbon capture and sequestration, which I wrote, along with 
Ken Berlin, one of my colleagues. And what I would like to do 
today is to highlight the conclusions to these reports, which 
are attached to my written testimony and hopefully will be in 
the record for this hearing.
    What we have heard from several witnesses is that the 
challenge posed by a dramatic increase in greenhouse gas 
emissions as a result of new coal plants is serious and urgent. 
If these plants do not control their emissions, the consequence 
will be to add many millions of tons of carbon dioxide to the 
atmosphere. And this growth in emissions will make it very, 
very difficult to move in the direction that many of us 
recognize is imperative, which is to reduce emissions, 
ultimately on the order of 70 to 80 percent by 2050.
    The most promising, and as best I can tell the only, path 
to control CO2 emissions from new coal plants is 
carbon capture and storage. The task facing Congress is to 
maximize the likelihood that CCS is widely deployed on an 
expeditious but realistic timetable and at a reasonable cost. 
The stakes are very high. If we succeed at this task, we will 
assure coal a secure place in the future U.S. energy mix. If we 
fail, coal's historic role as a vital energy resource in this 
country will be at risk.
    And I want to underscore that point, because there is I 
think growing evidence that coal faces a very uncertain future 
in the United States without carbon capture and storage. Two 
years ago, there were rosy predictions of a resurgence of coal, 
but today there is growing public opposition to new coal plants 
all around the country. Legal and political challenges to these 
plants are routine.
    In a remarkable development, we saw private equity 
investors taking over TXU, a large Texas utility, announce that 
they would cancel 8 out of 11 proposed coal plants if their 
buyout was consummated. Recently, in California and Florida, we 
have seen some significant barriers erected to the construction 
of new coal plants.
    And recognizing these trends, it is interesting that in 
July Citigroup downgraded the stocks of coal companies across 
the board, maintaining, and I quote, that ``prophecies of a new 
wave of coal-fired generation have vaporized while clean coal 
technologies remain a decade away or more.'' These trends I 
think underscore the urgency of this challenge, and also the 
very important solution that timely CCS deployment can provide.
    Let me turn to cap and trade programs and to the very 
important question of whether the cap and trade proposals that 
are now on the table in Congress will lead to timely deployment 
of CCS. Unfortunately, our analysis indicates that the initial 
stages of cap and trade programs are not likely to create 
carbon prices high enough to eliminate the cost differential 
between new coal plants with CCS and those without it.
    This would mean that new coal plant owners are unlikely to 
install CCS systems until the emission camps for these programs 
become sufficiently stringent to increase the price of 
CO2----
    The Chairman. Mr. Sussman.
    Mr. Sussman  [continuing]. Allowances to at least $30 per 
ton. This will probably not occur until 2030, and maybe even 
later.
    The Chairman. Mr. Sussman, I apologize, sir, but your time 
has expired.
    Mr. Sussman. Okay.
    The Chairman. So you will have plenty of time in the 
question and answer period, I am sure.
    Mr. Sussman. Okay. Thank you.
    The Chairman. Okay. Great. Thank you.
    [The prepared statement of Mr. Sussman follows:]

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    The Chairman. And our final witness is Mr. Stuart Dalton, 
who is Director for the Generation sector of the Electric Power 
Research Institute. Mr. Dalton is a leading expert on coal-
fired generation and carbon capture and storage. Among other 
efforts in this sphere, Mr. Dalton led EPRI's contribution to 
the National Coal Council's report on CCS and the Coal 
Utilization Council's--Research Council's technology roadmap.
    We welcome you, sir. Whenever you are ready, please begin.

                   STATEMENT OF STUART DALTON

    Mr. Dalton. Thank you, Mr. Chairman, members of the 
Committee. I appreciate the opportunity to speak today before 
the Committee. We believe that the--through the development and 
deployment of advanced coal plants with integrated 
CO2 capture and storage coal power can be part of 
the solution to addressing both our growing energy needs, needs 
for energy independence, and for the global climate change 
concerns. However, we believe a sustained RD&D program at 
greater levels of investment and resolution of legal and 
regulatory unknowns for long-term CO2 storage will 
be required to achieve the technologies.
    In direct response to a couple of the questions that were 
posed earlier by the Committee, I would suggest that if you use 
today's technology it would probably increase the cost of a 
conventional pulverized coal plant, assuming you were scaling 
up with current technology and took that risk, by some 60 to 80 
percent increase in the wholesale cost of power.
    And if you put it on a gasification plant using today's 
technology, that might be a 40 to 50 percent increase in 
wholesale cost of power. That is to the how much question.
    As to the when question, certainly it is heavily debated. 
We have heard different comments on when, but three to five 
years to build it, three to five years to inject, and three to 
five years to monitor adds up to a significant amount of time. 
And that is one of the questions is: when could these be built 
and proven in operation?
    We have a program that has been developed with about 60 
organizations from five continents working, which has laid out 
an RD&D program to move the technology forward. We see crucial 
roles for industry and governments worldwide in aggressively 
pursuing carbon capture and storage.
    A couple of key points from my written submission. Advanced 
coal technology powerplants, with the integrated capture and 
storage, will be crucial to the U.S. The availability of 
advanced technologies could dramatically reduce the projected 
increases in cost of wholesale electricity under a carbon cap, 
thereby saving the U.S. economy as much as $1 trillion by 2050 
in our estimation.
    The program has identified pathways to demonstrate by 2025 
a portfolio of attractive, highly efficient power, and 
integrated technologies. We see that with an aggressive program 
multiple large-scale capture and storage demonstrations by the 
middle of next decade, and some commercial applications 
starting around 2020.
    It will take additional sustained efforts past the first 
applications to take the test technology down the learning 
curve in cost. We have identified RD&D that is in the testimony 
of $8 billion between now and 2017, and $17 billion by 2025, 
needs to begin immediately to fully test that scale. We believe 
that the House Bill 3221 appears to be consistent with some of 
these recommendations.
    Major non-technical barriers must be addressed as well, 
such as CO2 storage and liability. Potential sale of 
CO2 to EOR may help some of the early applications 
in specific localities, as we have heard. But we believe 
ultimately that the primary economic driver will be the value 
of carbon emissions that results from any future climate 
policy.
    We have just produced a study--I hold it in my hand--
Electricity: The Power to Reduce CO2 Emissions, and 
a companion study earlier this year, Electricity Technology in 
a Carbon-Constrained Future. Emissions over the next 25 years 
could be reduced in our estimation. The study shows the largest 
single contributor is reduction by CCS technologies. It also 
showed that generation efficiency enhancements can contribute 
significantly. Those two are the actual largest contributors to 
reduction in CO2 in this study.
    It shows that U.S. generation mix based on a full portfolio 
of technologies, including advanced coal technologies, 
integrated with CCS, and advanced lightwater reactors, results 
in a wholesale reduction of cost of $1 trillion with a stronger 
manufacturing economy. The portfolio aspect is critical, 
because no single advanced coal technology or any generating 
technology has clear-cut economic advantages in each region, 
with each coal, and across the range of applications.
    We want to see how we can minimize economic disruption, and 
that, we believe, lies in the full portfolio of technologies. 
The four areas are: increasing efficiency and reliability of 
integrated gasification combined cycle powerplants, as well as 
cost reductions; increasing thermodynamic efficiency of coal-
fired powerplants, as was said by Mr. Morris; improving 
technologies for capture of CO2; reliable, 
acceptable technologies for long-term storage; and providing 
the financial mechanisms to share risk.
    In short, a comprehensive program is what is needed. We 
thank you for the opportunity.
    [The prepared statement of Mr. Dalton follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    The Chairman. Thank your, Mr. Dalton, very much.
    There are two roll calls on the House floor right now, with 
about six minutes for the members to go over there to make 
those votes. So we will take a very brief recess, and I think 
that we can reconvene around 11:15, if all of you can take note 
of that, and we will take a brief recess.
    [Recess.]
    The Chairman. The Committee will reconvene, and the Chair 
will recognize himself for a round of questions.
    Let me begin with you, Governor. In your testimony you 
state that many major investments in the electricity generation 
sector will not come to fruition until we provide regulatory 
certainty by enacting federal limits on carbon dioxide 
emissions. Is it fair to say that further delays in federal 
action will impose significant costs, and that it is in 
everyone's best interest that we take action as soon as 
possible?
    Governor Freudenthal. Mr. Chairman, being a lawyer, I 
hesitate to agree in the affirmative, because the devil is in 
the details. I do believe, and we have the same people come 
talk to us who come talk to this Committee, they want to make 
the investment, but they don't know in the absence of a federal 
regulatory scheme whether they are going to be able to capture 
the return. That is, will it be recognized by the public 
utility commissions around the country as being legitimately in 
their rate base?
    But having said that, the action that we take becomes 
important, because it has to have some form of glide path that 
recognizes the relative availability of the technologies at a 
given state in time. So, for instance, I think if one of the 
suggestions that I have heard is that we would just say nobody 
can build any powerplants today because--if they don't have 
carbon capture and sequestration.
    The problem with that is is that in spite of all of the 
rhetoric nobody has actually done carbon capture, and so what 
you need to do is something that I think most of the companies 
are looking at is, give us a clue what we need to do. We will 
try to make this thing carbon capture-ready, but we may need to 
proceed to meet our demand with some level of construction. So 
I think the failure to act freezes in place a lot of investment 
money.
    If we act wrong, we will permanently freeze it out, so we 
need to act in a way that says we are going to be realistic 
about the standard, here is what it is, here is your guidance. 
If you do this, you can get your recovery.
    The Chairman. Now, you cite a projection that GDP will 
decline by $400 to $800 billion if CCS is not deployed. Can you 
expand on that, and the likely costs?
    Governor Freudenthal. It is one of those numbers that my 
staff picked up. It is either out of the MIT study--I think it 
is out of the MIT study, because frankly, as I admitted before, 
I am a lawyer, so I don't pretend to have the answer. But what 
we are saying is is that if we don't act, and somehow we act 
inappropriately, I think those are the costs.
    And so this is something that has to be done with a scalpel 
and not with a machete. We need to very carefully think about 
how we are going to sculpt the regulatory environment, so that 
the states can essentially, in the Clean Air Act model, have 
some parallel system that helps on the enforcement under a 
state-approved implementation plan, and the private sector then 
knows what standards they have to meet, which of those costs 
can be recaptured through the various public utility 
commissions, and the means by which they are going to be 
captured.
    If we lay that out, I think people will react, because they 
are the same ones who talk to you. They come and say, ``Look, 
we are ready to do this, but we can't do it out of speculation, 
particularly in a regulated environment.''
    The Chairman. Can I ask you--can I ask Mr. Morris this. 
What does ``carbon capture-ready'' mean to AEP, in terms of the 
technology you are going to install?
    Mr. Morris. Congressman, for us, we see carbon capture in 
two different worlds. The most important and the most critical 
for all of us, this country and my company, is the retrofit 
technology on the existing fleet, because we, as a nation, 
based on the comments that you and others made in your 
introductory timeline point to the notion that over half of 
today's generation fleet is coal-based. Actually, more than 
half of the megawatt hours produced, and, therefore, used to 
fuel the U.S. economy is coal-based.
    So we have to find a way to capture on the existing 
stations, and that is why we are going forward with the 
validation projects that I mentioned in West Virginia and in 
Oklahoma, so that we can across our entire fleet put that 
technology to work, presuming that the validation undertakings 
work.
    Now, I, like the Governor, am a lawyer-environmentalist, so 
I am not bothered by the engineering challenges that my team 
constantly tells me about. I am blessed at American Electric 
Power having among the best engineers for over a century. We 
have made many, many breakthrough technological changes in this 
industry, and we think we are doing that again now.
    Secondly, to the comments that David made, to the comments 
that the Governor just made, we see this as a challenge for a 
new station as well. I would not argue that you cannot go 
forward at the state level and get authority to build a carbon-
ready, and, as soon as technology is validated, deployed, 
powerplant built without federal intervention, without a 
federal program. I think that there will be bold states that 
will take that step.
    As I think the Committee knows, clearly in our testimony we 
have such applications in front of the Commission in the State 
of Ohio. They have given us the preliminary go-ahead that is 
now being challenged at the Supreme Court level in the State of 
Ohio, which is the jurisdiction of appeal by right. And in West 
Virginia, we are going forward with an integrated plant. We 
have filed that to the West Virginia Commission and Virginia. 
Our Appalachian Power Company serves both of those particular 
states.
    So we have every reason to believe that the potential to 
get those plants approved without a federal process will work, 
but it is a societal cost, and it is a states' rights issue. 
And when you think of Virginia and West Virginia, very 
important coal-based states in this country, it may well be in 
their best interest. Clearly, Governor Manchin is a supporter 
of it, Governor Kaine appears to be a supporter of the issue, 
but it is the charge of their state regulatory commission to 
make those decisions.
    Out west, where you are working with lower-ranked coals--no 
offense, Governor--we are hoping to deploy what is called 
ultra-supercritical technology, which has not been done in this 
country. It has been done in Germany, it has been done in 
Japan. Higher temperatures, higher pressures, less fuel in for 
megawatt hours out, more expensive than supercritical, no 
question.
    That issue and, in fact, this very day in Louisiana--excuse 
me, in Little Rock, Arkansas, we have a team testifying in 
front of the Arkansas Commission seeking authority to do that. 
We have closed the record on a similar plant to be built in 
Oklahoma, as I mentioned. So I am a believer that with logic 
and timelines that are realistic states will go forward and 
allow us to do these things, because they will, in fact, 
validate the carbon capture both for the existing fleet as well 
as technologies for the new fleet.
    And as the technology goes forward for the capture, we will 
simply deploy that as we go. I think that is a much better 
approach than a command-control approach. That probably was 
necessary in Clean Air Act days, because so many in our 
industry thought not now, not ever. This is a willing industry. 
We just need the support of the states to get that done.
    The Chairman. You have 30 seconds, Governor.
    Governor Freudenthal. Mr. Chairman, if I might, under our 
law we will, and have, and will continue to permit coal-fired 
plants. The more interesting question to me is: if those plants 
choose to take actions to be carbon-ready, will those expenses 
be capturable in the rate base? And I think under the current 
law in most states it would not be, because it is not least 
cost, most reliable, whereas the--and so I am--I do believe we 
are going to continue to build plants.
    If we are going to want to send a signal to people that 
says, ``As you build them, you should contemplate this,'' we 
also have to send a commensurate market signal in some sense 
that they are going to be able to recapture those costs. 
Otherwise, those are shareholder costs and not ratepayer costs.
    And I think that the importance of this discussion is that 
whatever we do in this area it is going to cost, and it is 
going to be expensive. And one of the things that--and it is 
entirely an appropriate investment of societal resources. The 
only thing I would ask is that, as the Committee moves forward, 
you think about the consequences of that up and down the income 
scale.
    In our state, the bottom quartile we estimate spends about 
16 percent of their disposable income on energy. The top 
quartile spends somewhere between 1\1/2\ and 3. And so you 
begin these increments--and I was having this discussion with 
Mr. Hawkins that all of these things cost funding, and it is an 
appropriate expenditure, but we need to be mindful of the 
people who are going to bear those costs, not just the--we may 
have the capacity to impose those costs. The correctness of how 
we impose those costs I think has to be a consideration.
    The Chairman. You invoked Mr. Hawkins' name. Can you make 
some observations here on what you just heard?
    Mr. Hawkins. Certainly, with your permission. I think that, 
first, the MIT study on the future of coal has some very 
informative findings on the concept of capture-ready, and I 
think it is worth the Committee taking a look at.
    It is an elusive concept, and may prove to be illusory. The 
Energy Policy Act of 2005 has a definition of capture-ready 
that essentially is leaving space for installation of some 
undefined piece of equipment, which has led me to say that, 
well, I have a driveway that is Ferrari-ready. [Laughter.]
    If that is the definition. It is not going to be a simple 
matter to take a plant, which is optimized to run without 
capturing its CO2, and turn it into a plant that is 
optimized to run and capture its CO2. The energy 
flows are significantly different. The balance of plant 
equipment is significantly different. What hardware you put on 
in the first place is a complicated calculus.
    All of that leads us to believe that we need to jump to the 
outcome that we need to pursue in order to reconcile the use of 
coal and protecting the climate, which is just to have a policy 
that says starting in X date new coal plants will have to 
capture their carbon. Period. And I have outlined in the 
testimony proposals on how you can spread the additional costs 
associated with that policy, so that no single company's 
customers see a rate shock.
    This is not--we are not talking about doing this for all 
300 gigawatts of coal-fired powerplants that are out there 
operating today. We are talking about phasing it in one plant 
at a time, and the trick is to get those costs to be spread 
across the electric consumer's rate base. That is a reasonable 
thing to do, because by keeping coal in the mix we are avoiding 
spikes in gas prices that will wind up costing customers of 
gas-based utilities money, even if they never consume a 
kilowatt hour of power made from coal.
    So this is a reasonable approach. We need to get started, 
and we have the technology, and we should not flirt further 
with the concept of capture-ready, in my view.
    The Chairman. My time has expired.
    The Chair recognizes the gentleman from Washington, Mr. 
Inslee.
    Mr. Inslee. Yes. I want to pursue this issue of capture-
ready, because it seems more amorphous than a Ferrari even to 
me. Can any of you tell us what that would actually look like? 
If we were going to say, ``We want the industry, after a 
certain date, to build only capture-ready plants,'' what would 
that look like, if we know? Anyone?
    Mr. Sussman. Let me try an answer to that question. I think 
that talking about a plant being capture-ready is only the 
first part of the equation. The real question is: when is the 
plant going to implement CCS? And we have a proposal, which is 
very similar to David's, which is a proposal for an emission 
performance standard under which new plants would be required 
to implement CCS.
    Now, and this is a very important point, we would have a 
phase-in period. Basically, we are saying any plant built after 
2008, which would be the presumed date when legislation would 
be enacted, any plant built after 2008 would need to capture, 
either by 2016 or four years after the first date of operation, 
whichever is later.
    And the significance of that is that there is a phase-in 
period. So if a plant is built on date X, the owners of that 
plant know that they have to capture and sequester on date Y. 
And so, therefore, when they build and design the plant, they 
can take into account the requirement that capture will 
ultimately be necessary. During that phase-in period, the plant 
will be ``capture-ready,'' but the important thing is to have a 
hard deadline for implementation.
    And we are saying that ought to be 2016 or four years after 
the plant begins operating, whatever is later.
    Mr. Morris. Mr. Inslee, I might offer an additional thought 
there, because I think, although I have no reason to argue with 
either of the colleagues, my colleagues to the left, I am a 
firm supporter of both of these well-meaning individuals.
    If ``capture-ready'' simply means, you know, buy a big lot, 
I couldn't agree more with David that that's Ferrari desirous 
or something. When we look at the design of our integrated 
plants with General Electric Company and the Bechtel 
Corporation, we are actually looking at the technologies, we 
are looking at the metallurgy, we are looking at the steam 
flows, we are looking at the things that will need to be done 
to make certain that once the technology of capturing the 
carbon out of the fuel stream before it is introduced to the 
plant--very different from a post-combustion where you are 
capturing the carbon out of the flue gas--very, very different 
concepts, is a technology that will be there, and we are 
looking at the requirements of the turbine itself, which will 
mostly run on oxygen, then, rather than run on the synthetic 
gas. The synthetic gas itself will be mostly oxygen rather than 
a methane-based gas, which we are all much more familiar with.
    So to David's point, if capture-ready simply means buy a 
big lot, you are not doing anything. To Bob's point, if we take 
this pre-requirement period, then all we are doing is build the 
same capture-ready plant that I am speaking to. So why have a 
command-control approach to it when it isn't necessary? Because 
we will develop this technology as a country for the very point 
that our friend from Wisconsin mentioned in his opening 
comments: because it is economically in our best interest. It 
is environmentally in the world's best interest that we develop 
that technology.
    To us, when we say ``capture-ready'' that is what we mean. 
There isn't a technology at the 639 megawatt level, which is 
what these plants will be, that is deployable today. It needs 
to be validated, tested, and then put in place, and that is a 
difference, I think, not a great difference but a difference 
between what we are talking about.
    Governor Freudenthal. Mr. Inslee, it was--in my earlier 
comments I made reference to the fact that there was no 
incentive package for these technologies, the sort of capture 
part, in trying to make these so-called clean coal technologies 
function. It seems to me that one of the ways to accelerate and 
to better define how quickly these can get into the plants is 
for the Federal Government to be as aggressive with regard to 
supporting these technologies as we have been with regard to 
wind power.
    We are all very proud of the progress that is made on wind 
power, great benefits for my State, and great potential 
benefits. But this is really dependent on a tax credit that the 
Federal Government put in place for wind power. If we are 
equally serious--the other reason I like the tax credit is it 
allows the delivered rate at the busbar to be much more 
consistent with what the consumer can adopt out of wind power.
    I think we need to do the same level of commitment to these 
questions about the clean coal technologies, including the 
carbon capture portion, so that you don't end up with a 
physical impossibility or a technological impossibility of 
knowing what to--how to prepare the plant for them or how and 
when to get input in place.
    People have been sort of, ``Oh, I don't want to do anything 
that helps--that appears to be helping coal.'' I would reverse 
that and say if we don't do something to assist in the capture 
of carbon from coal, you are essentially putting in place a 
continuation of the status quo going forward, because you have 
neither market forces nor tax forces that align the incentives 
for people to make those investments on a broad enough base.
    Mr. Inslee. My time is up. I just want to comment. I hope 
we have cleaner coal before David Hawkins has a Ferrari in his 
driveway. [Laughter.]
    That is my timeframe. Thank you.
    Mr. Morris. I would happily have him have the car. 
[Laughter.]
    The Chairman. The gentleman's time has expired.
    The gentleman from Oklahoma, Mr. Sullivan.
    Mr. Sullivan. Thank you, Mr. Chairman.
    And this is a question I guess for everybody. The 
Intergovernmental Panel on Climate Change has concluded that 
global greenhouse gas emissions must be cut by 50 to 85 percent 
by the year 2050. In order to keep atmospheric concentrations 
in the range of 450 to 490 parts per million CO2 
equivalent, in your opinion, is there any way to meet that goal 
without including China and India?
    Mr. Morris. Absolutely none.
    Mr. Hawkins. China and India have to be a participant. The 
U.S. climate science program has recently conducted a modeling 
analysis. The MIT study also conducted an analysis that 
basically points out that China and India do not have to 
proceed necessarily on the same precise timetable as 
industrialized countries.
    But if they don't come to the table and participate 
aggressively in the next 10 or 15 years, we can't meet those 
targets, and that is why we are such strong advocates of U.S. 
leadership, because we think that the developing world is going 
to come to the table much faster if the U.S. is playing a 
leadership role.
    Mr. Sullivan. Anyone else?
    Mr. Bauer. I will agree with what my colleagues have said, 
and point out one other thing, that we--when we think about my 
statement earlier about 30 gigawatts and a quarter of growth 
from Chinese coal production and power generation, and you 
think about TVs and computers, it used to be that what America 
wants was what drove the world's marketplace. But since we 
don't build too many plants, whoever builds the most is going 
to be most rapidly be able to move the technology.
    So if they don't engage in this conversation, the 
technology is not going anywhere. That is the marketplace. That 
is why the--in fact, one of the thing--tax credits or tax 
penalties on carbon--when we build powerplants on here, in this 
country, most of the heavy portions come from China. So if we 
penalize them with taxing their carbon--lack of doing by way of 
what we do on imports--I know there is a discussion on that 
somewhere else--we will probably pay for that tax on our import 
of power generation facilities.
    Governor Freudenthal. Mr. Sullivan, I would say that I 
agree they have to be part of it. The part where I get nervous 
is when people pose that question and the answer is clearly 
yes, is then that we say that the United States is not going to 
move until China and India do. And I don't make that second 
step, because I think if we move properly we will be okay. If 
we move improperly, we are going to create an immense number of 
problems for this society, let alone worldwide.
    So I--you know, I never do understand how things happen in 
this--in the nation's capital. Mine is the simple life in a 
rural state. But it just seems to me that the logic is you have 
got to incent the technologies you want, you have to figure out 
a way to get part of the cost built into the rate base in a way 
that protects the low-end consumer and user, you have to end up 
with some willingness to say it is going to take a reasonable 
glide path time to get there.
    You have got to come up with something that is uniform 
across the country, so the states aren't pitted against each 
other, and you end up with some rational basis. And you need to 
invest significant funds in how we capture carbon--that is in 
those clean coal technologies--and significant funds in how you 
are ultimately going to store it.
    And the issue that nobody has talked about today that I 
want to make sure gets on the table is is the Federal 
Government has got to own at some point the liability. I have 
seen proposals where you are going to shift the long-term 
liability for CO2 to the states.
    And if you thought you had a mutiny with the Real ID Act, 
the states are really going to come off the wall if you say, 
``Once this is injected, states, you own that,'' because 
ultimately the--if we are talking about trying to sequester 
something for a couple hundred years, the liability for that--
really, the only place that that can rest is with the Federal 
Government, not with the individual states.
    Mr. Morris. And I would just like to make sure I add to my 
comment, because it was quick to the point that absolutely not, 
I believe that wholeheartedly, but I do share the Governor's 
view. That does not mean that my company or this industry or 
this country ought to sit back and do nothing if those others 
don't join us. That would be the wrong approach.
    But what we as a society need to then understand is that we 
often by ourselves can't fix this. So if you want to add--you 
know, you pick the number, $4, $5, $7, $10, $20 trillion to the 
U.S. economy, and you haven't moved the global warming needle a 
nano-inch, then that is a society debate that, for better or 
worse, you are all elected to make those decisions. And with 
all trust and confidence, we believe you will make solid and 
reasonable decisions in that light.
    Mr. Sullivan. Anybody else?
    [No response.]
    All right.
    The Chairman. The gentleman's----
    Mr. Sullivan [continuing]. I am out of time?
    The Chairman. You can ask another question.
    Mr. Sullivan. Okay. I have got a question for you, Mr. 
Morris. I am concerned about the potential impact of requiring 
new technologies on the rates that our constituents pay for 
electricity. Can you tell me what the best way to prevent 
prices from skyrocketing would be under a scenario where the 
government requires new technology for carbon capture or cap 
and trade?
    Mr. Morris. Congressman, what I would offer is that a 
carbon-controlled, coal-based powerplant in the long run is 
going to be much more cost effective for my customers at Public 
Service of Oklahoma, as well as the customers that we serve 
across this country, because the other option is to go forward 
with a much larger renewable standard, which is considerably 
more expensive than a carbon-controlled coal plant, or we lean 
on either new nuclear, which we are now beginning to see 
equally high prices--it won't be so cheap to meter. It will be 
quite expensive.
    Or we lean to natural gas, which you know even in Oklahoma, 
a very major gas-producing State, as is the Governor's, we are 
an 18-, 19 trillion foot supply. If we start running gas plants 
or build nothing but gas plants, we will be at a 24-, 27 
trillion demand. We import less than 1 trillion feet of LNG, 
and I don't see that growing any time. And we import 3- or 4 
trillion feet from Canada, which will continue to be reduced as 
they meet the successor to the Kyoto Protocol, because they 
won't meet that now.
    So the real cost, if we don't do this, will be skyrocketing 
natural gas powerplants.
    The Chairman. The gentleman's time has expired. I 
apologize. The gentleman's time has expired.
    Mr. Sullivan. No problem.
    The Chairman. The gentleman from Oregon, Mr. Blumenauer.
    Mr. Blumenauer. Thank you. I am curious as to your 
reflections on underground coal gasification technology. I have 
been intrigued with what I have heard about the conversion of 
deep, unminable coal into syn gas, and then that could be used 
to produce almost now I guess any hydrocarbon fuel or 
petrochemical. Lots of applications for that.
    But it appears to be very clean and easy to capture and 
sequester the carbon in the spent seam after you remove the syn 
gas, technically. Theoretically, it would appear to have 
tremendous potential. Do any of you gentlemen have experience 
with that and have some observations that you might share with 
the Committee?
    Governor Freudenthal. Mr. Chairman, Congressman, both in my 
life as a private lawyer before I got into this less 
respectable line of work, and my experience as Governor----
    Mr. Blumenauer. Being a witness or----
    Governor Freudenthal. No. [Laughter.]
    I had clients who did underground coal gasification, and 
the technology has come a long way, because the question is: 
how do you control the reaction underground and your capacity 
to characterize the formation with reliability, so that you 
know the CO2 stays and you get the gas?
    The potential for this to be a remarkably viable long-term 
source of energy for this country is amazing. There are immense 
reserves. In our State, we characterize anything under more 
than 3,000 feet deep as qualifying, and it is--the reserve is 
extensive. Again, the problem with the formation is that coal 
has all of these fractures and fissures, and so you have a lot 
of money. It is not unlike trying to make sure the 
CO2 stays down in a cavity.
    You have a lot of money invested in characterizing the 
formation, so that you can, with reliability, predict your 
capacity to control the gasification process, as well as where 
the off-gases are going to go. But it is one of those things 
that I would encourage the Committee to think about.
    Again, if you want to advance the rate at which the private 
sector pursues the development of those technologies, the way 
you do that is to set up some form of a tax credit that is 
essentially technology neutral and allows them to say okay. I 
mean, Shell has an approach that they like on gasification. I 
know a number of other companies have different technologies 
that they would like to try, but right now the assured price 
for natural gas is not sufficient for them to justify that 
long-term investment.
    But it is--I think it is one of those things--and I think 
you have hit upon one of the real nuggets for this country. 
Notwithstanding that I may have some bias, since we have a lot 
of that resource, but it really is there, and it allows you to 
have that reaction take place in a contained environment.
    Mr. Blumenauer. Thank you, Governor.
    Other comments?
    Mr. Hawkins. Well, I only have a familiarity with it based 
on reports and talking with some researchers in the field. And 
I think the Governor has identified one of the first issues, 
which is controlling the conversion process.
    Another issue that is a challenge is dealing with the 
combustion products. A lot of these coal seams have groundwater 
that is flowing through them, and that groundwater, once you 
have taken an area and subjected it to the gasification 
process, you are going to have a lot of byproducts. Those 
byproducts may have a lot of complicated and rather unfriendly 
chemical compounds associated with them, and you have to have a 
plan for managing the potential intersection between that 
groundwater and all of these combustion byproducts.
    These things are not necessarily impossible to solve, but 
they will require energy, they will require dollars. This is a 
concept that is worth looking at, worth researching. It is 
probably a couple of decades behind the surface gasification 
technologies that are commercially proven today, though.
    Mr. Bauer. If I may just add, I think the Governor did a 
great characterization. I think David also reflected on some of 
the challenges. We are involved in some of this preliminary 
work. The country of Brazil was looking at doing this, as well 
as some other countries in Eastern Europe. It has a great deal 
of promise. There are substantial needs, which I think are 
similar to the sequestration storage issue of how do you 
characterize, how do you monitor, how do you avoid unintended 
consequences to groundwater or other things in the area that 
have to be dealt with.
    So, again, the things that are being done around carbon 
sequestration or storage actually will have benefits, just as 
the things in oil reservoir mapping have had benefits for 
storage characterization.
    Mr. Blumenauer. Thank you.
    Mr. Chairman, I would hope that there may be an opportunity 
for us at a subsequent hearing to explore this in greater 
detail. I think there are actually other applications that are 
taking place in North America, in Canada. There has been, as 
Mr. Bauer mentioned, some experience in Central Europe. I think 
it holds great promise. It is something that isn't commonly 
talked about and looks like it could marry a number of the 
problems and opportunities together. And if it would be 
possible, I would appreciate your consideration.
    The Chairman. We can do that. To the gentleman from Oregon, 
obviously coal is the biggest problem, so we have to explore 
all of these potential solutions. So----
    Mr. Blumenauer. Thank you.
    The Chairman [continuing]. It will be done. Thank you.
    I just want to--I am going to recognize the gentleman from 
Missouri, Mr. Cleaver, but you should know that we promised 
Governor Freudenthal that he could leave at 12:00, and it is 
three minutes of 12:00. He made this request long ago, so if 
you have any questions for the Governor, you have got three 
minutes on the clock for him.
    And we thank you, Governor, for being here. Your testimony 
has been excellent. Thank you.
    Governor Freudenthal. Thank you, Mr. Chairman.
    The Chairman. The gentleman from Missouri.
    Mr. Cleaver. Thank you. Governor, thank you very much for 
being here, and your responses have been very helpful. You 
know, to some degree you do understand what it is like to be on 
this side of the table, so I appreciate your concerns. I don't 
have any questions for the Governor necessarily.
    I am interested in how we, you know, successfully 
sequester, but it seems to me that if you turn loose the 
American ingenuity we can solve a lot of those problems. The 
one problem I am not sure is going to be resolved as easily is 
the issue with China and India and, to a lesser degree, 
Southeast Asia, including Indonesia.
    If we are going to end up paying higher prices in Wal-mart 
by imposing some kind of tariff or, you know, if we--if our 
incentive is to force the Chinese and the Indians to use more 
money, pay more money to satisfy us, and if we don't want to 
pay more at Wal-mart and Target, what in the world are we--I 
mean, are we going to do? I mean, we--as I think we are 
learning, nations don't obey us well.
    And so, I mean, just saying ``you had better'' is not going 
to work. So what are we going to do?
    Mr. Morris. Congressman, if I might, the International 
Brotherhood of Electrical Workers' President, Ed Hill, and our 
company, American Electric Power, have put forth, now with the 
support of the AFL-CIO, UAW, the Mine Workers, the 
Boilermakers, the concept of creating a World Trade 
Organization compliant tariff requirement for those products 
which we would import for those nations that have not addressed 
the issue of global warming, because, again, what we are trying 
to address ourselves here is the issue of global warming, not 
U.S. warming, if, in fact, you are concerned about the climate 
process that may or may not unfold as time goes forward if we 
do nothing about this as a world.
    So the notion that there may be an additional cost for a 
good at the Wal-mart store or the Target store is a societal 
reality for the globe. Believing and dictating to those 
countries what they ought to do will not work, to your point. 
We now know that in any one of a number of demonstrations.
    But this concept--again, the way it works under the World 
Trade Organization is once you have required a carbon program 
on U.S. manufacturers, and it has been in place for half a 
decade, you can then require the same kind of program on 
international manufacturers who would export goods to this 
country. And that is the plan, and, quite honestly, it is 
gaining very reasonable support.
    Both the Bingaman-Specter bill have that in it, the 
Lieberman-Warner bill has a sketch of that in it. We have heard 
at least from the principal committee under Chairman Dingell 
and Committee Chair Boucher that they are very much in support 
of that concept as we go forward. That is one way to go about 
doing that.
    The thing that would worry me even more about that as we go 
forward, however, would be, how would we verify that those 
programs are in fact being followed? And so with this 
particular piece, we don't need to be as concerned about what 
they are or are not doing there. We just know that that is an 
economic driver that will eventually cause them to move in the 
right direction, as will their own populations.
    I think The New York Times this weekend had an excellent 
piece on the general feeling about the population in China in 
particular. But you are right to point out Indonesia, Brazil, 
there are many other countries involved.
    Thank you.
    Mr. Hawkins. If I could just comment, there is an 
opportunity for a virtuous circle here. NRDC has an office in 
Beijing. We now have nine people on staff there. And we spend 
most of our time analyzing the Chinese energy economy and 
pointing out the bottlenecks to growth that are represented by 
the inefficient processes in industrial production and in power 
production and trying to make the case to Chinese officials 
that by adopting better standards for end use efficiency, 
better standards for production efficiency, they can actually 
have more dollars go to value added products and fewer dollars 
go to BTUs that are moving around in the economy.
    And the adoption of the kind of program that Mike Morris 
just described by the United States could be just the added 
extra kicker to kind of help the Chinese officials to make this 
happen, because right now you have tension between the national 
government. A lot of the officials get this problem; they 
understand it. But the provincial governments are making money 
hand over fist building powerplants to feed the power hungry 
east coast of China.
    And so you have--you don't have a system that is 
necessarily in the best interests of China as a nation, but it 
is certainly in the short-term interests of a lot of provincial 
officials who are making lots of money for their provinces 
through this very rapid explosion of coal-fired powerplants 
that actually don't have to be built if the Chinese economy had 
efficiency programs. And we are trying to get those done. The 
politics are challenging. And, obviously, as a U.S.-based 
environmental organization, we have limited capacity to make 
those changes.
    But with supporting policies in the United States that 
essentially give another reason for the Chinese to pay more 
attention to these opportunities, we think we could make it 
happen.
    Mr. Cleaver. Thank you, Mr. Chairman.
    The Chairman. The gentleman's time has expired.
    Do any of the other members have any--does anyone have a 
final question they would like to ask? Mr. Inslee or Mr. 
Blumenauer? Mr. Cleaver, do you have any----
    Mr. Cleaver. No, thank you.
    The Chairman. Great. Well, let us do this. Let us, in 
reverse order, ask each of you to give us your one-minute 
summation of what it is that you want the Committee to remember 
from your testimony. As we deal with this energy bill over the 
next month or so, we will--this is going to be a city that will 
turn its attention to this climate change issue and cap and 
trade legislation.
    So tell us what it is that you want us to remember as we 
are moving forward. We will begin with you, Mr. Dalton.
    Mr. Dalton. Thank you, Mr. Chairman. First off, I would 
like to point out that the increased efficiency and integrated 
testing at full-scale is important for these technologies 
relatively quickly, even before full-scale commercial 
installation. The R&D needs to move forward, and the 
demonstration and deployment needs to move forward rapidly.
    Increased thermodynamic efficiency of pulverized coal, 
increased efficiency and reliability of intergasification that 
matches the combustion--the CO2 capture is very 
important, as well as improved technologies for CO2 
capture. Reliable technologies for CO2 storage and 
mechanisms to deal with the financial and technical risks in 
that storage are important, but a full portfolio is really 
required.
    The Chairman. Is required. Thank you.
    Mr. Sussman.
    Mr. Sussman. Thank you. On the path that we are on right 
now, I think it is a high likelihood that we are just not going 
to see widespread deployment of CCS before 2030 at the 
earliest. And I would submit that that is too late. What we 
need is we need a national implementation date. We would say 
that that implementation date is 2016. Others might say that it 
is 2020.
    And we need to send a very clear message to developers and 
builders of coal plants that any new coal plant would be 
expected to have CCS in place by that national implementation 
date. Then, we need to address the cost differential and the 
potential impacts on electricity price increases. And as we 
outline in our report, there is simply no alternative but to 
subsidize CCS until the price of carbon gets to a level that 
would incentivize CCS in the market.
    And that I think means a national expenditure, in our view, 
of somewhere between $35- and $40 billion to make CCS cost 
competitive until around 2030 when it should be cost 
competitive under a cap and trade system.
    The Chairman. Okay. Thank you.
    Mr. Hawkins.
    Mr. Hawkins. Mr. Chairman, every month of delay hurts us in 
attacking the climate problem and raises the costs of doing so. 
Every month 10 new coal plants are started up somewhere around 
the world. Each one of those coal plants is going to operate 
for 60 years or more, and we have no reliable prospect that any 
of the CO2 from those coal plants will be captured, 
because they are not being designed to allow that. Maybe it 
will happen, but we can't count on it.
    So it is critical that the United States act, and this 
Congress has the ability to act. We think the policy package 
that I outlined is the one that can make a huge change; that is 
a cap and trade program. And then, focused performance 
standards for making sure that the next coal plants that get 
built in the United States capture their carbon.
    There has been a lot of talk about proving things out, but 
the way we will prove this out is by operating these things at 
scale. We would get the learning by doing. These technologies 
are all commercially proven in pieces. We need to put them 
together, and we need a policy package to make it happen.
    The Chairman. Thank you, Mr. Hawkins.
    Mr. Bauer.
    Mr. Bauer. Thank you, Mr. Chairman. I would have a few 
points. The carbon capture and storage is achievable, it is 
realistic, and the R&D and large-scale demonstration that will 
take place over the next 15 years will fully make that a very 
feasible technology.
    There needs to be investment in the R&D. There needs to be 
regulatory certainty for the investment to come from the 
private sector as well, as well as the actual implementation, 
as Mr. Morris spoke to.
    I think it is also important to recognize that the energy 
industry is the private sector. The U.S. Government does not 
make electricity, although we do have the hydropower and some 
TVA, and like that, yet the majority is private sector. So 
things that make it for the private sector, the signals--both 
regulatory and otherwise--that make it work are very essential 
in this.
    One thing we did not talk about today is 60 percent of 
electricity demand is residential and commercial buildings. The 
ability to reduce demand or slow the growth in demand, not by 
slowing building but by higher standards of building codes, is 
a very important tool that is often undervalued, but yet 
substantially possible. I think that is worth looking at.
    And then, lastly, I think that the Committee has already 
indicated a recognition that our domestic resource coal and 
fossil fuels have to be an essential component, so we are 
talking about how do we do that realistically and economically.
    Thank you very much for your time.
    The Chairman. Thank you, Mr. Bauer.
    Mr. Morris.
    Mr. Morris. Thank you very much, Mr. Chairman. It seems to 
me that it is inevitable that we are going to work to a cap and 
trade program, and we would argue that it needs to be an 
economy-wide cap and trade program, that it needs to have 
timelines and reduction schedules that are realistic, and, in 
fact, achievable.
    We would believe that credits ought to be allocated to 
those who will invest the capital to make a difference in the 
environment, rather than auctioned, so that those who buy them 
can make money by the positions that they have taken. We 
obviously believe that the global nature of it needs to be 
addressed and cannot be denied or ignored. We obviously believe 
that we also ought to have a price cap on those credits, so 
that if you need to create more or you need to buy more, at 
least in the early go we know what that cost is, so that the 
U.S. economy can digest and adjust to that cost, whatever it 
might be.
    And, lastly, we think that those who have implemented early 
action and taken voluntary steps ought to get credits and bonus 
recognition for the steps that they have taken, because we, in 
fact, in a voluntary nature have made a huge difference in the 
CO2 footprint of our company alone, and many of my 
colleagues have done that as well.
    Thanks very much for the time to be here and share some 
ideas.
    The Chairman. Thank you, Mr. Morris, very much.
    Congresswoman Herseth Sandlin has arrived, and so this 
hearing is now officially in overtime as we recognize her for a 
round of questions. [Laughter.]
    Ms. Herseth Sandlin. I thank you, Mr. Chairman, and I thank 
the witnesses for their patience.
    I did want to explore just a couple of issues quickly, and 
if I could start with you, Mr. Bauer. You had talked about coal 
and biomass. Are you working with and familiar with the 
Department of Energy's workshops that they have done?
    They have set up by region, and in South Dakota, for 
example, within our region, one of our land grant universities 
is sort of leading these workshops to help calculate the 
availability and sustainability of feedstocks like switchgrass 
of--the sustainability of biomass by region that would then, of 
course, assist as it relates to those regional calculations and 
where the coal-fired facilities are located. And maybe you 
could just elaborate a little bit on the IGCC technology as it 
relates to integrating biomass with the coal plant.
    Mr. Bauer. Yes, ma'am, Congresswoman. I am familiar with 
that. In fact, there are two entities that implement that for 
DOE--the Golden office out of Denver and NETL where I am, 
Pittsburgh, Morgantown. We are operating mostly in the eastern 
half of the United States--Denver, Texas, you expect the 
western half. But I am familiar with the process of working 
with the land grant colleges and the State Energy Boards about 
funding to look at renewables and the source.
    Going specifically--the issue about biomass with coal is an 
issue, just like biomass anywhere. Is there a sufficient amount 
of biomass in a reasonable radius of transport to make it 
happen? That is when I mentioned switchgrass and those kind of 
crops that have a potential to add to it.
    Gasifiers can and do--and moving them over to The 
Netherlands it does about 30 percent--that is a wood waste 
biomass that they use over there with coal to produce 
electricity. They are looking at building another plant and 
actually capturing the CO2 and storing it, store 
sequestration.
    So it is doable. There are challenges, because of the 
characterization of the biomass and the different kinds of 
coals, and those are all technologically able to be addressed, 
but they aren't being done regularly so there will be R&D 
issues that have to be done with in the process of 
implementation.
    Ms. Herseth Sandlin. Do you think one of the other 
challenges--and I guess maybe not a challenge, but the 
importance of facilitating getting these measurements and 
calculations, because of the issue of biomass for electricity 
generation, and biomass for transportation biofuel production--
I mean, do you anticipate some sort of tension developing there 
if we don't get these calculations and measurements so we can 
adequately define what are reachable goals on both the 
electricity sector and the transportation sector side of the 
equation here?
    Mr. Bauer. Yes, I believe there is a realistic marketplace, 
just like there is today. Natural gas is one of the fuels that 
cuts across all marketplaces of use. We have lost the 
fertilizer industry offshore. We are importing natural gas from 
other countries in the form of fertilizer today. We lost 
chemical production because we can use natural gas for power 
generation and other things, so the price in the marketplace 
drives that.
    And the same thing will be true on competition for biomass 
for both biofuels--direct conversion and thermal conversion of 
biomass and coal together to perform coal biomass liquids for 
transportation. I think the economics of the market will work 
and sort that out, and also will drive towards certain crops 
besides food crops as sources for rapid growth of biomass.
    Ms. Herseth Sandlin. Thank you. And then, one final 
question, which anyone can additionally respond to either the 
issue of the biomass in the coal-fired facilities and what your 
company or what the sector is doing to respond to that.
    But, Mr. Hawkins, specifically, when you set forth the 
three-part policy package for a comprehensive cap and trade 
system, where do you see American agriculture playing a role in 
that system? Because when we traveled to Europe earlier this 
year, they don't include agriculture in their cap and trade 
system, and I think that they made a mistake in setting up 
their system not to do.
    And I think there is great potential for agriculture in 
certain farming practices and grazing practices to play a role 
in helping store carbon, especially as we transition to these 
new technologies. So your thoughts on that, please.
    Mr. Hawkins. Thank you, Congresswoman. We think that 
agriculture has an important role to play, and we think it 
would be important to design a cap and trade program to create 
incentives for practices that will reduce greenhouse gas 
emissions and enhance the storage of carbon in soils, for 
example.
    Our view is the best way to do that is to have a portion of 
the allowances that will be administered under any cap and 
trade program be available on basically a best bid basis for 
projects and programs in the agricultural sector that will 
reduce these greenhouse gas emissions. And that way American 
agriculture could be incented by being able to receive either 
allowances directly or the proceeds from allowance sales in 
order to support these programs.
    Mr. Morris. Two of the programs that we have used in our 
voluntary nature of reducing our carbon footprint drive 
themselves specifically to agriculture. One is the whole notion 
of methane capture, which, as you know, has a much more 
beneficial environmental global warming impact.
    Farmers create, through contracting with firms that do that 
work, particularly in the manure side of the business, that 
capture the methane, create credits, which we in turn would 
purchase and put in our bank to make certain that we have 
credits to take against our own global warming footprint, as 
well as no-till farming, which is another breakthrough 
undertaking.
    So including the entirety of the U.S. economy and the 
entirety of the U.S. creativity is what is going to be needed 
if we are going to be successful in this endeavor.
    The Chairman. Great. The gentlelady's time has expired, and 
all time for this hearing has expired as well.
    This is going to be the first of many, many hearings that 
we are going to have on this and related subjects that will 
result in legislation passing that will begin to change the 
relationship between the United States and greenhouse gases. We 
thank you very much for your participation today.
    [Whereupon, at 12:16 p.m., the Committee was adjourned.] 

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