[Senate Hearing 110-112]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 110-112
 
                       CURRENT ENERGY LEGISLATION

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

                                HEARING

                               before the

                         SUBCOMMITTEE ON ENERGY

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                                   ON

                                     

                           S. 645                                S. 838

                           S. 1089                               S. 1203

                           H.R. 85                               H.R. 1126



                                     

                               __________

                              MAY 22, 2007


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


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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                  JEFF BINGAMAN, New Mexico, Chairman

DANIEL K. AKAKA, Hawaii              PETE V. DOMENICI, New Mexico
BYRON L. DORGAN, North Dakota        LARRY E. CRAIG, Idaho
RON WYDEN, Oregon                    CRAIG THOMAS, Wyoming
TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          RICHARD BURR, North Carolina
MARIA CANTWELL, Washington           JIM DeMINT, South Carolina
KEN SALAZAR, Colorado                BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BLANCHE L. LINCOLN, Arkansas         GORDON H. SMITH, Oregon
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

                    Robert M. Simon, Staff Director
                      Sam E. Fowler, Chief Counsel
              Frank Macchiarola, Republican Staff Director
             Judith K. Pensabene, Republican Chief Counsel
                                 ------                                

                         Subcommittee on Energy

                BYRON L. DORGAN, North Dakota, Chairman

DANIEL K. AKAKA, Hawaii              LISA MURKOWSKI, Alaska
RON WYDEN, Oregon                    LARRY E. CRAIG, Idaho
TIM JOHNSON, South Dakota            RICHARD BURR, North Carolina
MARY L. LANDRIEU, Louisiana          JIM DeMINT, South Carolina
MARIA CANTWELL, Washington           BOB CORKER, Tennessee
ROBERT MENENDEZ, New Jersey          JEFF SESSIONS, Alabama
BERNARD SANDERS, Vermont             JIM BUNNING, Kentucky
JON TESTER, Montana                  MEL MARTINEZ, Florida

   Jeff Bingaman  and Pete V. Domenici are Ex Officio members of the 
                              Subcommittee







                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Hill, David, General Counsel, Department of Energy...............     6
Murkowski, Hon. Lisa, U.S. Senator from Alaska...................     1
Pearce, Drue, Federal Coordinator, Office of the Federal 
  Coordinator, Alaska Natural Gas Transportation Projects, 
  Department of the Interior.....................................     2
Tester, Hon. Jon, U.S. Senator from Montana......................     1
Thomas, Hon. Craig, U.S. Senator from Wyoming....................    11


                       CURRENT ENERGY LEGISLATION

                              ----------                              


                         TUESDAY, MAY 22, 2007

                               U.S. Senate,
                            Subcommittee on Energy,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:34 p.m., in 
room SD-366, Dirksen Senate Office Building, Hon. Jon Tester 
presiding.

OPENING STATEMENT OF HON. JON TESTER, U.S. SENATOR FROM MONTANA

    Senator Tester. The hearing will come to order. I want to 
wish everyone a good afternoon and thank you for being here 
today.
    We're here to hear half a dozen energy bills dealing with 
issues that will enhance our domestic energy programs from 
coal, renewable fuels, and natural gas supply; to reauthorize 
appropriations to help our steel and aluminum industries remain 
competitive; to help them focus on reduction of greenhouse gas 
emissions; to promote international collaboration with Israel 
in renewable and alternative energy programs; and to enhance 
technology transfer for increasing energy efficiency in the 
housing and construction sector.
    We have two distinguished witnesses here with us today. I 
want to thank you both for being here. With that, Senator 
Murkowski, if you have any opening statements we would love to 
hear them.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Senator Tester. Appreciate 
that. Appreciate the hearing this afternoon. I would like to 
take the opportunity to welcome to the committee Drue Pearce. 
Drue is the former president of the Alaska State Senate, the 
former Alaska representative at the Interior Department, and 
now the coordinator for the Alaska Gas Pipeline Coordinator's 
Office.
    She's here to testify on a bill that Senator Stevens and I 
have introduced, to make a few technical corrections in the 
operations of the office--this office intended to get our gas 
line project built to move Alaska's huge supplies of North 
Slope natural gas to markets in the lower 48.
    It was back in 2004 that here in the Congress we approved 
two measures in $18 billion loan guarantee, as well as 
expedited permitting and a streamlined court review in the 
project, a second incentive that provided two tax incentives 
for accelerated depreciation tax deductions for the cost of the 
gas conditioning plant.
    After the Federal incentives passed here in the Congress, 
the State then moved forward several years back to move towards 
negotiations with leaseholders of Prudhoe Bay for the oil and 
gas reserves, intending to reach an agreement.
    That was not successful, and this year, with a new governor 
in place, the process was restarted. The Alaska legislature 
just this last week approved the Alaska Gas Inducement Act. We 
look forward to good, positive movement as a result of that 
legislation, but we recognized that it was going to be 
necessary to have an Office of Federal Coordinators.
    The office has reached an agreement on how we'll oversee 
the 15 Federal agencies that will play a role in getting the 
pipeline built. It's transferred money to get the office 
running. It has a $2 million-plus appropriations request to 
fully fund the operations in this next year.
    But we also recognize that there are some minor 
improvements that are needed in the '04 Act to get this office 
quickly up and running to assist the State and get this gas 
line built so that we can get Alaska's gas to the lower 48.
    The changes are a waiver to personnel rules so the 
coordinator can quickly hire the expertise when it becomes 
clearer exactly what type of project will be proposed by the 
successful pipeline applicant; a provision to allow the office 
to assess fees for reviewing the plans, issuing the permits, 
and overseeing construction of the project; and a clarification 
on the traditional review provisions that are all pretty minor 
but very important that they pass quickly, given the State's 
timeframe for action by fall.
    I do appreciate the prompt hearing on the bill by the 
chairman. We recognize the need for more domestic natural gas. 
We anticipate that there may be some tweaks to this bill that 
this hearing might uncover, but I would like to think that we 
can move through them very quickly, and I appreciate the 
opportunity to get this issue underway. Thanks, Mr. Chairman.
    Senator Tester. Yes, thank you, Senator Murkowski. We'll 
now hear from the witnesses. I want to thank you both for being 
here. As I said before, Senator Murkowski did a more than 
adequate job of introducing you, Ms. Pearce.
    We also have with us here David Hill, General Counsel of 
the U.S. Department of Energy, and he's here to provide 
testimony.
    Ms. Pearce, since you are testifying on one bill and Mr. 
Hill's on the other five, I think you should just rock and fire 
and have at it.

 STATEMENT OF DRUE PEARCE, FEDERAL COORDINATOR, OFFICE OF THE 
    FEDERAL COORDINATOR, ALASKA NATURAL GAS TRANSPORTATION 
              PROJECTS, DEPARTMENT OF THE INTERIOR

    Ms. Pearce. Thank you, Mr. Chairman and members for this 
opportunity to speak for the subcommittee, and I want to thank 
you, Senator Murkowski, for your interest both in my agency, 
and your firm commitment to construction of the pipeline to 
commercialize Alaska's North Slope gas.
    Today, I am presenting the administration's preliminary 
views on the bill. We believe there are several technical 
corrections that should be made. We have made those available 
to the committee and we look forward to working with you to 
address those concerns.
    Marketizing our vast Alaskan North Slope natural gas 
resources, estimated at at least 200 TCF, is an important step 
in ensuring the Nation's energy demands are met. This isn't an 
Alaska project, Mr. Chairman; it's a North American project, 
with benefits flowing to consumers and industrial customers in 
the lower 48, as well as to our Canadian energy allies.
    The State of Alaska did take an important step last week in 
helping to move this enormous project forward. The legislature 
enacted Governor Palin's Alaska Gas Line Inducement Act, better 
known as the GIA, providing inducements for the construction of 
a pipeline. The Governor plans to have an RFP on the street 
July 1 and will license the project in the first quarter of 
2008.
    The Office of the Federal Coordinator has a variety of 
responsibilities, including coordination of the Federal 
regulatory process to eliminate delays in what is expected to 
be a $25 billion-plus project. We will closely coordinate with 
the State of Alaska. We also are responsible for coordination 
with Canada.
    I am meeting for the third time with Minister Jim Prentice, 
Canada's Minister of Indian Affairs Northern Development, as 
well as Chair of the Cabinet Committee on Energy Security, this 
week during his trip to the District of Columbia.
    Our office is small, presently staffed only by me, the 
Federal coordinator. I have supplemented the office during 
startup with personnel details from the Department of the 
Interior. The OFC will remain a small office, with as few as 
five or six professionals, pending selection of a project by 
the State of Alaska.
    Once a project is selected, it's crucial that we be able to 
quickly hire personnel from the limited pool of individuals 
with the qualifications necessary to efficiently carry out the 
functions of the OFC. Our staff will be concentrated in 
Washington and Alaska.
    The amendment provides the OFC authority to appoint and 
terminate personnel without regard to provisions of the law 
governing appointments in the competitive service. The OFC is a 
temporary agency. We sense that 1 year after construction of a 
project our staffing levels and employee skill needs will vary 
depending upon the project phase.
    The personnel authorities embodied in the bill are used for 
small agencies, especially those with fixed lifespans like 
ours. The cost reimbursement authorities are there because 
given the regulatory nature of our role, it's appropriate to 
assess costs to the project proponent for our services.
    This approach has been adopted by the Federal Government 
for other projects, such as the first model reimbursement 
authority used by the Department of the Interior when the 
Trans-Alaska Pipelines right-of-way grant was renewed just 4 
years ago.
    The reimbursement will reduce the cost of constructing this 
important energy link to the Federal taxpayer.
    The Office of the Federal Coordinator is open for business 
and excited about the prospect for the future of a natural gas 
pipeline to deliver clean natural gas to North American 
markets. We plan to have an important role in ensuring a 
timely, safe, and environmentally friendly project gets built 
in an efficient and effective manner.
    I appreciate the committee's interest in streamlining the 
agency's operations and look forward to working with you on the 
technical changes to the bill that we have brought forward. 
Thank you very much for your time today, and I'd be happy to 
answer any questions.
    [The prepared statement of Ms. Pearce follows:]
 Prepared Statement of Drue Pearce, Federal Coordinator, Office of the 
   Federal Coordinator for Alaska Natural Gas Transportation Projects
    Thank you Mr. Chairman and Committee Members for this opportunity 
to speak before the Subcommittee. The Legislation before the Committee 
has not gone through the Administration's formal interagency policy 
review process, and therefore I will be presenting the Administration's 
preliminary views on the bill. However, there are several aspects of 
the bill that will need technical correction or modification to conform 
to policies that apply more generally elsewhere in the government and 
we look forward to working with Committee to address those concerns.
    For over thirty years there have been sustained efforts to bring 
Alaska natural gas to the marketplace both in Alaska and the 48 
contiguous states. This effort is more important than ever to help 
assure adequate natural gas supplies for the United States as the 
country develops a comprehensive energy solution to take this great 
country through the century. Technology and conservation will be an 
ever important part of managing our energy needs. However, in the 
interim, certainty of supply is critical. Marketizing the vast Alaskan 
North Slope natural gas resources is an important step in assuring 
energy demand is met.
    Recently, the State of Alaska has taken an important step in 
helping to secure a pipeline to transport natural gas to the American 
people. The State legislature enacted Governor Palin's legislation, the 
Alaska Gasline Inducement Act (AGIA), providing inducements, including 
financial contributions, for construction of the pipeline. This is an 
important complement to the inducements provided by the United States 
in ANGPA and previously in the Alaska Natural Gas Transportation Act of 
1976 (ANGTA).
    Despite the fact that efforts have been underway for thirty years 
to encourage private sector construction of a pipeline project from 
Alaska through Canada into upper Midwestern markets, timely permitting 
still remains critical to the success of any project of this magnitude. 
Estimates now place the cost of one potential project, a nearly 3,000 
mile pipeline, at $30 Billion. Regulatory delays or excessive 
litigation can spell certain doom in the effort to bring this vast 
natural gas reserve to domestic markets. First gas will not even be 
shipped until ten years at the earliest after the initial private 
investment. Congress recognized these concerns and took several steps 
to facilitate the permitting process including expedited and 
streamlined judicial review in the United States Circuit Court of 
Appeals for the District of Columbia, required timelines for FERC's 
issuance of the certificate of public convenience and establishment of 
the Office of the Federal Coordinator.
    The Office of the Federal Coordinator has a variety of 
responsibilities, including coordination of federal participation with 
the expectation that the federal regulatory process will be streamlined 
and delay eliminated and, in coordination with the state of Alaska, 
responsibility for monitoring and oversight of construction. The OFC 
also is vested with authority for implementation of ANGTA authorities, 
for which a right of way has been issued and is subject to renewal/
expiration in 2010. Other federal agencies also have roles. It is 
anticipated that no fewer than 18 federal agencies will participate in 
the decision process. For instance, the Department of Energy is 
responsible for federal loan guarantee implementation and the Federal 
Energy Regulatory Commission is responsible for pipeline (National 
Environmental Protection Act (NEPA) compliance and issuance of the 
certificate of public convenience.
    The OFC currently is a small office permanently staffed only by the 
Federal Coordinator. The Federal Coordinator has supplemented OFC staff 
resources by personnel details from the Department of the Interior. The 
OFC plans to remain a small office, with as few as five or six 
professionals pending selection of a project by the state of Alaska. 
The composition of the team necessary for proper functioning of the OFC 
is highly dependent on the nature of the project selected by the state 
of Alaska. Upon project selection, it is crucial that the OFC be able 
to quickly hire personnel from the limited pool of individuals with the 
qualifications necessary to efficiently carry out the functions of the 
OFC. OFC staff will be concentrated in Washington D.C. and Alaska.
                         personnel authorities
    This amendment provides the OFC authority to appoint and terminate 
personnel without regard to the provisions of Title 5 of the United 
States Code governing appointments in the competitive service. The OFC 
is a temporary agency which sunsets one year after construction of a 
project. The staffing levels and employee skill sets will vary 
depending upon the project phases. For instance, the skill sets needed 
during the permitting phase differ substantially from those necessary 
during the construction phase. The office will maintain staffing at a 
core level pending identification of a specific project for 
construction by the state of Alaska. Not until a project is identified 
will it be prudent to more fully staff the OFC. Project staff for a 
pipeline only project may be very different from a project composed of 
a pipeline and liquefaction facilities. In addition, there is a limited 
field of qualified applicants available to assist the OFC given the 
specialized nature of the potential projects and the OFC role. These 
limitations combined with the need for timely efforts by the OFC make 
it useful to be able to hire and terminate certain staff outside the 
regular federal hiring process in order to remain responsive to project 
demands. The bill would address those concerns with a blanket exemption 
from standard personnel hiring procedures that apply to most other 
Federal agencies. While this type of exemption would be advantageous 
for hiring of certain highly-qualified staff, and is sometimes granted 
to agencies to fill positions with special skills, it is rare for an 
exemption to extend to an entire organization.
    This authority is sometimes used for small agencies, especially 
those with limited roles or fixed life spans. For instance, other 
agencies with this authority include the Denali Commission and the 
Vietnam Memorial Commission.
    This amendment also gives the OFC authority to obtain the temporary 
or intermittent services of experts or consultants pursuant to already 
existing authority contained in 5 U.S.C.  3109(b). This authority 
allows for the hire of necessary staff resources on a temporary or 
intermittent basis to deal with short term staffing, particularly with 
regard to technical matters and short term needs. It is anticipated 
that a variety of technical and professional services will be required 
on a temporary or intermittent basis given the specialized nature of 
the project to be constructed and the OFC functions.
    Personnel hired pursuant to this authority may be compensated at a 
rate not to exceed the maximum rate of basic pay authorized for senior-
level positions under 5 U.S.C.  5376.
                     cost reimbursement authorities
    Given the regulatory coordination, monitoring and oversight role of 
the OFC, it is appropriate to assess costs to the project proponent for 
these services. This same approach has been adopted by the federal 
government for other projects, such as with the Federal Land Policy and 
Management Act of 1976 (FLPMA, 43 U.S.C.  1734). Cost reimbursement 
authority would provide supplemental funds to offset the cost to the 
federal government of the OFC and reduce costs to the federal taxpayer.
    We understand that the intention of the amendment is to grant the 
OFC discretion to establish or change reasonable filing and service 
fees, charges and commissions and to allow the OFC to require deposits 
of payments and provide refunds in the same manner as currently is 
authorized for the Secretary of the Interior under FLPMA.
    We have concerns, however, that the language as drafted would not 
provide such parallel authority to the OFC but would, in fact, result 
in stripping the similar authority granted to the Secretary of the 
Interior in FLPMA. We have developed amended language that will address 
this issue and will provide it to the Committee. Because we do not want 
to disrupt the Department of the Interior's land management program 
under FLPMA, this issue must be addressed.
                                closing
    This concludes my remarks on the proposed amendments to ANGPA. To 
summarize, the Administration has not completed its full review of the 
bill and looks forward to further discussions with you and your staff. 
The preceding comments represent the Administration's preliminary views 
on the bill. The Office of the Federal Coordinator is open for business 
and is excited about the prospects for the future of a natural gas 
pipeline to deliver clean natural gas to domestic markets from Alaska 
reserves. The Alaska state legislature has taken a big step in 
assisting by passage of Governor Palin's Alaska Gasline Inducement Act. 
We anticipate that the Governor will select a project in early 2008. 
The Office of the Federal Coordinator will play an important role in 
assuring a timely, safe and environmentally friendly project. Thank you 
for your interest in this project so important to our Nation's energy 
infrastructure.

    Senator Tester. I think what we'll do is hold off on 
questions until after Mr. Hill makes his presentation. I'd like 
to welcome Senator Thomas to the committee.
    Mr. Hill.

 STATEMENT OF DAVID HILL, GENERAL COUNSEL, DEPARTMENT OF ENERGY

    Mr. Hill. Mr. Chairman, Senator Murkowski, members of the 
committee, thank you for inviting me to testify today. My name 
is David Hill, and I am the General Counsel of the United 
States Department of Energy. I am pleased to be able to present 
comments on five bills before the committee today and ask that 
my full written statement be included in the record. I will 
only briefly summarize that statement here.
    First, as to S. 645, we support this bill. It will ensure 
that low-sulfur coals are fully able to participate in the 
Clean Coal Power Initiative. We believe that the change in this 
bill is in the best interests of this Nation's energy policy.
    Second, as to S. 838, we do not support that bill as 
currently written. The department agrees that it is important 
for us to cooperate with Israel on energy security and energy 
supply matters, and that doing so will advance the energy 
security of both nations.
    However, we believe that existing bilateral arrangements 
already work well. We also believe that any bilateral work 
should not be solely funded by the United States Government, 
and that the amount of funding authorized by this bill should 
not be taken from other important work of DOE's Office of 
Energy Efficiency and Renewable Energy.
    Third, as to S. 1203, that bill would authorize an 
additional assistant secretary position at the Department of 
Energy. DOE currently is authorized to have seven assistant 
secretaries and we believe that number is sufficient; however, 
the department does not oppose increasing the authorized number 
of assistant secretaries at the Department of Energy if 
Congress sees fit to do so.
    Fourth, H.R. 85 would amend section 917 of the Energy 
Policy Act of 2005, which established advanced energy 
efficiency technology transfer centers. The Department recently 
issued a funding opportunity announcement under section 917, 
and applications under that announcement are due on July 3, 
2007.
    We believe that H.R. 85 is unnecessary because section 917 
of the 2005 Energy Policy Act already allows extension services 
to participate and the center is authorized by that section.
    We also are already engaged in a number of activities, such 
as work with a number of industrial assessment centers that 
coordinate the demonstration and application of advanced energy 
methods and technologies.
    Finally, H.R. 1126 would reauthorize and modify the Steel 
and Aluminum Energy Conservation and Technology Competitiveness 
Act of 1988. We generally support the change in direction of 
the Act to focus on technologies that would renounce greenhouse 
gas emissions.
    However, the bill maintains an industry-specific focus that 
we believe is not the best way to advance industrial energy 
efficiency. Instead, DOE is focusing its efforts on process 
energy efficiency improvements that can bring crosscutting 
benefits across various industries, including steel and 
aluminum, among other industries.
    Thank you, Mr. Chairman. At this time, I would be glad to 
answer any questions the committee may have.
    [The prepared statement of Mr. Hill follows:]
   Prepared Statement of David R. Hill, General Counsel, Department 
                               of Energy
    Chairman Dorgan, Senator Murkowski, and members of the Committee, 
my name is David Hill, and I am the General Counsel of the U.S. 
Department of Energy (Department or DOE). I want to thank you for the 
opportunity to appear today and offer preliminary comments on five 
energy-related bills that Congress is considering. The bills before the 
Committee today each make valuable contributions to our national 
discussion on energy security, but in some cases could benefit from 
further review, discussion and modification. The Department looks 
forward to working with the Committee to resolve these issues. I would 
like to discuss elements of each bill, as well as present some of the 
DOE activities that are already underway in the areas addressed by the 
bills.
                                 S. 645
    S. 645 modifies the technical criteria in the Energy Policy Act of 
2005 for the Clean Coal Power Initiative. The Department supports the 
proposed change because it would reduce a bias in the current 
requirement that favors a particular coal type, while still maintaining 
a stringent sulfur dioxide emission standard for the R&D program. The 
practical effect of the change will be to allow slightly less strict 
SO2 requirements for power plants burning low sulfur coals. 
Nevertheless, even with the proposed change, the SO2 
emission requirement for these lower sulfur coal-fueled power plants 
would remain as stringent, or more stringent, than the allowable 
emissions rate for higher sulfur coals.
                                 S. 838
    S. 838 addresses U.S.-Israeli cooperation on research, development, 
and commercialization of alternate energy, improved energy efficiency 
and renewable sources. The Department has serious concerns with this 
legislation as drafted. While cooperation with Israel to encourage 
cooperation on alternative and renewable energy sources could be 
beneficial, we believe that the bill should stress the need for true 
bilateral cooperative and interactive research, rather than research 
funded solely by the U.S. Government. In that regard, the Department 
already collaborates on a number of issues, and DOE has an umbrella 
agreement with the Israeli Ministry of National Infrastructures. We 
believe that existing bilateral arrangements serve both countries well, 
and we oppose the creation of additional burdensome organizational 
requirements, such as S. 838's Section 4 International Energy Advisory 
Board provisions.
    An Israeli initiative centered on energy security, environmental 
stewardship, and global climate change, similar to the President's 
Advanced Energy Initiative, would benefit Israel by helping ensure 
adequate and reliable supplies of energy for that country. The 
Department could assist Israel in developing that plan and in fact, 
DOE's Office of Energy Efficiency and Renewable Energy (EERE) already 
has engaged in initial discussions with our Israeli counterparts on 
these issues.
    Finally, S. 838 could have a significant adverse financial impact 
on EERE's budget. The bill would authorize $20 million annually for 
seven years for the projects authorized by this bill. We do not support 
taking this amount of funding away from other important EERE programs. 
In comparison, EERE's budget for the Asia Pacific Partnership, which 
encompasses six countries, including India and China, the two fastest 
growing economies and largest emitters of carbon, has a total annual 
budget of $7.5 million. Allocating $20 million out of currently 
authorized funding for a single country would shift scarce resources 
away from the Department's efforts to develop and commercialize 
advanced technologies that lessen our dependence on oil and provide for 
energy security. The goals of S. 838, as well as efforts to assist 
Israel in developing its own national energy action plan, can be 
achieved with substantially less funding.
    I do note that the bill authorizes DOE to accept contributions from 
private sources to carry out that Act. This could mitigate the need for 
appropriations to carry out this Act although some modifications would 
be necessary to make the bill workable.
    Again, I stress that the Department values its current 
collaboration with Israel, and seeks to build upon this already 
productive relationship. We believe, however, that the time for action 
is now, for both the United States and Israel. Putting action plans 
into place that are focused on alternative sources of energy is a goal 
that our nations can and must share, and we would urge the Committee to 
adopt legislation that supports that goal.
                                S. 1203
    S. 1203 expands the authorized number of Assistant Secretaries at 
the Department of Energy from seven to eight. The Department believes 
it already has a sufficient number of authorized assistant secretaries, 
but we do not oppose Congress increasing the number if it sees fit to 
do so. S. 1203 also would preserve the President's and Secretary of 
Energy's discretion to determine whether to appoint individuals to fill 
all of the authorized assistant secretary positions, to determine how 
best to manage the Department's mission, and to determine the 
portfolios for the assistant secretaries and other Departmental 
officials. At this time, the President and the Secretary have made no 
decision whether an individual would be nominated for the additional 
assistant secretary position should it be authorized, or what the 
responsibilities of any such official would be.
                                H.R. 85
    Turning to H.R. 85, this bill targets the demonstration and 
commercial application of advanced energy methods and technologies, a 
goal that effectively summarizes what we as a Nation must do to 
successfully move innovative products and processes from the laboratory 
into everyday use. This bill amends Section 917 of the Energy Policy 
Act of 2005 (EPACT), which established ``Advanced Energy Efficiency 
Technology Transfer Centers.'' EERE recently announced a solicitation 
under Section 917. It is our belief that extension services, which are 
added here, already can participate in the Centers. In addition, there 
are some technical issues which require further review and discussion, 
and we look forward to working with the Committee to resolve these 
minor concerns.
    The Department also is addressing the challenge of successful 
technology transfer by, among other things, supporting a robust and 
widespread regional and local outreach effort to ensure the adoption 
and commercial application of industrial and building energy system 
technologies and practices. For example, in coordination with the 
Department's Golden Field Office, we are instituting a new method of 
project management, called Stage Gating that incorporates the 
demonstration of technologies in the last stage of Federal development 
as part of deployment/technology transfer for commercialization. 
Through our Industrial Technologies Program, EERE works through 
Congressionally established Industrial Assessment Centers to provide 
energy evaluations and to help deploy advanced energy methods and 
technologies to small- and medium-sized companies. Recently we have 
broadened this effort by establishing a Memorandum of Understanding 
(MOU) with the Manufacturing Extension Partnership (MEP) program of the 
Department of Commerce's National Institute of Science and Technology 
(NIST). The MEP program consists of 59 main centers across the Nation, 
and will significantly increase our ability to deploy advanced energy 
methods and technologies to thousands of manufacturing facilities and 
buildings.
    EERE is currently establishing working relationships with the 
various types of centers I have mentioned to coordinate the 
demonstration and application of advanced energy methods and 
technologies. Key to this coordinated effort will be the integration of 
deployment activities with EERE's state partnerships. Any kind of 
regionally focused efforts would need state involvement to leverage 
state-sponsored energy programs.
    Thus, given the activity level already underway with a broad range 
of centers, it would not seem that the establishment of the additional 
centers would be needed. There is much to work with to advance our 
technology transfer goals, and our focus at the Department is on the 
successful support, use, and coordination of our tools at hand.
                               H.R. 1126
    H.R. 1126 would reauthorize and modify the Steel and Aluminum 
Energy Conservation and Technology Competitiveness Act of 1988. The 
Department generally supports the change in direction to develop 
technologies which reduce greenhouse gas emissions. However, while the 
bill does reauthorize provisions to encourage energy efficiency in 
these important industries, it also maintains an industry-specific 
focus that the Department believes is not the best way to advance 
industrial energy efficiency as a whole. DOE has restructured its 
Industrial Technologies Program to focus on process energy efficiency 
improvements that will bring more cross-cutting benefits and with wider 
application to a broader spectrum of manufacturing industries, 
including steel and aluminum.
    Another concern is the reauthorization of recoupment schemes. 
Although well-intentioned and attractive on the surface, they can 
ultimately serve as a disincentive to industry, and have been difficult 
to execute in practice. Although the Department supports continued 
research and development that will contribute to reducing energy costs 
for these industries, the Department also wants to pursue initiatives 
that address newer, high energy growth industries and next generation 
manufacturing technologies.
    Again, thank you for the opportunity to present the Department of 
Energy's comments on these bills. The Department looks forward to 
working with the Committee on these bills, and on the many other 
important energy matters facing our Nation. This concludes my prepared 
remarks. I would be happy to answer any questions the Committee may 
have.

    Senator Tester. Well, I appreciate both of your comments. 
Senator Murkowski, I'll let you lead off with questions.
    Senator Murkowski. Thank you. Ms. Pearce, the first 
question I think really is the obvious question. I know the 
answer, but I think for the record it is important that I ask 
and allow you to state clearly for the record why we need the 
Office of Pipeline Coordinator at this point in time.
    As I mentioned in my comments, right now the State has not 
approved the pipeline builder. That builder--either the gas 
producers or an independent pipeline company--until they can 
show the ability to finance the cost of this project, we don't 
have anything actually underway.
    So can you tell the committee some of the work that needs 
to be done at this point in time, at the Federal level, to be 
ready for the oversight of this enormous project?
    Ms. Pearce. Yes. Senator and Mr. Chairman, there are 
probably two primary areas that I'll discuss here very briefly.
    The first is a gap analysis that needs to be done at the 
Federal level, including an analysis of whether or not all of 
the agreements are in place in the Federal agency to move 
expeditiously when FERC has an application before it, because 
Congress gave FERC a finite amount of time--18 months--to 
complete an EIS on an enormous project.
    We can't wait until that application comes in the door 
before we ensure that the agencies are ready to move forward in 
a cooperative manner.
    Perhaps more importantly, though, we have the 
responsibility to directly oversee the cooperative efforts with 
the State of Alaska and work closely with the newly created 
pipeline coordinator at the State level to set up probably 
associate offices and work together on the permitting.
    The right-of-way, of course, was in the United States, 
across both State and Federal lands in somewhat of a patchwork 
method. So we'll be working directly with the Alaskans in doing 
that gap analysis.
    Minister Prentice and I will be talking further tomorrow 
about setting up some immediate organizations and applicable 
relationships where they don't yet exist between the 
appropriate Canadian agencies, at both the Federal and 
provincial level, and State and Federal agencies. Obviously, we 
don't want a pipeline to come to the border between Alaska and 
Canada and suddenly change the stipulations and the rules for 
the pipelines. A lot of coordination is going to happen. We are 
already embarking upon that gap analysis.
    In addition to that, we've already begun working with the 
State of Alaska, which has questions for our Federal agencies 
about some of the specifics of the Federal legislation that 
Congress passed in doing the enabling legislation.
    As they move through drafting the RFP, which they plan to 
have on the streets on July 1, they will be working with the 
Department of Energy, the Department of the Treasury, with us, 
and with FERC on specifics of things like probably most 
importantly, the loan guaranty.
    The State of Alaska's RFP and how it is worded can have an 
effect on the eventual cost to Federal taxpayers of the loan 
guaranty. So we need to begin coordinating those efforts today 
and not wait for an application to come in the door. We are 
already embarked upon doing those things.
    Senator Murkowski. Well, I appreciate that and recognize 
that with the extent of this project, we don't start at the 
last moment and assume that we're going to be on top of things.
    I need you to project into the crystal ball just for a 
moment, based on the work that has been done to this point in 
time, if everything goes perfectly, how quickly could we see 
gas flowing to the United States?
    Ms. Pearce. The most optimistic estimate--and this is based 
on producers' estimates of the amounts of time that they would 
need if they're the eventual licensee for a pre-application 
process--the most optimistic first gas in the pipe would be 
2017.
    I think more realistically we're looking at 2018 as 
optimistic.
    Senator Murkowski. The sooner the better.
    Ms. Pearce. The sooner the better.
    Senator Murkowski. Mr. Hill, I have just one quick question 
for you, if I may, and this is as it relates to H.R. 1126. I 
understand that in the original Steel and Aluminum Conservation 
and Technology Competitive Act, the industry participants were 
granted an intellectual property special exemption that favored 
industry participants over university research partners in 
retaining the intellectual property.
    If this bill is enacted, would the special exemption 
finding still apply, and does the department plan to review 
whether this special exemption is still warranted?
    Mr. Hill. I have to admit, Senator, I don't know whether or 
not that particular finding would still apply to the 
reauthorization. I'd be glad to get back to you on that.
    Senator Murkowski. Could you do that?
    Mr. Hill. I will do that.
    Senator Murkowski. I appreciate that. Thank you. Thank you, 
Mr. Chairman.
    [The information follows:]

    To implement the Steel and Aluminum Energy Conservation and 
Technology Competitiveness Act of 1988, the Department of Energy (DOE) 
required title to new inventions made by universities and DOE National 
Laboratories performing the research under each project under the 
program to be transferred to a holding company. The holding company was 
then required to provide royalty-free licenses to such new inventions 
to the industrial participants in each project. The industrial 
participants in each project were required to provide at least 20% 
direct cost sharing in the project and were obligated to repay the 
Government one and a half times the Federal expenditure in the project 
from the net proceeds from commercialization of the technologies 
developed in the project. If H.R. 1126 is enacted, the special 
exemption would no longer apply; however, DOE would undertake a new 
review to determine whether such a special intellectual property 
requirements are appropriate for the new program. The new review would 
involve consultation with industry, the university community, and the 
National Laboratories.

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

    Senator Thomas. Thank you, Mr. Chairman. Sorry I was late. 
I appreciate your having this hearing. I wanted to comment just 
a little bit on the amendment that I have here. As you know, we 
introduced this with ten original cosponsors, Chairman Bingaman 
and Ranking Member Domenici, and two more Senators have signed 
on since.
    The remedy is a sulfur removal disadvantage of Western 
coal, contained in the Energy Policy Act of 2005. The 
administration and DOD both support the idea. The Clean Cool 
Power Initiative, CCPI, authorizes in section 404 of the Energy 
Policy an alternative sulfur dioxide removal measurement for 
certain coal classification projects.
    It instructs the Secretary to establish milestones to be 
able to remove at least 99 percent of the sulfur dioxide. I'm 
simply saying this is there because low-sulfur coal in the West 
has such a smaller amount of sulfur, that to take 99 percent 
out of 5 percent is almost impossible.
    So this alternative criteria sets up a different 
alternative, but it will achieve an emissions standard that's 
no less--and in some cases greater--than that which achieved 
with the 99 standard using the coals. This alternative is also 
consistent with the Internal Revenue Code. I think it's 
something that we could do and hurry along our development of 
energy. So Mr. Hill, I have introduced that this would alter 
the 220 coals to eliminate the disadvantage that occurs. Are 
there a number of other goals in this CCPI program?
    Mr. Hill. Thank you, Senator Thomas. Yes. That provision of 
the Energy Policy Act of 2005 also establishes requirements, 
both for coal gasification facilities and for non-gasification 
facilities in terms of NOX removal, mercury removal, 
and efficiency goals. Those are different, depending on whether 
or not it's a gasification project or some other kind of a 
coal----
    Senator Thomas. How is this program moving along?
    Mr. Hill. It's actually moving along well. There are 
currently nine active projects, CCPI projects, that are out 
there. Three of those are operating, five are planned, and one 
is currently being negotiated. I anticipate that there will be 
another solicitation of another CCPI.
    Senator Thomas. Where are those located?
    Mr. Hill. They're in a number of States, and I can run down 
the list if you'd like me to. The Great River Energy Project is 
in Underwood, North Dakota. The NewCo Project is in Baldwin, 
Illinois. The University of Kentucky Project is in Ghent, 
Kentucky. The Western Greenbrier Project is in Rainelle, West 
Virginia. The Toxicon Project is in Marquette, Michigan. The 
WMPI Project is in Gilberton, Pennsylvania. Those are all 
first-round CCPI projects.
    Senator Thomas. Good.
    Mr. Hill. Then the second-round CCPI projects--the Mesaba 
Project is in Minnesota, the Pegasus Project is in Jewett, 
Texas, and the Southern Company Project will be in Orlando, 
Florida.
    Senator Thomas. I see. Thank you. Well, I appreciate your 
support and I hope that this would encourage more of the CCPI 
projects in the West where the coal is very abundant. So thank 
you, sir.
    Mr. Hill. Thank you, sir.
    Senator Smith. Thank you, Mr. Chairman. Mr. Hill, thank you 
for being here, and Ms. Pearce. Dave, does the Department 
provide funding for existing bilateral agreements with Israel 
now?
    Mr. Hill. Our Office of Policy and International Affairs 
currently works with--as well as our Office of Energy 
Efficiency and Renewable Energy--is currently working with 
Israel on a number of different projects.
    I don't know that there are specific research, bilateral 
research, projects with Israel, but my understanding is that 
there are individuals from both of those offices that are 
working with individuals from Israel.
    Senator Smith. Do you think that Israel can offer 
assistance to us on renewable energy issues?
    Mr. Hill. I think we benefit when we're working with other 
countries on matters of energy security, whether it's renewable 
energy projects, alternative energy, or things concerning 
energy security in general.
    So I think we do. The United States always can gain when we 
are working, either on a bilateral or a multilateral basis, 
with other countries.
    Senator Smith. I take it your objection to S. 838 is just 
simply the level of funding. What level of funding do you think 
is necessary?
    Mr. Hill. There are a couple of parts about it that we're 
concerned about, Senator Smith. One is research projects that 
are focused on a particular country. We think that while 
working on a bilateral basis can be useful, that research 
projects oftentimes--like with the Asia Pacific work that we're 
doing--should be focused on a number of different countries if 
we can.
    I don't have a specific number in mind that I think would 
be useful if the Department or if the Congress decided to enact 
this bill into law, but we'd be glad to continue to work with 
your staff on that matter.
    Senator Smith. What are your thoughts on: we don't want to 
spend any more than this rate, but we do want to do what's 
appropriate? It's an ally, and obviously they're in an area of 
the world that has a lot of energy.
    They don't, and they're looking for alternatives, and 
perhaps we can get something out of it. But I think we need to 
be involved in it.
    Mr. Hill. They are a very important ally; you're right, 
Senator Smith. We are currently working with them on a number 
of matters and, of course, would welcome the opportunity to 
continue the opportunity to continue with Israel.
    Senator Smith. Great. Thank you.
    Senator Thomas. Mr. Hill, kind of following along those 
lines, we'll start out with what would you recommend we do if 
we want to encourage a partnership with Israel in energy 
fields, whether it's in business or research or academia? I 
think Senator Smith had some good points. So what do we do, if 
not this bill?
    Mr. Hill. We currently do have arrangements in place where 
we can work with Israel, as well as with other countries. I do 
think that there are opportunities to expand our working 
relationship with Israel, even under existing frameworks.
    I also think that in terms of working with Israel, one of 
the things that we already are currently working with, with 
that nation, are efforts that really focus on their ability, 
that are focused on advancing that nation's energy security.
    I think whether or not any of those require additional 
legislative authorization--I'm not so sure they do--but we'd 
obviously be glad to discuss that further with the committee.
    Senator Thomas. Okay. With S. 645, it talks about relating 
sulfur dioxide emissions to Btus. It sounds like a good idea to 
me. Does this mean you'd be using that as a standard then, and 
not having two standards?
    Mr. Hill. Well, the way the bill is currently drafted, it 
allows the standard either to be based on the percentage 
removal or on the emissions in pounds of SO2 per 
million Btus. So it could be either of those.
    Again, depending on the sulfur content of the coal itself, 
the actual emission rate will be higher or lower depending on 
which of those you pick and depending on what the sulfur 
content of the coal is.
    What Senator Thomas was talking about, for example, in the 
lignite; with a 1 percent sulfur content, a 99 percent removal 
rate actually takes you down to below .03, and it's actually 
about a 0.029 emission rate. Yet, a 99 percent with a 5 percent 
sulfur content cumulous coal is actually at 0.08.
    We think this amendment is a good thing because it would 
allow different coals of different sulfur contents to 
participate in the program.
    Senator Thomas. So you don't anticipate simplification by 
going with just one standard; you anticipate running double 
standards on this, depending on what you're dealing with or 
where you're dealing with it.
    Mr. Hill. Yes, sir.
    Senator Thomas. That's fine. With H.R. 1126, it looks as if 
about 2000, with the Industries of the Future, the $65 million 
projected with the $9.2 million for 2008, is--I mean, it looks 
like you're trying to phase out the program. Is that accurate?
    Mr. Hill. This is on H.R. 1126?
    Senator Thomas. Yes, The information I have is that it's 
Industry of the Future, the funding for this program is going 
from $65 million in 2000 to a proposed $9.2 million in 2008. 
For the Steel and Aluminum Programs, $21.8 million in 2000, 
Fiscal Year 2000 and 2008 is proposed to be about $3.3 million.
    I'm just curious; isn't it a time where conservation tends 
to be the low-hanging fruit here? I'm just wondering what the 
thought process was on it.
    Mr. Hill. The department really has focused its energy 
efficiency efforts and their transfer efforts on crosscutting 
through various industries. We currently have the solicitation 
out under section 917. Again, the purpose of that is to promote 
technology transfer and to get energy efficiency technologies 
and conservation into the marketplace.
    Our efforts in terms of research, as well, are really 
focused on trying to--at crosscutting, not just with a specific 
industry focus on steel or aluminum or things like that in H.R. 
1126, but more crosscutting.
    Senator Tester. So if I heard you right, you're saying the 
dollars are available in other programs? Is that what you said?
    Mr. Hill. Well, our efforts in terms of the----
    Senator Tester. It's okay if you say no, because it just 
tells us where we're at.
    Mr. Hill. Well, I don't----
    Senator Tester. Here's the issue I have. It's the U.S. 
competitiveness. I mean, energy is a huge factor when you talk 
about competitiveness in the world marketplace, and I'm just 
wondering if you think that's the right direction to go? It may 
be the right direction to go. I just find it curious in this 
point in time, where conservation efforts are the easiest thing 
to do.
    Mr. Hill. We certainly think conservation efforts are very 
important. We think that the H.R. 1126 which focuses on the 
steel or aluminum industries--we think rather than focusing an 
authorization that is focused on those specific industries, 
that the program and our efforts are better focused on 
technologies that can have a broad crosscutting effect over 
various industries.
    Senator Tester. Okay, thank you. Further questions, 
anybody?
    Senator Murkowski.
    Senator Murkowski. Just one, very quickly, and this is to 
follow up on S. 838, that Senator Smith spoke to. As I 
understand, the United States and Israel have had some very 
longstanding cooperative collaborative relationships in 
research through the Binational Industrial Research and 
Development Foundation, the Binational Science Foundation, yet 
you've indicated that at least from the Department of Energy's 
perspective, your preference is not to direct to one country 
but rather look to regions.
    Is this a perspective that is unique to the Department of 
Energy?
    Mr. Hill. No. Thank you for the question, Senator. We 
certainly do have a number of agreements with different nations 
where we are working bilaterally with them on various areas. 
All I meant to say was in terms of authorizing particular 
amounts of research money to particular nations, we don't 
really view that as being necessary.
    That, rather, we have existing both bilateral and 
multilateral agreements with a number of different countries, 
some of which resulting in specific bilateral work with one 
country, others of which result in multilateral work.
    We'd prefer the ability to still work on that basis, just 
case-by-case, as it presents itself.
    Senator Murkowski. If the funding were there from Israel's 
perspective, or perhaps from the private sector, would the 
objection still remain the same?
    Mr. Hill. That does mitigate one of our concerns, and I do 
note that the bill itself allows for private contributions to 
be supplied to pay for some of the costs of that program. I do 
think there would need to be some technical changes to the bill 
in order to make those funds available and to actually offset 
the cost of the program. So again, we'd be glad to work with 
the committee.
    Senator Murkowski. Thank you. Thank you, Mr. Chairman.
    Senator Tester. Senator Thomas, any further questions? 
Senator Smith? Senator Salazar? All right. Well, with that, I 
again want to thank the panelists for being here today. I 
really appreciate your time and your answers to the questions.
    Senator Salazar. I do have a comment, Mr. Chairman.
    Senator Tester. Yes, Senator Salazar?
    Senator Salazar. You know, it's remarkable that the Senator 
from Montana so quickly ascended to the chairmanship of the 
committee. Congratulations. I was Number 101 for the last year, 
so I'm glad to see that the new 100 ascended so quickly.
    Senator Tester. No comment. This hearing is adjourned.
    [Whereupon, at 3:08 p.m., the hearing was adjourned.]

                                    

      
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