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


 
    ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR FISCAL YEAR 2008 

                              ----------                              


                       WEDNESDAY, APRIL 11, 2007

                                       U.S. Senate,
           Subcommittee of the Committee on Appropriations,
                                                    Washington, DC.
    The subcommittee met at 2:33 p.m., in room SD-138, Dirksen 
Senate Office Building, Hon. Byron L. Dorgan (chairman) 
presiding.
    Present: Senators Dorgan, Murray, Reed, Domenici, Craig, 
Bond, Allard, and Stevens.

                          DEPARTMENT OF ENERGY

STATEMENT OF HON. DENNIS R. SPURGEON, ASSISTANT 
            SECRETARY NUCLEAR ENERGY

              OPENING STATEMENT OF SENATOR BYRON L. DORGAN

    Senator Dorgan. We'll call the hearing to order. This is 
the Senate Appropriations Subcommittee on Energy and Water 
Development. We thank our witnesses for being here today. This 
is a hearing on the Office of Nuclear Energy, the Office of 
Energy Efficiency and Renewable Energy, the Office of Fossil 
Energy and the Office of Electricity Delivery and Energy 
Reliability.
    We're here to take testimony from the four program offices 
I've just described within the Department of Energy which 
oversee major aspects of the U.S. Government's energy R&D 
demonstration and deployment programs. I have a great deal of 
interest in these issues, as do others on this subcommittee, 
and I look forward to hearing today from our witnesses.
    Passage of the Energy Policy Act of 2005 (EPACT), thanks to 
my colleagues, Senator Domenici and Senator Bingaman and their 
leadership, was, I think, a step in the right direction. I was 
pleased to be on the authorizing committee and to be a part of 
the work in the passage of that legislation.
    But it was only a step. More needs to be done and we will 
continue to work in the authorization process to do that. The 
Energy Policy Act, however, only has its full impact if it is 
properly funded and implemented. Our ability to meet head on 
the challenges that we tried to describe in our Energy Policy 
Act will be hobbled by continued baby steps if we do not fully 
fund many of the issues that we care about. We need to be more 
deliberate, I believe, in addressing the major challenges that 
are associated with energy, since it is the central 
underpinning of our other economic, social, environmental, and 
foreign policy goals.
    So I believe we should set goals. We need to know where we 
are going and how we are going to get there; so there are two 
points that I think are very relevant to this hearing.
    First, we need to do a much better job of investing in our 
energy future. Second, we need to begin making these 
investments within and across entire energy systems rather than 
picking and choosing pieces of an energy puzzle.
    Note chart 1. In December 2006, a Government Accountability 
Office (GAO) study gave us this information. The total budget 
authority for energy research and development has dropped by 
over 85 percent in real terms between 1978 and 2005. We need to 
put our energy challenges front and center and we will never be 
able to move forward with declining investments like that. 
Research and development figures in a chart like this should 
indicate increasing funding but regrettably, that has not been 
the case.
    Chart 2 shows that of the Energy Department's $24.3 billion 
budget request for 2008, only $3.1 billion is directed toward 
energy matters. Let me say that again: Of $24.3 billion in the 
Department of Energy budget request, $3.1 billion is directed 
toward energy matters and of that only $2.5 billion is directed 
at energy technology programs. While I realize the Department 
has very broad and important mandates, this means that, in 
simple terms, only $1 in $8 in the Department of Energy request 
is actually going toward energy issues.
    On the second point, energy systems have many elements to 
them and we must undertake improvements along the R&D chain to 
these systems as wholes. We have two major systems at work, the 
transportation system and a power generation system. We must be 
prepared to understand these systems and address them at every 
stage, not just in bits and pieces.
    For example, if we want to promote renewable fuels, and I 
do, then we need to look at feed stocks, bio-refineries, fuel 
transportation, infrastructure, vehicles, public education, and 
marketplace acceptance. The Department of Energy suggests it 
does not pick winners and losers but I think in many ways 
that's very disingenuous.
    We can see many examples where, with tight budgets and 
different priorities, some areas have been done well and others 
not so well. One needs to look only at the Department's fiscal 
year 2007 spending plan. It demonstrates that two of our 
witnesses' programs had windfall budget increases while two saw 
cutbacks.
    The Department's consistency in those areas, I think, is an 
inconsistency in following through on long-term commitments and 
recognizing the Government's role in investing and directing 
policies along each stage of the energy system. I understand 
that we have limited resources and nearly unlimited wants. But 
we must find a way of addressing those key areas that are 
crucial to our energy success in the future.
    If our energy policy is going to be central to our Nation's 
future, and energy will be central to our Nation's future, then 
we're not going to be able to do it on the cheap or do it at 
the margins. I'm very interested in hearing today from the four 
witnesses, whose direct activities in the Department of Energy 
are, I believe, essential and central to the question of 
whether we will succeed in meeting our energy needs.
    Senator Domenici.

             OPENING STATEMENT OF SENATOR PETE V. DOMENICI

    Senator Domenici. Mr. Chairman, I realize that we have a 
full load of witnesses and many people here to hear what they 
have to say, including Senators but I would like to give just a 
brief opening statement. It will not be long.
    First let me say, I greatly appreciate the statement you 
made. I listened to it attentively. Obviously, I'm not sure 
that I agree with the conclusions that were arrived at by you 
and your helpers. But I do agree wholeheartedly with the 
premise and the thesis of what you've said.
    Actually, Mr. Chairman, we didn't have a Department of 
Energy for a long time. It was a Department put together by 
just piecing all kinds of agencies and then for a long time, 
nobody knew what the Department of Energy was supposed to do. 
You knew that from afar. I knew it from inside. We didn't know 
whether we were supposed to be for nuclear power. We didn't 
even know if there should be nuclear power mentioned within the 
Department of Energy for a number of years, Senator Bond. It 
just wasn't even thought of. So that accounts for many of the 
ups and downs that you have spoken of.
    Today, these four witnesses from the Department of Energy 
represent major energy supply R&D accounts. They've developed 
innovative research initiatives such as cellulosic biomass 
programs, the Global Nuclear Energy Partnership (GNEP), 
FutureGen and Solar America, which have the potential of 
deploying cleaner burning fossil fuel technology as well as 
zero emission technologies such as nuclear, solar and wind 
generation.
    This budget supports many of the research priorities 
included in EPACT, the bill you alluded to that we passed 2\1/
2\ years ago. One important goal of EPACT has been to make sure 
that innovative energy technology doesn't stay in the lab but 
will be deployed to reduce our greenhouse gas emissions as well 
as our country's less dependence on foreign energy sources.
    It is a fact that our energy markets are based on low cost, 
conventional generation. High cost renewable energy 
technologies face a serious challenge in the cost competitive 
environment.
    In addition to supporting additional R&D efforts, I've been 
focused on implementing the title XVII Loan Guarantee Program. 
This initiative can be effective--an effective tool in the 
leveraging of the Federal balance sheet to make the first of a 
kind renewable and alternative energy technology cost 
competitive.
    I've been surprised by the challenges facing the 
implementation of loan guarantee programs that we provided in 
the energy bill, especially in light of the fact that the 
export/import bank provides $18 billion in loan coverage to 
support U.S. commercial investments overseas. This is twice the 
level provided to support DOE's title XVII.
    I know investment overseas is important but I believe we 
have a serious problem when the administration provides greater 
assistance to support the sale of nuclear reactors to China 
than it provides for the deployment of nuclear reactors in our 
own country. I believe that's wrong and I think somehow we must 
fix it. It is very hard for us to fix it. I mean, we are going 
to have to pass specific laws that specifically direct whatever 
it is we want in this area that we're talking about in terms of 
loan guarantees.
    I'd like to also make a brief point about the Global 
Nuclear Energy Partnership--GNEP. This is a very exciting 
initiative. It proposes to close the nuclear fuel cycle. I 
understand there could be questions about it but I think once 
it gets on the table, let's the daylight see it all and see how 
it comes out. It is apt to be a very exciting thing that we 
should put together and work on.

                          PREPARED STATEMENTS

    I ask that the balance of my statement be made a part of 
the record and thank you, Mr. Chairman, for giving me an 
opportunity to address these issues and thank you, witnesses. 
It's good to have you all here.
    Senator Dorgan. Without objection. Senator Reed has also 
submitted a statement for the record.
    [The statements follow:]
             Prepared Statement of Senator Pete V. Domenici
    Mr. Chairman, today we have four witnesses representing the 
Department of Energy's major energy supply R&D accounts. These offices 
have developed innovative research initiatives such as the cellulosic 
biomass program, GNEP, FutureGen and Solar America, which have the 
potential of deploying cleaner burning fossil fuel technology as well 
as zero emission technologies such as nuclear, solar, and wind 
generation.
    This budget supports many of the research priorities included in 
EPACT. One important goal of EPACT has been to make sure that 
innovative energy technology doesn't stay in the lab but will be 
deployed to reduce our greenhouse gas emissions as well as make our 
country less dependent of foreign energy sources.
    It is a fact that our energy markets are based on low cost, 
conventional generation and that high cost, renewable energy 
technologies face a serious challenge in a cost competitive 
environment.
    In addition to supporting additional R&D efforts, I have been 
focused on implementing the title 17 loan guarantee program. This 
initiative can be an effective tool in leveraging the Federal balance 
sheet to make the first of a kind renewable and alternative energy 
technologies cost competitive.
    I have been surprised by the challenges facing the implementation 
of the loan guarantee program, especially in light of the fact that the 
Export-Import Bank provides $18 billion in loan coverage to support 
U.S. commercial investment overseas. This is twice the level provided 
to support DOE's title 17 program.
    I know investment overseas is important, but I believe we have a 
serious problem when the administration provides greater assistance to 
support the sale of nuclear reactors to China, than it provides for the 
deployment of nuclear reactors in our own country.
    Mr. Chairman, I would like to make a brief point about the Global 
Nuclear Energy Partnership (GNEP). This is a very exciting initiative. 
It proposes to close the nuclear fuel cycle and make a significant 
reduction on our spent fuel inventories.
    The world has begun to embrace nuclear power as a cost effective 
energy solution that does not contribute to greenhouse gases. Today, 
there are plans to build an additional 200 new nuclear plants in 
countries all across the world.
    I commend the administration for their efforts to develop a 
comprehensive plan that will address spent fuel management and to 
optimize this energy resource in a safe and secure manner.
    This issue is not going away and this country should be part of the 
global solution.
    I am looking forward to hearing from our witnesses, who are working 
very hard to make our country more energy independent and to reduce 
greenhouse gas emission to the lowest levels possible.
    Gentlemen, I appreciate your service very much.
                                 ______
                                 
                Prepared Statement of Senator Jack Reed
    Chairman Dorgan and Senator Domenici, I want to thank you for 
holding this hearing to review the Department of Energy's fiscal year 
2008 budget request. Federal funding for energy efficiency and 
renewable energy programs is very important to me. I want to express my 
disappointment at the Department of Energy's budget proposal for the 
Office of Energy Efficiency and Renewable Energy. The fiscal year 2008 
budget proposes only $1.24 billion for EERE--a $230 million decrease 
compared to the fiscal year 2007 Continuing Resolution funding level.
    Our Nation faces significant challenges as we strive to ensure our 
energy security, reduce the economic risks of high energy prices, and 
address global climate change. Energy efficiency and renewable energy 
programs that improve technologies for our homes, our businesses, and 
our vehicles must be the ``first fuel'' in the race for secure, 
affordable, and clean energy.
    Energy efficiency is the Nation's greatest energy resource. We now 
save more energy each year from energy efficiency than we get from any 
single energy source, including oil, natural gas, coal, and nuclear 
power. A 2001 National Research Council report found that for every 
dollar invested in the 17 Department of Energy energy-efficiency 
research and development programs, nearly $20 is added to the U.S. 
economy in the form of new products, new jobs, and energy cost savings 
to American homes and businesses.
    Unfortunately, under this administration, efficiency funding has 
fallen alarmingly since 2002. Adjusting for inflation, funding for 
efficiency has been cut by one-third. The fiscal year 2007 Continuing 
Resolution provided $1.473 billion for efficiency and renewable energy. 
I want to thank Senators Dorgan and Domenici for this increased 
funding. The $300 million added in fiscal year 2007 will help to 
restore the cuts of recent years, but increased investment is 
necessary. The Energy Policy Act of 2005 authorized over $3.8 billion 
for the EERE account. In order to reduce our dependency on fossil fuels 
and enhance our energy security, this is a time to grow our Nation's 
investment in energy efficiency, not cut funding.
    I want to add that I am disappointed that the Department of 
Energy's fiscal year 2007 spending plan submitted to Congress cut 
funding to the Weatherization program. The Senate passed an amendment 
to the Supplemental Appropriations bill to restore funding to $237 
million. While I hope this amendment will prevail in conference, it is 
my hope that the Department will reconsider its spending plan and 
restore the funding for weatherization while maintaining funding for 
other programs in the intergovernmental account.
    In closing, I want to say that I am glad to see the 
administration's support for cellulosic ethanol and an increase in 
funding to support cost-shared projects with industry for enzyme 
development to produce low cost sugars from biomass and for improved 
organism development for converting those sugars to ethanol. I want to 
make sure that the Department of Energy is aware of important research 
being conducted by the University of Rhode Island and Brown University 
in this field. Researchers in my State are developing biotechnology 
strategies to increase biomass of native grasses and enzymes for post-
harvest digestion of cellulose to improve efficiency of cellulosic 
ethanol production.

    Senator Dorgan. My colleagues, I would prefer to go to the 
witnesses but if you have a very brief opening statement that 
you feel like you must make, I'd certainly be happy to respect 
that.
    Senator Bond. That's a challenge, Mr. Chairman. I was going 
to spend most of my time praising you and the ranking member 
for the money you put in, the $300 million increase in funding 
through the continuing resolution.
    Senator Dorgan. Take as much time as you want.
    Senator Bond. For efficiency of renewable energy. I 
strongly support renewable energy, nuclear power, clean coal 
research. We have a lot of problems in Missouri if we have 
carbon caps or taxation. For low-income people, LIHEAP only 
covers one-sixth of them. We've lost jobs overseas from the 
increased cost of natural gas.
    These impose tremendous burdens and the best way we can 
work, I think, for the future, is through clean coal technology 
because right now, I just heard--I don't know, I just heard 
this fact that by 2012, the timeframe when Kyoto is going to go 
into place--by that time, China and India will build almost 800 
new coal-fired powerplants. The combined carbon emissions from 
those plants will be five times as much as the total reductions 
mandated by the Kyoto Accords and even though nobody is meeting 
them and we can't get China and India to meet them and curb 
their growth unless we are able to provide them the technology. 
I commend the President's Asia Pacific Partnership because 
that--developing the technology here, making it comparable in 
cost to current technology for coal-fired energy is absolutely 
essential. We've got to get over the foot dragging and the 
bureaucracy, get the money released for the EPA Act and I 
support your efforts and more authorization. I just think this 
is a critical element if we're going to take care of the needs 
in our country and not see our efforts overwhelmed by the 
growth in new coal-powered plants in China and India.
    Senator Dorgan. Thank you, Senator Bond. Others?
    Senator Craig. With reason and concern, I will only accept 
a slight bump up in the Idaho Lab budget. Other than that, I'll 
make my comments during the questioning period.
    Senator Dorgan. Thank you, Senator Craig.
    Senator Craig. Dennis, did you hear that?
    Mr. Spurgeon. Yes, sir, I heard that.
    Senator Craig. Thank you very much.
    Senator Dorgan. Senator Allard.

                           PREPARED STATEMENT

    Senator Allard. Mr. Chairman, I have some comments. I'll 
just submit them in the record.
    Senator Dorgan. Without objection.
    [The statement follows:]
               Prepared Statement of Senator Wayne Allard
    Mr. Chairman, thank you for holding this hearing today. I think it 
is very appropriate that you have asked the offices that are 
responsible for dealing with some of the most common ways of producing 
electricity to be here with the Office of Delivery and Reliability. And 
as we are all aware, no amount of electricity does us any good if we 
cannot get it to where it is needed.
    No one can argue that we are dangerously reliant on foreign sources 
of energy. We must decrease our reliance on foreign sources of energy 
by diversifying our energy sources and increasing conservation. I have 
long felt that a balanced energy portfolio that takes no technology off 
of the table is what is best for this Nation.
    For this reason I am a strong supporter of nuclear energy. Nuclear 
generation facilities produce vast and reliable quantities of 
electricity. I am pleased with the recent movement toward increasing 
our nuclear capacity, which has been the result of the Energy Policy 
Act passed in 2005. I am hopeful that we can continue this progress.
    I would like to extend a special welcome to Mr. Karsner, who 
oversees the Office of Energy Efficiency and Renewable Energy, which in 
turn oversees the National Renewable Energy Laboratory in Colorado. 
NREL makes a major contribution to the development of renewable energy 
technology and the technologies that are developed at NREL will remain 
vital to our Nation's energy progress.
    Renewable energy is a very important way that we can begin to 
reduce the demand for oil and, thereby, help make our country more 
secure. There are great opportunities for solar, wind, geothermal, 
biomass, fuel cells and hydro to make significant contributions. 
Research and the input of both government and industry partners are 
very important to allowing these opportunities to live up to their 
potential.
    Finally, fossil energy will remain important to energy production 
in this country. Technological advancements have made the use of coal 
cleaner and more efficient than ever before. In the United States we 
have vast amounts of domestic resources from traditional oil, coal and 
gas resources to unconventional sources such as oil shale. I firmly 
believe that we can and must continue to use these resources 
responsibly.
    I look forward to working with the committee to ensure that 
research and development in all fields of energy technology are funded 
in a manner that is responsible, but sufficient to ensure that the 
development and implementation of new technologies continues.

    Senator Dorgan. Thank you very much. Well, let me, on 
behalf of the entire subcommittee, thank the witnesses. We will 
begin today by hearing from the Honorable Dennis Spurgeon, who 
is the Assistant Secretary of the Office of Nuclear Energy. Mr. 
Spurgeon, let me say to all four of you that your full comments 
will be made a part of the permanent record and you may 
summarize. Mr. Spurgeon.

                  STATEMENT OF HON. DENNIS R. SPURGEON

    Mr. Spurgeon. Thank you very much, Mr. Chairman. Chairman 
Dorgan, Ranking Member Domenici and members of the 
subcommittee, it is a pleasure to be here today to discuss the 
fiscal year 2008 budget request for the Department of Energy's 
Office of Nuclear Energy.
    The Office of Nuclear Energy has made progress in the last 
several years in advancing our Nation's energy security and 
independence in support of the Department's strategic plan. It 
is my highest near-term priority to enable industry to deploy a 
new generation of nuclear power plants. We have also made steps 
toward the developing of advanced nuclear reactor and fuel 
cycle technologies while maintaining a critical national 
nuclear infrastructure.
    Today, 103 nuclear reactors generate roughly 20 percent of 
America's electricity, with the 104th reactor, Browns Ferry 
Unit 1, about to enter service. U.S. electricity demand is 
anticipated to grow 50 percent in the next 25 years, the 
equivalent of 45 to 50 1,000 megawatt nuclear reactors must be 
built just to maintain that 20 percent share.
    The United States is at a critical juncture in the future 
of nuclear power in the United States. Unlike many of our 
international research partners, our nuclear industry has not 
been heavily supported, financially and politically, over the 
past 30 years. Today, the need for increased electrical 
generation capacity is clear and hopefully undisputed.

                           NUCLEAR POWER 2010

    Fortunately, we do have a growth option that allows us to 
have a diversified electrical generation portfolio that 
includes a significant carbon emissions-free component and that 
is nuclear power. To support near term domestic expansion of 
nuclear energy, the fiscal year 2008 budget requests $114 
million for the Nuclear Power 2010 Program, to support 
continued cost shared efforts with industry to reduce the 
barriers to deployment of new nuclear power plants in the 
United States.
    In the past few weeks, we have seen major milestones met in 
the expansion of safe and clean nuclear power. In early March, 
the NRC voted to approve the early site permit for the Exelon 
Generation Company's Clinton site in central Illinois and 2 
weeks ago, the NRC approved the early site permit for the 
Entergy Corporation's Randolph site in Mississippi. The 
approval of these two sites is a step toward the ordering of 
new nuclear powerplants for construction on American soil, a 
feat that hasn't happened in 30 years.
    Why nuclear power? Nuclear power is the only proven base 
load producer of electricity for new capacity that does not 
emit greenhouse gases. It is vital that our current fleet of 
reactors be expanded in order to meet our needs for carbon-
free, dependable electric power.

                   GLOBAL NUCLEAR ENERGY PARTNERSHIP

    Any serious effort toward expanded global use of nuclear 
energy will inevitably require us to address the spent fuel and 
proliferation challenges that accompany such an expansion. To 
meet these challenges, President Bush initiated the Global 
Nuclear Energy Partnership or GNEP, a comprehensive approach to 
enable the expansion of nuclear power in the United States and 
around the world, to promote nonproliferation goals, to more 
efficiently use our nuclear fuel resources and to help resolve 
nuclear waste management issues.
    Domestically, GNEP provides a solution to the ever-growing 
issue of spent nuclear fuel. In conjunction with Yucca 
Mountain, GNEP provides a solution that outlines a closed fuel 
cycle, where energy is harvested from spent fuel before the end 
product is disposed of in a permanent geologic repository. The 
spent fuel will be recycled in a manner that will be more 
proliferation resistant than current processes used around the 
world. A closed fuel cycle will also alleviate some of the 
burden placed on Yucca Mountain and will possibly eliminate the 
need for a second geologic repository throughout the remainder 
of this century. We reiterate though that no fuel cycle 
scenario will eliminate the need for a geologic repository.
    We are all aware of the enormous amount of energy available 
from nuclear fission. One pound of uranium fuel in a reactor 
makes the same amount of electricity as 125 million pounds of 
coal. Recycling, as we planned in GNEP, while decreasing the 
overall mass of spent nuclear fuel, will also make it possible 
to use the energy remaining in the used fuel. A recycling 
facility processing fuel from existing U.S. light water 
reactors could recover the energy equivalent of the oil 
delivered by the Alaska Pipeline.
    Internationally, GNEP promises to address the growing 
global energy demand in an environmentally friendly manner. A 
global regime of countries able to provide a complete portfolio 
of nuclear fuel services, including Russia, France and possibly 
Japan, China and Britain, will provide these services to 
countries wanting to use nuclear power to meet their basic and 
growing energy needs without the cost and risk associated with 
the nuclear fuel cycle infrastructure. By providing these 
services to other countries, we hope to dissuade future states 
from developing enrichment capabilities like we are 
encountering in Iran today.
    The fact is, the United States is not currently positioned 
to be an active member of the global regime. We have limited 
enrichment capabilities and no back end recycling capabilities. 
Creating the capabilities needed to participate in the global 
expansion of nuclear power will take at least 15 to 20 years, 
meaning that in order to become an active participant of the 
global nuclear expansion, we need to begin now.
    Taking those necessary steps enables us to better assure 
that the imminent expansion will be safe, beneficial and will 
not promote the proliferation of nuclear weapons.
    The Department requests $405 million in fiscal year 2008 to 
begin work on developing a detailed, technically sound roadmap 
for implementing all aspects of the GNEP vision.

                           PREPARED STATEMENT

    Mr. Chairman, we appreciate the support we have received 
from the subcommittee as we seek to address the challenges 
surrounding the global expansion of nuclear power. We remain 
confident and optimistic about the role of nuclear energy in 
providing a solution to our Nation's energy stability and 
independence.
    I would be pleased to answer your questions, sir.
    Senator Dorgan. Secretary Spurgeon, thank you very much for 
your testimony. We appreciate it.
    [The statement follows:]
             Prepared Statement of Hon. Dennis R. Spurgeon
    Chairman Dorgan, Ranking Member Domenici, and members of the 
subcommittee, it is a pleasure to be here to discuss the fiscal year 
2008 budget request for The Department of Energy's (DOE) Office of 
Nuclear Energy.
    The Department of Energy's strategic plan portrays a long-term 
vision of a zero-emission future, free from the reliance on imported 
energy. A portfolio of nuclear programs is provided for in this plan 
for near-term, medium-term, and long-term sustained advances in nuclear 
technology.
    The Office of Nuclear Energy has made progress in the last several 
years in advancing our Nation's energy security and independence in 
support of the Department's strategic plan. The Department remains 
committed to enabling industry to deploy a new generation of nuclear 
power plants. We have also made steps forward in developing advanced 
nuclear reactor and fuel cycle technologies while maintaining a 
critical national nuclear infrastructure.
    Today, 103 nuclear reactors generate roughly 20 percent of 
America's electricity, with the 104th reactor, Browns Ferry unit 1, 
about to enter service. U.S. electricity demand is anticipated to grow 
50 percent over the next 25 years--the equivalent of 45 to 50 one-
thousand megawatt nuclear reactors must be built just to maintain that 
20 percent share. With nuclear power as the only proven base load 
producer of electricity that does not emit greenhouse gases, it is 
vital that our current fleet of reactors be expanded in order to meet 
our needs for carbon-free, dependable and economic electric power.
    Any serious effort to stabilize greenhouse gases in the atmosphere, 
while providing the increasing amounts of energy needed for economic 
development and growth, requires the expanded use of nuclear energy. 
This will inevitably require us to address the spent fuel and 
proliferation challenges that confront the expanded, global use of 
nuclear energy. To meet these challenges, the Department initiated the 
Global Nuclear Energy Partnership (GNEP), a comprehensive approach to 
enable an expansion of nuclear power in the United States and around 
the world, promote non-proliferation goals, and help minimize the 
amount of nuclear waste disposal.
    GNEP is a perfect example of where global cooperation is required 
to address a changing global energy landscape. The United States has a 
unique opportunity to influence global energy policy, and more 
specifically global nuclear energy policy. However, for the United 
States to have influence abroad, we must have an established domestic 
policy supportive of a significant role for nuclear power in our energy 
future, an aggressive nuclear research and development program, and a 
viable nuclear technology infrastructure. Through the GNEP program, we 
are pursuing in parallel the development of the policies, technologies, 
and facilities necessary for the United States to be a global leader in 
the nuclear energy enterprise and to ensure our energy security and 
national security objectives.
    The Department's fiscal year 2008 budget request proposes an $874.6 
million investment in nuclear research, development and infrastructure 
for the Nation's future. This budget request supports the President's 
priorities to enhance the Nation's energy security while enabling 
significant improvements in environmental quality. Our request supports 
development of new nuclear generation technologies and advanced energy 
products that provide significant improvements in sustainability, 
economics, safety and reliability, and proliferation and terrorism 
resistance.
    While we have made progress in all program areas, much remains to 
be done. Our fiscal year 2008 request moves us in the right direction 
and I will now provide you a report of our activities and explain the 
President's request for nuclear energy.
                           nuclear power 2010
    To support near-term domestic expansion of nuclear energy, the 
fiscal year 2008 budget requests $114 million for the Nuclear Power 
2010 program to support continued cost-shared efforts with industry to 
reduce the barriers to the deployment of new nuclear power plants in 
the United States. The technology focus of the Nuclear Power 2010 
program is on Generation III+ advanced, light water reactor designs, 
which offer advancements in safety and economics over the existing 
fleet of nuclear power plants already operating in the United States. 
To reduce the regulatory uncertainties and enable the deployment of new 
Generation III+ nuclear power plants in the United States, it is 
essential to demonstrate the untested Federal regulatory processes for 
the siting, construction, and operation of new nuclear plants. In 
addition, design finalization of two standard plant designs and NRC 
certification of these Generation III+ advanced reactor concepts are 
needed to reduce the high initial capital costs of the first new plants 
so that these new technologies can be competitive in the deregulated 
electricity market and deployable within the next decade.
    The fiscal year 2008 budget request continues the licensing 
demonstration activities started in previous years. Activities include 
completion of the last Early Site Permit demonstration projects and 
continuation of the New Nuclear Plant Licensing Demonstration projects 
that will exercise the untested licensing process to build and operate 
new nuclear plants and complete and obtain certification of two 
advanced Generation III+ advanced reactor designs. Engineering 
activities in support of the submission of two combined Construction 
and Operating License (COL) applications to the NRC will continue. In 
addition, two reactor vendors will continue first-of-a-kind design 
activities for two standard nuclear plants.
    In the past few weeks we have seen major milestones met in the 
expansion of safe and clean nuclear power. Earlier this month the NRC 
voted to approve the Early Site Permit for the Exelon Generation 
Company's Clinton site in central Illinois, and just yesterday the NRC 
approved the Early Site Permit for the Entergy Corporation's Grand Gulf 
site in Mississippi. The approval of these two sites is a step towards 
the ordering of new nuclear power plants for construction on American 
soil, a feat that hasn't happened in 30 years. With nuclear power as 
the only proven base load producer of electricity that does not emit 
greenhouse gases, it is vital that our current fleet of reactors be 
expanded in order to meet our needs for carbon-free, dependable and 
economic electric power.
    The project teams, Dominion Energy and NuStart Energy Development 
LLC., involved in the licensing demonstration projects represent power 
generating companies and reactor vendors that operate more than two-
thirds of all the U.S. nuclear power plants in operation today. As a 
result of the Nuclear Power 2010 program and Energy Policy Act of 2005 
financial incentives (e.g. standby support), 14 power companies have 
announced their intentions to apply for combined construction and 
operating licenses. Several have specifically stated that they are 
building on work being done in the Nuclear Power 2010 program as the 
basis for their applications.
    The United States is at a critical juncture in the future of 
nuclear power in the United States. Unlike many of our international 
research partners, our nuclear industry has not been heavily supported 
financially and politically over the past 30 years. Today the need for 
increased electrical generating capacity is clear and hopefully 
undisputed. Fortunately, we do have a growth option that allows us to 
have a diversified electrical generation portfolio that includes a 
significant carbon emissions-free component, and that is nuclear power. 
To realize this option, we are asking private companies to build plants 
whose collective cost could be a significant percentage of their net 
worth. This represents an enormous financial risk that few companies or 
lenders will be willing to assume without demonstrated certainty in the 
regulatory process and project cost.
    If one accepts the fact that we need more electrical generation 
capacity, and if one desires to have a component of that new capacity 
that is carbon free, and one recognizes the financial considerations 
associated with such a large private investment in technologies that we 
have not supported in 30 years, then the importance of this program to 
our future energy security is self-evident. These companies will be 
building new generating capacity in the very near future, but the 
question they must first answer is whether this generation will come 
from clean, safe, nuclear technologies or not.
    If widely deployed in the United States these new technologies will 
create significant business opportunities and will support the rapid 
growth of heavy equipment fabrication, high technology and commercial 
construction industries in this country. Moreover, these American 
technologies and industrial capabilities will be highly competitive 
internationally and would support our leadership role in the global 
expansion of safe, clean nuclear power.
                     advanced fuel cycle initiative
    One of the most important and challenging issues affecting future 
expansion of nuclear energy in the United States and worldwide is 
dealing effectively with spent nuclear fuel and high-level waste. For 
the medium-term, the Advanced Fuel Cycle Initiative (AFCI) will develop 
fuel cycle technologies that will support the economic and sustained 
production of nuclear energy while minimizing waste in a proliferation-
resistant manner. To support the development of these technologies, the 
fiscal year 2008 Budget request includes $395.0 million for AFCI.
    AFCI's near-term goals are to develop and demonstrate advanced, 
more proliferation-resistant fuel cycle technologies for treatment of 
commercial light water reactor spent fuel, to develop an integrated 
spent fuel recycling plan, and to provide information and support on 
efforts to minimize the amount of material that needs disposal in a 
geologic repository. AFCI conducts research and development of spent 
fuel treatment and recycling technologies to support an expanding role 
for nuclear power in the United States and to promote world-wide 
expansion of nuclear energy in a proliferation-resistant manner as 
envisioned for the Global Nuclear Energy Partnership (GNEP). AFCI is 
the U.S. technology component of the GNEP.
    Specifically, in fiscal year 2008, the Department intends to 
complete industry-led conceptual design studies for the nuclear fuel 
recycling center and the advanced recycling reactor Demonstration 
Analysis. Additionally, DOE will continue start-to-finish 
demonstrations of recycling technologies, which are expected to produce 
separated transuranics for use in transmutation fuel development, as 
well as conduct systems analysis and advanced computing and simulation 
activities focused on a variety of deployment system alternatives and 
supporting technology development. As part of GNEP Technology 
Development, the Department also intends to evaluate small, 
proliferation-resistant reactors for potential U.S. manufacture and 
export to reactor user nations.
    GNEP seeks to bring about a significant, wide-scale use of nuclear 
energy, and to take actions now that will allow that vision to be 
achieved while decreasing the risk of nuclear weapons proliferation and 
effectively addressing the challenges of nuclear waste disposal. GNEP 
will advance the nonproliferation and national security interests of 
the United States by reinforcing its nonproliferation policies and 
limiting the spread of enrichment and reprocessing technologies, and 
will eventually eliminate excess civilian plutonium stocks that have 
accumulated. The AFCI budget request supports the Department's goal of 
realizing the GNEP vision. AFCI activities in fiscal year 2007 and 
fiscal year 2008 are focused on developing a detailed roadmap for 
implementing all aspects of the GNEP vision and informing a Secretarial 
decision in June 2008 on the path forward for GNEP.
    Long-term goals for AFCI/GNEP will develop and demonstrate an 
advanced, more proliferation-resistant closed nuclear fuel cycle system 
involving spent fuel partitioning and recycling of long-lived 
radioactive elements for destruction through transmutation in fast 
reactors that could result in a significant increase in the effective 
capacity of the planned Yucca Mountain repository. This capacity 
increase could ensure enough capacity to accommodate all the spent fuel 
generated in the United States this century from any reasonably 
conceivable deployment scenario for nuclear energy. Yet, under any fuel 
cycle scenario a geologic repository is necessary. Therefore, GNEP and 
Yucca Mountain are proceeding on parallel tracks.
            generation iv nuclear energy systems initiative
    The fiscal year 2008 budget request includes $36.1 million to 
continue development of next-generation nuclear energy systems within 
the Generation IV program. For the long term, the Generation IV program 
will develop new nuclear energy systems that can compete with advanced 
fossil and renewable technologies, enabling power providers to select 
from a diverse group of options that are economical, reliable, safe, 
secure, and environmentally acceptable. In particular, the Next 
Generation Nuclear Plant (NGNP) reactor concept will be capable of 
providing high-temperature process heat for various industrial 
applications, including the production of hydrogen in support of the 
President's Advanced Energy Initiative.
    The NGNP, with an investment of $30 million within the Generation 
IV Nuclear Energy Systems Initiative, will utilize a Generation IV Very 
High Temperature Reactor configured for production of high temperature 
process heat for the generation of hydrogen, electricity, and other 
industrial commodities. The Energy Policy Act of 2005 (EPACT) 
authorized the Department to create a two-phased NGNP Project at the 
Idaho National Laboratory (INL). The Department is presently engaged in 
Phase I of the EPACT defined scope of work which includes: developing a 
licensing strategy, selecting and validating the appropriate hydrogen 
production technology, conducting enabling research and development for 
the reactor system, determining whether it is appropriate to combine 
electricity generation and hydrogen production in a single prototype 
nuclear reactor and plant, and establishing key design parameters. 
Phase I will continue until 2011, at which time the Department will 
evaluate the need for continuing into the design and construction 
activities called for in Phase II.
    The fiscal year 2008 budget request maintains critical R&D that 
will help achieve the desired goals of sustainability, economics, and 
proliferation resistance. Further investigation of technical and 
economical challenges and risks is needed before a decision can be made 
to proceed with a demonstration of a next-generation reactor.
                      nuclear hydrogen initiative
    Hydrogen offers significant promise as a future energy technology, 
particularly for the transportation sector. The use of hydrogen in 
transportation will reduce U.S. dependence on foreign sources of 
petroleum, enhancing our energy security. The fiscal year 2008 budget 
request for the Office of Nuclear Energy includes $22.6 million to 
continue to develop enabling technologies, demonstrate nuclear-based 
hydrogen production technologies, and study potential hydrogen 
production strategies to support the President's vision for a future 
hydrogen economy.
    Currently, the only economical, large-scale method of hydrogen 
production involves the conversion of methane into hydrogen through a 
steam reforming process. This process produces ten kilograms of 
greenhouse gases for every kilogram of hydrogen, defeating a primary 
advantage of using hydrogen--its environmental benefits. Another 
existing method, electrolysis, converts water into hydrogen using 
electricity. Electrolysis is typically used for small production 
quantities and is inherently less efficient because electricity must 
first be produced to run the equipment used to convert the water into 
hydrogen. Additionally, the environmental benefits of electrolysis are 
negated unless a non-emitting technology, such as nuclear or renewable 
energy, is used to produce the electricity. The Nuclear Hydrogen 
Initiative is developing processes that operate across a range of 
temperatures for the various advanced reactors being researched by the 
Generation IV Nuclear Energy Systems Initiative. These processes, 
coupled with advanced nuclear reactors, have the potential for high-
efficiency, large-scale production of hydrogen.
    The objective of this program is to demonstrate the technologies at 
increasingly larger scales ultimately culminating in an industrial 
scale that would be technically and economically suited for commercial 
deployment. Fiscal year 2005 and fiscal year 2006 activities were 
focused on the validation of individual processes and components; 
fiscal year 2007 and fiscal year 2008 are focused on the design, 
construction and operation of integrated laboratory scale experiments. 
In fiscal year 2008, the Department will complete construction of 
integrated laboratory-scale system experiments and begin testing to 
enable the 2011 selection of the technology that could be demonstrated 
in a pilot scale hydrogen production experiment.
                   radiological facilities management
    The Office of Nuclear Energy's fiscal year 2008 budget request also 
includes $53.0 million to maintain critical research and production 
facilities for medical isotopes and radioisotope power systems at the 
Idaho National Laboratory, the Oak Ridge National Laboratory, the Los 
Alamos National Laboratory, the Sandia National Laboratory, and the 
Brookhaven National Laboratory. This request also includes funding for 
University Research Reactors.
    These funds assure that the infrastructure for the facilities meet 
essential safety and environmental requirements and are maintained at 
operable user-ready levels. Programmatic activities, including 
production and research, are funded either by other DOE programs, by 
the private sector, or by other Federal agency users.
    The Department seeks $14.9 million to maintain one-of-a-kind 
facilities at the Idaho, Oak Ridge, Brookhaven, and Los Alamos National 
Laboratories for isotope production and processing. These isotopes are 
used to help improve the accuracy, effectiveness, and continuation of 
medical diagnoses and therapy, enhance homeland security, improve the 
efficiency of industrial processes, and provide precise measurement and 
investigative tools for materials, biomedical, environmental, 
archeological, and other research. Actual operations, production, 
research or other activities are funded either by other DOE programs, 
by the private sector, or by other Federal agency users.
    The Department also maintains unique facilities and capabilities at 
the Idaho, Oak Ridge, and Los Alamos National Laboratories that enable 
the Department to provide the radioisotope power systems for space 
exploration and national security applications. The fiscal year 2008 
budget requests $35.1 million to maintain the basic facilities and 
associated personnel whereas mission specific development or hardware 
fabrication costs are provided by the user agencies. This arrangement 
is essential in order to preserve the basic capability regardless of 
periodic fluctuations in the demand of the end product users.
    Finally, the Department requests $2.9 million in fiscal year 2008 
to provide research reactor fuel to universities and dispose of spent 
fuel from university reactors. Currently, there are 27 operating 
university research reactors at 27 institutions in the United States. 
Many of these facilities have permanent fuel cores and therefore do not 
require regular fuel shipments. However, DOE supplies approximately a 
dozen universities with fresh fuel and shipments of spent fuel as 
needed.
                      idaho facilities management
    The Department is working to transform Idaho National Laboratory 
into one of the world's foremost nuclear research laboratories. As 
such, the fiscal year 2008 budget request seeks $104.7 million for the 
Idaho Facilities Management Program to maintain and enhance the 
laboratory's nuclear energy research infrastructure.
    The Idaho Facilities Management Program operates and maintains 
three main engineering and research campuses and the Central Facilities 
Area at the Idaho National Laboratory. The 3 main engineering and 
research campuses are: (1) the Reactor Technology Complex which houses 
the world-renown Advanced Test Reactor, (2) the Materials and Fuels 
Complex, and (3) the Science and Technology Campus. As the Idaho 
National Laboratory landlord, the Office of Nuclear Energy also 
operates and maintains the Central Facilities Area at Idaho National 
Laboratory, providing site-wide support services and from which various 
site infrastructure systems and facilities, such as electrical utility 
distribution, intra-laboratory communications systems, and roads are 
managed and maintained. Also included within the Central Facilities 
Area is the Radiological and Environmental Sciences Laboratory operated 
by the Office of Nuclear Energy.
                idaho site-wide safeguards & securities
    The mission of the Idaho Site-wide Safeguards and Security program 
is to protect the assets and infrastructure of the Idaho National 
Laboratory from theft, diversion, sabotage, espionage, unauthorized 
access, compromise, and other hostile acts that may cause unacceptable 
adverse impacts on national security; program continuity; or the health 
and safety of employees, the public, or the environment.
    The fiscal year 2008 Budget Request includes $72.9 million to 
provide protection of nuclear materials, classified matter, government 
property, and other vital assets from unauthorized access, theft , 
diversion, sabotage, espionage, and other hostile acts that may cause 
risks to national security, the health and safety of DOE and contractor 
employees, the public or the environment.
      university reactor infrastructure and educational assistance
    While the University Educational Assistance program has concluded, 
funding will continue to be provided to the Nation's nuclear science 
and engineering universities through our applied research and 
development programs by means of our Nuclear Energy Research Initiative 
(NERI). NERI funds are competitively awarded to support research 
objectives of the Advanced Fuel Cycle Initiative, the Generation IV 
Energy Systems Initiative and the Nuclear Hydrogen Initiative. By 
increasing the opportunities for university participation in our 
research programs, the Department seeks to establish an improved 
education and research network among universities, laboratories, 
industry and government. Approximately $62 million in funding for 
universities is included in the research programs for fiscal year 2008, 
a 21 percent increase over the fiscal year 2007 request.
                               conclusion
    This concludes my prepared statement. Your leadership and guidance 
has been essential to the progress the program has achieved thus far 
and your support is needed as we engage the task ahead of investing in 
our energy security.
    I would be pleased to answer any questions you may have.

    Senator Dorgan. Next, we will hear from Secretary Karsner. 
Secretary Karsner is Assistant Secretary for the Office of 
Energy Efficiency and Renewable Energy. Secretary Karsner, we 
welcome you.
STATEMENT OF HON. ALEXANDER KARSNER, ASSISTANT 
            SECRETARY FOR ENERGY EFFICIENCY AND 
            RENEWABLE ENERGY
    Mr. Karsner. I appreciate that. Chairman Dorgan, Ranking 
Member Domenici, members of the subcommittee, thank you for 
this opportunity to testify on the President's fiscal year 2008 
budget request for the Office of Energy Efficiency and 
Renewable Energy, EERE.
    The request includes $1.24 billion for EERE, approximately 
$60 million more than the fiscal year 2007 request to Congress. 
To be clear, my statement today is presented primarily in 
comparison with the administration's fiscal year 2007 request; 
however, because the Department has now submitted its fiscal 
year 2007 operating plan, I'm also going to highlight some of 
the key allocations from that appropriation.
    The fiscal year 2008 budget request addresses pressing 
energy and environmental challenges by accelerating the 
development of renewable energy and advanced energy efficiency 
technologies. Much of EERE's funding is an integral part of the 
President's Advanced Energy Initiative (AEI). The AEI was 
launched in 2006 to confront our Nation's addiction to oil, 
lessen dependence on foreign resources and reduce emissions by 
developing clean sources of electricity generation.
    In the 2007 State of the Union Address, the President 
raised the bar further by seeking legislative action to reduce 
gasoline consumption by 20 percent within the decade, the 20 in 
10 plan. The 20 in 10 legislative proposals include an 
increased alternative fuel standard and reduced fuel 
consumption through raising and reforming corporate average 
fuel economy with a CAFE&ogram.
    The President's budget request increases funding for 
programs that support the 20 in 10 goal, including biomass and 
biofuels R&D to expand the availability of alternative 
transportation fuels. While the fiscal year 2007 continuing 
resolution is a substantial increase over the President's 
fiscal year 2008 budget proposal, the funds will be used to 
accelerate critical components of the Advanced Energy 
Initiative. EERE is directing an additional $30 million to 
commercial biorefinery demonstrations, $10 million additional 
for plug-in hybrid battery development, and over $100 million 
for improvements at the National Renewable Energy Laboratory, 
NREL. The increase will accelerate the completion of NREL's 
research support facility, a state-of-the-art building complex. 
As a national model of LEED certified advanced design, it's 
going to showcase the renewable energy and energy efficiency 
technologies that NREL develops and reduce its operating costs. 
Preliminary analyses indicate the potential to achieve up to 
$122 million of life cycle savings.
    The increase will also support expansion of NREL's 
Integrated Bio-Refinery Research Facility, which provides the 
industry with a very unique test bed for emerging technologies.
    Returning to fiscal year 2008, EERE's overall budget 
request reflects the goals of accelerating new energy R&D and 
expanding commercialization and deployment of emerging 
technologies. The request for biomass and biorefinery systems 
R&D is $179.3 million, an increase of $29.6 million or almost 
20 percent over the previous year. This proposal highlights the 
essential role of the Biofuels Initiative in increasing 
America's energy security.
    The program is focused on making cellulosic ethanol cost-
competitive by 2012. EERE will continue to support cost-shared 
efforts with industry to develop and demonstrate cellulosic 
biorefinery technologies that enable the production of 
transportation fuels and co-products. In addition, EERE is 
engaging in cost-shared projects with industry for enzyme 
development and for improved organism development or 
ethanologens for converting the sugars into ethanol. These two 
projects address major barriers to meeting our 2012 targets.
    For the Vehicle Technologies Program, the Department is 
requesting $176.1 million for fiscal year 2008 to advance the 
development of energy-efficient, environmentally friendly, 
flexible platform technologies for cars and trucks that use 
significantly less oil and enable industry to comply with the 
proposed reformed CAFE standards. This request is $10.1 million 
higher than the fiscal year 2007 request and will advance the 
state of the art for energy storage batteries, power 
electronics and motors, and drive systems and testing needed to 
accelerate the viability and delivery of plug-in hybrid 
electric vehicles.
    Battery technologies have made significant progress, 
reducing the cost of next generation hybrid vehicle batteries 
in each of the past 3 years, from almost $1,200 per vehicle to 
$750 per vehicle. In fiscal year 2008, we expect to bring that 
down further to $625 per vehicle and to increase our emphasis 
on batteries specifically optimized for plug-in hybrid 
applications.
    Next, hydrogen is an important element of our strategy for 
energy security and environmental stewardship. The President's 
$309 million budget request for the Hydrogen Fuel Initiative 
fulfills his 5-year commitment of $1.2 billion. The portion of 
this under EERE is $213 million, which reflects a $7.2 million 
increase over the fiscal year 2007 budget request.
    Much progress has been made since the announcement of the 
Hydrogen Fuel Initiative in 2003. The research has reduced the 
high volume cost of automotive fuel cells from $275 per 
kilowatt in 2002 to $107 per kilowatt in 2006, a major step 
toward the ultimate cost target of $30 per kilowatt.
    Our research is going to continue to sharpen its focus to 
meet hydrogen production objectives through renewable pathways, 
including performing with bioderived liquids and electrolysis.
    For solar energy, the fiscal year 2008 request is $148.3 
million, a level that is nearly twice the enacted 2006 level. 
The Department's photovoltaic R&D focuses on those technology 
pathways that have the greatest potential to achieve more cost 
competitiveness and grid parity by or before 2015. Industry-led 
partnerships with universities, State groups and national 
laboratories, known as Technology Pathway Partnerships, will 
continue in fiscal year 2008 to address the issues of cost, 
performance, and reliability.
    Other priority key program areas of EERE include Building 
Technologies, which targets the long-term goal in 2020 of net-
zero energy buildings--houses that can produce as much energy 
as they use on an annual basis. We're going to help industry 
produce a white light-emitting diode, or LED, lamp, which has 
already set the world record for LED brightness and efficacy in 
a power chip.
    Wind energy focuses on reducing wind power costs and 
removing siting and transmission barriers to expand and use 
wind energy up to potentially 20 percent of our grid capacity 
in the United States.
    Industrial Technologies, which in addition to leveraging 
successful partnerships with energy intensive industries, will 
support the development of next generation technologies that 
can revolutionize the U.S. industrial processes and deliver 
dramatic energy and environmental benefits.

                           PREPARED STATEMENT

    My written statement, of course, includes greater detail on 
these and other programs but this concludes my opening remarks 
and I'm happy to answer any questions the subcommittee members 
may have of me.
    Senator Dorgan. Secretary Karsner, thank you very much for 
your testimony.
    [The statement follows:]
              Prepared Statement of Hon. Alexander Karsner
    Mr. Chairman and members of the committee, thank you for this 
opportunity to testify on the President's fiscal year 2008 budget 
request for the Office of Energy Efficiency and Renewable Energy 
(EERE).
    The President's fiscal year 2008 budget request includes $1.24 
billion for EERE, approximately $60 million (5 percent) more than the 
fiscal year 2007 request to Congress. To be clear, because of timing in 
drafting this testimony and finalizing the Department's operating plan 
for the fiscal year 2007 year-long Continuing Resolution (CR), my 
written testimony on the fiscal year 2008 budget request is presented 
primarily in comparison to the administration's fiscal year 2007 
request. EERE received a $300 million increase in funding under the CR. 
I am grateful to Congress for its vote of confidence in the energy 
efficiency and renewable energy programs, but note that this level is 
above the allocation in the President's request. In allocating the 
additional $300 million, EERE will accelerate the priorities reflected 
in administration initiatives such as the ``20 in 10'' plan and the 
Advanced Energy Initiative (AEI), while still carrying out 
implementation of the Energy Policy Act of 2005 (EPACT).
    The fiscal year 2008 budget request addresses pressing energy and 
environmental challenges facing our country today by accelerating the 
development of both renewable energy technologies to increase the 
amount of clean energy produced in the United States and advanced 
energy efficient technologies, standards, and practices that use less 
energy. Much of EERE's funding is an integral part of the President's 
AEI, launched in 2006 to confront our addiction to oil, lessen 
dependence on foreign resources, and reduce emissions by developing 
clean sources of electricity generation. Together, new technologies can 
help change the way we power our homes, businesses, and automobiles.
    In his 2007 State of the Union address, the President raised the 
bar by seeking legislative action for our country to reduce gasoline 
consumption by 20 percent in the next 10 years, the ``20 in 10'' plan. 
The fiscal year 2008 budget request increases funding for programs that 
may help the Nation achieve the ``20 in 10'' goal, including, for 
example, biomass/biofuels R&D that may help to expand the availability 
of alternative transportation fuels.
    EERE's applied science R&D contributes to the foundation for 
transforming the Nation's energy options and energy use. For example, 
one of this year's R&D 100 awards went to the Department's Idaho 
National Laboratory for its work with Xtreme Xylanase, an enzyme 
produced by bacteria found in the hot, acidic waters of Yellowstone 
National Park. Work on Xtreme Xylanase was funded in part by EERE's 
Biomass Program. The metabolic versatility of this enzyme (it breaks 
down cellulose and hemicellulose over a broad range of temperatures and 
acidic pH conditions) could help make cellulosic ethanol more 
efficiently and economically. In the field of solar energy, a new 
world-record 40 percent efficient concentrating photovoltaic solar cell 
was developed as a result of collaboration between DOE, the National 
Renewable Energy Laboratory, and Spectrolab. For general lighting 
applications with solid-state lighting, Cree, Inc., with DOE R&D 
funding, has released the new XLamp 7090 power white light-emitting 
diode (LED), setting a world record for LED brightness and efficacy (at 
85 lumens/Watt) in a power chip.
    It is essential, however, that, we work not only to accelerate R&D 
for new energy technologies, but address the accelerated adoption of 
technologies into commercial products that are widely available at 
reasonable cost to all Americans. Thus, in addition to its historical 
role of leading Federal applied science on emerging technologies, EERE 
is taking aggressive steps to catalyze the rapid commercialization and 
deployment of critical energy advances through innovative partnerships 
and collaboration with lenders and investment groups, the States, and 
industry leaders. We seek to help enable and accelerate market 
transformation toward the use of more efficient and cleaner 
technologies.
    EERE's overall budget request reflects the funding needed to meet 
our goals. The following EERE programs target and support sectors of 
energy use and supply that will help lead our Nation to a secure energy 
future:
                  biomass and biorefinery systems r&d
    The fiscal year 2008 budget request for Biomass and Biorefinery 
Systems R&D is $179.3 million, an increase of $29.6 million, almost 20 
percent above the fiscal year 2007 request. This proposed funding 
increase reflects the essential role of the Biofuels Initiative in 
increasing America's energy security. Biomass is the most viable 
renewable option for producing liquid transportation fuels in the near 
term, with the potential to help reduce our dependence on imported oil.
    The focus of the program is to make cellulosic ethanol cost-
competitive by 2012. EERE will continue in fiscal year 2008 to support 
its cost-share efforts with industry to develop and demonstrate 
technologies to enable cellulosic biorefineries for the production of 
transportation fuels and co-products. The fiscal year 2008 funding 
increase also supports the validation of advancing biomass conversion 
technologies and feedstocks in biorefineries at approximately 10 
percent of commercial scale. This effort enables industry to resolve 
remaining technical and process integration uncertainties for the 
``next generation'' of biorefinery process technologies being examined 
at a significant, but less-costly scale. Ultimately, 10-percent scale 
demonstrations have the potential to reduce the overall cost and risk 
to industry along with improving the likelihood of obtaining financing 
for commercial-scale facilities.
    The fiscal year 2008 funding increase will also support EERE cost-
shared projects with industry for enzyme development for producing low 
cost sugars from biomass and for improved organism development or 
``ethanologen'' for converting those sugars to ethanol. These two 
industry cost-share projects address major barriers to meeting the 2012 
cost goal. Overall knowledge gained from section 932 projects, 10 
percent validation scale projects, enzyme development, and ethanologen 
R&D, combined with other key R&D activities, should accelerate 
industry's ability to produce cost-competitive cellulosic ethanol.
    To address biomass resource availability and feedstock 
infrastructure to reduce the cost and improve the storage of delivered 
biomass in different geographical areas of the United States, EERE will 
continue to support the Regional Feedstock Partnership work with the 
U.S. Department of Agriculture (USDA) and land grant colleges. These 
partnerships will help identify the regional biomass supply, growth, 
and biorefinery development opportunities.
    In order to capture and coordinate Federal-wide activities 
supporting the President's goal, the Biomass Program is developing a 
National Biofuels Action Plan commissioned through the Biomass Research 
and Development Initiative. The Biomass Program will also establish the 
framework for an ethanol reverse auction in accordance with section 942 
of EPACT 2005. The auction will award incentives on a per gallon basis 
of cellulosic biofuels produced.
                      vehicle technologies program
    In fiscal year 2008, the Department is requesting $176.1 million 
for the Vehicle Technologies Program to advance development of 
increasingly more energy-efficient and environmentally friendly, 
flexible platform technologies for cars and trucks that will use 
significantly less oil and enable the auto industry to comply with 
reformed CAFE standards. This request is $10.1 million higher than the 
fiscal year 2007 request, and will advance the state of the art for 
energy storage batteries, power electronics and motors, and the hybrid 
drive systems and testing needed to accelerate manufacturing viability 
and delivery of plug-in hybrid electric vehicles.
    Activities in the Vehicle Technologies Program contribute to two 
cooperative government/industry activities: the FreedomCAR and Fuel 
Partnership (where CAR stands for Cooperative Automotive Research) and 
the 21st Century Truck Partnership. The FreedomCAR and Fuel Partnership 
is a collaborative effort among the U.S. Council for Automotive 
Research (USCAR--representing the three domestic automobile 
manufacturers), five energy suppliers, and DOE for cooperative, pre-
competitive research on advanced automotive technologies having 
significant potential to reduce oil consumption. The 21st Century Truck 
Partnership focuses on commercial vehicles. The partnership involves 
key members of the commercial vehicle industry, (truck equipment 
manufacturers and engine manufacturers) along with three other Federal 
agencies. The R&D centers on improving advanced combustion engine 
systems and fuels and on reducing vehicle parasitic losses, meaning 
frictional and aerodynamic losses, extra loads like air conditioning, 
and other vehicle inefficiencies that increase fuel consumption.
    Vehicle Technologies Program activities that support the goals of 
the FreedomCAR and Fuel Partnership focus on high-efficiency and 
flexible platform vehicle technologies such as advanced combustion 
engines and their enabling fuels, hybrid vehicle systems (including 
plug-in hybrids), high-power and high-energy batteries, lightweight 
materials, and power electronics. These technologies could lead to 
substantial oil savings if adopted by industry participants and 
included in their manufacturing plans.
    The FreedomCAR goals include reducing the volume production cost of 
a high-power 25kW battery for use in hybrid passenger vehicles from 
$3000 in 1998 to $500 by 2010. In 2006 we projected through the 
modeling of research data that lithium ion battery cost could be 
reduced to $750 per 25 kW battery system when produced in mass 
quantities. This year's request increases the emphasis on plug-in 
hybrid vehicle component technologies. Cited by the President as a key 
part of the strategy for reducing America's dependence on oil, these 
technologies offer the potential to make significant additional 
improvements in petroleum reduction beyond that achievable with 
standard hybrid configurations.
    Combustion engine efficiency has made good progress over the past 3 
years (2004-2006), with our R&D increasing the efficiency of light-duty 
passenger vehicle diesel engines from 35 to 41 percent. This means that 
if manufacturers were to produce these more efficient engines, a car 
that previously got the CAFE average of 27 miles per gallon on gasoline 
could potentially get 37 miles per gallon with an advanced, clean 
diesel. In fiscal year 2008, we expect to reach 43 percent efficiency 
for passenger vehicle diesel engines, approaching the 2010 goal of 45 
percent. These advanced combustion engines have the potential to 
achieve the efficiency goals for cars and trucks while maintaining cost 
and durability with near-zero emissions. Battery technologies have also 
made significant progress toward program goals, having reduced the cost 
of next-generation hybrid vehicle batteries in each of the past 3 
years, from almost $1,200 per vehicle at the beginning of fiscal year 
2004 to $750 at the end of fiscal year 2006. In fiscal year 2008, we 
expect to bring that down to $625 per vehicle, and to increase our 
emphasis on batteries specifically optimized for plug-in hybrid 
vehicles to have battery technology ready by 2014 that will enable 
automobile manufacturers to economically produce competitive plug-in 
hybrid vehicles having a 40 mile all-electric range.
    R&D programs will also continue to accelerate materials research 
directed at light, strong vehicle structures to enable the production 
of lighter vehicles that could result in higher efficiency fleets, and 
to develop thermoelectric materials for efficient energy recovery from 
heat. Other activities will focus on expanding efforts to promote the 
adoption and use of petroleum-reducing fuels, technologies, and 
practices, principally by working with industry partners, fuel 
providers, Clean Cities coalitions and their stakeholders, and end-
users on activities ranging from using more alternative fuel vehicles 
and renewable fuel blends to driving smarter, minimizing wasteful idle 
time, and purchasing vehicles that get better fuel economy. 
Accordingly, the Vehicle Technologies Deployment budget request 
(including Clean Cities) will increase by over 100 percent relative to 
the fiscal year 2007 request.
                      hydrogen technology program
    Hydrogen is an important element of our Nation's long-term strategy 
for energy security and environmental stewardship. It could enhance our 
energy security by providing a transportation fuel that may be produced 
from a variety of domestic resources; and it should serve our 
environmental interests by allowing vehicles to operate using fuel 
cells, without generating any tailpipe emissions. The Department's 
research is focused on pathways that produce and deliver hydrogen from 
diverse origins including emission-free nuclear, and renewable 
resources.
    The President's $309 million fiscal year 2008 budget request for 
DOE for the Hydrogen Fuel Initiative fulfills his commitment of $1.2 
billion over 5 years. The portion of this under our purview in EERE is 
$213 million, which reflects a $17.2 million increase over the fiscal 
year 2007 budget request. The proposed increase will accelerate and 
expand efforts to research and develop hydrogen-storage systems to 
improve performance, and fuel cell materials and components to reduce 
their cost, and improve durability. It will also support accelerating 
cost reduction of renewable hydrogen production technologies as well as 
critical delivery technologies.
    Much progress has been made since the announcement of the Hydrogen 
Fuel Initiative in 2003. The research has reduced the high-volume cost 
of automotive fuel cells from $275 per kilowatt in 2002 to $107 per 
kilowatt in 2006--a major step towards the ultimate cost target of $30 
per kilowatt. In fiscal year 2008, we will continue projects on fuel 
cell catalysts and membranes, and cold-weather start-up and operation. 
In addition to reducing cost and improving performance, this work will 
help us achieve our 2010 durability target of 5,000 hours, which should 
enable a vehicle lifetime of 150,000 miles.
    We have also achieved our 2006 hydrogen cost goal of $3 per 
gasoline-gallon-equivalent for hydrogen produced by distributed 
reforming of natural gas, a potentially economical early market 
pathway. Our research will sharpen its focus to meet the same objective 
through renewable pathways--including reforming of bio-derived liquids 
and electrolysis. We are also working with the Department's Offices of 
Nuclear Energy, Fossil Energy, and Science to develop nuclear-based 
hydrogen production, hydrogen from coal--exclusively with carbon 
sequestration--and longer-term biological and photoelectrochemical 
hydrogen production pathways.
    Our diverse hydrogen-storage portfolio is also showing promising 
results, with innovative materials being developed in areas such as 
metal hydrides, chemical hydrides, and carbon-based materials. Research 
conducted at our ``Centers of Excellence,'' and by independent 
projects, has continued to increase material storage capacity. 
Substantial breakthroughs are required to reach our goal of providing 
consumers with enough storage for a 300-mile driving range, without 
compromising a vehicle's interior space.
    Developing hydrogen technologies that can be manufactured 
domestically will also improve our economic competitiveness. Our 
manufacturing R&D effort addresses the need for high-volume fabrication 
processes for fuel cells and many other components, which are all 
currently built one-at-a-time. This is essential to lowering the cost 
of these technologies, and to developing a domestic supplier base.
    In addition to these R&D activities, we are addressing other 
challenges significant to realizing the benefits of hydrogen fuel 
cells. Our Technology Validation Program has brought together teams of 
automobile manufacturers and energy companies to operate and evaluate 
fuel cell vehicles and hydrogen stations under real-world conditions. 
To date, the program has placed 69 fuel cell vehicles on the road, 
served by 10 hydrogen fueling stations.
    Furthermore, we are working to ensure safe practices, and--through 
support of existing codes and standards development organizations--we 
are laying the groundwork for developing technically sound codes and 
standards, which are essential to implementing hydrogen technologies.
    Finally, our education activities focus on overcoming the knowledge 
barriers inherent in the introduction of new technology. Last month, we 
released a multimedia web-based course that introduces hydrogen to 
first responders. In the coming year, we will continue to expand the 
availability of training and conduct outreach to raise awareness of the 
technology.
    The effects of the Department's broad-based efforts in the Hydrogen 
Program are being seen nationwide, and progress has been substantial. 
Investments are not only occurring at the Federal level, but also at 
state and local levels. These diverse investments increase our 
probability of success in overcoming existing technological barriers, 
which will allow industry to make fuel cell vehicles that customers 
will want to buy, and encourage investment in a hydrogen refueling 
infrastructure that is profitable.
                          solar energy program
    The Solar Energy Program sponsors research, development, and 
deployment of solar energy technologies and systems that can help our 
Nation meet electricity needs and reduce the stress on our electricity 
infrastructure. Through the Solar America Initiative (SAI), the Solar 
Program aims to accelerate the market competitiveness of solar 
electricity as industry-led teams compete to deliver solar systems that 
are less expensive, more efficient, and highly reliable. The Solar 
Program supports three technology areas: photovoltaics (PV), 
concentrating solar power (CSP), and solar heating and lighting. The 
fiscal year 2008 budget request for Solar Energy is $148.3 million, a 
level that is nearly twice the enacted fiscal year 2006 level.
    To lower costs more rapidly and improve performance, the 
Department's PV R&D, budgeted in fiscal year 2008 at $137.3 million, 
focuses on those technology pathways that have the greatest potential 
to reach cost-competitiveness and grid parity by or before 2015. 
Industry-led partnerships with universities, state groups and National 
Laboratories, known as ``Technology Pathway Partnerships,'' will 
continue in fiscal year 2008 to address the issues of cost, 
performance, and reliability associated with each pathway. Work on PV 
modules, the heart of PV systems, will be conducted, as well as other 
``balance-of-system'' components.
    To catalyze market transformation, DOE will promote the expansion 
of the solar marketplace by seizing opportunities for growth and by 
lowering barriers to entry. The Department will provide technical 
outreach to States and utilities, continue pressing work on codes and 
standards issues, and solicit new applications for its Solar America 
Cities activity. These market transformation activities help pave the 
way for technologies developed by our industry partnerships to enter 
the marketplace.
    We will emphasize the importance of interconnection standard 
procedures and net metering regulations that are designed to 
accommodate solar and other clean distributed energy systems. A 
precondition for large-scale solar market penetration in America is to 
have the proper means for homeowners and businesses to connect solar 
systems to the grid, as well as to be paid for excess electricity they 
feed back into the grid. We are working with our colleagues in the 
Department's Office of Electricity Delivery and Energy Reliability to 
develop ``best practice'' recommendations for States to use as they 
undertake consideration of interconnection procedures and net metering 
regulations and make implementation decisions pursuant to sections 1251 
and 1254 of EPACT 2005. Fiscal year 2008 funding will also be used to 
offer technical outreach to States and utilities to enhance solar 
connectivity issues.
    Work will continue on the multi-year solicitations launched in 
fiscal year 2007 that promote adoption of market-ready solar 
technologies and a new effort will support benchmarking, modeling, and 
analysis for the systems driven approach, and market, value and policy 
analysis needed to support the SAI. EERE's PV activities are 
increasingly coordinated and when possible convergent with solar energy 
activities in the Building Technologies and the Federal Energy 
Management programs, and the research activities of the DOE Office of 
Science.
    The fiscal year 2008 budget request for CSP--systems that utilize 
heat generated by concentrating and absorbing the sun's energy to drive 
a heat engine/generator to produce electric power--is $9.0 million. The 
development of advanced thermal energy storage technologies will be 
expanded, along with continued support to develop next generation 
parabolic trough concentrators, solar engines, and receivers. For 
distributed applications, research will focus on improving the 
reliability of dish systems through the operation and testing of 
multiple units. Technical assistance will be provided to industry in 
its development of a 1.0 MW dish system in California that is expected 
to be the precursor of several much larger plants. Technical support 
will also be provided to the Western Governors' Association and several 
southwestern utilities to assist their CSP deployment activities.
    The Solar Heating and Lighting program, a $2.0 million request, 
will focus on R&D to reduce the cost of solar heating in freezing 
climates. The program will also support collaboration with EERE's 
Building Technologies programs to integrate photovoltaic systems, solar 
water heating, and solar space heating into home design and structure. 
Such deployment efforts will help to seize market expansion 
opportunities.
                     building technologies program
    Energy use by residential and commercial buildings accounts for 
over one-third of the Nation's total energy consumption, including two-
thirds of the electricity generated in the United States. Addressing 
that significant sector of energy consumption, the $86.5 million 
requested this year for the Building Technologies Program represents a 
$9.1 million increase of 12 percent over the fiscal year 2007 request. 
The funding supports a portfolio of activities that includes solid 
state lighting, improved energy efficiency of other building components 
and equipment and their effective integration using whole-building-
system design technique, the development of codes and standards for 
buildings and appliances, and education and market introduction 
programs, including ENERGY STAR and EnergySmart Schools.
    Funding for Residential Buildings Integration aims to enable 
residential buildings to use up to 70 percent less energy, and to 
integrate renewable energy systems into highly efficient buildings to 
achieve the long-term goal in 2020 of net Zero Energy Buildings--houses 
that produce as much energy as they use on an annual basis. During 
fiscal year 2008, research for production-ready new residential 
buildings that are 40 percent more efficient will continue for four 
climate zones.
    The $19.3 million request for solid state lighting will advance 
development of the organic and inorganic LEDs that has the potential to 
double the efficiency of fluorescent lighting technology. The fiscal 
year 2008 requested funding will be used to develop general 
illumination technologies with the goal of achieving energy 
efficiencies of up to 93 lumens per Watt with improved visual comfort 
and quality of light and focus on applied research that enables the 
industrial base to manufacture LEDs.
    The fiscal year 2008 request reflects the Department's commitment 
to clear the backlog of equipment standards and test procedures that 
had accumulated in the prior 12 years and meet the statutory schedule 
for rulemakings for new products covered by EPACT 2005. The Department 
will continue to implement productivity enhancements that will allow 
multiple rulemaking activities to proceed simultaneously, while 
maintaining the rigorous technical and economic analysis required by 
statute.
    Funds for the Building Technologies Program will also support 
development of highly insulating and dynamic window technologies and 
integrated attic-roof systems needed to achieve long-term zero energy 
building goals. Efforts to accelerate the adoption of efficient 
building technologies by consumers and businesses include expanded 
ENERGY STAR specifications and labels for more products, promotion of 
advanced building efficiency codes, and public-private partnerships to 
advance efficient schools, hospitals, commercial lighting, and home 
building.
                   federal energy management program
    The Federal Energy Management Program (FEMP) assists Federal 
agencies, including DOE, in increasing their use of energy efficiency 
and renewable energy technologies through alternative financing 
contract support and technical assistance, and coordinates Federal 
reporting and evaluation of agency progress each year. As the single 
largest energy consumer in the United States, the Federal government 
must set an example and lead the Nation toward becoming a cleaner, more 
efficient consumer by using existing energy efficiency and renewable 
energy technologies and techniques. On January 24, 2007, President Bush 
signed a new Executive Order to strengthen the environmental, energy, 
and transportation management of Federal agencies which includes a 
requirement for agencies to reduce their energy intensity by 3 percent 
each year until 2015, compared with a 2003 baseline.
    The fiscal year 2008 request for FEMP is $16.8 million, a slight 
decrease of $0.1 million from the fiscal year 2007 request. We are 
requesting $7.9 million for FEMP alternative financing programs that 
help agencies access private sector financing to fund energy 
improvements without the use of current appropriations. We expect to 
achieve not less than $160 million in private sector investment through 
Super ESPCs, Energy Savings Performance Contracts, and Utility Energy 
Service Contracts (UESCs), which will result in about 15 trillion Btus 
in energy saved over the lifecycle of the projects. Furthermore, we are 
requesting $6.5 million for Technical Guidance and Assistance to help 
Federal energy managers identify, design, and implement new 
construction and facility improvement projects that incorporate energy 
efficiency and renewable energy. FEMP will assist Federal agencies in 
meeting the increased energy efficiency goals, established by the new 
Executive Order, by orienting its Technical Guidance and Assistance, 
Training, and Outreach activities towards attracting private-sector 
financing for investment into energy efficiency at Federal facilities. 
In addition to the focus on facility energy consumption, FEMP also 
tracks alternative fuel use in Federal vehicle fleets.
    In fiscal year 2008, the Departmental Energy Management Program 
(DEMP) is being discontinued. FEMP will still provide policy guidance 
and technical assistance to the Department, but DOE has determined that 
the management of energy efficiency and renewable investments at its 
facilities can be more effectively conducted by those facilities. While 
not reported separately, DOE national labs and other facilities spend 
significant funding (direct and indirect) on energy efficiency 
improvements, while also using ESPCs and UESCs where appropriate.
                          wind energy program
    The Wind Program focuses on reducing wind power costs and removing 
barriers to resource utilization of wind energy technology in the 
United States. The program's fiscal year 2008 request is $40.1 million.
    As a result of 30 years of R&D, wind turbines can now provide cost-
effective, reliable clean energy in high wind speed areas. While we 
will continue to do R&D to improve wind energy technologies in low wind 
speed areas, we are also focusing on near-term actions to remove 
existing barriers to increasing the use of wind energy, building on the 
current robust market for wind energy in the United States. These 
efforts could help to set the path for the wind industry to accelerate 
its penetration of delivered emission-free energy, significantly 
expanding beyond the roughly one percent of installed electrical 
generating capacity today.
    The program is expanding application and deployment-related 
activities. The $12.9 million requested for Systems Integration and 
Technology Acceptance will help wind technologies entering the market 
to overcome key obstacles such as grid integration, siting, permitting, 
and environmental barriers. In addition, there will be increased 
support to address issues of pre-competitive turbine reliability and 
performance via efforts of National Laboratories and Cooperative 
Research and Development Agreements or ``CRADAs'' with industry. The 
Wind Program will also establish a Federal interagency siting group to 
minimize regulatory delays on wind projects.
    The Wind Program is funding a broader effort on distributed wind 
technologies and applications to advance the full scope of diverse 
opportunities for wind energy on the distribution side of the electric 
power system.
    A U.S. wind industry-wide roadmapping analysis, being supported by 
the DOE wind program, is underway to determine the technical 
feasibility for wind energy to generate 20 percent of our Nation's 
electricity. To achieve this vision it would require grid 
modernization, expansion, and integration, and removal of other 
deployment barriers. Success would enable delivery of more than 300 
gigawatts of new, clean, affordable, and domestic production capacity 
to our urban load centers and be a substantial contributor to economic 
growth, manufacturing, and rural prosperity. EERE will work with DOE's 
Office of Electricity Delivery and Energy Reliability on several 
studies aimed at expanding electricity transmission between remote wind 
resources and urban areas.
              weatherization and intergovernmental program
    In fiscal year 2008, we are requesting $204.9 million for 
Weatherization and Intergovernmental Activities, a $20.1 million 
decrease from the fiscal year 2007 request. The reduction is primarily 
related to the decrease in the amounts requested for the Weatherization 
Assistance Program, which will enable greater investments in advanced 
R&D within the EERE portfolio to address national priorities: reducing 
dependence on foreign oil, accelerating the development of clean, 
emission-free electricity supply options, and developing highly 
efficient new technologies, products, and practices for our homes and 
buildings.
    The requested $144 million for the Weatherization Assistance 
Program will fund energy efficiency audits and upgrades for at least 
54,599 low-income homes. DOE works directly with States and certain 
Native American Tribes that contract with local governmental or non-
profit agencies to deliver weatherization services to homes in need of 
energy assistance.
    The $45.5 million requested for the State Energy Program provides 
financial and technical assistance to State governments, enabling them 
to target their high priority energy needs and expand clean energy 
choices for their citizens and businesses. This request includes $10.5 
million for a competitive solicitation that will seek regional and 
state partnerships to replicate smart energy policies and programs 
among States. The regional context is outlined in EPACT and aligns with 
our electricity transmission infrastructure.
    Clean electricity generation is targeted by the Renewable Energy 
Production Initiative, which provides financial incentive payment to 
public and Tribal utilities and not-for-profit electric cooperatives 
for renewable generation systems that use solar, wind, geothermal, or 
biomass technologies. The Tribal Energy Program aims to facilitate the 
installation of 100 MW of renewable energy generation by Native 
American tribes by 2010.
    The Asia Pacific Partnership (APP) for Clean Development and 
Climate requests funding at the $7.5 million level. This international 
partnership is an important and innovative accord to accelerate the 
development and deployment of clean energy technologies among the six 
member countries: Australia, China, India, Japan, South Korea, and the 
United States. Representing about half of the world's economy, 
population, energy use, and emissions, the six countries have agreed to 
work together and with private sector partners to set and meet goals 
for energy security, national air pollution reduction, and global 
warming, employing policies and practices that promote sustainable 
economic growth and poverty reduction, while addressing the serious 
challenge of climate change.
                    industrial technologies program
    Industry consumes more energy than the residential, commercial, and 
transportation end-use sectors, and it is also the Nation's second 
largest emitter of CO2. Advancements in industrial energy-
efficient technology could improve U.S. competitiveness, and contribute 
to our national effort to reduce oil imports, alleviate natural gas 
price pressure, and pre-empt the need for new power plants and 
consequent emissions.
    The fiscal year 2008 budget request for Industrial Technologies is 
$46.0 million, a $0.4 million increase over the fiscal year 2007 
request. The program will leverage its innovative technology transfer 
practices and partnerships with energy-intensive industries, while 
shifting toward more crosscutting and higher-impact R&D activities that 
will bring innovative energy solutions to a much broader group of 
industrial companies, at a more accelerated pace.
    The Industrial Technologies Program (ITP) has a track record for 
moving innovative technologies from R&D through commercialization and 
onto the floors of industrial plants. In 2006 alone, 8 technologies 
funded by ITP received prestigious R&D 100 awards. New technologies 
emerging from ITP's R&D program are being adopted to help solve some of 
industry's toughest energy and competitiveness challenges. In many 
cases, this is occurring through the industrial energy assessments that 
ITP is conducting at 250 of the Nation's largest energy-consuming 
manufacturing plants as part of Secretary Bodman's ``Easy Ways to Save 
Energy'' initiative. We estimate that ITP-sponsored technologies and 
deployment activities have contributed to industrial energy savings of 
over $3.1 billion in one year (2004).
    The $7.2 million requested for the new activity, Energy-Intensive 
Process R&D, will support R&D in 4 crosscutting areas to better deliver 
technology solutions for the industrial processes that consume the most 
energy. These four areas are Energy Conversion Systems, Industrial 
Reaction and Separation, High-Temperature Processing, and Fabrication 
and Infrastructure. One example of a technology that cuts across the 
industrial sector to deliver savings is ITP's ultra-high efficiency, 
ultra-low emissions, industrial steam generation ``Super Boiler.'' 
Since steam is used in every major sector, the potential benefits are 
tremendous. The Super Boiler is 10 to 20 percent more efficient than 
current technology and can reduce NOX emissions to below 5 
parts per million, which represents an approximately 90 percent 
reduction in emissions from a conventional boiler.
    The $4.9 million request for the new Inter-Agency Manufacturing R&D 
activity working with the National Science and Technology Council will 
support the development or adaptation of next-generation technologies 
that can revolutionize U.S. industrial processes and deliver dramatic 
energy and environmental benefits. These next-generation technologies, 
such as entirely new processing routes and supply chains, can have 
broad applications across industry, yet they typically require the type 
of high-risk, high-return R&D that one industry cannot usually 
undertake. Our initial research focus will include development of 
techniques and processes needed for nanomanufacturing. We aim to help 
transform industrial processes by enabling the mass production and 
application of nano-scale materials, structures, devices, and systems 
that provide unprecedented energy, cost, and productivity benefits in 
manufacturing.
    Deployment efforts such as ``Best Practices'' activities and 
Industrial Assessment Centers will continue to deliver the results of 
energy-efficiency R&D and energy-saving practices to industrial plants 
nationwide. A vehicle for educational outreach, the university-based 
Industrial Assessment Centers train engineers and scientists in the 
energy field, providing opportunities for students to conduct energy 
assessments at no cost to small and medium-sized manufacturing plants 
in the United States.
                     facilities and infrastructure
    The fiscal year 2008 budget request of $7.0 million for Facilities 
and Infrastructure, an increase of $1.0 million from the fiscal year 
2007 request, supports the operations and maintenance of the National 
Renewable Energy Laboratory (NREL) in Golden, CO. NREL is a single-
purpose National Laboratory dedicated to R&D for energy efficiency, 
renewable energy, and related technologies that provides EERE, as well 
as DOE's Office of Science and the Office of Electricity Delivery and 
Energy Reliability, with R&D, expert advice, and programmatic counsel.
                 program direction and program support
    The Program Direction budget supports the management and technical 
direction and oversight needed to implement EERE programs at both 
headquarters and the Project Management Center. Areas funded by this 
request include: Federal salaries, information systems and technology 
equipment, office space, travel, and support service contractors. The 
fiscal year 2008 budget request for Program Direction totals $105.0 
million, a $14.0 million increase over the fiscal year 2007 request. 
This increase reflects EERE's updated staffing needs, which more 
closely align critical skills to mission requirements and adds staff to 
support technical program staffing shortfalls and implementation of the 
AEI and EPACT 2005 priorities.
    The Program Support budget request provides resources for 
crosscutting performance evaluation, analysis, and planning for EERE 
programs and for technical advancement and outreach activities. The 
information developed by the Program Support components provides 
decision makers at every level the information they need to make 
choices related to energy alternatives that can help the Department 
achieve its goals. The fiscal year 2008 budget request for Program 
Support activities totals $13.3 million, representing a $2.4 million 
increase from the fiscal year 2007 budget request. The increase 
reflects the expansion of EERE's market transformation and 
commercialization analysis and expanded efforts in the Technology 
Advancement and Outreach Office.
                               conclusion
    Accelerating research, development, and deployment of America's 
abundant clean sources of energy and making more efficient use of all 
energy consumed is central to EERE's mission, and to a secure and 
competitive economic future that enhances our environmental well-being 
for our Nation and our world. We believe the administration's fiscal 
year 2008 budget request for energy efficiency and renewable energy 
programs strategically positions the stepping stones that will 
continuously catalyze and accelerate new energy sources, technologies, 
and practices into the marketplace, and hasten the transformation of 
how our homes, businesses, and vehicles use energy.
    This concludes my prepared statement, and I am happy to answer any 
questions the Committee members may have.

    Senator Dorgan. Next we will hear from the Honorable Tom 
Shope, the Assistant Secretary of the Office of Fossil Energy. 
Mr. Shope, thank you for being with us.
STATEMENT OF HON. THOMAS D. SHOPE, ACTING ASSISTANT 
            SECRETARY FOR FOSSIL ENERGY
    Dr. Shope. Thank you, Mr. Chairman, thank you, Ranking 
Member Domenici and members of the subcommittee. It is an honor 
for me to appear before you today to present the Office of 
Fossil Energy's proposed budget for fiscal year 2008.
    Fossil Energy's $863 million budget request for fiscal year 
2008 will allow the office to support the President's top 
initiatives for energy security, clean air, climate change and 
coal research as well as DOE's strategic goal of protecting our 
national and economic security by promoting a diverse supply 
and delivery of reliable, affordable, and environmentally sound 
energy.
    Let me begin the presentation of our budget with coal, our 
most abundant and lowest cost domestic fossil fuel. Coal today 
accounts for nearly one-quarter of all of the energy and more 
than one-half of the electricity produced in the United States. 
Because coal is so important to our energy future, our proposed 
budget of $448 million for the President's coal research 
initiative, related fuel cell R&D and program direction 
accounts for more than one-half of our total budget. Our 
overarching goal is to conduct research and development that 
will improve the competitiveness of domestic coal in future 
energy markets, allowing the Nation to tap the full potential 
of its abundant fossil energy resources in an environmentally 
sound and affordable manner.
    This year's request completes 3 years ahead of schedule the 
President's commitment to invest $2 billion on clean coal 
research over 10 years. Our coal research initiative is broken 
down into the following components. We are requesting $73 
million for the Clean Coal Power Initiative, a cooperative, 
cost-shared program between the Government and industry to 
demonstrate emerging technologies in coal-based power 
generation so as to help accelerate commercialization. Work on 
promising technologies selected in two prior solicitations will 
continue in fiscal year 2008 and we plan to announce a third 
solicitation during the year.
    The first of a kind, high priority FutureGen project will 
establish the capability and feasibility of co-producing 
electricity and hydrogen from coal with near zero atmospheric 
emissions, including carbon dioxide. FutureGen's proposed 
budget of $108 million for fiscal year 2008 will be used to 
support detailed plant design and procurement and other 
preliminary work. Technology development supporting FutureGen 
is embodied in our Fuels and Power Systems Program. Included in 
the Program's proposed budget for fiscal year 2008 of $245.6 
million, you will find the research and development for carbon 
capture and sequestration, membrane technologies for oxygen and 
hydrogen separation, advanced combustion turbines, fuel cells, 
coal to hydrogen conversion and gasifier related technologies.
    The high priority carbon sequestration program with a 
proposed budget for fiscal year 2008 of $79 million for 
developing a portfolio of technologies with great potential to 
reduce greenhouse gas emissions. The goal is to achieve 
substantial market penetration after 2012. In the long term, 
the program is expected to contribute significantly to the 
President's goal of developing technologies to substantially 
reduce greenhouse gas emissions.
    In addition, the network of seven regional carbon 
sequestration partnerships and the International Carbon 
Sequestration Leadership Forum established by DOE in 2003 will 
continue their important work, including conducting vital, 
diverse geologic CO2 storage tests. Research and 
development carried out by the Coal to Hydrogen Fuels Program, 
funded at a proposed $10 million, will make the future 
transition to a hydrogen-based economy possible by reducing the 
costs and increasing the efficiency of hydrogen production from 
coal.
    We have requested $62 million in fiscal year 2008 to 
continue the important work of a Solid State Energy Conversion 
Alliance, the goal of which is to develop the technology for 
low cost, scalable, and fuel flexible fuel cell systems.
    Consistent with our fiscal year 2006 and 2007 budget 
requests, the Petroleum Oil Technology and Natural Gas 
Technologies Research and Development Programs are proposed to 
be terminated in fiscal year 2008. However, the Office of 
Fossil Energy will continue to carry out important 
responsibilities in the oil and natural gas sector, such as 
management of the ultra-deep water and unconventional resources 
research program mandated by the Energy Policy Act of 2005.
    In addition, fossil energy will continue to authorize 
natural gas imports and exports, collect and import data on 
natural gas trade, operate the Rocky Mountain Oil Field Testing 
Center and oversee the Loan Guarantee Program for the Alaska 
Natural Gas Pipeline.
    The Energy Policy Act of 2005 directs the strategic 
petroleum reserve to prepare to increase its oil storage to 1 
billion barrels. Additionally, the President recently 
recommended expanding the reserve's capacity to 1.5 billion 
barrels. Our budget request of $331 million, almost double last 
year's request, will fund the reserve's continued readiness as 
well as the immediate filling of the reserve to its current 
capacity of 727 million barrels. The budget includes $168 
million to begin expansion at existing and new sites towards 
the 1.5 billion barrels.

                           PREPARED STATEMENT

    Mr. Chairman and members of the subcommittee, this 
completes my prepared statement. I'd be happy to answer any 
questions you may have.
    Senator Dorgan. Secretary Shope, thank you very much for 
your testimony.
    [The statement follows:]
               Prepared Statement of Hon. Thomas D. Shope
    Mr. Chairman, members of the committee, it's a pleasure for me to 
appear before you today to present the Office of Fossil Energy's (FE) 
proposed Budget for fiscal year 2008
    Fossil Energy's $863 million budget request for fiscal year 2008, 
one of the largest FE requests made by this administration, will allow 
the Office to achieve 2 fundamental objectives: first, to support the 
President's top priorities for energy security, clean air, climate 
change and coal research; and second, to support the Department of 
Energy's strategic goal of protecting our national and economic 
security by promoting a diverse supply and delivery of reliable, 
affordable, and environmentally-sound energy.
    More specifically, the proposed budget emphasizes early initiation 
of an expansion of the Strategic Petroleum Reserve; rapid development 
of technologies to manage and dramatically reduce atmospheric emissions 
of the greenhouse gas carbon dioxide from fossil fuel use in power 
generation and other industrial activity; and design and other 
preparatory work on the FutureGen project to combine in one plant the 
production of electric power and hydrogen fuel from coal with near-zero 
atmospheric emissions.
                the president's coal research initiative
    I will begin the detailed presentation of our proposed budget with 
coal, our most abundant and lowest cost domestic fossil fuel. Coal 
today accounts for nearly one-quarter of all the energy--and about half 
the electricity--consumed in the United States. Because coal is so 
important to our energy future, our proposed budget of $448 million for 
the President's Coal Research Initiative, related fuel cell R&D and R&D 
by Federal employees within program direction accounts for more than 
half our total budget.
    I should mention here that our fiscal year 2008 Budget focuses our 
research and development on activities that support the President's 
Advanced Energy Initiative and key provisions of the Energy Policy Act 
of 2005. These activities will be conducted largely through cost 
sharing and industry collaboration. As a result of the evaluations 
under the Research and Development Investment Criteria, and the Program 
Assessment Rating Tool, activities throughout the program emphasize 
research and development for technologies that will be used in the 
FutureGen project.
    The goal of the overall coal program, which includes the 
President's Coal Research Initiative, is to conduct research and 
development that will improve the competitiveness of domestic coal in 
future energy markets. The administration strongly supports coal as an 
important component of our energy portfolio. This year's budget request 
completes the President's commitment to invest $2 billion on clean coal 
research over 10 years, 3 years ahead of schedule. Our coal budget 
request is broken down into the following components:
Clean Coal Power Initiative
    We are requesting $73 million in fiscal year 2008 for the Clean 
Coal Power Initiative (CCPI), a cooperative, cost-shared program 
between the Government and industry to demonstrate emerging 
technologies in coal-based power generation so as to help accelerate 
commercialization. CCPI allows the Nation's power generators, equipment 
manufacturers and coal producers to help identify the most critical 
barriers to coal use in the power sector. Technologies to eliminate the 
barriers are then selected with the goal of accelerating development 
and deployment of applications that will economically meet 
environmental standards while increasing plant efficiency and 
reliability. Work on promising technologies selected in two prior 
solicitations will continue in fiscal year 2008, and we plan to 
announce a third solicitation during the year, which will focus on 
advanced technology systems that capture carbon dioxide for 
sequestration and beneficial reuse.
    Some activities of the Clean Coal Power Initiative will help drive 
down the costs of Integrated Gasification Combined Cycle (IGCC) systems 
and other technologies for near-zero atmospheric emission plants that 
are essential to the FutureGen concept.
FutureGen
    FutureGen is a high-priority project that will establish the 
capability and feasibility of co-producing electricity and hydrogen 
from coal with near-zero atmospheric emissions including carbon 
dioxide. FutureGen is a public/private partnership designed to 
integrate technologies that ultimately will lead to new classes of 
plants that feature fuel flexibility, multi-product output, electrical 
efficiencies of over 60 percent, and near-zero atmospheric emissions. 
FutureGen's goals include electricity at costs no more than 10 percent 
above power from comparable plants that are incapable of carbon 
sequestration. The capture and permanent storage of atmospheric carbon 
emissions is a key feature of the FutureGen concept, as is the 
capability to use coal, biomass, or petroleum coke. The project should 
help retain the strategic value of coal--the Nation's most abundant and 
lowest cost domestic energy resource. FutureGen's proposed budget of 
$108 million for fiscal year 2008 will be used to support detailed 
plant design and procurement, as well as ongoing permitting, 
preliminary design and site characterization work.
    To help fund both the CCPI and FutureGen projects in fiscal year 
2008, our proposed Budget redirects $58 million in unexpended sums and 
$257 million in deferred appropriations from the original Clean Coal 
Technology program. Specifically, the Budget proposes to transfer $108 
million of the $257 million deferral to the FutureGen project, and 
cancel the remaining $149 million from the deferral. Of the unobligated 
balances carried forward at the start of fiscal year 2008, $58 million 
is transferred to the Clean Coal Power Initiative (CCPI).
                        fuels and power systems
    Technology development supporting FutureGen is embodied in the core 
research and development activity of the Fuels and Power Systems 
program. The Fuels and Power Systems program's proposed budget for 
fiscal year 2008 is $245.6 million. Of this total amount, $183.6 
million will fund research and development for carbon capture and 
sequestration, membrane technologies for oxygen and hydrogen 
separation, advanced combustion turbines, coal-to-hydrogen conversion, 
and gasifier-related technologies. The remaining balance of $62 million 
will support Fuel Cells.
    The program breaks down as follows:
Advanced Integrated Gasification Combined Cycle
    With proposed funding of $50 million for fiscal year 2008, the 
Advanced Integrated Gasification Combined Cycle program will continue 
to concentrate efforts on gas stream purification to meet quality 
requirements for use with fuel cells and conversion processes, on 
impurity tolerant hydrogen separation, on elevating process efficiency, 
and on reducing the costs and energy requirements for oxygen production 
through development of advanced technologies such as air separation 
membranes.
Advanced Turbines
    A funding request of $22 million will allow the Advanced Turbines 
program to continue its concentration on the creation of a turbine-
technology base that will permit the design of near-zero atmospheric 
emission IGCC plants and a class of FutureGen-descended plants with 
carbon capture and sequestration. This research emphasizes technology 
for high-efficiency hydrogen and syngas turbines and builds on prior 
successes in the Natural Gas-based Advanced Turbine Systems Program.
Advanced Research
    The Advanced Research program bridges basic and applied research to 
help reduce the costs of advanced coal and power systems while 
improving efficiency and environmental performance. The proposed $22.5 
million budget for Advanced Research will fund projects aimed at a 
greater understanding of the physical, chemical, biological and thermo-
dynamic barriers that currently limit the use of coal and other fossil 
fuels.
Carbon Sequestration
    The Carbon Sequestration program, with a proposed budget for fiscal 
year 2008 of $79 million, is developing a portfolio of technologies 
with great potential to reduce greenhouse gas emissions. This high-
priority program's primary concentration is on dramatically lowering 
the cost and energy requirements of pre- and post-combustion carbon 
dioxide capture. The goal is to have a technology portfolio by 2012 for 
safe, cost-effective and long-term carbon mitigation, management and 
storage, which will lead to substantial market penetration after 2012. 
In the long term, the program is expected to contribute significantly 
to the President's goal of developing technologies to substantially 
reduce greenhouse gas emissions.
    The Carbon Sequestration program's activities in fiscal year 2008 
will concentrate on research and development projects for carbon 
dioxide (CO2) capture and storage, as well as measurement, 
monitoring and verification technologies and processes.
    In coordination with the current partnerships, the program will 
determine the ``highest potential'' opportunities for the initial 
expedited round of large scale sequestration tests in saline, coal, 
and/or oil and gas bearing formations. This work will begin with a 
physical characterization of the surface and subsurface, reservoir 
modeling, and NEPA review.
    The Partnerships will also move on to the next phase of the Weyburn 
project, where CO2 is being injected into a producing 
oilfield. Weyburn's success would deliver both decreased carbon 
emissions and increased domestic oil production.
    Finally, DOE formed the international Carbon Sequestration 
Leadership Forum (CSLF) in 2003 to work with foreign partners on joint 
carbon sequestration projects, and to collect and share information. 
That work will in continue in fiscal year 2008.
    Several members of the CSLF have also signed on to the FutureGen 
project, and others have signaled strong interest in joining.
Fuels
    Research and development carried out by the Coal-to-Hydrogen Fuels 
program, funded at a proposed $10 million, will make the future 
transition to a hydrogen-based economy possible by reducing the costs 
and increasing the efficiency of hydrogen production from coal. This 
program is an important component of both the President's Hydrogen Fuel 
Initiative and the FutureGen project.
Fuel Cells
    Within Fuel Cells, we have requested $62 million for fiscal year 
2008 to continue the important work of the Solid State Energy 
Conversion Alliance, the goal of which is to develop the technology for 
low-cost, scalable and fuel flexible fuel cell systems that can operate 
in central, coal-based power systems as well as in other electric 
utility (both central and distributed), industrial, and commercial/
residential applications.
Research by Federal Staff
    In addition to the funding levels reflected for Fuels and Power 
Systems, there is $20 million provided within the Program Direction 
account that directly supports the President's Coal Research 
Initiative, plus $1 million for fuel cells. This funding supports 
Federal staff directly associated with conducting the research 
activities of specific Fuels and Power Systems subprograms.
Petroluem and Natural Gas Technologies
    Consistent with the fiscal year 2006 and fiscal year 2007 Budget 
Requests, the Petroleum-Oil Technology and Natural Gas Technologies 
research and development programs will be terminated in fiscal year 
2008.
    The Oil and Gas group will manage the Ultra-Deepwater and 
Unconventional Resources Research Program mandated by the Energy Policy 
Act of 2005. However, I should point out that the 2008 Budget proposes 
to repeal this legislation, consistent with the fiscal year 2007 Budget 
Request.
    In addition, FE will continue to authorize natural gas imports and 
exports, collect and report data on natural gas trade, and operate the 
Rocky Mountain Oilfield Testing Center.
    FE will also oversee the loan guarantee program for the Alaska 
Natural Gas Pipeline.
Strategic Petroleum Reserve
    The Strategic Petroleum Reserve (SPR) exists to ensure America's 
readiness to respond to severe energy supply disruptions. The Reserve 
reached its highest inventory level--700 million barrels of oil--in 
2005 The Energy Policy Act of 2005 directs DOE to fill the SPR to its 
authorized 1 billion barrel capacity, as expeditiously as practicable. 
Additionally, in the 2008 Budget, the President proposed expanding the 
Reserve's capacity to 1.5 billion barrels.
    Our budget request of $332 million for fiscal year 2008--almost 
double last year's request--will fund the Reserve's continued readiness 
through a comprehensive program of systems maintenance, exercises, and 
tests, as well as beginning expansion to 1 billion barrels at existing 
and new sites and NEPA work to expand to 1.5 billion barrels. DOE will 
begin immediately to fill the reserve to its current capacity of 727 
million barrels through purchases of oil with available balances as 
well as through placement of the Department of the Interior's royalty 
in-kind oil into the SPR.
Northeast Home Heating Oil Reserve
    The Northeast Home Heating Oil Reserve was established in July 2000 
when the President directed the Department of Energy to establish a 
reserve capable of assuring home heating oil supplies for the Northeast 
states during times of very low inventories and significant threats to 
immediate supply. The Reserve contains 2 million barrels of heating oil 
stored at commercial terminals in the Northeast and is in good 
condition. The current 5-year storage contracts expire in September 
2007. A request for bids was issued in February 2007. The proposed 
fiscal year 2008 budget requests $5.3 million for continued operations.
Naval Petroleum and Oil Shale Reserve
    The fiscal year 2008 budget request of $17.3 million for the Naval 
Petroleum and Oil Shale Reserve (NPOSR) will allow it to continue 
environmental remediation activities and determine the equity 
finalization of Naval Petroleum Reserve 1 (NPR-1); operate NPR-3 until 
its economic limit is reached, and while operating NPR-3, maintain the 
Rocky Mountain Oilfield Test Center..
    Because the NPOSR no longer served the national defense purpose 
envisioned in the early 1900s, the National Defense Authorization Act 
for Fiscal Year 1996 required the sale of the Government's interest in 
Naval Petroleum Reserve 1 (NPR-1). To comply with this requirement, the 
Elk Hills field in California was sold to Occidental Petroleum 
Corporation in 1998. Subsequently, the Department transferred 2 of the 
Naval Oil Shale Reserves (NOSR-1 and NOSR-3), both in Colorado, to the 
Department of the Interior's (DOI) Bureau of Land Management. In 
January 2000, the Department returned the NOSR-2 site to the Northern 
Ute Indian Tribe. The Energy Policy Act of 2005 transferred 
administrative jurisdiction and environmental remediation of Naval 
Petroleum Reserve 2 (NPR-2) in California to the Department of the 
Interior. DOE retains the Naval Petroleum Reserve 3 (NPR-3) in Wyoming 
(Teapot Dome field).
                      elk hills school lands fund
    The National Defense Authorization Act for fiscal year 1996 
authorized the settlement of longstanding ``school lands'' claims to 
certain lands by the State of California known as the Elk Hills 
Reserve. The settlement agreement between DOE and California, dated 
October 11, 1996, provides for payment, subject to appropriation, of 9 
percent of the net sales proceeds generated from the divestment of the 
Government's interest in the Elk Hills Reserve. Under the terms of the 
Act, a contingency fund containing 9 percent of the net proceeds of the 
sale was established in the U.S. Treasury and was reserved for payment 
to California.
    To date, DOE has paid $300 million to the State of California. The 
first installment payment of the settlement agreement was appropriated 
in fiscal year 1999. While no appropriation was provided in fiscal year 
2000, the Act provided an advance appropriation of $36 million that 
became available in fiscal year 2001 (second installment). The next 4 
installments of $36 million were paid at the beginning of fiscal year 
2002, fiscal year 2003, fiscal year 2004, and fiscal year 2005 
respectively. A seventh payment of $84 million was made in fiscal year 
2006.
    The fiscal year 2008 budget proposes no funding for the Elk Hills 
School Lands Fund. The timing and levels of any future budget requests 
are dependent on the schedule and results of the equity finalization 
process.
    fossil energy's budget meets the nation's critical energy needs
    In conclusion, I'd like to emphasize that the Office of Fossil 
Energy's programs are designed to promote the cost-effective 
development of energy systems and practices that will provide current 
and future generations with energy that is clean, efficient, reasonably 
priced, and reliable. Our focus is on supporting the President's top 
priorities for energy security, clean air, climate change, and coal 
research. By reevaluating, refining and refocusing our programs and 
funding the most cost-effective and beneficial projects, the fiscal 
year 2008 budget submission meets the Nation's critical needs for 
energy, environmental and national security.
    Mr. Chairman, and members of the committee, this completes my 
prepared statement. I would be happy to answer any questions you may 
have at this time.

    Senator Dorgan. Finally, we will hear from the Honorable 
Kevin Kolevar, Director of the Office of Electricity Delivery 
and Energy Reliability. Director, you may proceed.
STATEMENT OF KEVIN M. KOLEVAR, DIRECTOR, OFFICE OF 
            ELECTRICITY DELIVERY AND ENERGY RELIABILITY
    Mr. Kolevar. Thank you, Mr. Chairman, members of the 
subcommittee for the opportunity to testify on the President's 
fiscal year 2008 budget request for the Office of Electricity 
Delivery and Energy Reliability.
    The mission of the Office is to lead national efforts to 
modernize the electricity delivery system, enhance the security 
and reliability of America's energy infrastructure, and 
facilitate recovery from disruptions to energy supply.
    The President's budget request includes $114.9 million for 
OE in fiscal year 2008, which represents a 16 percent decrease 
from the fiscal year 2007 operating plan. This request includes 
$86 million for Research and Development activities, $11.6 
million for Operations and Analysis activities and $17.4 
million for Program Direction.
    I will first address the activities of OE's Research and 
Development program. Our request of $86 million for fiscal year 
2008 will fund the following four main activities--high 
temperature superconductivity, visualization and controls, 
energy storage and power electronics, and renewable and 
distributed systems integration. The development of these 
advanced electricity technologies will influence the future of 
all aspects of the electric transmission and distribution 
systems.
    The first activity I would like to highlight is the science 
and development of high temperature superconductivity. 
Superconducting cables transmit electricity through conductors 
of temperatures approaching absolute zero, thus preventing 
resistance to electrical voltage, which allows large amounts of 
electricity to be transmitted over long distances with little 
line loss. Superconductivity, therefore, hold the promise of 
alleviating capacity concerns while moving power efficiently 
and reliably.
    Another critical piece of a resilient and reliable modern 
grid is enhancing the security of our control systems. Our 
visualization and control activity focuses on improving our 
ability to measure and address the vulnerabilities of control 
systems. The research in this area will allow us to detect 
cyber intrusion, implement protective measures and response 
strategies, and sustain cyber security improvements over time.
    Using our understanding from previous energy storage 
demonstration activities, we are researching and developing 
new, advanced higher energy density materials and storage 
devices for utility scale application. The program also focuses 
on research in power electronics to improve material and device 
properties that are needed for transmission level applications.
    Finally, in 2007, the renewable and distributed systems 
integration activity will complete the transition away from 
generation technology activities and will then focus on grid 
integration of distributed and renewable systems in 2008. This 
is a logical step in advancing clean energy resources to 
address future challenges.
    I will now discuss DOE's Permitting, Siting and Analysis 
Office, which is tasked with implementing mandatory EPACT 
requirements to modernize the electric grid and enhance the 
reliability of the energy infrastructure. These requirements 
include analyzing transmission congestion, proposing energy 
corridors for the Secretary's consideration and coordinating 
Federal agency review of applications to site transmission 
facilities on Federal lands. The President's budget requests 
$5.7 million for this Office in fiscal year 2008.
    On August 8, 2006, the Department published its National 
Electric Transmission Congestion Study in compliance with 
section 1221(a) of the Energy Policy Act. This study 
highlighted more than 15 geographic areas where electric 
congestion or capacity constraints exist. The Department has 
announced that, due to the significant public interest in the 
national corridor issues, before the Secretary designates any 
national corridor, he will first issue any designations in 
draft form to facilitate focused review and comment by affected 
States, regional entities, and the general public.
    Another major effort involves the implementation of section 
368 of the Energy Policy Act, which requires the designation of 
energy right-of-way corridors on Federal lands in the 11 
contiguous western States. The agencies plan to publish a draft 
programmatic environmental impact statement for the designation 
of the energy corridors in the late spring of this year and 
will solicit public comments.
    Finally, this Office is preparing to implement DOE's 
responsibilities under the new section, 216(h) of the Federal 
Power Act. Section 216(h) provides for the Department to act as 
the lead agency for purposes of coordinating all applicable 
Federal authorizations and related environmental reviews 
required to site an electro-transmission facility.
    OE's Office of Infrastructure Security and Energy 
Restoration facilitates the protection of the Nation's critical 
energy infrastructure. This Office is responsible for 
coordinating and carrying out the Department's obligations for 
critical infrastructure identification, prioritization, 
protection, and national preparedness within the energy sector. 
The President's 2008 budget request includes $5.9 million for 
this Office.
    In times of declared emergencies, this Office coordinates 
Federal efforts under the National Response Plan to assist 
State and local governments and the private sector in the 
restoration of electrical power and other energy-related 
activities. DOE personnel deployed in regions affected by 
large-scale electrical outages to assist in recovery efforts. 
The Infrastructure Security and Energy Restoration Office also 
works with States to foster greater awareness of the regional 
scope of energy interdependencies and to develop energy 
assurance plans that address the potential cascading effects of 
energy supply disruptions.
    In his 2007 State of the Union Address, the President 
emphasized the importance of continuing to change the way 
America generates electric power and highlighted the 
significant progress we have already made in integrating clean 
coal technology, solar and wind energy, and clean safe nuclear 
energy into the electric transmission system.
    Technology such as power electronics, high temperature 
superconductivity and energy storage hold not only the promise 
of lower costs and greater efficiency but also directly enhance 
the viability of clean energy resources by addressing issues 
such intermittency, controlability and environmental impact.
    We cannot simply rely on innovative policies and 
infrastructure investment. We must also invest Federal dollars 
in the research, development, and deployment of new technology 
in order to improve performance and ensure our national 
security, economic competitiveness, and environmental well-
being.
    Mr. Chairman, this concludes my statement. I look forward 
to any subcommittee questions.
    Senator Dorgan. Dr. Kolevar, thank you very much for your 
statement.
    [The statement follows:]
                 Prepared Statement of Kevin M. Kolevar
    Mr. Chairman and members of the committee, thank you for this 
opportunity to testify on the President's fiscal year 2008 budget 
request for the Office of Electricity Delivery and Energy Reliability.
    The mission of the Office of Electricity Delivery and Energy 
Reliability (OE) is to lead national efforts to modernize the 
electricity delivery system, enhance the security and reliability of 
America's energy infrastructure, and facilitate recovery from 
disruptions to energy supply. These functions are vital to the 
Department of Energy's (DOE) strategic goal of protecting our national 
and economic security by promoting a diverse supply and delivery of 
reliable, affordable, and environmentally responsible energy.
    The President's fiscal year 2008 budget includes $114.9 million for 
OE in fiscal year 2008, which is an 8 percent decrease from the fiscal 
year 2007 request. This includes $86.0 million for Research and 
Development activities, $11.6 million for Operations and Analysis 
activities, and $17.4 million for Program Direction. As DOE is 
currently preparing a spending plan in accordance with the terms of the 
2007 Continuing Resolution, my testimony on the fiscal year 2008 budget 
request reflects a comparison to the administration's fiscal year 2007 
request.
    When Thomas Edison opened the Pearl Street Station in lower 
Manhattan on September 4, 1884, he could hardly have foreseen the role 
electricity would play in the development of American society. Although 
the demand for electric lighting and power initially drove the 
station's construction, electricity ultimately stimulated and enabled 
technological innovations that reshaped America. Today, the 
availability and access to electricity is something that most Americans 
take for granted. Most people cannot describe what it is or where it 
comes from. Yet, it is vital to nearly every aspect of our lives from 
powering our electronics and heating our homes to supporting 
transportation, finance, food and water systems, and national security.
    The Energy Information Administration has estimated that by the 
year 2030, U.S. electricity sales are expected to increase by 43 
percent from their 2005 level. Although this is a positive indicator of 
a growing economy, it is also a significant amount of new demand on an 
electricity infrastructure that is already stressed and aging. With 
this in mind, OE's fiscal year 2008 budget request reflects a 
commitment to implement the directives of the Energy Policy Act of 2005 
(EPACT), support research of breakthrough technologies, and coordinate 
Federal response to temporary disruptions in energy supply to ensure a 
reliable and secure electricity infrastructure for every American in 
the coming decades.
    Meeting our future electricity needs will not be solved by focusing 
only on expanding our generation portfolio or on energy conservation. 
Perhaps the greatest challenge today, as it was in Edison's time, is 
building the elaborate network of wires and other facilities needed to 
deliver energy to consumers reliably and safely.
                        research and development
    The fiscal year 2008 budget request of $86.0 million for the 
Research and Development (R&D) program within OE funds 4 activities: 
High Temperature Superconductivity; Visualization and Controls; Energy 
Storage and Power Electronics; and Renewable and Distributed Systems 
Integration.
    Over the past 18 years, DOE has invested more than $500 million in 
the science and development of high temperature superconductivity. 
Superconductivity holds the promise of addressing capacity concerns by 
maximizing use of available ``footprint'' and limited space, while 
moving power efficiently and reliably. It also supports advanced 
substation and interconnection designs that allow larger amounts of 
power to be routed between substations, feeders, and networks using 
less space and improving the security and reliability of the electric 
system.
    Today, the High Temperature Superconductivity activity continues to 
support second generation wire development as well as research on 
dielectrics, cryogenics, and cable systems. This activity is being 
refocused to address a near-term critical need within the electric 
system to not only increase current carrying capacity, but also to 
relieve overburdened cables elsewhere in the local grid. The 
superconductivity industry in the United States is now at the critical 
stage of moving from small business development to becoming a part of 
our manufacturing base.
    Enhanced security for control systems is critical to the 
development of a reliable and resilient modern grid. The Visualization 
and Controls Research & Development activity focuses on improving our 
ability to measure and address the vulnerabilities of controls systems, 
detect cyber intrusion, implement protective measures and response 
strategies, and sustain cyber security improvements over time. The 
fiscal year 2008 request reflects an increase of $7.75 million related 
to support this effort.
    This activity is also developing the next generation system control 
and data acquisition (SCADA) system that features GPS-synchronized grid 
monitoring, secure data communications, custom visualization and 
operator cueing, and advanced control algorithms. Advanced 
visualization and control systems will allow operators to detect 
disturbances and take corrective action before problems cascade into 
widespread outages. The need to improve electric power control systems 
security is well-recognized by both the private and public sectors.
    The Energy Storage and Power Electronics activity proposes an 
increase of $3.80 million in fiscal year 2008 to: (1) leverage 
understanding gained from previous Energy Storage demonstration 
activities to research and develop new advanced higher energy density 
materials and storage devices for utility scale application; and (2) 
focus on enhanced research in Power Electronics to improve material and 
device properties needed for transmission-level applications.
    Large scale, megawatt-level electricity storage systems, or 
multiple, smaller distributed storage systems, could significantly 
reduce transmission system congestion, manage peak loads, make 
renewable electricity sources more dispatchable, and increase the 
reliability of the overall electric grid.
    The Renewable and Distributed Systems Integration Research & 
Development activity completed the transition away from generation 
technology activities in fiscal year 2007 and will focus on grid 
integration of distributed and renewable systems in fiscal year 2008, 
which is a logical step in advancing clean energy resources to address 
future challenges.
                    permitting, siting, and analysis
    In fiscal year 2008, the Department is requesting $5.7 million for 
the Permitting, Siting, and Analysis (PSA) Office within the Operations 
and Analysis subprogram, which implements mandatory requirements set by 
EPACT to modernize the electric grid and enhance reliability of the 
energy infrastructure by contributing to the development and 
implementation of electricity policy at the Federal and State level. 
The Permitting Siting and Analysis Office is also tasked with analyzing 
transmission congestion, proposing energy corridors for the Secretary's 
consideration, and coordinating Federal agency review of applications 
to site transmission facilities on Federal lands.
    The Department published its National Electric Transmission 
Congestion Study on August 8, 2006, in compliance with section 1221(a) 
of EPACT, which requires DOE to prepare a study of electric 
transmission congestion every 3 years. The study named more than 15 
areas of the Nation with existing or potential transmission congestion 
problems. The study identifies Southern California and the East Coast 
from New York City to Washington, DC, as ``Critical Congestion Areas,'' 
because transmission congestion in these densely populated and 
economically vital areas is especially significant.
    During the development of the study, which relied on extensive 
consultation with States and other stakeholders, the Department 
provided numerous opportunities for discussion and comment by States, 
regional planning organizations, industry, and the general public. OE 
intends to supplement the tri-annual Congestion Studies study by 
publishing annual progress reports on transmission improvements in the 
congested areas.
    Section 1221(a) also requires the Secretary to issue a report based 
on the August 8 Congestion Study. In this report, if consumers in any 
geographic area are being adversely affected by electric energy 
transmission capacity constraints or congestion, the Secretary may, at 
his discretion, designate such an area as a National Interest Electric 
Transmission Corridor (National Corridor).
    Because of the broad public interest in the implementation of 
section 1221(a), the Department invited and received over 400 public 
comments on the designation of National Corridors. The Department 
continues to evaluate these comments, and has not yet determined 
whether, and if so, where, it would be appropriate to propose 
designation of National Corridors. Prior to issuing a report that 
designates any National Corridor, the Department will first issue a 
draft designation to allow affected States, regional entities, and the 
general public additional opportunities for review and comment.
    Another major effort involves the implementation of section 368 of 
EPACT, which requires the designation of energy right-of-way corridors 
on Federal lands in the 11 contiguous Western States. An interagency 
team, with DOE as the lead agency, conducted public scoping meetings 
concerning the designation of corridors in each of the 11 contiguous 
Western States. The agencies plan to publish a draft Programmatic 
Environmental Impact Statement for the designation of the energy 
corridors in late spring of 2007 and will solicit public comments.
    In August 2006, DOE and 8 other Federal agencies signed a 
Memorandum of Understanding (MOU) that clarifies the respective roles 
and responsibilities of Federal agencies, State and tribal governments, 
and transmission project applicants with respect to making decisions on 
transmission siting authorizations. DOE is preparing to implement its 
responsibilities under the new section 216(h) of the Federal Power Act 
to coordinate with these 8 other Federal agencies to prepare initial 
calendars, with milestones and deadlines for the Federal authorizations 
and related reviews required for the siting of transmission facilities. 
DOE will maintain a public website that will contain a complete record 
of Federal authorizations and related environmental reviews and will 
work closely with the lead Federal NEPA agency to encourage complete 
and expedited Federal reviews. DOE is currently considering the 
procedures it will use in carrying out this program.
             infrastructure security and energy restoration
    The President has designated the Department of Energy as the Lead 
Sector Specific Agency responsible for facilitating the protection of 
the Nation's critical energy infrastructure. The Infrastructure 
Security and Energy Restoration (ISER) activity of the Operations and 
Analysis subprogram is responsible for coordinating and carrying out 
the Department's obligations to support the Department of Homeland 
Security in this important national initiative. The fiscal year 2008 
request is for $5.9 million in funding for Infrastructure Security and 
Energy Restoration within the Operations and Analysis subprogram.
    The Infrastructure Security and Energy Restoration activity 
fulfills DOE's responsibilities as defined in Homeland Security 
Presidential Directives 7 and 8 for critical infrastructure 
identification, prioritization, and protection and for national 
preparedness. In times of declared emergencies, this Office also 
coordinates Federal efforts under the National Response Plan to assist 
State and local governments and the private sector in the restoration 
of electrical power and other energy-related activities.
    In the event of a large-scale electrical power outage caused by 
natural disasters such as hurricanes, ice storms, or earthquakes, DOE 
personnel will deploy to the affected region to assist in recovery 
efforts. During the 2005 hurricane season, DOE was specifically 
deployed to respond to 5 hurricanes: Dennis, Katrina, Ophelia, Rita and 
Wilma. In such instances, DOE coordinates all Federal efforts to assist 
local authorities and utilities in dealing with both measures to 
restore power and to resolve other issues related to fuel supply.
    The Infrastructure Security and Energy Restoration Office also 
fosters greater awareness of the regional scope of energy 
interdependencies by working with States to develop energy assurance 
plans that address the potential cascading effects of energy supply 
problems. Exercises are conducted with States and Federal partners to 
help sharpen this focus. Finally, staff work with States and DHS in 
emergency situations to help resolve issues brought on by temporary 
energy supply disruptions, such as the winter 2007 propane shortage in 
Maine.
                               conclusion
    In his 2007 State of the Union address, President Bush emphasized 
the importance of continuing to change the way America generates 
electric power and highlighted significant progress in integrating 
clean coal technology, solar and wind energy, and clean, safe nuclear 
energy into the electric transmission system.
    Technologies such as power electronics, high temperature 
superconductivity, and energy storage hold the promise of lower costs 
and greater efficiency, and also directly enhance the viability of 
clean energy resources by addressing issues such as intermittency, 
controllability, and environmental impact.
    Federal investment in the research, development, and deployment of 
new technology combined with innovative policies and infrastructure 
investment, is essential to improving grid performance and ensuring our 
energy security, economic competitiveness, and environmental well-
being.
    This concludes my statement, Mr. Chairman. I look forward to 
answering any questions you and your colleagues may have.

                          FOSSIL ENERGY BUDGET

    Senator Dorgan. Let me begin with a couple of questions and 
then I'll call on my colleagues.
    First, Secretary Shope, the ability to use the abundant 
supplies of coal that we have in this country depends a lot on 
the research and development capability in the fossil energy 
R&D programs. I was looking at your numbers and if you take out 
the 25 percent for FutureGen and then take out the strategic 
petroleum reserve money, isn't it then the case that the 
administration budget is proposing less money for fossil energy 
R&D?
    Mr. Shope. Well Senator, we do take a portfolio approach to 
not only the coal aspect of the program, the entire fossil 
energy program, as I mentioned, focusing on energy security 
both in the domestic economic impacts as well as economic 
opportunities that it provides. So when we talk about our coal 
budget, we really are looking at a $426 million coal budget 
going forward. That's the amount of money we will be advancing 
in 2008.
    Senator Dorgan. But isn't that a substantial reduction?
    Mr. Shope. Compared to our 2006 budget, we had $366 million 
that was applied in 2006.
    Senator Dorgan. Applied by 2007 numbers?
    Mr. Shope. In 2007, we're going to be applying $425 
million.

                             COAL RESOURCES

    Senator Dorgan. My point was not about your portfolio 
approach, admirable as that might be. My point was with respect 
to the use of our coal resources, abundant resources that can 
probably only be used in the future, in the way that many of us 
would like them to be used, if we, through research and 
development, unlock the mystery of this technology to be able 
to sequester carbon and burn coal in a way that's clean, 
doesn't just spoil our atmosphere and so on. My question is, if 
you remove SPRO and remove FutureGen, isn't the case, with 
respect to the issue of being able to use our coal resources 
and able to devote research and development funds, that there 
is a substantial reduction there?
    Mr. Shope. If you're looking at strictly the MMG research 
and the research and development, our fuels and power systems, 
that's correct. There's a decrease in there but there is an 
increase again--we've looked at our program and said, what is 
it that we need to accomplish our goals?
    Senator Dorgan. I understand that but then how does one 
justify at this moment--it seems to me that we've come to an 
important intersection here in energy policy. Some regions have 
coal resources, others have oil, nuclear power and so we're 
talking about a lot of issues here. We have hundreds of years 
of coal resources. We can only use them, in my judgment, if 
we're able to make the investment to unlock the mystery of how 
to avoid putting effluents into the air and causing all kinds 
of issues. How do we use research and development to get to 
that point? So how does one justify coming to this 
intersection, saying to us, ``Oh, by the way, with respect to 
that account, we want to cut funding.''
    Mr. Shope. Well, Senator, I agree with your statements 
about that. That's exactly what we need to do is to move 
forward and we're looking for a technology approach forward. I 
would say to you that the research and development--we still 
have a very active, vibrant portfolio in our research and 
development area. But we also are looking forward to moving 
these--the technologies out, getting them applied. So that's 
why we do have the FutureGen project going forward. It's part 
of our--that's actually a research project in and of itself so 
all the money that we are using in FutureGen are research 
dollars.
    But in addition, we're trying to look at carbon capturing 
storage, the issue that is really preeminent in our program and 
saying we need to move forward and get these technologies 
deployed so we'll increase in our sequestration budget as well, 
to bring this to fruition.
    Senator Dorgan. You know, the problem is, it's never much 
fun to inquire of someone who I think, in a less guarded 
moment, would probably say, I understand your point. We should 
be asking for more money but this is the President's budget. 
I'm here to support the President's budget. That's what I'm 
paid for. So I can't get, perhaps, as candid an answer as I 
would hope on whether it makes a lot of sense at this 
intersection, to cut that portion of the budget. It just seems 
nuts to me. With all due respect, if we want to use that 
resource, we're going to have to find ways to be able to use it 
and unlocking those ways, in my judgment, would require some 
directed funding to our priorities. We're going to do that 
rather than cutting funding.

             ENERGY EFFICIENCY AND RENEWABLE ENERGY BUDGET

    But I understand your answers, Mr. Secretary. I don't mean 
to badger you. Let me ask Secretary Karsner a similar type of 
question. You and I visited the Renewable Energy Laboratory at 
Golden, Colorado. I was enormously impressed by it. I, of 
course, have a great interest in all of these accounts and a 
good many of them are going to be decreased, as you know and I 
suspect if I asked you the same question, I'll get an answer--
--
    Mr. Karsner. I support the President's budget.
    Senator Dorgan. So is there any chance after the hearing, 
we could have a cup of coffee and find out where I could ask 
you the same questions? But more seriously, you know, we here 
in Congress added money to this bill, as you know $300 million. 
When you take that with the 2007 level and then the plus up of 
$300 million, the 2008 request, in virtually every area, with, 
I think, maybe two exceptions, is going to be a cut in funding 
2008 versus 2007.
    We're talking, on the authorizing committee, Senator 
Bingaman, Senator Domenici, myself and Senator Craig, and 
others about this notion of how to put together another follow-
on energy bill and what parts are necessary, so we understand 
the urgency. It seems to me there is a confluence of events 
here with respect to what has become sort of a consensus on 
climate change, our vulnerability with respect to oil and 
foreign oil. There is a greater urgency to these issues and it 
seems to me out of step with that greater urgency to see 
proposed reductions in spending in most of the accounts dealing 
with renewable and energy efficiency issues. Would you agree 
with me, Secretary Karsner?
    Mr. Karsner. In substance, in the character of what you're 
saying, I do agree. I think the differential is largely 
accounted for by the idiosyncrasies of the budgeting process. 
This 2008 budget originated more than 2 years ago, just as I'm 
currently preparing a 2009 budget 2 years into the future for 
an administration I won't be a part of. Technology, of course, 
moves much faster, as do these priorities, and when we had the 
opportunity for the spend plan, which is really the first 
budget that I've had the opportunity to exercise influence 
over, it does very accurately reflect our priorities in a 
contemporaneous, real-time snapshot of the portfolio approach 
and there is a heavier emphasis on efficiency.
    Senator Dorgan. I think it is important to note that the 
Congress, on a bipartisan basis, in putting together the fiscal 
year 2007 appropriation bills, combined, I believe, 10 bills 
into one omnibus because we were required to do that. 
Republicans and Democrats together said ``You know what? We're 
under funded in the renewables area and so we added to all of 
these accounts.'' There are priorities that come from the 
administration and then priorities that come from the Congress 
and we will try to work our will in terms of what we believe 
the right priorities will be. I mentioned the renewable energy 
and fossil fuel accounts and I think it's important to 
understand that there is a renewed urgency here with respect to 
both and so your area is going to be critically important to 
us. We need to get out of your area some very significant 
opportunities and changes for the future.

                         NUCLEAR ENERGY BUDGET

    Secretary Spurgeon, can you tell me how the $114 million 
for shared costs of efforts to reduce barriers to deploy 
nuclear power, would be spent? I don't quite understand from 
the description how that would be dispersed.
    Mr. Spurgeon. It's spent through two consortia. The NuStart 
Consortia, which consists of 10 electric generating companies 
plus two manufacturers and the Dominion Power Group, which has 
one utility and manufacturer and architect engineers associated 
with it. The whole objective of the Nuclear Power 2010 Program 
is to remove the barriers to entry of these first nuclear 
powerplants into the marketplace. So what we are doing is we're 
spending money on design standardization costs. We're spending 
money in design standardization and in preparing the combined 
operating licenses for two different types of reactors, one a 
boiling water reactor and the second, a pressurized water 
reactor.
    So it's to get the first ones through the process so that 
those that follow can reference the first ones and shorten the 
time scale and thus, cost for introducing nuclear power in the 
United States.

              ELECTRICITY DELIVERY TECHNOLOGICAL ADVANCES

    Senator Dorgan. I don't know as much about that area. 
That's why I asked the question. I will submit further 
questions as well, just so that I understand more. And, 
finally, then I will turn to my colleagues.
    Director Kolevar, it seems to me that we have not seen any 
substantial change in the technology of delivering electricity 
for perhaps three-quarters of a century. We string lines and we 
run electricity over the lines and we run these lines through a 
corridor. I know some companies are working on new 
technologies--composite conductors, to name one, and there are 
others. If we could see dramatic advances there, we might be 
able to use existing corridors to double or triple the 
capability of moving electricity to where it's needed and 
that's part of what your investment is about, I understand.
    With what hope can we approach a future with new 
technologies for the transmission of electricity? Thus far, we 
have had very few advances in those areas.
    Mr. Kolevar. You're correct, Mr. Chairman. It is certainly 
challenging space. There have been a variety of new 
technological advances that we have not seen penetrate the 
system in any significant fashion. I do believe the opportunity 
is there for a couple of reasons. One, the system today is 
increasingly stressed and in two parts of the country, we 
either came close to or experienced blackouts. I think that 
will drive greater technological penetration of transmission 
scale applications and distribution scale applications that can 
enhance reliability.
    I also think it's the case that the work that is going on 
with the Federal Energy Regulatory Commission (FERC) and the 
Nuclear Regulatory Commission (NRC) in pushing new mandatory 
reliability standards will help some of these technologies to 
be pushed into the market.

           ELECTRICITY DELIVERY AND ENERGY RELIABILITY BUDGET

    Senator Dorgan. Director Kolevar, I'll give you the 
opportunity to learn from Secretary Shope on this subject but 
you're probably not happy to see a $132 million research and 
development budget drop to $86 million. I assume that this is 
probably not advancing our pursuit of new technologies.
    Mr. Kolevar. We were able to leverage a number of synergies 
in the program where we saw the drop that you reference from 
fiscal year 2006 to 2008. Mr. Chairman, I would also note that 
the majority of that reduction was scheduled for phase-out. It 
was in some reciprocating engine work and in some combined heat 
and power work where we had achieved or came very close to 
achieving some pre-established milestones. There was a general 
thought that when we achieve what we set out to achieve that we 
ought to then discontinue that project and focus on some other 
applications.
    Senator Dorgan. Would you prefer at least the minimum level 
of funding for the pursuit of research and development for new 
technology in electric transmission?
    Mr. Kolevar. I'm sorry, I don't understand your question. 
At the minimum 2008 level?
    Senator Dorgan. At least in the pursuit of research and 
development and in the area where there has been so little 
progress for so long and where so much is necessary for us to 
be able to produce in one area and transmit to another. I was 
wondering whether you would prefer level funding, at a minimum 
level, for this function of research and development.
    Mr. Kolevar. Yes, sir. Level funding at a minimum would be 
appreciated.
    Senator Dorgan. Thank you. Senator Domenici.
    Senator Domenici. Well, Mr. Chairman, you succeeded.
    Senator Dorgan. I did. I didn't want to mention that but I 
did.
    Senator Domenici. Three witnesses and three shots but you 
got there. Let me make an observation first. Obviously, he's 
sitting in the chair and I'm sitting next to him as ranking 
member. That got turned around just a few months ago but I 
think that it should be--it would be appropriate for me to 
indicate to the four of you that I can recall your coming 
before the subcommittee to get confirmed for your jobs and I 
was obviously sitting in this position with my friend and 
ranking member--who came before the Energy and Natural 
Resources Committee, which frequently gets confused with this 
subcommittee. This isn't the subcommittee.
    And I was quite impressed when we finished getting all of 
you, the four of you, that this late in this administration, we 
were going to get such qualified people. I openly expressed 
myself as saying that the Secretary of Energy and his Under 
Secretary, Clay Sell, have done some exciting work in getting 
the four of you to take these jobs. And I repeat that. I hope 
you're as enthused now as you were when you told us why you 
would take this job, knowing full well that whether it is a 
Republican or a Democrat, there is a big chance you will not be 
around for 5 or 6 years to see your dreams achieved.
    I do believe I was right in my assessment about you. Your 
work has been exciting. I think you are challenged even though 
you had a terrible start with the lousy work that the United 
States Senate did and we were in charge, not them, in not 
getting an appropriation bill and then throwing upon you the 
kind of appropriation that we did and then you having to 
address questions like you are here, when this appropriation 
process is all out of focus for the year 2005, 2006, 2007, and 
2008. But I commend you.

                     PREVENTING REGIONAL BLACKOUTS

    Now I want to just start with you on the right hand side. 
When we passed the energy bill, the authorizing bill, those of 
us who were very thrilled with the bill had a check-off list 
and almost everybody had one item that said that if this works, 
it should not be too long before America can say, we will not 
have any more regional blackouts in our grid across the 
country. I didn't ask you, Director Kolevar, whether I could 
make that statement. We thought that's what we did. I'm sure 
Senator Craig said the same thing. He had it on his list. What 
we had done is created authority in you so that we should avoid 
the pitfalls that cause the grid failures.
    Now quickly, without too much elaboration, did we give you 
the right authority and are you pursuing--is this being pursued 
with vigor so that what we told the American people may become 
a reality in terms of the stability of the grid system?
    Mr. Kolevar. Yes, sir, I would say that you did. We believe 
that the provisions contained in the Energy Policy Act of 2005, 
when executed, will dramatically assist reliability of the 
overall transmission and distribution systems.
    Senator Domenici. I want to say to you, I think they're 
right and I certainly would not want you to operate under this 
law if it is deficient. If it is, I think you ought to tell us 
because we don't want you to go 4 years or so trying to give us 
stability in the grid and then tell us, the law was short. You 
got it?

                         LOAN GUARANTEE PROGRAM

    Mr. Kolevar. Yes, sir.
    Senator Domenici. Now let me move over to Secretary 
Karsner.
    Secretary Karsner, I'll try to hurry up but I can't resist. 
If you or any of the other witnesses are talking about a budget 
and you're talking about the amount of money the Federal 
Government is putting into an account and you look to the 
energy bill and found that there is a section that provides for 
loan guarantees for new technology or technologies that 
implement this act, would it be fair to think that you would 
assume that maybe some loan guarantees would be added to your 
portfolio so that more money could be spent by the 
entrepreneurs and business people that took advantage of this 
law?
    Mr. Karsner. That would be fair.
    Senator Domenici. Let me just say, that is fair and that 
is--the chairman knows that and he was not talking against that 
in his questions but the truth of the matter is and Senator 
Craig, would you believe that we still do not have a packaged 
set of regulations from the Department of Energy----
    Senator Craig. Twenty months after the passage of the act. 
Yes, I'm counting, month by month, week by week, day by day.
    Senator Domenici. No, I'm telling you that I understand 
that every time we turn around, we run into another stalwart 
and they are stalwarts--in this administration that say, I 
don't like loan guarantees and therefore, they get them 
stalled. We write them. They pass judgment based on their 
existence in life and say, well, I don't like them. I submit 
and Mr. Chairman, that on loan guarantees, when we're finished, 
even though we're not an authorizing committee, that we ought 
to ask our staff how to write loan guarantee provisions in this 
bill that if signed by the President, we will be rid and 
finished with them having any judgment with reference to how to 
write the loan guarantee bills. And I'm going to try to do 
that, if you would help, we'll do it bipartisan and get it 
written and get that out of the way so loan guarantees will be 
finished in terms of having to look at authorizing language. 
Would that help you and would that help you, Secretary Shope, 
in your part of this law, too?
    Mr. Shope. The loan guarantee provisions are beneficial to 
our program.
    Senator Domenici. Not yours; Secretary Karsner?
    Mr. Karsner. They are essential to the growth of 
commercialization in our----
    Senator Domenici. What about you, Secretary Spurgeon?
    Mr. Spurgeon. Essential.
    Senator Domenici. Even in the big nuclear program, you need 
it?
    Mr. Spurgeon. Yes, sir.
    Senator Domenici. Oh and the administration loves the 
nuclear program. Have they said anything to you as to why we 
can't get the loan guarantees going?
    Mr. Spurgeon. Senator Domenici, the administration--the 
Department of Energy is moving very aggressively to implement 
the loan guarantee program. Now that we have the requisite 
authorization to move forward with creating the office, which 
was established, which was received 1 month ago. It is a matter 
of public record that the Department has prepared a notice of 
proposed rulemaking and that has been received and is under 
review at the Office of Management and Budget as of March 16.
    Senator Domenici. So you must be part of driving this 
thing?
    Mr. Spurgeon. Yes, sir.

                               COAL USAGE

    Senator Domenici. Well, that's good. I like the way you 
drive things. It's apt to get done. It's very important that 
you understand what's going on or it won't happen. We'll be 
through another Congress.
    I have one last question to ask of the Secretary who is in 
charge of coal. People think that the United States is going to 
stop using coal because of environmental problems. Everything I 
read about the future says that there will be more coal used in 
the next decade than this previous--this decade past. Is that 
the assumption you're operating under?
    Mr. Shope. Yes, it is, Senator. I would agree with that.
    Senator Domenici. And is it not true that we must convert 
coal to things like liquids and other usable products and that 
requires a lot of technology and innovative--and money to be 
invested?
    Mr. Shope. It does, Senator and it is part, again, of the 
President's alternative fuel strategy to include clean coal to 
liquids technologies, to make it part of our strategy. So yes, 
the entire use of coal is essential to our Nation's energy 
security.

                   GLOBAL NUCLEAR ENERGY PARTNERSHIP

    Senator Domenici. My last question is, who knows anything 
about the GNEP Program? Secretary Spurgeon, how much money did 
the President put in to start this program?
    Mr. Spurgeon. To start it in 2008?
    Senator Domenici. Yes.
    Mr. Spurgeon. Four hundred and five million dollars, sir.
    Senator Domenici. That's what you are here asking us for.
    Mr. Spurgeon. Yes, sir.
    Senator Domenici. That won't get you ready in terms of 
specifications?
    Mr. Spurgeon. Yes, sir. That gets us to the point where we 
can define a technology pathway forward with sufficient 
information so that we're not guessing at what the right answer 
might be. We need to offer it to the Secretary for the 
Secretary to make a decision on a pathway forward and you need 
to inform that decision by good information from industry, from 
our national laboratories and from our universities.
    Senator Domenici. Thank you very much.
    Senator Dorgan. Senator Craig.
    Senator Craig. Thank you, Mr. Chairman. I didn't make an 
opening statement so let me react not unlike the ranking member 
has, by agreeing certainly with the premise of your opening 
statement as it relates to our energy future and where we need 
to go and what we've done to date and what I hope we will do in 
the future.
    Let me also say that last Wednesday, I stood on the top of 
a reactor core, EBR-1. For those of you who don't know what 
EBR-1 was, it's now an historic site. I didn't think we'd been 
involved in the nuclear business long enough to describe it as 
a historic event but it was, is an historic site so designated 
by President Lyndon Johnson. EBR-1 was first constructed in 
1949. It started producing power in 1951. It lit the first 
light bulb ever powered by nuclear generated electricity in 
1951 out on the high deserts of Idaho.
    When I was standing on top of that reactor core, Dennis, I 
thought, oh, if we had only continued from that point forward 
at the rate we were moving at that time. We might not even be 
so dependent upon the Middle East today or anybody else for 
that matter and my guess is, we wouldn't be generating 
electricity at the rate of only 20 percent total nuclear. It 
would be substantially greater than that and we'd have the 
waste problem solved a decade or so ago. But we stalled out 
politically. We simply--we were fearful of where we were even 
though the technology argued there was nothing to fear. We've 
changed that. We've adjusted and thank goodness America is 
awakening to a new reality and that new reality is embodied in 
the Energy Policy Act of 2005 that deals primarily with power 
generation, in something that the chairman and I introduced 
just recently that deals primarily with transportation sector 
fuels, the SAFE Act and all I am saying to all of you in your 
presentation today is, too many good ideas and not enough 
money.
    Because we can help drive industry in the right direction 
by creating some of the safeguards, some of the buffers and 
some of the incentives. But the marketplace is doing a 
marvelous job at this moment. I say this publicly and loudly, 
even though I don't like saying it. The good news of last year 
is that we got $3 gas. We may get it again this summer. The bad 
news is we got $3 gas but the good news, is it's probably 
creating and generating in the marketplace, one of the greatest 
resurgent and investment in energy than the total energy 
portfolio ever in the history of our country. And that's good 
because I find it shameful of a great power to be so reliant 
upon those who would jerk our diplomatic chain and change our 
foreign policy in a way simply so that we can continue to serve 
our habits and I'm talking about hydrocarbon habits.

                   NEXT GENERATION NUCLEAR POWERPLANT

    Now, having said that, let me switch back to EBR-1 or 
should I fast-forward to GNEP and NGNP because that's really 
where we are today. Since the time that Pete Domenici and I and 
Jeff Bingaman and everybody else on that committee crafted 
EPACT, 33, 34 nuclear reactors on the drawing board? What is it 
today, Dennis?
    Mr. Spurgeon. The number can be either but it's either 33 
or 34.
    Senator Craig. Somewhere in that range. Now, let me say 
this to you as a statement because I don't disagree with any 
direction you're headed in. I just wish we could head there a 
little faster. You're going to find too many of us on this--not 
too many of us on this subcommittee would in any way disagree 
with you as it relates to nuclear power and the role it plays 
and the value of it in the future--our security, our 
competitiveness, reduction of greenhouse gases--all of that. 
And I would suspect that you would not hear any complaints from 
myself, Senator Domenici or the chairman regarding the strong 
emphasis you've placed on the budget for securing nuclear power 
through your R&D efforts in the advanced fuels cycle initiative 
or NGNP or GNEP.
    My only advice to you would be that you remain flexible. In 
dealing with both chambers, both parties as it relates to a 
broad goal that we all seem to support. The resurgence of 
nuclear power in the United States, I think, is upon us. I'm 
not sure where a new administration will take us but I'm 
confident that the two committees of authority in the House and 
the Senate, in a bipartisan way, will advance the cause we 
started with the passage of EPACT.
    However, you may find that the narrow goals of GNEP that 
must follow may not be pursued as aggressively as some of us 
might like. Instead, we all need to keep focused on moving the 
ball forward for nuclear and maintaining the momentum of what 
we've done. I think you understand what I'm saying. If the 
nuclear budget remains whole but it doesn't reflect exactly 
what any one of us might ask for, we can all agree that the 
nuclear resurgence continues and will be as a positive step 
forward for this country. My guess is that we'll tinker around 
the edges and we may add a few dollars here or there to all of 
your budgets. They are woefully inadequate.
    I'm willing to shift the priorities in the entire budget to 
give you greater ability in your budget. I am just growing so 
very tired, as the American people are, of finding this great 
Nation jerked around by puppet governments around the world, 
largely because of a dependency we've now developed and a lack 
of vision decades ago in where we needed to get.
    Thank you all for your presentations today. You are very 
skillful in doing it. If the Secretary had been here, he'd have 
got 10 minutes. You each got 10 minutes. So we were glad to see 
you and not the Secretary.
    Because I think it was important that all that you said be 
said for the sake of the country and the policy you project. 
Thank you. Thank you, Mr. Chairman.
    Senator Dorgan. Senator Craig, thank you very much. Senator 
Allard?

                 NAVAL OIL SHALE RESERVE CERTIFICATION

    Senator Allard. Thank you, Mr. Chairman. Thank all of you 
for your testimony. Secretary Shope, you're familiar with the 
naval oil shale reserve legislation and the agreement that was 
worked out by the Department of Energy and the Department of 
the Interior when there was a transfer of management of that 
particular property in Colorado?
    Mr. Shope. I am, yes sir.
    Senator Allard. My understanding is that the Department of 
the Interior is ready to certify that you're not ready to 
certify because you're waiting for a cleanup to be completed. 
What is your estimate it is going to cost to finish that 
cleanup?
    Mr. Shope. Again, Senator, the reserve has been transferred 
to the Department of the Interior, so actually----
    Senator Allard. I'm sorry. I got that turned around.
    Mr. Shope. Yes, sir.
    Senator Allard. I apologize for that.
    Mr. Shope. So we actually will wait until the Department of 
the Interior certifies the plant.
    Senator Allard. They need to certify and I've been told 
that we're waiting for your certification but you're not 
willing to give that until they have cleaned up the Anvil Point 
facility.
    Mr. Shope. Senator, I'll have to take that particular 
question for the record because that's inconsistent with what 
my current knowledge is of that matter, Senator.
    Senator Allard. Okay, well that's what we've been told by 
the Department of Energy is that you're waiting for the cleanup 
of that and we've been estimated that the cleanup is around $13 
million at the high end. It's not anticipated to go over $13 
million--that's a high figure and yet, there is revenue being 
generated from that property now. I've been told that equals 
about $70 million. The legislation directs that the revenue 
from the natural resources on that property be returned to the 
local communities and the State of Colorado and you have $13 
million of outside costs and you're holding $70 million in 
there that you're not redistributing back to the State of 
Colorado.
    It seems to me that there ought to be more of a concerted 
effort to get that return. Why are you sitting on that money?
    Mr. Shope. Well again, Senator, the Department of the 
Interior has the lead on it. We would certify after their 
certification--and you're indicating----
    Senator Allard. According to our information, they have 
certified it.
    Mr. Shope. And that has not been made known to me but I 
will immediately look into it and address that in the record.
    Senator Allard. They had indicated--they indicated to my 
staff that they are willing to certify. The legislation 
requires joint certification, which means the Department of 
Energy also has to certify. So that's our understanding and I 
would hope that you would get back to us because that's 
important. For the life of me, I don't understand why you're 
sitting on $70 million when the maximum estimate on cleanup on 
that is around $13 million. Heck, even if you wanted to raise 
your estimate to $20 million, if you could get the other $50 
million or so to the local communities because they're being 
impacted right now because of the oil shale development that is 
happening in that particular area of the State. So they need 
that to meet their challenges that they are facing with that 
development. So, we'll continue to stay in touch with you on 
that and if you'll respond back. We'll get a formal question to 
you and then if you could respond back to us, we'd appreciate 
it.
    Mr. Shope. Absolutely, Senator.
    [The information follows:]
                         Anvil Points Mine Site
    When the management of Anvil Points mine site was transferred to 
the Department of the Interior there was environmental remediation work 
that needed to be completed. The Department of the Interior assumed 
responsibility for the cleanup of Anvil Points; however, the Secretary 
of Energy must approve the cleanup plan.
    To the best of our knowledge the Department of the Interior has 
completed a feasibility study and the detailed engineering plan. The 
final cleanup plan appears to be in draft form; however, the cleanup 
plan has not been submitted to the Department of Energy for approval.
    It is also our understanding that part of the cleanup plan involves 
removal of the mine access road. However, before this can happen the 
U.S. Geological Survey must get into the mine and remove drilling cores 
that have been stored there.
    The Department of Energy remains ready to review and approve the 
Anvil Points environmental remediation plan once it is submitted by the 
Department of the Interior.

              PROGRAM ASSESSMENT RATING TOOL (PART) SCORES

    Senator Allard. Also, you're familiar with the PART Program 
of the President. I suppose all of you have done that. It's 
where you measure--you put goals out there that are measurable 
and then you are evaluated. Actually, the Department of Energy 
has done better than most of the agencies and I want to 
compliment you on that.
    But there are six areas in which I think there are some 
issues that need to be addressed and I'm just going to call 
them quickly to your attention. In the Department--and I'm not 
calling these up because I support them but what I want to make 
sure is that the taxpayer dollars that are going in there are 
creating results. There are two programs that have been 
measured and this is done by the Office of Management and 
Budget (OMB), by the way. There are two areas where you have 
been rated as ineffective. I don't know who has jurisdiction 
over the Natural Gas Technology Program.
    Mr. Shope. I do, Senator.
    Senator Allard. Why is that rated ineffective?
    Mr. Shope. It's rated ineffective based upon the other 
priorities within the Office of Fossil Energy. So it's 
ineffective in the sense of--not that the program is 
mismanaged, not that there has been any inappropriate 
activities or misspending of money----
    Senator Allard. What's happening to the money they're 
getting?
    Mr. Shope. It's now being effectively utilized, all the 
dollars have been and our reviews demonstrate that. What the 
ineffectiveness refers to is the balance of putting money 
toward natural gas research and development in light of the 
high costs, the high price of hydrocarbons as they are being 
received today.
    Senator Allard. Is that a correctable problem?
    Mr. Shope. Well, we corrected it by terminating the 
program.
    Senator Allard. Okay, so it's terminated.
    Mr. Shope. At the end of 2008.
    Senator Allard. Okay, very good. All right, what about oil 
technology? That's rated as ineffective.
    Mr. Shope. Again, the same thing. This is not ineffective 
in the sense of mismanagement or any inappropriate--it's a 
matter, is this--is the taxpayer dollars being best spent by 
investing in this research in 2008?
    Senator Allard. It will be terminated?
    Mr. Shope. Yes.
    Senator Allard. It will be terminated. All right. Now there 
are some that don't demonstrate any results. It's all--there is 
the National Nuclear Infrastructure Program and they haven't 
bothered to set any goals at all or measure them so why haven't 
they bothered to do that? I guess that's you, Secretary 
Spurgeon.
    Mr. Spurgeon. I think that's another program within the 
Department that's being referred to there, sir.
    Senator Allard. And that will be terminated or what?
    Mr. Spurgeon. I'm not sure which program that is, so. I 
think it's a Defense program.
    Senator Allard. It's called the national nuclear 
infrastructure. If you go on Expectmore.gov on the Internet, 
you'll see it there.
    Mr. Spurgeon. Let me take that for the record for the 
Department, sir.
    [The information follows:]
                     Program Assessment Rating Tool
    The National Nuclear Infrastructure Program Assessment Rating Tool 
(PART) is focused on activities carried out by the Office of Nuclear 
Energy's Idaho Facilities Management and Radiological Facilities 
Management programs at Idaho National Laboratory (INL).
    Performance measures were established for the INL during the fiscal 
year 2005 merger of the Idaho National Engineering and Environmental 
Laboratory (INEEL) and the Argonne National Laboratory-West (ANL-W). 
The National Nuclear Infrastructure PART assessment was completed 
during the fiscal year 2006 budget formulation process, concurrent with 
activities associated with creation of INL.
    The overall rating of ``Results Not Demonstrated'' is not due to 
the lack of performance measures, but the inability to demonstrate 
results against the established performance measures during the short 
period of time between the establishment of the new laboratory and 
completion of the PART assessment. The Department continues to track 
its performance against cost and schedule baselines. Further, the 
Department employs a Facility Operability Index performance measure 
that assesses the readiness of the infrastructure to support NE, other 
DOE and Work-For-Others milestones. The Department continues to 
evaluate and look for improvements in the operation of INL.

              PROGRAM ASSESSMENT RATING TOOL (PART) SCORES

    Senator Allard. All right. And then on the University 
Nuclear Education Program--results not demonstrated. Why is 
that?
    Mr. Spurgeon. What was that, Senator?
    Senator Allard. It's the University Nuclear Education 
Programs. Results are not demonstrated. In other words, they 
haven't been able to establish goals that show that they're 
getting anything accomplished.
    Mr. Spurgeon. We have a--I think our university dollars are 
being very well spent. It's sometimes very difficult to 
quantify goals for research that is happening and support of 
developing education programs for us. I'll give you a better 
answer than I'm able to give up here.
    Senator Allard. When they make application, you can insist 
on them giving you----
    Mr. Spurgeon. We are. We are moving the university research 
programs to be program based and so that we will be able to 
have a better measure of performance against objective.
    [The information follows:]
          Part Score For University Nuclear Education Program
    The mission of the University Reactor Infrastructure and Education 
Assistance program has been to enhance the national nuclear educational 
infrastructure to meet the manpower requirements of the Nation's 
energy, environmental, health care, and national security sectors. More 
specifically, the program was designed to address declining enrollment 
levels among U.S. nuclear engineering programs.
    A PART assessment was completed for the University Reactor 
Infrastructure and Education Assistance program during the fiscal year 
2007 budget formulation process. The assessment, conducted under the 
title ``University Nuclear Education Programs,'' determined that 
enrollment target levels of the program had been met and that Federal 
assistance was no longer needed to encourage students to enter into 
nuclear-related disciplines. Since the late 1990s, enrollment levels in 
nuclear education programs have tripled, reaching upwards of 1,500 
students in 2005, the program's target level for the year 2015. In 
addition, the number of universities offering nuclear-related programs 
also has increased. These trends reflect renewed interest in nuclear 
power. Students continue to be drawn into this course of study and 
universities, along with nuclear industry societies and utilities, 
continue to invest in university research reactors, students, and 
faculty members. However, the assessment also concluded that the 
program performance measures that did not clearly communicate the 
linkage between Federal funding and growth in enrollment in nuclear-
related disciplines. This led to the rating of ``Results Not 
Demonstrated''.
    The Department is using part of its fiscal year 2007 funds to 
support all students currently on an Office of Nuclear Energy 
fellowship or scholarship for the period of their initial appointment. 
No student is in danger of losing his/her funding assuming that they 
stay within the original guidelines of the program with regard to 
course of study and grades. No additional funds are requested in fiscal 
year 2008 for these activities, effectively closing out the program. 
However, $2.9 million was requested in fiscal year 2007 to provide 
fresh reactor fuel to universities and to dispose of spent fuel from 
university reactors. Under the fiscal year 2007 CR, these activities 
are also being funded. In fiscal year 2008, $2.9 million is requested 
for these activities under Research Reactor Infrastructure, within the 
Radiological Facilities Management program.
    In addition to funding research reactor activities, the Department 
remains committed to supporting university research through its Nuclear 
Energy Research Initiative (NERI). In fiscal year 2007, $38.3 million 
will support NERI grants to universities within NE's R&D programs. The 
fiscal year 2008 budget request includes $58.6 million to support NERI 
grants to universities within NE's R&D programs.

              PROGRAM ASSESSMENT RATING TOOL (PART) SCORES

    Senator Allard. Now there's one other program, the State 
energy programs. What's happening there? They are--who has 
those?
    Mr. Karsner. That's me.
    Senator Allard. Why aren't those--why aren't there any 
results being demonstrated there?
    Mr. Karsner. I can't speak to the report. I feel like there 
are results being demonstrated there but I'm happy to analyze 
that report.
    Senator Allard. The Office of Management and Budget did an 
evaluation on that and said they----
    Mr. Karsner. It will not be the first time I disagree with 
the Office of Management and Budget.
    Senator Allard. Well, if you could get something back to us 
on those. As policy makers, if we knew----
    Mr. Karsner. Absolutely, sir.
    [The information follows:]
                    State Energy Program Part Score
    In 2004, the State Energy Program (SEP) received a rating of 
``Results Not Demonstrated'' for the OMB Performance Assessment Rating 
Tool (PART) exercise. This rating is ``given when programs do not have 
acceptable long-term and annual performance measures'' (quoted from OMB 
PART Tool Guidance No. 2007-02, Jan 29, 2007). The Program had offered 
information for the PART based on an evaluation conducted by Oak Ridge 
National Laboratory (ORNL). OMB cited the need for a more comprehensive 
impact methodology for the study as well as an independent evaluator.
    DOE has taken several actions in response to OMB's concerns. In 
2005, SEP requested an independent review of the ORNL report by the 
Board of Directors of the International Energy Program Evaluation 
Conference, Inc. This independent review found the ORNL study to be a 
``reasonable foundation from which to estimate the national effects of 
the SEP program.'' In 2006 the program finalized the SEP Strategic 
Plan, which established long-term goals, objectives, and strategies to 
set a new direction for the program in response to the OMB assessment. 
In 2007 SEP initiated a comprehensive evaluation of the program by an 
independent evaluator to quantify program performance and identify 
areas for improvement.

                  UNIVERSITY NUCLEAR EDUCATION PROGRAM

    Senator Allard. Some of these programs, I think--they look 
good and sound good so I want to--and like all the rest, I want 
to see us move forward on that. So I just want to follow up 
that. Thank you, Mr. Chairman.
    Senator Domenici. Mr. Chairman?
    Senator Dorgan. Yes?
    Senator Domenici. With reference to the program you asked 
about, it referred to----
    Senator Dorgan. University, yes.
    Senator Domenici. I want to say that in 1995, when there 
was nothing going on and this Senator decided we should get 
started on some and we started by putting back into the 
university system what had been there for many years and 
terminated and that was some assistance to encourage youngsters 
who had the proclivity for nuclear engineering and the like, 
excited them about--and it was working and we spent about $25 
million a year at the maximum and then the President, because 
he didn't have enough money, terminated it and I don't think 
I've been able to put it back. But that's the history.
    Senator Dorgan. Thank you for that response and I'd agree 
that we need to encourage students to get into these areas. 
It's probably important when you have a shortage there.
    Senator Domenici. Thank you.
    Senator Dorgan. Senator Murray.
    Senator Murray. Thanks very much, Mr. Chairman, for holding 
this hearing and Senator Domenici and all of our panelists. I 
think it's been a very interesting discussion. I think we all 
are looking for ways to provide alternative energy and I think 
there are a lot of great ideas out there. This has been a great 
panel and chance to hear all that. I was out in my state over 
the last week and had a chance to talk to my sorghum grain 
farmers there, very interested in the opportunities that are 
out there and obviously, my dairy farmers are talking about 
biowaste. We've got nuclear, biodiesel, hydrogen--so many 
opportunities and a lot of work ahead of us.
    I think we have to remember, we've got to be careful what 
we do. Every source of energy seems to have a challenge to it 
and how we move forward is really important but I appreciate 
all the work that you're doing.

                           VEHICLE EFFICIENCY

    Secretary Karsner, let me start with you. I really 
appreciate the President's initiative to cut our dependency on 
oil through the greater use of biofuels but there are other 
things we can do as well. We not only need to introduce 
alternative fuels but we have to look at how we can get 
efficiency in vehicles as well. Your efficiency programs--we've 
seen a significant increase in the 2007 spending plan and the 
increase in the 2008 EERE budget seems to emphasize funding for 
hybrid electric systems and decreases funding for research and 
materials and advance combustion. According to the Department's 
own estimates, these activities would have a lot more dramatic 
and near term impact on CO2 emissions and reducing 
our dependency. Can you comment on whether you agree that 
improvements in combustion processes could greatly enhance our 
fuel economy by new lightweight materials, things like that?
    Mr. Karsner. I do agree that improvements will remain a 
central focus. I think some of the diminishing, programmatic 
budgeting there might reflect some of these successes, 
actually. In other words, there are natural limits to what 
gains can be had from the physical properties of internal 
combustion efficiency and it's going to ultimately be balanced 
against the emissions that come out of those engines. So the 
idea is, optimizing the efficiency to the maximum degree as a 
physical device and minimizing the emissions in some of those 
cases, for example, heavy trucks, is what that applies to. 
We're getting right up to that optimum barrier.
    Senator Murray. Do you think we know everything we need to 
know?
    Mr. Karsner. No, absolutely not.
    Senator Murray. Okay. Well, how much of the 2007 spending 
plan was directed to advanced combustion R&D?
    Mr. Karsner. I can report back with the precise numbers but 
we did have a substantial increase in the 2007 spend plan to 
vehicle technologies.
    [The information follows:]
                  Funding For Advanced Combustion R&D
    For fiscal year 2007, $49,706,000 is being directed to advanced 
combustion R&D in the Vehicle Technologies Program.

                FUNDING FOR ADVANCED COMBUSTION RESEARCH

    Senator Murray. And your 2008 is reduced funding?
    Mr. Karsner. Well, of course, the 2008 was submitted ahead 
of the 2007, so as Senator Dorgan pointed out, it's a bit of an 
anomaly this year.
    Senator Murray. Okay. Well, it just seems to me that we 
need to keep focusing on all kinds of programs and reducing the 
research on that is not going to help us improve our--or help 
us get off our dependency of oil. So I'm a little bit concerned 
about that.

                                BIOFUELS

    I also wanted to ask you, DOE seems to be putting a lot of 
their focus on cellulosic ethanol but there are other biofuels 
that contribute to the mix as my farmers tell me, constantly. 
What is the Department doing to support really a diversified 
approach to reducing our Nation's dependence with fuel such as 
biodiesel or biomethane?
    Mr. Karsner. Well, of course, we support all biofuels and 
of course, the President's approach is to have the broadest 
scope available to alternative sources to gasoline. That's the 
subject of a hearing tomorrow but the administration endorses 
all of those.
    Some of them are more mature than others in terms of their 
efficiency process and their competitiveness so they don't need 
the level of breakthrough that cellulosic ethanol needs. The 
other sort of metric that we look at is the quantitative or 
volumetric capacity to make an impact of those biofuels and, 
although all of these are important and we want to maximize 
what each of them can contribute, there is no question that 
ethanol, through various forms of biomass, volumetrically will 
contribute much, much more than any of those that you named and 
so that's why it gets a greater emphasis.
    Senator Murray. Are there projects out there that do cross 
funding that help both of them----
    Mr. Karsner. Well, codes and standards, by way of example--
in fact, I would say we have more emphasis on the codes and 
standards for biodiesel so that we can certify them. Since we 
have a fairly competitive biodiesel industry that is growing 
very rapidly, it's very important to us that engine 
manufacturers be able to warrant the use of those in different 
ambient conditions so that's a big focus with biodiesel. We've 
just certified B-5 in some of the engines. I understand we're 
looking at B-20 levels and so codes and standards will be one 
of those that is cross funded.

         GRID RESEARCH AT PACIFIC NORTHWEST NATIONAL LABORATORY

    Senator Murray. Okay, thank you. I appreciate that and 
Director Kolevar, I just wanted to mention, I heard Senator 
Dorgan talking to you about the grid and modernizing our grid 
and moving to better technologies and what we needed to do and 
I just wanted to make sure you knew about the Pacific Northwest 
National Lab and the work that they're doing out of my State to 
help efficiency on the grid. Have you ever visited there?
    Mr. Kolevar. I have not, Senator. I intend to this year. 
I'm aware they're pulling real time data from Bonneville Power 
and visualizing, from a layman's perspective and then in more 
detail on some of the work that is going on there. It sounds to 
be very promising.
    Senator Murray. Yes, the Grid Wise Program is really 
starting to look at how we can really focus on some 
efficiencies and better transmission. We'd really love to have 
you come out and take a look at it. Mr. Chairman, you might 
want to, too. I think you're right to mention that we need to 
have some efficiencies with that system and there is some work 
being done. I think we need to do more but we'd love to have 
both of you visit. So, thank you very much.

                RETRIEVABLE ENERGY IN SPENT NUCLEAR FUEL

    Senator Dorgan. Thank you very much. Just a couple other 
queries. Secretary Spurgeon, you talked about the closed fuel 
cycle. Can you tell me, just for my own information, how much 
energy is retrieved from spent fuel? You talked about 
retrieving the energy from spent fuel. What percent of the 
energy?
    Mr. Spurgeon. Well, if we do a recycle and if we just 
recycle one time, in a light water reactor, you would recover 
20 percent roughly of the input fuel. Now there are ways, 
looking to the future, where you could recover substantially 
more than that. But just one recycle and that's where I made 
the comparison base when I said as much as the Alaska Pipeline 
provides in energy value. It's just based on one recycle, 20 
percent saving existing reactors, not including new ones that 
might be built in the future.

                             WEATHERIZATION

    Senator Dorgan. Secretary Karsner, the issue of 
weatherization. I did not ask you about that. I assumed since I 
come from North Dakota that you would have expected me to so I 
don't want to disappoint you here. As you know, in the 
weatherization account, the proposal is to make a cut in that 
account. It was $242 million in fiscal year 2006. In fiscal 
year 2008, it will be $144 million, which is the budget 
request. Tell me what you think the consequences of that would 
be, to cut $100 million from weatherization?
    Mr. Karsner. Well, there are lots of consequences. One of 
the primary consequences is that we have more funding to 
accelerate biofuels for national security and lower greenhouse 
gas emissions. That's on the positive side. On the negative 
side, it will mean, because that is an additive program for 
returns; that is, that there is a correlation between dollars 
spent and houses weatherized. It will obviously mean a 
diminution in the amount of houses we can achieve in a fiscal 
year.
    Senator Dorgan. I've been out to watch what they do in the 
weatherization program to substantially improve some of these 
older homes in order to reduce the amount of heat loss. Is that 
program effective? Also, is it a part of our energy efficiency 
efforts? Because we're saving energy by insulating homes and so 
on, so tell me how you view that program.
    Mr. Karsner. I view any efficiency improvements as 
effective but with a limited pool of dollars and an enormous 
task, as I said, for the larger aggregate goals of lowering 
greenhouse gas emissions and enhancing national security, it 
has the unfortunate disposition of competing against other 
efficiency investments in our applied research and development 
portfolio that have enormous returns that are multiplicative 
across the population. Although this is a very important 
segment of the population and it is a worthy program to focus 
on, in the context of competing in our portfolio to achieve 
those same efficiency objectives, the returns are very, very 
low.
    Senator Dorgan. Are these mostly lower income people that 
are competing?
    Mr. Karsner. For the weatherization dollars?
    Senator Dorgan. Right.
    Mr. Karsner. It is all low income people.
    Senator Dorgan. So the competition, we've put them in here 
as the lower income people that own old homes that are leaking 
heat and terribly inefficient, trying to struggle through the 
winter to pay a heat bill. They're put in competition with all 
the other accounts and so they get hit with a $100 million 
reduction in funding. Is that something you support?
    Mr. Karsner. Well, I don't support the phrasing of it in 
that particular way but I do support the cut in the sense that 
I have to look at it as a portfolio. I have no other choice but 
to look at the precious taxpayer dollars that way. In fact in 
reality, this cut is really restoring what the Clinton 
administration budgetary year appropriations were in terms of 
apportionment of the portfolio. The President, in his first 
term push for poverty alleviation, substantially injected new 
funding into the weatherization program, I think at a time 
before most of the other technologies were reasonably 
commercial where they are today and at a time before we felt 
this kind of pressure from $3 gas and other pressing 
priorities.
    So we are sort of putting it back into balance to where it 
had historically been, which still makes it one of the largest 
programs in the Nation's applied research and development 
portfolio for new energy developments. And these are difficult 
choices but we feel like turning the housing stock itself 
quicker in the aggregate through working on the building 
envelope, insulation, better windows across the board is at 
least as important ultimately.
    Senator Dorgan. Mr. Karsner, we added $25 million in the 
Supplemental here in the Senate for weatherization. Do you 
support that?
    Mr. Karsner. No, I do not.
    Senator Dorgan. Do you oppose it?
    Mr. Karsner. I do oppose that.
    Senator Dorgan. Why?
    Mr. Karsner. The first reason is a little bit personal. We 
submitted a $160 million budget for fiscal year 2007 and though 
we had the authority of the spend plan through Congress' 
generous markup of our budget, of my own volition and push, I 
sought to meet the Senate written mark of $204 million and 
added $40 million to the weatherization program in the spend 
plan. Much of that money this late in the year will roll over 
into next year so it is well funded to begin with and it is at 
the level that the Senate itself had written into the budget, 
albeit I understand it was the last Senate. Every new dollar 
that we add for that is taking a dollar away from the other 
efficiency programming markups that we have and the returns on 
those are 20 to 1, according to the National Academy of 
Sciences, and I think the returns are too big to forfeit.
    Senator Dorgan. Let me--well, first of all, thank you. You 
know, while we might agree and disagree about certain 
priorities and the importance of certain accounts, I agree with 
Senator Domenici's statement earlier. I think all four of you 
are significant public servants whose background and 
capabilities give you the opportunity to do a good job for this 
country and coming to serve in an administration that is not so 
long for this town, what 20 or 21 months left? I mean, you've 
not signed on for a 6- or 8-year term in most cases.
    You've come from various disciplines to assume leadership 
in these accounts and I appreciate that. I think all four of 
you have a lot to offer this country, even when we might 
disagree about priorities. It's my intent that I and the other 
members of this subcommittee work with you as we want to learn 
from you and want to help you meet the challenges ahead. While 
we might disagree on the exact amounts that should be invested 
in certain activities, at the end of the day, I think, we all 
share a common interest in success in your four areas. All four 
of these areas are very, very important as functions in the 
Department of Energy and your coming here today to respond to 
our questions and to give us a glimpse of what you're doing is 
very important.
    I understand Senator Domenici has made a career of this 
during the Clinton administration, having agency witnesses come 
up and defend the President's budget. That's what they're paid 
to do. It's what they are required to do and if they didn't do 
that, they'd probably go back and find out that their desk was 
cleaned out. So it is a little frustrating for us sometimes but 
having recognized that, we appreciate working with you and we 
appreciate you being here today.
    Senator Domenici, do you have anything to add at the 
conclusion?
    Senator Domenici. One last one. First, Mr. Chairman, I want 
to thank you for your last remarks. I have great admiration for 
a Senator who speaks as you have just spoken and I don't know 
you that well even though we've been here a long time but the 
more I learn, the more I like what I hear and I thank you for 
that.
    I want to say and ask which one of you would be--would 
represent global warming, the problems with global warming, 
proposed solutions. Which one would have----
    Mr. Karsner. I think that's the Department, sir.
    Senator Domenici. The Department. So we'll talk to the 
Department on that, okay? I think that's okay. I'll talk to the 
Department because I want to just make a statement.
    You know, we're soon going to be called upon to perhaps 
vote on a program, an American program to help contain 
CO2, one way or another. There are various ways to 
do that, one of which is the simplest one was to put a tax on 
carbon.
    I think that has lost favor quite a bit. In between there, 
there are various ways. I'd just like to make a point that I 
have spent a substantial amount of time and continue to spend 
more on analyzing the amount of CO2 that China and 
India are producing and emitting and the lack of positive 
action on the part of either of those countries to diminish the 
carbon dioxide and to the contrary, a dramatic increase in 
power plants that are fed by dirty coal. That's your area, 
Secretary Shope. You know about that. You're not in charge of 
the big picture but you know about that. They are unfortunate--
they have a lot of coal but it's dirty coal. At least the Lord 
could have made it clean and it wouldn't have had an ambient 
problem. They don't even clean up the first stage in the 
countries I just spoke of. They burn it without anything on 
there to clean up the pollutants as it is burned.
    But I'm going to close with this remark. As of now, we 
understand that they produce in China--not India, China, about 
one reactor that is somewhere between 500 and 750 kilowatts--
megawatts, excuse me, a week, about one a week. Now, you can't 
hardly imagine that being an American even though we claim we 
are the biggest gobblers of energy and we do nothing like that, 
such that if we were asked to spend great amounts of money to 
constrain carbon dioxide, the question will be asked of those 
who are for it, what is China and India going to do?
    And if the answer is nothing, then it would appear to me 
that the American people would have a very big, big issue to 
raise with the Congress that would do something because all we 
would do would be to tie our own hands and legs, do nothing 
significant to help the problem of CO2 in the outer 
atmosphere because, as a matter of fact, it is global in nature 
not American. And I'm not going to support unilateral 
containment without some hope--no, without some real evidence 
that China and India will join us in research and development 
and expenditure of substantial money to contain CO2 
in their countries.
    I think that's important that those of us who are involved 
get our heads together and see what all this means. It may mean 
that China might have to think a little sooner rather than 
later about what they'll do because I don't know that we'll sit 
by and buy their products forever either at the prices that are 
reduced because they spend nothing to clean it up while we 
spend much. That's a true impediment to us selling any products 
worldwide or vice versa. I thank you, Mr. Chairman. I yield.
    Senator Dorgan. Senator Domenici, thank you. If in fact it 
is a global economy and we all live in the same fishbowl then 
global pollution affects all of us as well and the Senator has 
expressed himself with respect to a vote on the Kyoto Treaty, 
believing that you cannot begin to deal with these issues, 
leaving China and India out of the equation. Especially because 
it's a global economy, those industries, those manufacturing 
plants and others that want to belch pollutants into the air 
have no regulatory costs of doing so and can simply move their 
plant overseas, fire their American workers and accelerate the 
job loss in this country.
    Having said all that, I think the testimony today, for 
example, with respect to the search for new technologies, the 
search for carbon sequestration, the search of this country to 
unlock the mysteries from these new technologies is very 
important because I assume that we will want very quickly to 
share those technologies with everyone around the world. I 
would say to you, Senator Domenici, I was persona non grata in 
my State for some long while with the coal industry when I 
served in the State capitol. I was one of those that led the 
fight to demand that, with respect to strip mining of coal, 
there would be segregation of topsoil, that companies ensure 
the contouring of the land for reclamation and that every new 
plant producing electricity had to have the latest available 
technology, wet scrubbers for instance.
    You can well imagine the way the industry responded. I was 
an enemy of the industry. Well, guess what? Twenty years later, 
twenty-five years later, they are all glad they did it and all 
of us in North Dakota are glad they did it.
    We produce a lot of coal. We're the first State in the 
country to meet the ambient air standards, even though we had 
substantial plants, because we spent the money to put those wet 
scrubbers on. We now see contoured land that looks great. It 
was land from which coal seams were extracted and topsoil was 
segregated and the contour was redone. You drive past there 
these days and see the vegetation, you can't tell there was 
coal mined from it.
    It is always harder at ground zero to begin to push these 
issues. You're absolutely right. If we decide to proceed and 
China and India do nothing, we will have accomplished very 
little and yet, in many ways, just as with stopping the spread 
of nuclear weapons, it falls on our country's shoulders. We 
must at least, at a minimum, begin a series of no regret steps 
as we begin to address all of these issues.

                     ADDITIONAL COMMITTEE QUESTIONS

    So, Senator Domenici, you and I will have a lot of work to 
do and I'll enjoy doing it with you because you have a great 
deal of experience and have offered a lot to this subcommittee 
over many, many years.
    [The following questions were not asked at the hearing, but 
were submitted to the Department for response subsequent to the 
hearing:]
             Questions Submitted to Hon. Dennis R. Spurgeon
             Questions Submitted by Senator Byron L. Dorgan
                   global nuclear energy partnership
    Question. I have heard Secretary Bodman talk about the Global 
Nuclear Energy Partnership (GNEP) as being an initiative that will take 
a couple of decades. Yet, your testimony refers to a Secretarial 
decision in June 2008. Further, your testimony refers to the 
development of commercial-scale reprocessing facilities in conjunction 
with industry. I understand many in industry feel more research and 
development is necessary on GNEP before moving forward on facilities.
    So, I am confused by the disconnect between Secretary Bodman's own 
observation of GNEP being a couple decade long process and this rush to 
a Secretarial decision in June 2008 and development of commercial scale 
reprocessing facilities.
    First, can you please explain to me what the Secretarial decision 
in June 2008 will be about? And second, can you explain why we would be 
turning so soon to development of commercial scale facilities?
    Answer. The Secretarial decision in 2008 is intended to determine 
the GNEP path forward. The Department intends for this decision to 
include a decision on whether or not and how to proceed with a nuclear 
fuel recycling center and an advanced recycling reactor. This will 
require compiling information regarding the requisite technologies, 
economics, and environmental impacts. The specific elements supporting 
the decision are a credible technology pathway and progress on its 
implementation; a business plan; definition of a government-private 
partnership that could be formed; completion of NEPA requirements; and 
a nonproliferation assessment.
    In addition, a path forward on the Advanced Fuel Cycle Facility is 
anticipated to be part of the Secretarial decision.
    The Department's work with industry at this stage will focus our 
research and development in support of future commercial-scale 
facilities. Engaging industry at this time could save the United States 
nearly a decade in time and a substantial amount of money, while still 
engaging and reinvigorating the nuclear community with new facilities 
and continued long-term R&D. Development of a credible U.S. program for 
construction of commercial fuel cycle facilities is a critical element 
of a strategy to convince other States considering nuclear energy 
programs that they can rely on the United States for their fuel cycle 
needs. Making the United States an influential participant in fuel 
cycle technology is vital to fulfilling the GNEP vision.
    Question. Under GNEP, I understand it will take one new fast 
reactor to burn the reprocessed fuel from approximately every three to 
four light water reactors. If this is correct and today there are 103 
existing light water reactors, we will need 25 to 34 new fast reactors 
to burn just the reprocessed fuel from existing light water reactors. I 
understand the nuclear power industry is not interested in building 
fast reactors. For GNEP to work properly, will the Federal Government 
have to build 30+ fast reactors or will industry be mandated to build 
them?
    Answer. Deployment of advanced fast reactors is currently 
envisioned as a commercial activity, with revenues being generated from 
the production of electricity while the transuranic material is 
simultaneously consumed. One goal for GNEP is to establish a business 
case that supports the commercial deployment of advanced recycling 
reactors, which are fast reactors. The number of advanced recycling 
reactors required to use the fuel recovered from LWR spent nuclear fuel 
depends on a number of factors. For example, a key factor is the rate 
at which an advanced recycling reactor would destroy the transuranic 
elements, recovered from the spent nuclear fuel, while generating 
electricity. Other factors include the initial core loading of an 
advance recycling reactor and the ability to recycle the spent fuel 
from the advanced recycling reactors.
    Question. A primary goal of GNEP is to develop a reprocessing 
technology that is ``proliferation resistant.'' Some claim DOE's 
proposed separations technologies all provide less than 1 percent of 
the International Atomic Energy Agency's ``self-protection'' standard 
for plutonium. Given these considerations, how can DOE's GNEP proposal 
meet the nonproliferation goal?
    Answer. One goal of GNEP is to develop a reprocessing technology 
that is ``more'' proliferation resistant than those currently used 
throughout the world which separate pure plutonium. The separations 
technologies being considered by the Department would not separate pure 
plutonium and would, therefore, be more proliferation resistant than 
those currently in use. The Department's fiscal year 2008 budget 
request supports over $88 million for further research and development 
on advanced reprocessing technologies.
    Question. Another goal of GNEP is to confine reprocessing and 
uranium enrichment to ``countries that already have substantial, well-
established fuel cycles.'' Does DOE's fiscal year 2008 budget request 
include funds for cooperation with the Korea Atomic Energy Research 
Institute (KAERI) for pyroprocessing research and development?
    Answer. Bilateral collaboration with South Korea on nuclear energy 
R&D occurs under the International Nuclear Energy Research Initiative 
(I-NERI). All I-NERI joint projects employ cost sharing on an 
approximately equal basis by the participating countries. Each country 
is responsible for funding its side of joint projects. In the case of 
the United States, current-year approved program budgets provide the 
funding for our contributions to the joint projects. As part of I-NERI 
collaborations, Korea, as represented by KAERI, is actively engaged in 
relevant work in fiscal year 2007 and supported in the fiscal year 2008 
budget request.
    It is important to note, however, that KAERI does not process spent 
fuel or special nuclear material as part of this cooperation. All 
pyroprocessing-related research and development activities involving 
use of spent fuel or special nuclear material under these I-NERI 
projects or work-for-others programs is done at DOE National 
Laboratories. Annual meetings between the U.S. Government, National 
Laboratory and KAERI officials have been instituted since 2006 to 
monitor cooperative activities in the area of pyroprocessing and 
advanced fuel cycle technologies.
    Question. Does DOE intend to offer the Republic of Korea, a country 
that the United States to date has not permitted to reprocess due to 
proliferation concerns, a role in GNEP as a ``supplier'' country?
    Answer. The Republic of Korea has the sixth largest nuclear power 
program in the world. The Government of the Republic of Korea has made 
the decision not to possess reprocessing or enrichment facilities and 
is limiting the scope of its research and development on pyroprocessing 
technologies. Nevertheless, the Republic of Korea is actively engaged 
in the development of advanced reactor and fuel cycle technology, 
nuclear safety, radioactive waste management, and other related work 
programs on the national, bilateral and multilateral levels. We gain a 
great deal by working with these experts. The Republic of Korea is 
engaged in research and development that supports GNEP involving small-
reactors, advanced burner reactors, computer modeling, safeguards and 
basic science, but not separations of spent fuel.
    At this point, DOE has not specifically invited countries to 
participate in GNEP as ``supplier countries.'' It is generally 
anticipated that the expansion of civilian nuclear power could be 
provided by countries already possessing the infrastructure to 
manufacture nuclear power plants as well as provide fuel supply 
services.
    Question. Which countries has DOE invited to participate in GNEP as 
``supplier'' countries?
    Answer. At this point, DOE has not specifically invited countries 
to participate in GNEP as ``supplier countries.'' It is generally 
anticipated that the expansion of civilian nuclear power could be 
provided by countries already possessing the infrastructure to 
manufacture nuclear power plants as well as provide fuel supply 
services.
    Question. Which countries has DOE invited to be ``users''?
    Answer. DOE believes it is advantageous to seek partnerships for 
the expansion of civilian nuclear power worldwide by providing support 
on infrastructure development for countries newly considering nuclear 
power (e.g., legal, regulatory, safety, knowledge base, experience, 
etc.). DOE does not plan to invite countries as ``users'' or 
``suppliers,'' but rather seeks partners. The GNEP partnership is open 
to all countries agreeing to the statement of principles. The benefit 
of partnership is having access to products and services on the front 
and back end of the fuel cycle while relieving countries of the 
liability, infrastructure and expense associated with such facilities. 
Ultimately, there will be technology partners, materials partners 
(e.g., uranium) and infrastructure partners. In December 2006, the 
United States co-hosted, along with several other IAEA Member States 
(Canada, China, France, India, Japan, Russia, and South Korea), a 
workshop in Vienna, Austria, on ``Issues for the Introduction of 
Nuclear Power.'' Twenty-six countries currently without nuclear power--
yet considering it as a potential addition to the energy portfolio--
attended this workshop.
                         nuclear energy's role
    Question. The Energy Information Administration's Annual Energy 
Outlook 2007 reference case indicates that nuclear power provided 19 
percent of the Nation's electricity in 2005 and is expected to provide 
15 percent of the Nation's electricity in 2030.
    How do you reconcile the fact that, even as the U.S. Government is 
providing greater Federal assistance to the nuclear power industry 
through various research programs and deployment incentives than ever 
before, that portion of electricity generated from nuclear power 
facilities is expected to decrease as a percentage of our overall 
electricity production in the next 25 years?
    Answer. As you know, there has been no new construction of nuclear 
plants in the United States in 30 years. However, nuclear power still 
supplies a significant percentage of our electrical needs, because 
plant efficiencies have increased electricity production equivalent of 
27 1000 megawatt plants without new construction. As such, there is 
little additional efficiency to be gained with the existing fleet of 
reactors.
    According to the Energy Information Administration's (EIA) Annual 
Energy Outlook 2007, America's demand for electric power is projected 
to increase at an average annual rate of 1.5 percent between now and 
2030. In the Annual Energy Outlook 2007, EIA assumes that the 
equivalent of 12 new nuclear plants (1,000 megawatts each) would be 
built by 2030. The capacity lost from the few currently operating 
plants that will be retired by 2030 is assumed to be offset by power 
uprates at existing plants and the restart of TVA's Browns Ferry Unit 
One. Therefore EIA estimates total nuclear capacity to increase from 
100 GW today to 112 GW in 2030. Based on EIA's assumptions, all the 
nuclear plants operating in 2030 would produce only about 15 percent of 
the generation mix in the United States.
    The Department is aggressively pursuing actions through our Nuclear 
Power 2010 program to ensure the growth of electricity produced by 
nuclear power. To date, 15 power companies have notified the Nuclear 
Regulatory Commission of their intentions to submit 19 applications for 
combined Construction and Operating Licenses for 33 new reactor plants. 
Therefore, we expect that much more than the 12 gigawatts of new 
nuclear capacity projected by EIA will be realized before 2030. New 
nuclear plants would only need to be brought on line at a rate of three 
or four per year, a rate lower than that already proven achievable in 
some years in the 1970s, in order for nuclear power to provide 20 
percent of the mix in 2030.
                                 ______
                                 
             Questions Submitted to Hon. Dennis R. Spurgeon
            Questions Submitted by Senator Pete V. Domenici
        gnep advanced fuel cycle facility--luxury or necessity?
    Question. Mr. Spurgeon, the Department has requested funding for 
the Advanced Fuel Cycle Facility. This new research facility is 
intended to perform all of the critical advanced reactor fuel 
development. However, it seems to me that this brand new facility 
actually duplicates the numerous older facilities located across the 
DOE complex that are still in use today.
    This funding would go a long way in upgrading several existing 
facilities and would have the added benefit of supporting a diverse 
scientific mission such as medical isotopes, environmental 
characterization, and support for the space mission.
    This new facility seems to be more of a luxury, rather than a 
necessity.
    Can you please explain your rationale for deciding to build a 
single brand new facility rather than make the necessary investments in 
our existing laboratory infrastructure?
    Answer. The Advanced Fuel Cycle Facility (AFCF) project is in the 
early stages of the conceptual design; no decision has been made to 
construct the facility and DOE is evaluating reasonable alternatives. 
The Department is aware that facilities exist that, with refurbishment 
or upgrades, could perform some, but not all, of the functions 
currently planned for the AFCF. A full examination of the trade-offs 
between constructing a new facility and upgrading existing ones is 
required in accordance with the Department orders for a major system 
acquisition.
    The AFCF would allow the Department to perform R&D, technology 
development, and demonstrate the integrated operations and processes 
involved in the recycling of spent nuclear fuel. These operations would 
include receiving the spent nuclear fuel, separating its various 
constituents, fabricating new fuel, containing transuranic elements, 
for an advanced recycling reactor, manufacturing lead test assemblies 
that are necessary for fuel qualification, and waste handling. This 
facility would have a continuous throughput rate from start to finish, 
from reprocessing both spent thermal and fast reactor fuel to 
fabricating new fuel types yet to be fully developed. Currently, no 
single facility with that capability exists.
                            np 2010 program
    Question. Mr. Spurgeon, your budget provides $113 million for the 
Nuclear Power 2010 program. This is significantly below the $183 
million needed to fulfill the 50/50 cost share agreement to prepare the 
detailed engineering designs needed to resolve the technical, 
engineering and regulatory challenges needed to license a new reactor.
    What is the Department's justification for failing to meet its cost 
share commitment and how will this impact the cost and schedule of this 
project?
    Answer. The Department of Energy (DOE) is meeting its cost-share 
funding commitment for these important nuclear energy projects. DOE 
remains committed to spend $586.5 million as Federal cost share as 
agreed to with industry. DOE's cost-share primarily supports the 
demonstration of the ``untested'' regulatory process for the combined 
Construction and Operating Licenses for two new nuclear plants. It also 
supports the completion of the first-of-a-kind engineering for two 
reactor designs. The designs will be completed in sufficient detail to 
give power companies the cost and schedule information they need to 
make plant orders. If the fiscal year 2008 budget request of $114 
million is appropriated by Congress, DOE will have provided industry 
with over $300 million of the $586.5 million total of Federal cost 
share by the end of fiscal year 2008.
    In November 2006, the industry proposed DOE increase its cost-share 
for these two projects by $161 million to a new total DOE cost-share of 
$727 million. With this increase, industry proposes activities worth 
$183 million in fiscal year 2008. DOE declined this industry request 
because its cost and scope went beyond DOE's original commitments.
    Question. Based on the budget shortfall, are you able to predict 
which design, engineering, or regulatory activities will not be funded. 
Do you believe this will impact one reactor design over the other?
    Answer. DOE does not believe one particular reactor design would 
have an advantage over the other based on DOE's fiscal year 2008 budget 
request.
    The fiscal year 2008 budget request of $114 million for the Nuclear 
Power 2010 program is sufficient for funding necessary activities in 
fiscal year 2008. The request is consistent with the agreed-to cost-
share funding commitment.
                        np 2010 program reforms
    Question. Last year, I raised a number of tough questions about the 
cost controls of the NP 2010 program and whether or not the NuStart 
team would be able to deliver on the budget commitments they had agreed 
to. This criticism seemed to force the reactor vendors to sharpen their 
pencils and improve the work product.
    Do you believe the DOE's private partners have made the necessary 
improvements to get this program back on track?
    Answer. Given that these are uncharted waters for industry and DOE, 
substantial improvements have occurred on the NuStart and Dominion 
projects and the Department recognizes some risks remain. These known 
risk areas and the contingency plans to address them are under constant 
NuStart and Dominion management review.
    One of the more substantial improvements has been the integration 
of the reactor vendor engineering and power company combined 
Construction and Operating License (COL) application development 
efforts. These integration efforts are evident through formal review 
teams such as the Economic Simplified Boiling Water Reactor and the AP 
1000 Engineering Review Teams and the Design Control Document/
Construction and Operating License Integration Team. DOE believes these 
industry efforts significantly improve the likelihood two COL 
applications will be submitted to the Nuclear Regulatory Commission in 
the first quarter of fiscal year 2008.
    Question. Are you confident that this program will be able to 
deliver two reactor designs that the NRC will be able to license?
    Answer. The Department of Energy (DOE) is highly confident the 
licensing demonstration projects with Dominion and NuStart will yield 
approved Nuclear Regulatory Commission (NRC) design certifications and 
combined Construction and Operating Licenses (COL) for the two advanced 
light water reactor designs: the Westinghouse Advanced Passive (AP) 
1000 and the GE Economic Simplified Boiling Water Reactor (ESBWR). The 
NRC already certified the reactor design for the AP 1000 in December 
2005. NRC has projected the ESBWR design certification could occur in 
fiscal year 2010. DOE expects COL applications to be submitted to NRC 
in the first quarter of fiscal year 2008 and NRC issuance of approved 
licenses in fiscal year 2010.
                   foreign interest in nuclear energy
    Question. Mr. Spurgeon, it seems everyday that I pick up a 
newspaper, another country or company is announcing that they are going 
forward with a new nuclear plant, or expanding their existing fleet to 
meet their growing energy needs. Countries such as India, China, 
Pakistan, Russia, Romania, Finland, Argentina and the United States all 
have plants under construction. Worldwide there are another 200 new 
plants on the drawing boards.
    The countries that have expressed an interest in a nuclear plant 
also need to make plans for uranium fuel supplies and a solution for 
their nuclear waste. Not all of these questions have been answered and 
this has forced the IAEA to think about how the world can safely expand 
civilian nuclear power without increasing the proliferation threat.
    It occurs to me that the rest of the world is moving ahead with 
civilian nuclear power regardless of what the United States does.
    What do you think about the worldwide nuclear effort and how will 
GNEP play a role in this?
    Answer. Worldwide, nations are becoming more concerned with meeting 
energy demands, providing energy security and engaging in energy 
practices that are acceptable for sustaining the environment. DOE sees 
nuclear power as a safe, clean, and efficient means to meet these 
needs. The expansion of nuclear power can satisfy these needs and must 
be expanded in a safe and proliferation resistant manner. For that 
reason, DOE, through the Global Nuclear Energy Partnership (GNEP), 
plans to assist countries newly interested in nuclear power to work 
toward developing sound infrastructure. In December, 2006, the U.S. co-
hosted a workshop in Vienna, Austria, on ``Issues for the Introduction 
of Nuclear Power.'' Twenty-six countries currently without nuclear 
power--yet considering it as a potential addition to the energy 
portfolio--attended this workshop.
    While a key goal of GNEP is expansion of nuclear energy, GNEP has 
other roles. Another key objective of GNEP is to reduce the 
proliferation risks that might otherwise be associated with the global 
expansion of nuclear energy. GNEP supports the goals and objectives 
outlined in the Energy Policy Act of 2005 which calls for diversifying 
the U.S. energy supply with sources such as nuclear power which is an 
important emissions-free component of the U.S. energy portfolio. GNEP 
provides a vision for future energy needs worldwide in a way that 
reduces waste burdens and proliferation risks. GNEP aims to reinforce 
nonproliferation policies by offering reliable nuclear fuel services to 
discourage the spread of enrichment and reprocessing technologies. GNEP 
also aims to draw down and eventually to eliminate excess stocks of 
separated civil plutonium that have accumulated. In addition, GNEP 
facilities aim to reduce proliferation and security risks by using 
materials that are less easily used in nuclear weapons than separated 
plutonium.
                                  gnep
    Question. Mr. Spurgeon, the budget request for the GNEP program is 
extremely complicated. The budget seems to fund three separate 
activities including fundamental R&D, technology design and then a 
third category known as ``technology development.'' This third 
category, which consumes one-third of the GNEP budget, seems to 
duplicate the other activities.
    Can you please clarify this and provide me with a detailed written 
accounting of the spending plan for the GNEP Technology Development 
Account.
    Answer. The GNEP Technology Development activity includes 
activities within the Advanced Fuel Cycle Initiative that provide 
support to each of the three Global Nuclear Energy Partnership (GNEP) 
projects: the nuclear fuel recycling center, advanced recycling 
reactor, and an advanced fuel cycle research facility. Whereas the work 
associated with GNEP R&D activities such as Separations and Advanced 
Fuels Development involves basic research and bench-scale or 
laboratory-scale experiments of a variety of potential technologies, 
the Technology Development activity funding will be used to further 
develop technology that has been shown to be feasible at the laboratory 
or engineering scale, as well as to optimize design parameters and size 
equipment. This account also supports the small reactor and 
international collaboration efforts.
    As the Department continues its research and development, industry 
engagement, and other activities, the specific allocations for fiscal 
year 2008 for GNEP Technology Development activity could change. 
However, for fiscal year 2008, the Department currently anticipates 
allocating approximately $50 million for the nuclear fuel recycling 
center, $34 million for an advanced recycling reactor, $38 million for 
an advanced fuel cycle research facility, $6 million for international 
collaborations and agreements, and $5 million for grid-appropriate 
reactors in developing countries.
           gnep--coordinating research with other ne programs
    Question. The committee would like to understand the Department's 
view on the plans to tie together the various elements that make up its 
nuclear programs such as NGNP and GNEP. First, there is the potential 
to cooperate on fuel technologies that would benefit the high 
temperature gas reactor being considered for NGNP as well as Advanced 
Reactors being developed under the GEN IV program.
    Will the Department conduct the appropriate analysis high 
temperature gas cooled reactor's capability to burn nuclear waste and 
the potential for synergy with the NGNP and GNEP?
    Answer. One of the key objectives of the Global Nuclear Energy 
Partnership (GNEP) is to make nuclear power an attractive alternative 
to fossil fuels for developing countries around the world. Because the 
power demand requirements are limited for these countries, they will 
likely need smaller reactors. A Very High Temperature Reactor (VHTR), 
such as that being developed in the Next Generation Nuclear Plant 
(NGNP) program, is a small modular reactor design that could 
potentially be well suited in meeting the objectives of GNEP for global 
deployment of nuclear power to developing countries. While the 
Department (DOE) has conducted studies regarding the use of VHTRs for 
actinide destruction, DOE chose to utilize fast reactors initially for 
this component (actinide destruction) of the GNEP mission, while DOE 
continues research and development on VHTR and other technologies. The 
decision to use fast reactors is detailed in DOE's December 2006 
report, The U.S. Generation IV Fast Reactor Strategy. The Sodium-Cooled 
Fast Reactor (SFR) was chosen as the most promising fast reactor 
concept for meeting DOE's strategic goals. The United States has 
extensive experience with SFRs, and an SFR deployed as the Advanced 
Burner Reactor under GNEP could be operational in the 2020-2025 
timeframe.
    DOE is performing research and development on the NGNP consistent 
with the timeline established in the Energy Policy Act of 2005. 
Additional research and development on the use of high-temperature gas-
cooled reactor for actinide burning could be performed after the 
underlying concepts supporting VHTR operation with uranium have been 
thoroughly validated.
             cooperative nuclear fuel research with russia
    Question. I understand that NNSA, in conjunction with Rosatom, is 
developing the technology such as fuel and advanced power conversion 
systems for high temperature gas cooled reactors in a cost-shared 
program whose purpose it is to ultimately burn surplus Russian weapons 
plutonium.
    How much has been committed to this program and under what program? 
What is the nature of the research and how will this benefit the GNEP 
effort? Is this research being coordinated with NE?
    Answer. Between fiscal year 1999 and fiscal year 2006, the 
Department provided $17.1 million to Russian Institutes to develop the 
Gas Turbine-Modular Helium Reactor (GT-MHR) for plutonium disposition 
in Russia. During that timeframe, Rosatom provided an equivalent $17.1 
million of matching Russian funds as well. This program is managed 
through the National Nuclear Security Administration (NNSA) and has 
been in place for over 8 years. The current scope of this cooperation 
is to conduct research and development in high risk technology areas 
such as the development of plutonium particle fuel and power conversion 
unit technologies. The advanced recycling reactor component of the GNEP 
program may benefit from this effort as it continues to develop 
advanced fuel forms and power conversion technologies. The Office of 
Nuclear Energy receives and considers reports summarizing the Russian 
GT-MHR research program.
    Question. Based on the Russian's level of indecision on MOX; why 
does the Department believe this would be a prudent use of resources at 
this time. Is this being cost shared?
    Answer. The Russian view of weapon grade plutonium is that it is a 
valuable national resource and that disposition in Russian Light Water 
Reactors (LWRs), such as the VVER, is not the most efficient use of 
this resource. Originally, both the United States and Russia had agreed 
to MOX disposition in LWRs. However, over time, the Russians expressed 
misgivings with LWR disposition, although they have never specifically 
excluded use of LWRs for disposition. The Russians have since proposed 
consideration of two additional approaches, which they consider to be a 
more efficient use of their plutonium. These two additional approaches 
are disposition in the BN-800 fast reactor, which is under construction 
(the plutonium disposition program has always considered the 
disposition of a limited quantity of plutonium in the BN-600 fast 
reactor); and development of a High Temperature Gas Cooled Reactor for 
possible use for plutonium disposition, should this reactor become 
available in time.
    The current Russian proposal includes cost sharing in every 
scenario under discussion, including LWRs, although specific details 
have yet to be negotiated.
                           nuclear fuel cycle
    Question. Mr. Spurgeon, much of the focus of the Department since 
the passage of the Energy Policy Act 2005 toward nuclear power has been 
on the development of new nuclear reactors. As you know, there are 
other valued components of the domestic nuclear fuel cycle. Currently, 
our country has only one functioning aging enrichment facility and 
another soon to come on-line in the next few years. These facilities 
will provide the fuel of the nuclear renaissance in America and build 
upon the President's energy security programs.
    Can you tell me what the Office of Nuclear Energy is doing to 
encourage development in the front end of the U.S. nuclear fuel cycle, 
in the enrichment areas of the fuel cycle?
    Answer. With 104 nuclear power plants currently licensed in the 
United States and the announcements by power companies for license 
applications for over 30 new plants, the Department of Energy (DOE) 
believes that U.S. energy security would be significantly enhanced by 
private sector investment in new domestic uranium enrichment capacity. 
Currently, the aging and energy-intensive gaseous diffusion plant at 
Paducah, Kentucky is the Nation's only operating enrichment plant. 
Three private companies, General Electric (GE), Louisiana Energy 
Services (LES), and USEC Inc. (USEC) are at various stages of deploying 
new U.S. enrichment plants featuring advanced technology. LES is the 
furthest along with construction having started on its National 
Enrichment Facility in New Mexico that will utilize gas centrifuge 
technology commercially deployed by Urenco in Europe. USEC and GE are 
working to demonstrate commercial viability of the American Centrifuge 
and SILEX projects, respectively.
    With respect to the Department working with private enrichers, DOE 
and USEC signed an agreement in June 2002, whereby USEC Inc. made a 
commitment to deploy an enhanced version of DOE's previously developed 
gas centrifuge technology at the Portsmouth Gaseous Diffusion Plant 
site. USEC, in order to demonstrate its American Centrifuge, is funding 
a Cooperative Research and Development Agreement with the DOE's Oak 
Ridge National Laboratory. In December 2006, DOE and USEC signed a 
long-term lease agreement for USEC to build its commercial plant at DOE 
facilities at Portsmouth, Ohio. At the same time, DOE granted USEC a 
patent license for DOE's gas centrifuge technology that requires USEC 
to pay royalties to the U.S. Government on annual sales of enriched 
uranium from centrifuge plant production. While LES and GE are pursuing 
other technical approaches, DOE encourages all three companies in their 
efforts to deploy reliable and competitive advanced enrichment 
technology.
    Question. Does the Department need any new authorities in this 
regard?
    Answer. Both LES and USEC are seeking to use DOE's uranium 
inventories to facilitate the startup of their new enrichment 
facilities. At this time, DOE does not need additional authorization to 
sell or transfer uranium to a private company.
                                 ______
                                 
             Questions Submitted to Hon. Alexander Karsner
             Questions Submitted by Senator Byron L. Dorgan
               balancing renewable and efficiency funding
    Question. DOE has strongly backed many of the programs in your 
office and the President highlighted initiatives to be pursed by the 
Office of Energy Efficiency and Renewable Energy in his State of the 
Union address. This includes work on hydrogen technology, biomass and 
biorefinery R&D, solar energy, and vehicle technologies. These are all 
important.
    However, it seems that there is much greater emphasis on targeted 
renewable energy programs than other programs within your office such 
as energy efficiency programs, the Weatherization Assistance Program, 
and the State Energy Programs. In your opinion, do you have the right 
balance between the renewable side of your office and the energy 
efficiency side of your office? Why are these energy efficiency 
programs not seeing the same funding increases as the renewable energy 
programs are?
    Answer. Yes, the Office of Energy Efficiency and Renewable Energy 
maintains a balanced portfolio that supports achievement of programs' 
goals and ensures optimal use of resources.
    The fiscal year 2008 budget request includes increases for many of 
our energy efficiency programs. The Building Technologies Program 
budget request is $9.1 million greater than the fiscal year 2007 
request, the Vehicle Technologies Program budget request is $10.1 
million greater than the fiscal year 2007 request and the Industrial 
Technologies Program is $435,000 greater than the fiscal year 2007 
request.
    Many of the Department's efficiency programs have very high returns 
at low cost, such as FEMP, appliance standards, energy efficiency 
building codes, ``Save Energy Now'', and Energy Star rating system, to 
name a few.
               balancing research with deployment funding
    Question. I recognize that money at DOE is being devoted to R&D 
but, voluntary deployment and market transformation programs also are 
needed to move new technologies into the marketplace, and standards and 
codes are needed to set a minimum threshold for using cost-effective 
technologies. By some accounts, just over 50 percent of your $1.24 
billion in your fiscal year 2008 budget request is for research and 
development activities. Is this an appropriate amount? What portion of 
funding is being applied to renewable energy R&D and what portion to 
energy efficiency R&D? What is the Department doing, beyond the basic 
R&D, to transition new technologies into the marketplace on the 
efficiency side?
    Answer. The Office of Energy Efficiency and Renewable Energy (EERE) 
maintains a balanced portfolio of programs to advance renewable power 
generation, diversify transportation fuels, and promote energy 
efficiency. In our fiscal year 2008 request, almost 52 percent is R&D 
with the balance invested in regulation, commercialization and grant 
programs. This balance is appropriate because many of the Department's 
efficiency programs are lower cost programs, such as FEMP, appliance 
standards, energy efficiency building codes, ``Save Energy Now'', and 
Energy Star rating system, to name a few.
    The Office of Energy Efficiency and Renewable Energy (EERE) 
programs related to energy efficiency comprise approximately 46 percent 
of the total EERE proposed fiscal year 2008 budget (including program 
direction and support funds).
    The Department's approach to promoting new technologies couples 
technology push with market demand pull, and works to address barriers 
to the market adoption of advanced technologies through various program 
initiatives. For example, the Department plans to lead by example with 
the Executive Order 13423 and become an early adopter of energy 
efficient and renewable energy technologies. By identifying markets 
where the life-cycle costs of advanced energy technologies currently 
form a compelling economic argument, the Federal Government will create 
demand pull which will increase the economies of scale and drive the 
technologies down the cost curve. The Department is also looking to 
stimulate the commercialization of advanced technologies by bridging 
the gap between R&D and the market place. To this end, the Department 
has designated a Director of Commercialization and Deployment, located 
within the Energy Efficiency and Renewable Energy Program, to oversee 
and guide our deployment-related efforts. However, ultimately 
commercialization decisions are up to industry.
                   weatherization assistance program
    Question. The Weatherization Assistance Program funding has been 
cut from $242.5 million in fiscal year 2006 to $204.5 million in the 
fiscal year spending plan, and the fiscal year 2008 request is for $144 
million. That is a 41 percent cut from fiscal year 2006. Why is the cut 
so significant? Is the Department still interested in moving the 
Weatherization Assistance Program to another Federal agency?
    Answer. The 2007 operating plan optimizes resources and provides 
the appropriate amount of resources to support the achievement of goals 
and priorities. We have chosen to prioritize investments in energy 
efficiency and renewable energy R&D that have multiplicative returns 
such as improvements to appliances and the building envelope that 
affect the whole American population rather than additive returns not 
associated with technological R&D that target a single segment of the 
population. For example, the National Academy of Sciences studied the 
benefits of the energy efficiency portfolio and found that the return 
on the research and development (R&D) investment was roughly 20 to 1. 
In contrast, the Weatherization Assistance Program has a return on 
investment of 1.5 to 1.
    The Department of Energy has no current proposal to move the 
Weatherization Assistance Program to another Federal agency.
                          appliance standards
    Question. As you know, DOE has been plagued for years by long 
delays in issuing appliance efficiency standards. So far, you seem to 
be meeting the aggressive schedule you set last year for getting the 
required standards out, and I am pleased that you asked for additional 
funds. However, a recent GAO report said additional changes are needed 
in the program, and I am concerned that recent proposed standards have 
been weak and are not using the tremendous potential of this program to 
address our energy needs.
    The GAO report said the program faces a 600 percent increase in 
workload with a 20 percent resource increase in the fiscal year 2007 
budget. Have you analyzed the staffing and funding requirements to 
carry through the standards plan, and can you share that with us?
    Answer. Yes, the Department has conducted a thorough assessment of 
resource needs for the efficiency standards program. On January 31, 
2006, the Department submitted an aggressive plan to Congress, 
addressing both the history and the future plans for the Appliance 
Standards Program. That plan does in fact commit to a rulemaking 
schedule that is six times the historical rulemaking rate for this 
program. The actions detailed in that plan are expected to dramatically 
increase the efficiency of the process and the output rate. In addition 
in our fiscal year 2007 operating plan, we have directed resources 
necessary to improve the program. Early improvements in the program are 
evidenced by the timely issuance of final test procedures for various 
products and final standards for commercial products, as set out in the 
plan DOE provided to Congress. . Changes in our process include 
implementing product bundling within a single rulemaking and organizing 
staff into seven technology teams.
    Since committing to this schedule for the standards program, the 
Department has met 100 percent of its scheduled deadlines. We have 
completed eight rulemakings since EPACT 2005, including test procedure 
rulemakings and codification of prescribed standards, and have made 
significant progress on others that were underway prior to EPACT 2005. 
In 2006, we initiated standards rulemaking for 12 additional products 
and remain on schedule for all future deadlines.
    Question. Some of the largest possible savings, for example from 
standards on furnace fans and refrigerators, are not included in the 
plan, and thus will not be considered for at least 5 years. Can you 
tell us how much additional resources you would need to begin work on 
the most important standards now?
    Answer. You correctly note that the plan did not include provisions 
for new refrigerator and furnace fan efficiency standards. Current 
statutory requirements for refrigerator standards have been met and 
refrigerators of today consume approximately 70 percent less energy 
than they did in the early 1970s. The Energy Policy Act of 2005 gave 
DOE the authority to set standards for furnace fans but did not specify 
a statutory deadline. The plan provided to Congress is focused on 
implementing all statutorily required rulemakings, which are numerous. 
We continue to evaluate our published schedule for opportunities to 
accelerate and expand to additional products, such as furnace fans, 
while staying on schedule.
    Question. DOE has rejected some recent suggested standards because 
they were not deemed consistent with current law. Do you need any 
additional legal authority to issue standards that make the most sense 
for consumers?
    Answer. In February, Secretary Bodman sent legislation to Congress 
requesting authorization to streamline the standards process and bring 
more efficient products to market sooner. This fast-track legislative 
proposal would allow the Department to move directly to a Final Rule 
for certain products when a clear consensus for a standard exists among 
manufacturers, efficiency advocates, and other stakeholders. By using 
this process, we would be able to promulgate an energy efficiency 
standard directly when all relevant interests jointly have negotiated 
and submitted an agreed proposed standard that meets all statutory 
criteria. In some cases, directly issuing a final rule would shorten 
the time to a completed standard by nearly a third and shave months off 
the rulemaking process. To be clear, if the Department determines that 
a consensus does not exist, this proposal would not preclude 
rulemaking; it would simply require the Department to use the 
traditional three-stage process.
    Other pending legislative proposals would fix various problems with 
the existing statute, provide DOE with needed flexibility in some 
areas, establish statutory efficiency standards for several products, 
and mandate DOE to develop standards for other products. We are hopeful 
that constructive legislation in this area will be enacted before the 
end of this year.
                             building codes
    Question. A small DOE program to assist States in setting and 
achieving compliance with their building energy codes leverages a few 
million dollars to improve the efficiency of every new building in much 
of the country. It has been rated the most cost-effective of all DOE 
programs assisting States. Yet the proposed fiscal year 2008 budget 
request would cut it.
    Several studies have shown we are wasting huge amounts of energy 
because of poor compliance with codes. EPACT 2005 authorized a program 
to help States improve compliance. With so much building occurring 
around the country, wouldn't this be a good time to add a little 
funding to help make sure these buildings are up to code?
    Answer. Yes, we are currently restarting and reinvigorating the 
codes program under the fiscal year 2007 Continuing Resolution which 
provided approximately $2 million to the State building energy codes 
activities. The fiscal year 2008 request is $3.8 million. The 
Department has effectively provided technical assistance and training 
through the Building Energy Code Program website, 
(www.energycodes.gov), technical support, web-based training, stand-up 
training, webcasts, and Setting the Standard newsletter. Efficient use 
of funds allows the Department to continue to provide assistance to 
improve compliance to national, regional, and State building code 
officials and stakeholders. For example, there are over 3 million hits 
a month on the Department's www.energycodes.gov website and some 6,000 
residential code compliance tools are downloaded monthly by designers, 
builders and code officials. The Department trains approximately 2,000 
code officials, designers, and builders to implement these codes and 
updates and improves the core materials and code compliance software to 
reflect recent changes in the model energy codes and emerging energy 
efficiency technologies.
                   federal energy management program
    Question. I understand that you are big supporter of improving 
energy efficiency in Federal facilities. I am concerned about the 
ability of your office to sufficiently train, educate, and support 
other agencies of the Federal Government related to the Federal Energy 
Management Program (FEMP). In January, President Bush signed an 
Executive Order with new and updated energy savings targets and other 
requirements. Yet the proposed budget would cut the Federal Energy 
Management Program, which leads the Government-wide effort to save 
energy, by another 12 percent.
    What is DOE's role in implementing the new Executive Order? What 
funding is provided in the budget for this purpose?
    Wouldn't additional funding for FEMP save the Federal Government 
more money than it would cost by reducing energy waste?
    Answer. The Department's role is to provide specific and 
authoritative guidance to Federal agencies on the provisions of the 
Executive Order and to support agency efforts to meet the goals through 
assistance with third party financing and design assistance. Virtually 
all of FEMP's fiscal year 2008 budget request of $16.8 million will be 
used for the implementation of the Executive Order and associated 
statutory requirements in some way.
    The private sector will be the most important funding source for 
saving energy at Federal agencies. FEMP's third party financing 
activities, in conjunction with the private sector, can potentially 
fund projects needed to meet the Executive Order goals.
                            public education
    Question. Public education is the quickest way to reduce energy use 
and address current energy prices and supply-demand imbalance. Yet 
there is almost no money for public education on energy efficiency in 
the budget, despite a $90 million authorization in EPACT 2005.
    How much funding would be available for proactive energy-efficiency 
public education programs under this budget? Where is that funding in 
the budget?
    What is your plan for using those funds, including plans for 
partnering or contracting with other organizations?
    Answer. Within our fiscal year 2008 budget request, we include $4.9 
million in funding to support public information activities within our 
Program Support budget line and within each program's budget.
    The funding supports a range of activities and programs including 
websites, Energy Saver fact sheets, development of publications, the 
EnergyStar program, and the Energy Efficiency and Renewable Energy 
Information Center. In the past we have partnered with the 
Environmental Protection Agency (EPA), the Alliance to Save Energy, 
retailers and utilities to promote energy efficiency through public 
awareness campaigns such as ``Powerful Savings,'' ``Easy Ways to Save 
Energy'' and the ``Power Is In Your Hands.'' We have also collaborated 
with EPA and retailers to promote EnergyStar qualified products through 
the EnergyStar program. The 2008 budget supports our partnerships with 
business and non-governmental organizations to help leverage funding to 
promote education on energy efficient technologies and products as well 
as alternative sources of energy and fuel.
                              oil savings
    Question. In the State of the Union address, President Bush called 
for reducing our gasoline use by 20 percent in 10 years. This budget 
increases some budget areas important to that goal, such as DOE's 
Biomass program, but decreases others, including DOE's Vehicle 
Technologies program.
    If we are serious about addressing our ``addiction'' to oil, don't 
you think we need to invest more in vehicle efficiency as well as in 
new fuels, and in improving trucks and buses as well as cars?
    Answer. The Department's balanced portfolio of investments 
addressing both efficiency improvements and alternative energy sources 
outlined in the 2008 budget optimizes the use of resources and supports 
the achievement of stated goals. The 2008 Budget for the Vehicle 
Technologies Program is approximately $10 million above the 2007 
request. Most of the increase is to support the development of plug-in 
hybrid technologies, which show great promise of increasing light duty 
vehicle fuel economy.
    Question. The president's goal assumes a 4 percent annual fuel 
economy improvement in new cars and light trucks, but the light truck 
fuel economy standards issued so far only increase by 2 percent a year. 
What will change to get a 4 percent increase in the future? Do we need 
more research to support this goal?
    Answer. The President's goal to reduce gasoline consumption is 
ambitious and would require the use of more advanced fuel economy 
technologies in the new vehicle fleet. The Department believes that 
accelerated consumer adoption of hybrid and plug-in hybrid electric 
vehicles and advance combustion engines offers the potential to 
significantly reduce oil consumption in the near-term. However, any 
requirements to improve new car and light truck fuel economy would also 
have to be technologically feasible, economically practicable, and 
ensure that vehicle safety is not compromised.
    The Department of Energy's role in this effort is to accelerate 
advanced technology vehicles including through significant new 
investments in advanced batteries for hybrid and plug-in hybrid 
electric vehicle applications. Also, the Department is continuing 
research and development of advanced combustion engines to address the 
technical barriers to the commercialization of more efficient advanced 
internal combustion engines. Specific goals for combustion research are 
to improve, by 2012, the efficiency of internal combustion engines from 
30 percent to 45 percent for light-duty applications while meeting 
cost, durability, and emissions constraints.
                   epact 2005 and geothermal programs
    Question. The Energy Policy Act of 2005 provides specific 
directives for DOE's renewable energy research efforts. In general, the 
overall approach is spelled out in section 931, which states: (a)(1) 
OBJECTIVES.--The Secretary shall conduct programs of renewable energy 
research, development, demonstration, and commercial application, 
including activities described in this subtitle. Such programs shall 
take into consideration the following objectives: (A) Increasing the 
conversion efficiency of all forms of renewable energy through improved 
technologies. (B) Decreasing the cost of renewable energy generation 
and delivery. (C) Promoting the diversity of the energy supply. (D) 
Decreasing the dependence of the United States on foreign energy 
supplies. (E) Improving United States energy security. (F) Decreasing 
the environmental impact of energy-related activities. (G) Increasing 
the export of renewable generation equipment from the United States.
    Subsection (c) of this section of EPAct specifically provides 
direction for geothermal energy research. It states:
    GEOTHERMAL.--The Secretary shall conduct a program of research, 
development, demonstration, and commercial application for geothermal 
energy. The program shall focus on developing improved technologies for 
reducing the costs of geothermal energy installations, including 
technologies for: (i) improving detection of geothermal resources; (ii) 
decreasing drilling costs; (iii) decreasing maintenance costs through 
improved materials; (iv) increasing the potential for other revenue 
sources, such as mineral production; and (v) increasing the 
understanding of reservoir life cycle and management.
    For the fiscal year 2007 Spending Plan and the fiscal year 2008 
budget request, how do the Department's decisions in each of those 
documents with respect to the geothermal energy research and 
development program comport with the statutory direction provided by 
Congress in section 931 of Public Law 109-58?
    Answer. Since the 1970s, the Department of Energy has conducted a 
research and development program in geothermal technology valued in 
excess of $1.3 billion. That investment has helped to produce the 
strong market for geothermal energy we see today. In fiscal year 2007 
and fiscal year 2008, the Department requested zero funds for the 
Geothermal Program because the program has achieved key research 
objectives for conventional hydrothermal technology development and 
there are substantial incentives that support the near-term development 
of the technology and deployment of the geothermal resource base. 
Consequently, power production from high-temperature, shallow resources 
is now a relatively mature technology. Projects under construction, or 
which have both power purchase agreements and are undergoing production 
drilling, amount to 489 megawatts in eight Western States. The fiscal 
year 2007 operating plan for the Department included $5 million to 
support geothermal power co-produced with oil and gas demonstration 
efforts, for an evaluation of enhanced geothermal systems to help 
industry prioritize its technology needs, and to bring to completion 
selected projects on exploration, drilling, and/or conversion 
technologies. In addition, some fiscal year 2006 unspent or uncosted 
funds will also be used to conclude research projects on exploration, 
drilling, and/or conversion technologies.
  geothermal program and the national research council recommendations
    Question. The administration's repeated efforts to close down and 
defund the geothermal research program also appears to contradict the 
recommendations of the last external review of the Department of 
Energy's renewable programs, the 2000 report of the National Research 
Council entitled Renewable Power Pathways. That National Research 
Council's examination of the geothermal program states in clear terms 
the importance of the program, and the recommendation that it continue 
to be funded: ``In light of the significant advantages of geothermal 
energy as a resource for power generation, it may be undervalued in 
DOE's renewable energy portfolio.''
    Does the Department agree with the National Research Council that 
the U.S. geothermal resource base holds significant potential to 
contribute to national energy needs?
    What actions did the Department take to implement the 
recommendations made by the National Research Council in 2000?
    Has the Department had further communications with the National 
Research Council about its assessment and any follow-up by the 
Department?
    Answer. Yes, the U.S. geothermal resource base is large, and can 
contribute to diversification of our national energy portfolio through 
increased private sector development. DOE's Geothermal Program has 
achieved its key research objectives for conventional geothermal 
resources. There are substantial incentives that support development of 
the geothermal resource base without further investment in R&D. The 
fiscal year 2007 operating plan for the Department included $5 million 
to support geothermal power co-produced with oil and gas demonstration 
efforts, for an evaluation of enhanced geothermal systems to help 
industry prioritize its technology needs, and to bring to completion 
selected projects on exploration, drilling, and/or conversion 
technologies. In addition, some fiscal year 2006 unspent or uncosted 
funds will also be used to conclude research projects on exploration, 
drilling, and/or conversion technologies.
    Since 2000, the Department has taken actions to implement all 10 
recommendations made by the National Research Council. These actions 
include new or expanded research initiatives, technology demonstration 
projects, increased collaboration with other agencies, and improved 
international cooperation.
    The Geothermal Program has not had any further communication with 
the National Research Council; however the Department has continued to 
work with the National Research Council in other areas of renewable 
energy.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein
                         geothermal termination
    Question. The President's budget for fiscal year 2008 proposes to 
eliminate funding for geothermal energy research. Based on reports by 
the National Renewable Energy Laboratory (NREL) and the Massachusetts 
Institute of Technology, the Geothermal Energy Association estimates 
that, with a relatively small amount of research funding, geothermal 
energy can meet up to 20 percent of U.S. power needs by 2030. Please 
answer the following questions:
    Given the critical need to develop low-carbon electricity 
generation technologies, why does the DOE propose to stop conducting 
research into geothermal energy?
    Answer. The Department's geothermal program has achieved its key 
research objectives and there are substantial incentives that support 
the near-term development of the technology and deployment of the 
geothermal resource base. Geothermal power production from high-
temperature, shallow resources is now a relatively mature energy 
technology. Projects under construction, or which have both Power 
Purchase Agreements and are undergoing production drilling, amount to 
489 megawatts in eight Western States. The Western Governors 
Association geothermal task force recently identified over 100 sites 
with an estimated 13,000 megawatts of near-term power development 
potential.
                    wind and solar production costs
    Question. The Massachusetts Institute of Technology (MIT) has 
released a report suggesting that, for less than the cost of a single 
clean-coal power plant, the United States could conduct the research 
needed to enable production of up to 100 GWe of low carbon energy from 
enhanced geothermal systems by 2050. How much would it cost for EERE 
research programs to enable production of 100 GWe of energy from wind 
and solar sources by 2050?
    Answer. The primary factors contributing to production of 100 GWe 
of wind and solar energy are no longer exclusively or even 
substantially driven by government funded research projects. The rate 
at which potential capacity is converted to productive projects will 
depend on the amount and type of private capital investments in 
projects, and on the durability and scope of policy incentives. The 
goal of the Wind Program and Solar Program is to enable these renewable 
energy technologies to compete with conventional electricity throughout 
the Nation by helping to reduce costs. Under the President's Solar 
America Initiative, the goal is to improve the performance and reduce 
the cost of solar energy systems to make photovoltaics cost-competitive 
with conventional electricity sources by 2015. The President's fiscal 
year 2008 budget request of $40 million for wind and $148 million for 
solar contributes to these goals being met. Also, the Department's 
investment in technology development of next-generation systems may 
help enable solar companies to invest more private capital in scaling 
up manufacturing, as well as accelerate cost reductions to help 
increase demand for solar as it reaches cost-competitiveness in more 
markets.
    If the research goals are met, DOE estimates 177 GW of wind power 
and 190 GW of solar power by 2050. These estimates are in accordance 
with the Government Performance and Results Act (GPRA) analysis that 
accompanies the President's budget.
                      enhanced geothermal systems
    Question. The Massachusetts Institute of Technology (MIT) report 
only considers the potential to tap geothermal energy from putative 
``Enhanced Geothermal Systems (EGS).'' What is the additional untapped 
capacity of more conventional geothermal technologies? How much of this 
capacity could be tapped by 2030 with sustained investment of $50-$100 
million per year? By 2050?
    Answer. Currently, conventional geothermal production is 
approximately 3,000 MWe. A recent Western Governor's Association report 
indicates that there is potential for up to 5,600 MWe by 2015.
    The rate at which potential capacity is converted to productive 
projects will largely depend on the amount and type of private capital 
investments in projects.
    Question. In the Energy Policy Act (EPACT), the Secretary of Energy 
was instructed to ``promulgate regulations which describe in detail 
methods for calculating and verifying energy and power consumption and 
cost, based on the provisions of the 2005 California Non-Residential 
ACM manual.'' Please answer the following questions:
    What is the DOE's progress towards this goal?
    Can DOE provide a detailed comparison between proposed regulations 
and the California Non-Residential ACM manual, with justification for 
deviations? If not, how much additional funding is needed to complete 
this effort?
    If such funding were provided, when would these new regulations be 
issued?
    Answer. EPACT section 1331 directs the Secretary of the Treasury, 
in consultation with the Secretary of Energy, to promulgate methods of 
calculation for energy consumption and cost. On June 26, 2006, the 
Department of the Treasury and the Internal Revenue Service (IRS) 
issued Notice 2006-52, Deduction for Energy Efficient Commercial 
Buildings, that set interim guidance relating to the deduction for 
energy efficient commercial buildings under  179D of the Internal 
Revenue Code. The Department of Energy provided technical guidance for 
the Notice. It is my understanding that Treasury elected to adopt the 
provisions of the California ACM manual that do not conflict with 
ASHRAE Standard 90.1-2001.
    At this time, the IRS has only promulgated interim guidance in 
advance of proposed regulations. The justification for any potential 
deviation from the California manual and proposed Federal rules would 
rest with the Department of Treasury.
    At this time, I am not able to provide an answer as to when the 
Department of Treasury might request funding for this rule nor when 
Treasury might promulgate a proposed rule.
    Question. Can DOE provide similar updates for progress towards all 
other energy efficiency regulatory requirements of the Energy Policy 
Act (EPACT)?
    Answer. I am pleased to report progress on a number of energy 
efficiency requirements of EPAct. On January 31, 2006, the Department 
submitted a report to Congress on its standards activities prepared in 
response to section 141 of EPACT 2005. The report publicly laid out our 
action plan and schedule for rulemakings out to the year 2011. Since 
committing to this schedule for the standards program, the Department 
has met 100 percent of its targets. We have completed eight rulemakings 
since EPACT 2005, including test procedure rulemakings and codification 
of prescribed standards, and have made significant progress on others 
that were underway prior to EPACT 2005. The Department has also 
established guidelines regarding the use of energy metering in Federal 
buildings, as outlined in section 103. A standard for premium efficient 
electric motors was published in the Federal Register on August 18, 
2006, per section 104. The section 109 requirement for a determination 
on whether the revised ASHRAE (American Society of Heating, 
Refrigeration and Air-Conditioning Engineers) code requires revisions 
to Federal building performance standards is on track. In addition, an 
acquisition plan for an energy efficiency pilot program for states has 
been completed and a procurement requirements document developed to 
fulfill section 140.
                   global nuclear energy partnership
    Question. The Department of Energy's Office of Nuclear Energy (DOE-
NE) has given many different reasons for the need to invest in the 
nuclear fuel reprocessing aspects of the Advanced Fuel Cycle Initiative 
through the program known as the ``Global Nuclear Energy Partnership 
(GNEP).'' This initiative represents a significant change from long-
standing U.S. nuclear policy, but no consensus has been established and 
program goals have not yet been fully vetted by an independent 
authority. The President's budget requests an increase of $152 million 
over fiscal year 2007 levels for this program, and an even greater 
increase with respect to fiscal year 2006 levels. These increases are 
much greater than the combined increases for research into all 
renewable resources such as wind, solar, geothermal, and biological. 
Please answer the following questions:
    What is the primary justification for this program? In order of 
priority, what are the secondary justifications for this program?
    Answer. Today, 103 nuclear reactors generate roughly 20 percent of 
America's electricity. U.S. electricity demand is anticipated to grow 
50 percent over the next 25 years--the equivalent of 45 to 50 one-
thousand megawatt nuclear reactors must be built just to maintain that 
20 percent share. With nuclear power as the only proven base load 
producer of electricity that does not emit greenhouse gases with the 
ability to increase output substantially, it is vital that our current 
fleet of reactors be expanded in order to meet our needs for carbon-
free, dependable and economic electric power.
    Any serious effort to stabilize greenhouse gases in the atmosphere, 
while providing the increasing amounts of energy needed for economic 
development and growth, requires the expanded use of nuclear energy. 
This will inevitably require us to address the spent fuel and 
proliferation challenges that confront the expanded, global use of 
nuclear energy. To meet these challenges, the Department initiated the 
Global Nuclear Energy Partnership (GNEP), a comprehensive approach to 
enable an expansion of nuclear power in the United States and around 
the world, promote non-proliferation goals, and help minimize the 
amount of nuclear waste disposal.
    Additionally, many formerly non-nuclear countries are now 
considering the nuclear option to meet their energy needs. It is vital 
for the United States to be able to influence the safety, security and 
proliferation characteristics of nuclear reactors intended for these 
emerging nuclear states, as well as position U.S. industry for 
leadership in this growing international market. Together with the 
assurance of reliable fuel services, GNEP provides an attractive energy 
solution for many countries that could serve to eliminate the need for 
them to develop the more proliferation-vulnerable parts of the nuclear 
fuel cycle. Coupled with the spent fuel recycling and actinide burning 
technologies of GNEP, the United States has the potential to meet its 
growing energy demands and those of developing countries in a manner 
that minimizes potential negative impact to the United States and the 
world.
    Question. The GNEP implementation plan calls for rapid construction 
of demonstration facilities for nuclear fuel reprocessing. Can you 
provide a consensus statement from our international partners 
describing what their contribution will be and what their requested 
contribution from the United States is?
    If such a consensus is not available, then what level of funding is 
needed to establish the needed international consensus prior to 
building new facilities on U.S. soil? Please justify.
    Answer. Discussions are currently in progress with several of our 
international partners to help define the parameters of and potential 
deployment strategies for the GNEP facilities. Those discussions are 
not yet at the point where a consensus on the amount of cost sharing, 
or if cost share at all, could be established. At this time, given the 
undefined technical, political, financial, and strategic aspects of 
GNEP, it is not possible to pursue quantitative discussions with our 
partners. Likewise, those same undefined factors render it impractical 
to make a reasonable estimate of the level of funding required to 
establish an international consensus prior to constructing the GNEP 
facilities in the United States. When GNEP has developed sufficiently 
to develop those estimates, the Department would be able to provide 
them.
    Question. In his statement, Assistant Secretary Spurgeon stated 
that ``Any serious effort to stabilize greenhouse gases in the 
atmosphere, while providing the increasing amounts of energy needed for 
economic development and growth, requires the expanded use of nuclear 
energy''. No further documentation was provided to support this 
conclusion. Can DOE provide a comparison of the complete lifecycle 
costs to produce nuclear energy and safely manage nuclear waste as 
compared to producing a comparable amount of energy from renewable 
energy resources? If such a comparison cannot be provided, then please 
provide scientific, peer-reviewed support for this statement.
    Answer. A recent study by the European Commission (``External 
Costs--Research results on socio-environmental damages due to 
electricity and transport,'' European Commission, 2003, p. 12, [http://
ec.europa.eu/research/energy/pdf/externe_en.pdf]) states, ``Nuclear 
power in general generates low external costs, although the very low 
probability of accidents with very high consequences and the fuel cycle 
impacts are included. It is also a technology with very [lifecycle] low 
greenhouse gas emissions.'' On page 13 of the report, a table shows 
that nuclear power's external costs are on a par with renewables. While 
this study considered European experiences, it is expected the 
situation in the United States would not differ significantly.
    Other reports may contradict this. What can be said is that there 
is currently in operation no clean, base-load, fossil-fuel power-
generation technology; solar and wind power have great potential in 
their limited ranges of operations; hydroelectric is essentially fully 
subscribed; and that leaves nuclear power. Nuclear power now provides 
over two-thirds of our Nation's non-emitting electricity while 
renewables, primarily hydropower, account for the rest. Until such time 
as we can efficiently store the power produced by wind and solar power, 
they will continue to augment but cannot replace base-load power 
generation. Nuclear power is the only non-emitting technology that is 
ready today to be deployed in quantities sufficient to meet our growing 
demand for electricity.
                             fossil energy
    Question. The Department of Energy's Office of Fossil Energy (DOE-
FE) has proposed extensive new investments in coal energy, yet proposes 
cuts in funding for oil and gas research. Acting Assistant Secretary 
Shope justifies this change with an argument that can be summarized as, 
``because coal is a critical domestic energy resource today, it will 
continue to be so in the future.'' This may happen, but continued 
innovation may well replace coal with improved new technologies. Coal 
is a valuable energy resource over the near-term, but its long-term 
future is still uncertain. Please answer the following questions:
    A recent study by the Climate Group indicates that the global 
market for biofuels, wind power, solar photovoltaic, and fuel cells 
will be $167 billion by 2015; with $523 million of venture capital 
invested in these technologies in California in 2005. What is the 
comparable global market for clean coal technologies? How will 
continued investment in coal research and development improve American 
competitiveness in a global, carbon-constrained economy? How does the 
return on investment for coal compare to that for other technologies?
    Answer. Recent estimates indicate large markets for clean coal 
technologies through the near-term and continuing out to 2030. The 
International Energy Agency (IEA) World Energy Outlook (WEO) 2006 
projects that coal will remain the dominant source of electricity to 
2030 in both scenarios investigated (a reference scenario and an 
alternate scenario that significantly reduces the rate of increase in 
demand and emissions). Coal-based power generation in 2030 will be at 
least 60 percent higher than today, remaining the world's largest 
source of electricity in 2030. Investment in electricity generation is 
expected to exceed $5.2 trillion cumulatively by 2030, resulting in 
more than 5000 GW of new capacity. Over 144 GW of integrated 
gasification combined cycle (IGCC) capacity is expected over that 
timeframe. Assuming a conservative capital cost of $1,000 per kilowatt 
for new coal plants, this equates to roughly a $150 billion market for 
the expected new IGCC plants alone.
    With the increased demand for coal, R&D investments in clean coal 
technology development aimed at near-zero emissions, while improving 
its efficient use, could help coal remain a competitive and 
environmentally-sound energy option for future generations of power 
plants, as well as for production of alternative fuels. As energy 
demand rises, coal will continue to compete by deploying new systems 
and innovative technologies that will keep it, and the existing fleet 
of coal-fueled generating stations, viable well into the future.
    We will continue to rely on all forms of energy sources to meet the 
growing energy needs. Coal will continue to be relied upon for baseload 
power generation. Continued investment in coal R&D (including low cost 
carbon capture and storage) will help produce clean, economical, and 
efficient coal-based power plants to keep the United States at a 
competitive advantage and poised to take advantage of global 
opportunities even in a carbon-constrained scenario. Meeting future 
global energy needs will require the introduction of a variety of 
technologies to meet growing electricity demands with stringent 
emission regulations. Coal will remain in the near-term and beyond.
    Question. The United States Geological Survey (USGS) has recently 
completed a series of studies indicating that only 10-20 percent of 
total U.S. coal resources may be economically recoverable. How does 
this compare with prior estimates by the Department of Energy? If the 
USGS estimates are correct, to what extent does this limit the 
capability of coal to power America's future?
    Answer. The Department of Energy's coal resource estimates are all 
based on U.S. Geological Survey (USGS) data. It is our understanding 
that USGS has not completed any full basin studies that validate the 
findings of the several local studies referred to. We look forward to 
reviewing the systematic inventory of the U.S. coal reserve base 
currently underway by the USGS, once it is available. The coal resource 
in the United States is vast; estimated to be 4,000 to 9,600 billion 
tons. Current usage is about 1 billion tons/year. Coal will be able to 
power America for the foreseeable future.
    Question. Energy experts at the Electric Power Research Institute 
(EPRI) have suggested that the technology to separate carbon dioxide 
from the emissions of coal fired utilities is ready for commercial 
demonstration, and that the biggest challenge is demonstrating the 
ability to safely sequester carbon dioxide. Is this true? If so, then 
why does the proposed fiscal year 2008 budget direct significantly more 
funding to research into coal combustion and carbon dioxide separation 
than to research into carbon sequestration?
    Please provide a comparison between total requested funding for 
carbon sequestration, and that for coal combustion and carbon capture.
    Answer. The emphasis of the funding for Carbon Sequestration 
(capture and storage) remains focused on the storage component of 
sequestration, including CO2 field injection tests. However, 
cost and efficiency penalties of existing capture technologies remain a 
challenge in terms of affordability and net plant output impacts. While 
certain post-combustion CO2 capture technologies, such as 
amine-based systems, could be ready for commercial demonstration in the 
next several years, several other advanced systems are only at the 
laboratory, bench-, and pilot-scale stage of development. Because of 
differences in plant age, size, configuration, and other site-specific 
factors, it is expected that a suite of CO2 capture 
technologies will be employed by electric utilities in order to achieve 
significant reductions in emissions from coal-based power plants 
without significantly increasing the cost of electricity.
    The Department of Energy (DOE) estimates that based on current 
amine scrubbing technology, the removal of CO2 from the flue 
gas of an existing coal-fired power plant would constitute as much as 
90 percent of the total cost of carbon capture, transport, and storage. 
Hence, the criticality of continued research and development of 
CO2 capture technologies. DOE's coal program targets 
improved performance and cost savings based on a system-wide approach 
that targets the most effective avenues for advancing carbon capture 
and storage technology. DOE conducts R&D on technologies that will 
enable carbon capture and storage in the following program areas: 
Integrated Gasification Combined Cycle, Turbines, Sequestration, Fuels, 
Fuel Cells, and Advanced Research.
    The DOE Carbon Sequestration Program aims to develop technologies 
that will lower both the cost of the carbon capture technology, but 
also the amount of additional power capacity required due to efficiency 
loses. It is the goal of the Program, by 2012, to develop technologies 
resulting in less than a 20 percent increase in the cost of electricity 
for post-combustion capture and oxycombustion technologies. Pre-
combustion (integrated gasification combined cycle related) 
technologies are targeting less than a 10 percent increase in the cost 
of electricity. Of the approximately $86 million requested for the 
Carbon Sequestration Program (including roughly $7 million of R&D by 
Federal employees under the Program Direction line item), about $15 
million (or about 18 percent) is intended to be used for carbon capture 
technology research. These technologies are based on application to 
both coal combustion and gasification systems.
                                 ______
                                 
                Questions Submitted by Senator Jack Reed
                     epact and efficiency programs
    Question. Mr. Karsner, you have recognized energy efficiency as a 
critical response to the Nation's energy challenges, but the budget 
proposed by the President does not. Funding for the President's 
Advanced Energy Initiative programs is coming mostly from cuts in 
efficiency programs. Given that efficiency is the Nation's fastest and 
most abundant clean energy resource, how can you justify a budget that 
continues to cut research, development, and deployment in this 
strategically critical area? Do you believe that the funding for 
energy-efficiency programs in the budget match the Nation's need for 
saving energy? What would be the impacts of the proposed budget cuts, 
including for industrial and vehicles R&D, and for weatherization 
assistance?
    Answer. The fiscal year 2008 budget adequately funds a balanced 
portfolio of activities at levels that support achievement of programs' 
goals. It is important to note that the Office of Energy Efficiency and 
Renewable Energy (EERE) programs related to energy efficiency comprise 
approximately 46 percent of the total EERE proposed fiscal year 2008 
budget (including program direction and support funds). For example, 
the Building Technologies Program budget request is $9.1 million 
greater than the fiscal year 2007 request and the Vehicle Technologies 
Program budget request is $10.1 million greater than the fiscal year 
2007 request and the Industrial Technologies Program is $435,000 
greater than the fiscal year 2007 request.
    EERE maintains a balanced portfolio that uses an integrated 
strategy of energy efficiency and renewable energy to increase our 
energy security and reduce our dependence on oil. The 2008 budget 
request optimizes resource use and appropriately funds all energy 
efficiency programs to support achievement of stated goals.
    The fiscal year 2008 budget request includes funding increases for 
both the Industrial Technologies Program and the Vehicle Technologies 
Program. In general we have chosen to prioritize investments in energy 
efficiency and renewable energy R&D that have multiplicative returns 
such as improvements to appliances and the building envelope that 
affect the whole American population rather than additive returns not 
associated with technological R&D that target a single segment of the 
population. For example, the National Academy of Sciences studied the 
benefits of the energy efficiency portfolio and found that the return 
on the research and development (R&D) investment was roughly 20 to 1. 
In contrast, the Weatherization Assistance Program has a return on 
investment of 1.5 to 1.
    Question. Mr. Karsner, the Energy Policy Act of 2005 (EPACT 2005) 
authorized a number of new energy-efficiency programs on public 
education, utility efficiency programs, building codes, appliance 
rebates, and other areas. Are any new energy-efficiency programs 
authorized in EPACT funded in the proposed budget? Does this budget 
allow you sufficient funding to implement the energy bill, including 
the added requirements on the appliance standards, Federal energy 
management, and Energy Star programs?
    Answer. Yes, we are implementing numerous energy efficiency 
programs authorized by EPACT 2005. Here are some selected examples. The 
fiscal year 2008 requests funds for the establishment of new 
EnergyStar qualification levels for clothes washers, as directed in 
EPACT section 131; the issuance of grants to establish Advanced Energy 
Efficiency Technology Transfer Centers as directed in EPACT section 
917; reporting on the establishment of a program to inform the public 
on various aspects of energy efficiency as directed in section 134 and 
developing the next generation of low-emission, high efficiency diesel 
engine technologies as directed in section 754. We have also requested 
funds under section 140 to provide financial assistance to States to 
carry out energy efficiency pilot programs.
    Yes, the fiscal year 2008 budget request includes adequate funding 
for a balanced portfolio that supports achievement of goals, including 
sufficient funding for appliance standards, Federal energy management 
and EnergyStar.
                    weatherization funding decrease
    Question. Mr. Karsner, I led a bipartisan letter to Secretary 
Bodman supporting the fiscal year 2007 funding level of $242.5 million 
for Weatherization. You chose to cut that program to $204.5 million, 
and in recent House testimony I think you referred to Weatherization as 
a ``welfare program.'' As you know, in the fiscal year 2007 
Supplemental Appropriations bill passed by the Senate, we included an 
additional $25 million for Weatherization. Weatherization provides 
almost 25 percent in energy savings for every house we improve, and 
well over 100,000 homes were done this past year. It is clearly a 
successful deployment program that helps lower-income homeowners and 
neighborhoods today. It is not a welfare program, it is an energy 
program. With the administration's support and focus on reducing energy 
demands, why wouldn't you also strongly support Weatherization?
    Answer. The 2008 budget optimizes resources and adequately supports 
the achievement of the program's goals and priorities. We have chosen 
to prioritize investments in energy efficiency and renewable energy R&D 
that have multiplicative returns such as improvements to appliances and 
the building envelope that affect the whole American population rather 
than additive returns not associated with technological R&D that target 
a single segment of the population. The National Academy of Sciences 
studied the benefits of the energy efficiency portfolio and found that 
the return on the research and development (R&D) investment was roughly 
20 to 1. In contrast, the Weatherization Assistance Program has a 
return on investment of 1.5 to 1.
             industrial efficiency program funding decrease
    Question. Mr. Karsner, the industrial energy efficiency program has 
been slashed from well over $100 million just a few years ago to 
approximately $50 million in fiscal year 2007. The fiscal year 2008 
budget request would further reduce this effort. With over one-third of 
our energy use in this sector, what is the justification for this cut?
    Answer. The fiscal year 2008 request for the Industrial 
Technologies Program (ITP) is $435,000 higher than the fiscal year 2007 
request. Also, under the discretion given to the Department by Congress 
under the fiscal year 2007 Continuing Resolution, this program was 
increased by $11 million. ITP has historically worked with the eight 
most energy-intensive manufacturing industries to research, develop, 
and implement advanced technologies that save energy, reduce costs, and 
improve environmental performance. These activities have contributed to 
significant reduction in energy use. As the program evolves, we are 
seeking more effective and efficient ways to develop technologies that 
are high impact and applicable to multiple industries. ITP has 
developed a new strategy with more emphasis on crosscutting R&D which 
will allow ITP to continue partnership with end-user industries while 
broadening industry participation to include other growth industries 
and technology developers.
            materials manufacturing and industrial materials
    Question. Mr. Karsner, in fiscal year 2006, research and 
development for the materials manufacturing industry was $21 million. 
There is only $9 million in your budget for fiscal year 2008, a 55 
percent cut, and research and development for industrial materials is 
slashed by 57 percent to $5 million. These low numbers reflect a 
decision to back away from development of key new technologies that 
could significantly strengthen our manufacturing global competitiveness 
while reducing carbon emissions in a sector that consumes more energy 
than any other sector of the economy. Materials manufacturers co-fund 
this research and development effort and outlined a program in the 
range of $250 million to support the development of the next generation 
of production process technologies needed by their industries to be 
able to dramatically reduce their energy use per unit of output, cut 
carbon emissions, and compete globally. What is the rationale for 
cutting back investment in research and technology in materials 
manufacturing and industrial materials?
    Answer. The Industrial Technologies Program (ITP) has invested 
approximately $21 million in fiscal year 2006 through the Industries of 
the Future on technology development, focusing on industry-specific 
research needs. However, ITP is seeking more effective and efficient 
ways to develop technologies that have higher impacts and are 
applicable to multiple industries. ITP has developed a new strategy 
with more emphasis on crosscutting R&D which will minimize duplicative 
efforts and allow ITP to develop technologies meeting the needs of 
multiple industries. This approach will also accelerate technology 
development with broader industry participation to include other growth 
industries and technology developers. Materials manufacturing R&D will 
continue to play an important part of this program.
                      ``save energy now'' campaign
    Question. Mr. Karsner, EERE has implemented the ``Save Energy Now'' 
campaign to audit the 200 largest industrial customers/facilities in 
the United States. Could you specifically detail what facilities have 
been audited and most importantly, what energy measures have been 
implemented in those facilities? If changes have not been implemented, 
could you please explain why? Do you think funding support through the 
industrial program would help on the implementation side?
    Answer. As of December 31, 2006, the first 200 Energy Savings 
Assessments, with the firms listed in the following pages, were 
conducted. Several companies had more than one plant audited. 
Approximately half a billion dollars per year in energy savings was 
identified from those audits. Typical energy savings identified 
consisted of 5 to 15 percent of a plant's total energy use, consistent 
with a potential reduction of 3.3 million tons per year in 
CO2 emissions. The audited firms are being contacted 6 
months, 1 year, and 2 years after the audit to determine implementation 
of these recommendations. To date, the energy measures most commonly 
implemented in the plants as a result of these audits are in the areas 
of process heat and steam.
    It is entirely the choice of the audited company as to whether 
savings recommendations are implemented and the cost-effectiveness of 
the recommendations is dependent on interest rates, and equipment, 
labor, materials prices, and other considerations in addition to the 
energy prices. Often the purchases must wait for the next capital 
acquisition cycle or the next time that the plant shuts down for 
routine maintenance. Nevertheless, as of April 24, 2007, $116 million 
of the potential $494 million per year of energy savings has already 
been implemented or is in the process of being implemented.
    The fiscal year 2008 budget funding level is appropriate and 
sufficient to support achievement of the program's mission and goals. 
The program is not designed to be an implementation mechanism--it is 
the choice of the audited company as to whether it is worthwhile and 
cost-effective to implement the audit findings. The Save Energy Now 
initiative has demonstrated it can provide useful information to inform 
these industry decisions.
                     appliance efficiency standards
    Question. Mr. Karsner, DOE has been plagued for years by long 
delays in issuing appliance efficiency standards. So far you seem to be 
meeting the aggressive schedule you set last year for getting the 
required standards out, and I am pleased that you asked for additional 
funds. However, a recent GAO report said additional changes are needed 
in the program, and I am concerned that recent proposed standards have 
been weak and are not using the tremendous potential of this program to 
address our energy needs.
    The GAO report said the program faces a 600 percent increase in 
workload with a 20 percent resource increase in the fiscal year 2007 
budget. Have you analyzed the staffing and funding requirements to 
carry through the standards plan, and can you share that with us?
    Some of the largest possible savings, for example from standards on 
furnace fans and refrigerators, are not included in the plan, and thus 
will not be considered for at least 5 years. Can you tell us how much 
additional resources you would need to begin work on the most important 
standards now? DOE has rejected some recent suggested standards because 
they were not deemed consistent with current law. Do you need any 
additional legal authority to issue standards that make the most sense 
for the American people?
    Answer. Yes, the Department has conducted a thorough assessment of 
resource needs for the efficiency standards program. On January 31, 
2006, the Department submitted an aggressive plan to Congress, 
addressing both the history and future plans for the Appliance 
Standards Program. That plan does in fact commit to a rulemaking 
schedule that is six times the historical rulemaking rate for this 
program. The actions detailed in that plan will dramatically increase 
the efficiency of the process and the output rate. In addition, in the 
2007 operating plan and 2008 budget, the Department directed resources 
to support these efforts. Changes in our process include implementing 
product bundling within a single rulemaking and organizing staff into 
seven technology teams.
    Since committing to this schedule for the standards program, the 
Department has met 100 percent of its scheduled deadlines. We have 
completed eight rulemakings since EPACT 2005, including test procedure 
rulemakings and codification of prescribed standards, and have made 
significant progress on others that were underway prior to EPACT 2005. 
In 2006, we initiated standards rulemaking for 12 additional products 
and remain on schedule for all future deadlines.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici
                       loan guarantee regulations
    Question. I understand that the Department sent its proposed draft 
regulations at the end of March to OMB for approval. It has been nearly 
3 weeks without any action.
    Based on the delays in approving the regulations, will you be able 
to meet the August deadline for the implementation of regulations as 
established in the Joint Funding Resolution?
    Answer. The Department is working to meet the August 2007 deadline 
contained in the Revised Continuing Appropriations Resolution, 2007, 
Public Law 110-5. A Notice of Proposed Rulemaking was published in the 
Federal Register on May 16, 2007 and is open for public comment until 
July 2, 2007. It is not possible to guarantee that the rule will be 
completed by the August deadline but an aggressive effort is underway 
to make that happen.
              loan guarantee programs (title 17 of epact)
    Question. The Export-Import Bank of the United States is planning 
to provide over $18 billion in new loan guarantees in fiscal year 2008, 
more than double the level proposed for the Department of Energy. A 
portion of these loan guarantees will be for new advanced technology 
power generation facilities being built overseas.
    Can you explain why the administration has such a difficult time in 
providing adequate loan authority to implement a no-cost loan guarantee 
program at the similar level as we support foreign economic development 
under the Export-Import Bank program?
    Answer. The nature of the Energy Policy Act of 2005 Title XVII loan 
guarantee program is unique among other Federal loan guarantee programs 
in that it encourages the employment of new or significantly improved 
and innovative technologies to reduce or sequester pollutants or 
greenhouse gas emissions, while at the same time requiring a 
``reasonable prospect of repayment.'' Other programs are primarily 
concerned with commercial market risk. To manage the inherent risks of 
this loan guarantee program, DOE is planning for an initial small 
portfolio of projects in order to gain experience and expertise and to 
ensure that the program is implemented correctly.
     loan guarantee--technical evaluation and financial evaluation
    Question. It is my understanding that the Department is attempting 
to recruit staff that has strong project development experience to 
evaluate these applications from a financial standpoint.
    At the same time, the evaluations are currently undergoing a 
technical evaluation by DOE staff to determine whether or not the 
technology is commercially viable.
    How are the evaluations proceeding and when do you expect these 
evaluations to be completed?
    Answer. The Department is completing a preliminary review of the 
143 pre-applications submitted in response to the August 2006 
solicitation and guidance has been issued to program offices to begin 
the technical reviews of the pre-applications. Until the program 
offices have had the opportunity to complete the technical reviews on a 
sufficient number of pre-applications, the Department cannot say 
precisely how long it will take to complete the evaluations.
    Separately, the Loan Guarantee Office will be reviewing each pre-
application for compliance with the financial, commercial, and other 
criteria set forth in the August 2006 solicitation and accompanying 
guidelines. Ultimately, the goal is to complete the pre-application 
evaluations this summer.
                        deploying new technology
    Question. Mr. Karsner, our energy sector has developed around low 
cost energy technologies such as coal. We have spent decades and 
billions of dollars supporting alternative energy sources such as wind 
and solar, yet these technologies still only make up a small portion of 
our generation mix. Tax credits have helped, but the intermittent 
nature of these incentives has undermined their effectiveness.
    It appears that we need to come up with a new model that will 
encourage the commercial deployment of alternative energy sources 
utilizing private capital. Obviously, this is something we have 
attempted through the loan guarantee program, but I wonder if we need a 
larger more aggressive solution in order to transform our energy 
sector--similar to the Export Import Bank or Overseas Private 
Investment Corporation.
    I assume you have met with investors and venture capital groups 
interested in deploying new technology. What is the major concern of 
these groups and what can we do to encourage investment in new 
alternative energy technology to get it out of the lab and into the 
market?
    Answer. In general, investment decisions center on maximizing the 
expected return for a given level of risk. With respect to alternative 
energy technology investments in particular, private sector investors 
repeatedly voice at least three primary concerns: an unstable and 
irregular policy environment and the negative economic incentive to 
build first-of-a-kind plants.
    By creating a stable and standardized policy environment with 
reasonable investment incentives, the Federal Government can help to 
lower risk and to increase private sector support of alternative energy 
technologies.
    Question. What about the deployment of high cost investments such 
as nuclear power?
    Answer. The principal causes of the financial risk surrounding 
nuclear power are political and regulatory uncertainties. By 
demonstrating the new Nuclear Regulatory Commission licensing process, 
codified at 10 CFR part 52, via our partnership program, Nuclear Power 
2010, the political and regulatory uncertainties of nuclear power would 
be significantly reduced. Further, the Department has just released a 
Notice of Public Rulemaking and has not yet solicited expressions of 
interest for loan guarantees by the nuclear power utilities, so it is 
not clear how the industry will respond to such an offering. 
Consequently, it is too early for the Department to assess whether a 
more aggressive solution would be needed to encourage more nuclear 
power plant construction.
                              battery r&d
    Question. Mr. Karsner, your budget for Vehicles Technology is 
presented in a new format that provides fewer details about specific 
research projects.
    I am interested to learn what the budget provides for battery R&D. 
As you are well aware the gasoline/electric hybrid car technology has 
become very popular. However, batteries continue to be the greatest 
technology challenge facing auto manufacturers.
    How much funding has the President requested for battery research 
in fiscal year 2008 and how has that changed over the past 2 years?
    Answer. The fiscal year 2008 budget includes $42 million to support 
advanced battery R&D, such as batteries for plug-in hybrid vehicles. 
This includes work on long-life, abuse-tolerant lithium batteries and 
more advanced high-power batteries along with power-control systems and 
components that are optimized for plug-in hybrids. The fiscal year 2008 
request for energy storage R&D is a 70 percent increase over the fiscal 
year 2006 appropriations, and is level with the fiscal year 2007 
operating plan.
    Question. Please explain to the subcommittee what your goals are 
for battery research? What can we expect in terms of performance 
improvements over the next 5 years?
    Answer. Energy storage research aims to reduce costs and help 
overcome specific technical barriers related to performance, life, and 
abuse tolerance. The current cost of high energy, plug-in hybrid 
vehicle battery is $1,000/kWh; our cost goal in support of the AEI is 
to reduce the cost of these batteries to $300/kWh by 2014. These 
barriers are being addressed collaboratively by the DOE's technical 
research teams and battery manufacturers.
                              solar energy
    Question. Mr. Karsner, during the past 6 years there has been 
explosive growth (+45 percent) in solar cell manufacturing worldwide. 
However, the United States currently produces only about 10 percent of 
the solar cells produced worldwide and has only grown by 7 percent 
since 2001. The current manufacturing leaders are Japan and Europe.
    Clearly there are many factors that contribute to this outcome, but 
I am interested to know if the United States is behind because we lack 
the technical capability or if policies being pursued in Europe and 
Japan are driving this demand growth.
    Answer. The capabilities in U.S. industry and at national 
laboratories and universities are strong. Indeed, U.S. companies are 
producing the highest-performance products in a variety of PV 
technologies, including crystalline silicon, amorphous silicon, and 
concentrating PV. Additionally, the leading global producer of 
polysilicon feedstock is a Michigan-based subsidiary of Dow-Corning 
(Hemlock Corporation).
    The United States has lost market share in solar photovoltaic (PV) 
manufacturing because in recent years solar companies have sited 
manufacturing facilities near locations with the highest demand for the 
technology. Installations have increased significantly in Japan and 
Germany due to their long-term policies and incentives. Similarly, the 
solar manufacturing capacity in these countries has increased steadily 
as well, a fact that can be linked to the policies. For example, the 
German feed-in tariff program guarantees the owner of the panel a 
steady price for generated energy (that is even higher than the price 
of electricity) for 20 years following the installation; this tariff 
established a long-term, stable investment environment that has been 
attractive to companies looking to site facilities for adding 
manufacturing capacity. In addition, Germany and the European Union 
have also bundled cash grants, cost savings and other incentives for 
companies building new manufacturing facilities--offsetting up to 40 
percent of the capital expenditure required to build a new plant--which 
has resulted in U.S. companies announcing plans to site facilities in 
Germany.
    Question. What is the Department of Energy doing to improve the 
efficiency and deployment of solar technology in the United States?
    Answer. The Solar America Initiative (SAI) in February 2006 will 
make solar photovoltaics (PV) cost-competitive by 2015. Achieving the 
goal of the SAI will require a significant investment in reducing the 
cost of PV systems. Funding in fiscal year 2007 for the Solar America 
Initiative totals $159 million.
    There are critical areas where the Department is focusing its 
efforts to help increase efficiency, cost-effectiveness and deployment 
of solar technologies. First, solar thermal concentrating solar power 
plants (CSP) have the potential to contribute significantly to 
electricity supply in the Southwest, home to 15 of the 20 fastest-
growing metro areas in the country. Second, by focusing on the 
development of building efficiency design and technologies coupled with 
distributed PV, the Department could help enable Americans nationwide 
to buy new ``zero energy'' homes and to work in ``zero energy'' office 
buildings--which will produce as much energy as they use.
    Question. What can we expect in terms of technology or 
manufacturing improvements over the next 5 years?
    Answer. On March 8, 2007, under the SAI, the Department announced 
the selection of 13 industry-led solar technology development projects 
expected to receive up to $168 million in Federal funding over the next 
3 years (subject to appropriations). These projects may ultimately help 
to expand the annual U.S. manufacturing capacity of PV systems. These 
projects are specifically focused on developing new photovoltaic 
components or manufacturing equipment, or even complete photovoltaic 
systems.
                  cellulosic biomass--reverse auction
    Question. The fiscal year 2008 budget request includes $5 million 
to develop options to establish a reverse auction for biofuels as 
proscribed in section 942 of EPACT. This incentive program is intended 
to help make cellulosic biofuels cost competitive by 2015. It is my 
understanding that the reverse auction would require DOE to solicit 
bids from eligible producers. The lowest bid on a per gallon basis 
would receive the incentive funding.
    This is a first of a kind proposal for biofuels. Do you believe 
that we are ready technologically or economically, to support this 
auction?
    Answer. The Department is evaluating section 942 of EPACT 2005, 
which directs the establishment of a reverse auction incentive program 
for the production of cellulosic biofuels. The fiscal year 2008 budget 
request includes $5 million to develop background knowledge and 
evaluate options for this incentive program.
                      improved building efficiency
    Question. Mr. Karsner, the fiscal year 2008 budget requests an 
increase in funding for building efficiency R&D including improvements 
to window, lighting, and insulation designs. At the same time, funding 
for weatherization has been reduced.
    Are you able to quantify the benefits of investing in innovative 
building technologies over the weatherization program? In other words, 
can we save more energy by investing in building technologies R&D and 
deployment as opposed to the weatherization assistance?
    Answer. EERE is evaluating the potential benefits of the Building 
Technologies Program and the Weatherization Assistance Program. In 
addition, the National Academies of Science has indicated that the 
Weatherization Program's return on investment is 1.5 to 1, compared to 
an approximately 20 to 1 return on investment for the Building 
Technologies Program.
                          concentrating solar
    Question. I have been very interested in the commercialization of 
the concentrating solar power (CSP) technology. What is DOE's plan for 
supporting this dish technology deployment in the fiscal year 2007 and 
fiscal year 2008 budgets?
    In the fiscal year 2006 budget, DOE provided about $3.3 million to 
Sandia to support the development of a 1 MW dish engine pilot project. 
Is the plan to increase that funding in fiscal year 2007 budget to 
continue these efforts? If so, for how much money and when will it 
become available?
    Answer. The Department is working with industry on the development 
of two CSP technologies: parabolic trough and dish-engine systems. The 
Department is providing technical assistance to the first commercial 
U.S. CSP project, a 64 MW trough system near Las Vegas, by Solargenix/
Acciona Solar Power, which is expected to become operational in May 
2007. Stirling Energy Systems (SES), a dish system developer, plans to 
commercialize dish technology through two projects (300 MW and 500 MW) 
in California. The Department is supporting the SES effort by providing 
technical assistance in improving the reliability of their Stirling 
engine, and helping in the design-for-manufacture of the system. The 
effort will continue through fiscal year 2008.
    In fiscal year 2007, the Department is funding Sandia at the $1.5 
million level to support technical assistance to SES for system 
deployment. At this time, Sandia has access to the entire $1.5 million.
    As I understand it, there are two solar projects targeted to start 
actual construction (``hardware in the ground'') in late 2008 or early 
2009. A major program to commercialize the dish engine systems for 
high-volume, low-cost manufacture is underway. When the transformation 
from low-volume to high-volume production of this hardware is 
completed, it will pave the way for U.S.-based companies to take a very 
big step into the large-scale solar market.
    Question. How can the Department most effectively support the 
commercial deployment of this technology in the near term in order to 
realize large scale commercial deployment?
    Answer. We believe our support for technical assistance to 
companies pursuing trough and dish technologies as designed and funded 
in the fiscal year 2008 budget is very effective. Large scale, near-
term CSP commercialization is ultimately the decision of industry and 
depends on competitive Net Present Value (NPV) assessments by capital 
markets, which can only be realized through life cycle cash flows.
                        existing biomass awards
    Question. Recipients of the alternative hydrogen production and 
utilization competitive grants (No. DE-PS26-06NT42801) are telling 
Congress that DOE's fiscal year 2008 budget does not includes funds for 
their awards and that they need to cease work.
    Can you clarify the funding commitment for this competitively 
awarded program to the subcommittee and provide details on how DOE will 
fund the competitively awarded grant in the future?
    Answer. The fiscal year 2008 budget request for the Fuels program 
is $10 million, which is a reduction of $12 million from the fiscal 
year 2007 operating level. Fiscal year 2008 funding will only support 
areas of research and development (R&D) that are central to the 
production of hydrogen from coal. We will continue Hydrogen from Coal 
Research to develop improved, novel technology for the production of 
hydrogen including research in scale-up technologies which will 
simultaneously produce and separate coal-derived hydrogen from the 
other gas constituents in one membrane reactor. All research in high-
hydrogen content liquid fuels will be terminated because these are 
mature but evolving technologies where the private sector has the 
resources and incentives to conduct R&D. All research in hydrogen 
utilization for mobile applications (e.g., car engines) will be 
terminated because this research is conducted by the Office of Energy 
Efficiency and Renewable Energy (EERE). This research terminated within 
the Office of Fossil Energy would include projects selected as a result 
of Funding Opportunity Notice No. DE-PS26-06NT42801 since they are 
aimed at ethanol production and mobile applications of hydrogen 
utilization. Termination of this work is proceeding in an orderly 
manner and contractors have been properly notified.
              deployment of renewable energy technologies
    Question. In a GAO report to Congress dated December 2006, it is 
repeatedly stated that DOE has made steady incremental progress in 
making each of the renewable energy technologies more cost competitive.
    As I have mentioned in my opening statement, I am more concerned at 
this point about deployment of these technologies.
    What is the Department doing to take these technologies that are 
more cost competitive and fully deploy them into the marketplace?
    Answer. The Department's approach to promoting new technologies 
couples technology push with market demand pull, and works to address 
barriers to the market adoption of advanced technologies through 
various program initiatives. For example, the Department plans to lead 
by example with the Executive Order 13423 and become an early adopter 
of energy efficient and renewable energy technologies. By identifying 
markets where the life-cycle costs of advanced energy technologies 
currently form a compelling economic argument, the Federal Government 
will create demand pull which will increase the economies of scale and 
drive the technologies down the cost curve. The Department is also 
looking to stimulate the commercialization of advanced technologies by 
helping to bridge the gap between R&D and the market place. To this 
end, the Department has designated a Director of Commercialization and 
Deployment, located within the Energy Efficiency and Renewable Energy 
Program, to oversee and guide our deployment-related efforts. However, 
commercialization decisions are ultimately up to industry.
                                 ______
                                 
               Question Submitted by Senator Thad Cochran
    Question. Secretary Karsner, it is my understanding that your 
office is willing to consider funding for renewable energy programs 
through an ``unsolicited proposal'' process. Mississippi State 
University has submitted an unsolicited proposal to your office for its 
Sustainable Energy Research Center (SERC), a program which was funded 
in fiscal year 2006 and included in the fiscal year 2007 Senate Energy 
and Water Appropriations report. What is the status of this proposal? 
Will the SERC receive fiscal year 2007 funding?
    Answer. On February 27, 2007 the Office of the Biomass Program 
received the SERC unsolicited proposal via email. The Program responded 
on March 6, 2007 by directing Mississippi State University to the 
formal channels for submitting an unsolicited proposal and by inviting 
them to meet with the Program. For any proposal to be considered 
unsolicited, it must be unique and not covered by any current or 
proposed solicitation. The Biomass Program hosted Dr. Glenn Steele and 
Dr. William Batchelor at DOE on April 12, 2007 and informed them of 
upcoming competitive solicitations that would be applicable to their 
area of focus. We will provide a formal response to the unsolicited 
proposal. Currently, the Program is in the process of preparing that 
response.
    The Office of Biomass Program is in the process of evaluating the 
SERC proposal. The Program needs to make a determination that the 
proposal is meritorious and compliant with criteria for unsolicited 
proposals, and meets and supports the Program's Research, Development 
and Deployment plans to be recommended for funding.
                                 ______
                                 
               Question Submitted by Senator Wayne Allard
              electricity delivery and energy reliability
    Question. What is being done to increase available transmission 
from the often remote sites where renewable energy is produced to the 
more populated areas where the electricity is needed and how are your 
offices working together on that?
    Answer. The transmission grid needs to be sufficiently large and 
robust to accommodate the increased level of renewable energy resources 
that are becoming available, as well as to meet the many other 
challenges of the 21st century.
    The Department is implementing the provisions of the Energy Policy 
Act of 2005 (EPACT) to help ensure that consumers receive electricity 
over a dependable, modern infrastructure. These provisions include 
EPACT section 368 that requires designation of energy corridors on 
Federal lands; section 1221(a) that requires a study of electricity 
transmission congestion once every 3 years, coupled with the authority 
given to the Secretary of Energy to designate national interest 
electric transmission corridors; and the new Federal Power Act section 
216(h) that requires the Department to act as the lead agency for 
purposes of coordinating all applicable Federal authorizations and 
related environmental reviews to site an electric transmission 
facility.
    The Department also provides technical assistance to States, 
regional bodies, and others on issues such as methods and tools to 
increase regional planning and coordination of transmission, improving 
transmission siting, better understanding the location of suitable 
renewable resources (``resource characterization''), and improving the 
ability of the grid to plan for and operate with renewables that are 
intermittent (``grid integration issues''). Technical assistance is 
provided to the Department's Power Marketing Administrations as they 
explore what role they can play in providing access to additional 
renewable generation through transmission. With some types of 
assistance, such as renewable grid integration, the technical 
assistance is informed by research and development that is sponsored by 
the Department.
    At the distribution level of the grid, the Department continues to 
provide technical assistance to States that wish to adopt more 
favorable interconnection standards, metering, demand response, and 
related methods that enable greater use of distributed renewables 
generation. For example, the Department funded the national voluntary 
``IEEE 1547'' interconnection standard that is referenced in EPACT 
section 1254 regarding ``Interconnection Standards'' for States to 
consider.
    In addition, using funding under the Renewable & Distributed 
Systems Integration activity line of the fiscal year 2007 Operating 
Plan, the Office of Electricity Delivery and Energy Reliability (OE) is 
soliciting for projects that would integrate renewable and distributed 
energy systems into the grid. By successfully demonstrating this 
integration, the use of renewable and distributed energy technologies 
to support electric distribution operations should substantially 
increase for supplying power and other ancillary services during peak 
load periods. The project would also demonstrate the ability of these 
technologies to reduce power required by the distribution feeder. This 
will be accomplished through modeling, design, integration, and R&D of 
renewables and distributed energy integration into the distribution 
system; low-cost sensors; advanced monitoring; and consumer 
information.
    The Office of Energy Efficiency and Renewable Energy (EERE) 
typically focuses research and development activities on improving the 
efficiency, cost, and emissions profiles of generation technologies, 
including renewables.
    OE and EERE understand that for this policy to succeed, it is 
crucial to collaborate not only on grid-scale innovations, but also on 
bringing the applications to the consumer. In coordinating near-term 
and long-term goals, OE and EERE remain alert to changes in need and 
demand. Both offices also support State and regional efforts to 
integrate renewable and distributed energy resources in their electric 
system planning efforts. In this spirit, OE and EERE have formed a 
focus group to concentrate on integration issues with renewables. OE 
and EERE are closely coordinating fiscal year 2007 activities under the 
operating plan in this area.
    Question. I am also curious what research is being done to develop 
electricity storage, especially electricity manufactured from renewable 
sources?
    Answer. The energy storage program of the Office of Electricity 
Distribution and Energy Reliability has conducted a research program on 
basic storage mechanisms, devices, and systems for over a decade. The 
program is considered worldwide to be one of the leaders in this field. 
Research is conducted on advanced batteries, flow batteries, 
supercapacitors, and flywheels, as well as the necessary megawatt level 
power electronics. Major demonstrations are fielded in partnership with 
utilities, the California Energy Commission (CEC), and the New York 
State Energy Development Authority. In particular, we are involved with 
the CEC in the development of a microgrid which incorporates 500kW of 
supercapacitors to harmonize wind and hydro power. We also work with 
the Bonneville Power Administration on a power electronics device which 
will smooth short term wind and wave power fluctuations when combined 
with storage. A project with the Iowa municipalities explores the 
possibility of using 200MW of compressed air storage in conjunction 
with a 75MW wind farm and inexpensive off-peak power.
    Energy storage can significantly increase the integration of 
renewable sources of energy into the electric system. Storage increases 
the reliability of intermittent resources like wind and photovoltaics, 
allowing these sources to become relatively constant sources of power. 
Renewable power produced in off-peak periods can be stored and used 
during periods of greater demand, thus making renewables dispatchable. 
Likewise, energy storage can bridge the gap during decreased periods of 
renewable production and, when combined with appropriate electronics, 
it can also eliminate short term flutters that decrease power quality 
and impact digital equipment on the grid.
                                 ______
                                 
              Questions Submitted to Hon. Thomas D. Shope
             Questions Submitted by Senator Byron L. Dorgan
                      fossil energy budget request
    Question. Your testimony suggests that your fiscal year 2008 budget 
request of $863 million is one of the largest fossil energy requests by 
this administration. Yet, there are only two large program requests in 
your budget--a doubling of funds for the FutureGen project and a 
doubling of funds for the Strategic Petroleum Reserve (SPR) expansion. 
The FutureGen request now makes up 25 percent of the coal R&D request.
    With the extraction of the requests for FutureGen and the SPR 
expansion from your budget request, are you not actually cutting many 
other fossil energy R&D programs?
    Answer. The FutureGen project is a key Presidential priority in the 
Office of Fossil Energy's portfolio and is an important component of 
the Coal Research Initiative. It remains a significant step towards 
realizing the goal of creating a near-zero atmospheric emission energy 
option for coal. The Strategic Petroleum Reserve provides an emergency 
oil stock to bolster U.S. energy security and a possible mitigation 
when disruptions in commercial oil supplies threaten the U.S. economy. 
We believe the current budget represents a balanced Fossil Energy 
Program portfolio that addresses all of the highest priority 
requirements to meet the program goal.
                       coal r&d research funding
    Question. The President's fiscal year 2008 Budget Request 
recommends $245.6 million for the coal R&D program, is approximately 
$55.7 million less than the fiscal year 2006 enacted budget level. This 
is largely due to some programs being zeroed out or severely cut back. 
This includes the Innovations for Existing Plants (IEP) program and the 
Advanced Research program. For example, defunding the IEP program will 
eliminate work for testing mercury control technologies and research on 
the energy-water nexus. This program is extremely important in 
validating mercury control technologies to insure different coals will 
be competitive under the mercury control (mercury MACT) rules, which 
require utilities to begin making reductions of mercury from their 
emissions by 2012. Without this program, there is a very real 
possibility that technologies will not be available by 2012 that can 
capture the mercury emitted from the combustion of coals.
    Why has the Department requested elimination or reduction of 
important coal research and development programs?
    Answer. The fiscal year 2008 Coal Research and Development budget 
request proposes a balanced research and development (R&D) program 
portfolio in support of the overall goal of near-zero atmospheric 
emissions coal.
    Within the Advanced Research Program, bioprocessing was determined 
too long term to have an appreciable impact and certain other topics 
are not focused on technology being developed in the Coal R&D Program 
aimed at achieving the overall goal of near-zero emissions coal.
    The IEP Program was developing low-cost technologies for reducing 
emissions from existing coal power plants and has been very successful. 
However, the industry now has regulatory drivers to incentivize them to 
continue development and deployment on their own of such technologies. 
EPA promulgated the Clean Air Interstate Rule (CAIR) to reduce 
emissions of sulfur dioxide and nitrogen oxides and the Clean Air 
Mercury Rule (CAMR) to reduce mercury emissions. These regulations 
provide industry with incentives to fund R&D for technologies for low-
cost compliance to meet the emissions standards. Therefore, further 
Federal investment in mercury removal and other emission control 
technology is not needed.
                      carbon sequestration funding
    Question. The carbon sequestration program request is proposed at 
$79 million for fiscal year 2008, and the Department funded $100 
million in the fiscal year 2007 Spending Plan. I have noted that the 
DOE budget justification states that DOE will conduct demonstrations in 
3 or 4 sites across the country with the $79 million sequestration 
budget, as opposed to conducting large-scale demonstrations in each of 
the 7 regional sequestration partnerships--which is necessary to insure 
this technology can be used in every region of this country.
    Are the funds requested for fiscal year 2008 sufficient enough to 
conduct the several large-scale carbon sequestration demonstrations in 
every region of this country that are necessary to insure carbon 
sequestration is a valid option to insure carbon capture and storage 
from coal fired power plants? What is the Department's longer-term 
strategy related to the carbon sequestration program?
    Answer. The Department's long-term strategy is to conduct large-
scale field tests to determine that carbon capture and storage is a 
safe, effective approach to reduce greenhouse gas emissions. In 2007, 
the program is beginning work on the ``highest potential'' 
opportunities for an initial expedited round of four large scale 
sequestration tests (approximately 1 million tons CO2 per 
year for each site). DOE has provided additional funding in the fiscal 
year 2007 budget for the Carbon Sequestration Program to award these 
initial large volume sequestration tests. The fiscal year 2008 budget 
request is sufficient to continue the four large-volume sequestration 
injection projects that were accelerated with additional funding 
received in fiscal year 2007.
                  clean coal power initiative funding
    Question. The DOE request for the Clean Coal Power Initiative 
(CCPI) is $73 million for fiscal year 2008. Although this has increased 
by $68 million over the President's request of $5 million in fiscal 
year 2007, it still seems inadequate. The CCPI program is the only 
mechanism through which those clean coal technologies can be 
demonstrated in order to determine their commercial acceptable. It is 
through the demonstration program at DOE that this country has achieved 
significant reductions in NOX, SOX and 
particulate matter because of technologies that were developed and 
demonstrated with DOE support. As a result, our Nation has 
significantly reduced criteria pollutants from coal-fired power 
generation, while both maintaining low cost electricity for the 
consumer and increasing the amount of coal-fired electric power 
generation over the last 3 decades. Given the success of this program, 
it would be a prudent decision to increase the budget for this program 
so that DOE can work with industry to conduct several large scale 
projects to demonstrate carbon capture and sequestration technologies 
that can be applied to both the existing fleet and new coal plants if 
we are going to achieve meaningful reductions of carbon dioxide 
emissions.
    Is it not the case that, of the $73 million requested in fiscal 
year 2008, $58 million was returned from a previous project that did 
not go forward? Does this mean that the Department is only asking for 
$15 million in new funding for the CCPI program in fiscal year 2008? 
The Department has made much larger requests for the CCPI program in 
previous years so why is the Department not committed to funding this 
program to the same extent in fiscal year 2008?
    Answer. The Department's strategy has been to accumulate sufficient 
funds over several years and issue a solicitation to support the Clean 
Coal Power Initiative (CCPI). The $68 million increase for CCPI in 
fiscal year 2008 over the fiscal year 2007 request is derived in part 
from the transfer of $58 million in balances from the Clean Coal 
Technology Program that are no longer needed to complete active 
projects. This increase allows for the solicitation of a third round of 
demonstration projects in fiscal year 2008. In addition the fiscal year 
2007 funding level which was increased by $55 million over the request 
will be used for the third round solicitation.
   rescission of $149 million from the clean coal technology account
    Question. The President's fiscal year 2008 budget request 
recommends rescinding $149 million of previously appropriated clean 
coal technology funds. Rescinding these dollars would effectively 
cancel that money for future clean coal demonstration projects and send 
these funds back into the Federal Treasury. The clean coal program is 
under funded in a time when accelerated investments in coal technology 
development have never been more important. We should not be rescinding 
clean coal funds, but adding new funds to the program to insure we 
develop, in a timely manner, cost effective coal technologies.
    Why does the administration insist on rescinding this funding, 
which was previously appropriated and can be directed for clean coal 
demonstration projects in future years?
    Answer. All project funding commitments in the CCT Program have 
been fulfilled and only project closeout activities remain. The 
administration proposes to transfer $108 million of the $257 million 
deferral to the FutureGen project, and cancel the remaining $149 
million. Of the $66 million in unobligated balances carried forward at 
the start of fiscal year 2008, $58 million is transferred to the Clean 
Coal Power Initiative (CCPI). CCPI will complete the Round 3 
solicitation using unobligated funds from projects that were selected 
but not awarded, plus appropriations that have not yet been committed 
to projects. We believe that the cumulative available funding will be 
sufficient for a Round 3 CCPI solicitation.
                university oil and gas research funding
    Question. I am very concerned about the impacts of the cuts in oil 
and gas research funding for a number of reasons but am particularly 
worried about the impacts of these cuts on the education of our next 
generation of energy technologists who are graduate students today.
    Can you tell me how many universities will be affected by the 
scheduled elimination of almost all oil and gas R&D by DOE in its 
fiscal year 2007 Spending Plan?
    Can you please list those universities that currently receive 
funding? Can you tell me if and when you intend to issue a stop work 
order to these institutions?
    Will these universities be forced to shut down their oil and 
natural gas research programs?
    Answer. There are 25 projects at universities that will be affected 
by the funding reduction in the operations plan. Federal funding for 
oil and gas research and development activities is not needed because 
industry has the incentives and resources to accomplish such activities 
on its own. Given the private sector's incentives and capabilities, we 
believe that private industry is best positioned to fund R&D at 
universities and elsewhere, which will provide educational 
opportunities for our next generation of energy technologists.
    The universities that currently receive funding are: University of 
Alaska, Fairbanks; University of Alabama; University of Arkansas; 
University of Arizona; Baylor University; California Institute of 
Technology; Carnegie Mellon University; Clemson University; Colorado 
School of Mines; Stanford University; University of Illinois; 
University of Kansas; Florida International University; Georgia Tech 
University; Kansas State University; Louisiana State University; 
Massachusetts Institute of Technology; Michigan Tech University; 
Western Michigan University; University of Mississippi; Mississippi 
State University; University of Southern Mississippi; Montana State 
University; Montana Tech--Bureau of Mines; New Mexico Institute of 
Mining and Technology; State University of New York; University of 
Columbia; University of Oklahoma; Oklahoma State University; Prairie 
View A&M University; University of North Carolina; University of Tulsa; 
University of Pittsburgh; Penn State University; University of Texas--
Austin; University of Texas--Bureau of Economic Geology; Texas A & M 
University; University of Houston; Rice University; University of Utah; 
West Virginia University; Woods Hole Oceanographic Institute; and the 
University of Wyoming.
    The Oil and Natural Gas program has previously sent letters to all 
program participants notifying them of the potential shortfalls in the 
fiscal year 2007 budget. These researchers are currently working using 
existing (prior year) funds. Subsequently, all universities with 
existing cooperative agreements impacted by the decrease in funds were 
contacted and informed of the lack of funding for fiscal year 2007. The 
majority of DOE projects are grants or cooperative agreements, for 
which a stop work order is not issued.
    Each university program will have to examine its particular 
situation. In many cases, other Government and/or industry funding may 
be available to the university.
                           natural gas cartel
    Question. In his 2006 State of the Union speech, President Bush 
indicated he wanted to reduce our reliance on ``imported energy 
sources.'' At the same time, DOE and FERC have launched an aggressive 
campaign to import more liquefied natural gas (LNG) into the United 
States.
    The two largest suppliers of imported liquefied natural gas to the 
United States are Trinidad Tobago and Algeria. Trinidad Tobago has only 
around 23 trillion cubic feet of gas reserves and will ultimately have 
to get gas supplies from Venezuela if it wants to continue its 
liquefaction enterprise. Algeria is a member of OPEC. Further, I note 
that Russia, Iran, Qatar, Algeria, and Venezuela announced recently 
they are meeting in Doha this week to discuss forming a natural gas 
cartel. This is very troubling.
    Finally, I would point out that according to DOE's 2003 National 
Petroleum Council Gas Supply Study, the United States has almost 60 
years of technically recoverable natural gas, but we need new 
technologies to produce them.
    How does the administration's policy of reducing our reliance on 
imported energy sources square with its policies to encourage the 
imports of very large volumes of LNG, especially in light of this very 
disturbing news about a possible gas cartel?
    Answer. Historically, U.S. imports of natural gas have come 
primarily from Canada by pipeline with small amounts of LNG imported 
from various countries. In the Energy Information Administration's most 
recent Annual Energy Outlook natural gas imports from Canada are 
forecast to decline and LNG imports are expected to rise to fill this 
gap.
    The administration's role in addressing LNG imports is to ensure 
that importing facilities are permitted in a timely manner. The market 
will decide what facilities are economic, which ones will be built, and 
how much LNG to import. Furthermore, we don't believe intense 
discussions of a gas cartel are likely to result in the development of 
a cartel at this point, considering the relative infancy of the global 
LNG spot market.
    The administration's policy of reducing our reliance on imported 
energy also includes research and development that will strengthen the 
Nation's energy security. For example, the administration has proposed 
to make the R&D investment tax credit permanent. Under the Advanced 
Energy Initiative, the 2008 Budget includes initiatives for hydrogen 
fuel, biofuels, plug-in hybrid vehicles, clean coal, nuclear, and solar 
photovoltaics to help displace future demand for oil and natural gas. 
The administration also supports removing unnecessary barriers to 
developing existing reserves of oil and gas including, for instance, 
the environmentally responsible exploration and development of reserves 
in Alaska.
    Question. Is the administration aware of the fact that if all LNG 
import facilities approved by the administration were built and 
operating at capacity we would be importing almost 60 percent of our 
natural gas most of it from many of the same countries that hold us 
hostage to imported oil?
    Answer. The administration is responsible for permitting proposed 
LNG import facilities. However, the market will decide which ones will 
ultimately be built and become operational. It is unlikely that it 
would be economical to construct every LNG import facility that has 
been proposed, and historically LNG importing facilities have typically 
operated below their peak capacity levels. Also, Australia and Norway, 
countries that are viewed as reliable energy suppliers, are developing 
LNG exporting facilities that could supply U.S. markets.
    Question. Who are the 10 largest U.S. investors and partners in 
building and operating regasification facilities in the United States?
    Answer. There are currently only five built and operating LNG 
import terminals in the United States. These include the Distrigas 
terminal in Everett, Massachusetts owned by Suez; the Cove Point, 
Maryland terminal owned by Dominion; the Elba Island, Georgia terminal 
owned by El Paso; the Trunkline terminal in Lake Charles, Louisiana 
owned by Southern Union; and the Energy Bridge terminal in the Gulf of 
Mexico offshore Louisiana owned by Excelerate Energy.
    Question. Why would the administration propose eliminating all 
funding at DOE for natural gas supply research when we have 60 years of 
technically recoverable gas reserves in the United States but need new 
technologies to produce them?
    Answer. Natural gas production is a mature industry that has every 
incentive, particularly at today's prices, to enhance production and 
continue research and development of technologies on their own. There 
is no need for taxpayers to subsidize natural gas companies in these 
efforts.
                                 ______
                                 
             Questions Submitted by Senator Robert C. Byrd
                               futuregen
    Question. Mr. Secretary, in 2004, the President announced the 
initiation of the FutureGen project, a $950 million, 10-year 
demonstration project to construct the world's first coal-fueled, near-
zero emissions electricity and hydrogen power plant.
    I have been supportive of the concept behind FutureGen. FutureGen, 
if successful in meeting the intended goals, could be a major 
breakthrough for a clean and efficient use of coal and good for the 
economic and environmental well being of our country and the world. 
However, ever since the inception of this project, I have been very 
vocal about my major concerns about the project--namely how the 
administration intends to pay for its $700-plus million share of this 
project without robbing the basic Fossil Energy research and 
development programs and the total cost growth potential of this 
project, given increasing costs of construction and the types of 
unanticipated costs that usually accompany first-of-its-kind projects.
    The Department of Energy's press release, dated April 10, 
announcing that the price of construction materials and equipment, 
labor, and other heavy construction expenses have significantly driven 
the estimated total costs of the FutureGen project to $1.7 billion 
through fiscal year 2016 came as no surprise to this Senator. Even with 
the Department assuming $300 million in anticipated power sales to 
offset the costs of the project, the Federal Government is still left 
with a hefty cost share of $1.1 billion--at least $300 million more 
than anticipated.
    Despite the many inquiries I have submitted to the Department of 
Energy in the past, the Department has never been able to adequately 
explain to me how it is planning to fund its $700 million-plus share 
for the FutureGen project. Can you explain to me how the Department 
plans to pay for this major escalation of an additional $300 million?
    Answer. The initial cost estimate for FutureGen was developed by 
the National Energy Technology Laboratory (NETL), which estimated the 
total cost of the FutureGen Project at approximately $950 million in 
constant 2004 dollars. This cost estimate was included in the 2004 
Report to Congress. While the Department has acknowledged that costs 
for some of the currently planned components of the FutureGen plant 
have generally increased, the Department has made no commitment beyond 
the $39 million Government cost-share in Budget Periods Numbers 0 and 
1. Budget Period No. 1 will begin the detailed design for the plant and 
re-scoping of the project may be necessary to remain within budget. The 
cost for the FutureGen Project is shared between the Department of 
Energy, the FutureGen Industrial Alliance, and contributions from 
foreign governments. The Department anticipates requesting sufficient 
appropriations for the Government's cost-share for FutureGen to meet 
the objectives and schedule for this initiative.
    Question. I have helped to provide funding for many major 
Government construction projects in the past and know that 
unanticipated costs are commonplace. Beyond inflation increases that 
DOE has just projected, how does the Department plan to cope with 
unforeseen costs that might arise with the construction of this first-
of-its-kind project? How much funding has been set aside for future 
contingencies?
    Answer. The project is structured in phases such that progression 
to the next phase depends on the successful accomplishment of 
objectives and milestones from each preceding phase.
    To date, the cost basis estimate has remained the same as the 
original cost estimate identified in the March 2004 Program Summary to 
Congress. Contingencies are inherent in the base cost estimate as a 
function of design definition and technology development. The inherent 
contingency in the FutureGen cost estimate is consistent with industry 
recommended practices for a conceptual design with substantial advanced 
technologies. The costs associated with these contingencies are 
included in anticipated funding profile.
    Cost and schedule risks are very real for large, first-of-a-kind 
projects and cannot be eliminated completely until construction is 
completed. We are making our best efforts to maintain budget for this 
important validation of the coal-based near-zero atmospheric emissions 
concept.
    Question. In fiscal year 2008, the FutureGen program is funded at 
$108 million, a 500 percent increase from the fiscal year 2006 level, 
while the Natural Gas R&D program, the Oil R&D program, and the 
Innovations for Existing Plants program under the Coal R&D program were 
zeroed out. This is a very disturbing trend, and one that I suspect 
will only worsen as the project goes to construction in future years. 
Will you be cutting into the Coal R&D program even deeper to fund cost 
growths in FutureGen?
    Answer. During the 2000 campaign, the President committed to spend 
$2 billion over 10 years on clean coal technology. The budget completes 
that commitment 3 years ahead of schedule, with $385 million in funding 
for the Coal Research Initiative in 2008. The funding levels in the 
budget for clean coal activities are among the highest in this 
administration and also from any President in the last 2 decades.
    The fiscal year 2008 budget request for FutureGen, when adjusted 
for inflation, is consistent with the funding profile as disclosed in 
the FutureGen Program summary as reported to Congress in fiscal year 
2004. The fiscal year 2008 funding request is to cover NEPA compliance, 
significant design activities, and procurement of long-lead items. 
FutureGen is integral to the Coal R&D program, and continual 
investments in the coal R&D program are necessary in order to support 
the development of technologies to drive towards the goal of near-zero 
atmospheric emissions coal, which includes the integrated, scale-up 
testing of the necessary R&D.
    The Natural Gas research and development (R&D), the Oil R&D, and 
the Innovations for Existing Plants programs are proposed for 
termination because the Federal R&D role in these areas have been 
completed and industry should take on that responsibility. The oil and 
gas industry has the incentives and resources to accomplish oil and gas 
R&D without additional Federal subsidies, which are unwarranted in 
today's price environment. Promulgation of CAIR and CAMR provided a 
market incentive for developing many advanced, cost-effective emissions 
controls and has ended the need for Federally funded R&D in areas under 
the Innovations for Existing Plants program. The current fiscal year 
2008 budget request has been formulated based on the needs of the 
Fossil Energy Program and is consistent with meeting the goals and 
objectives of the Department's Strategic Plan.
    Question. What role will the National Energy Technology Laboratory 
play in FutureGen? Enough to support the approximately 1,200 Federal 
and contractor staff who currently support Fossil Energy Research and 
Development program?
    Answer. The National Energy Technology Laboratory (NETL) has the 
lead responsibility for managing the FutureGen project as well as the 
many other projects that it has under its purview to advance the 
Department's goals and carry out its mission.
    Question. If FutureGen is successful, will the Department be able 
to deploy FutureGen-type technologies in other locations across the 
country in coming decades or will additional resources, studies, tests, 
and demonstrations to expand deployment of these technologies be 
necessary?
    Answer. The goals of the FutureGen project are to prove the 
technical feasibility and economic viability of a near-zero atmospheric 
emission coal energy option, thus leading to the broad acceptance of 
the concept. The FutureGen project has been designed to operate under 
real-world conditions and at large enough scale to adequately prove the 
viability of the concept. The key is to prove that near-zero 
atmospheric emissions coal is technically viable and that its costs are 
not prohibitive. The coal research and development program of which 
FutureGen is a part, is designed to advance the development of 
technologies that reach the goal of near-zero atmospheric emissions 
while increasing efficiencies, increasing clean energy production, and 
decreasing costs. Ultimately, the market will determine when and how 
many of these plants are deployed, yet a successful operation of the 
first FutureGen plant is an important prerequisite to the widespread 
deployment of near-zero atmospheric emission coal plants.
                      clean coal power initiative
    Question. The administration has included $73 million for the Clean 
Coal Power Initiative (CCPI) in the fiscal year 2008 budget, which is a 
considerable improvement over the $5 million that the President sought 
in his fiscal year 2007 budget request.
    I understand that two CCPI Round II projects are experiencing cost 
growths. Will the fiscal year 2008 CCPI funds be used to make up these 
cost growths and how much would be made available to each project? How 
much fiscal year 2008 funding and how much prior-year funding will be 
applied to a third CCPI solicitation?
    Answer. Additional funding provided by DOE to an awarded project to 
help cover project cost growth due to the increase in material, 
equipment, and skilled labor cost comes from unobligated funds 
appropriated to the coal demonstration program before fiscal year 2006. 
These are funds previously committed to projects which have withdrawn 
from the demonstration program since selection and would be used for 
the Round III solicitation absent cost growth in projects from previous 
rounds. Funds provided to a project to cover cost growth will not be 
available to fund projects selected in CCPI Round 3. No fiscal year 
2008 funds will be used to cover any cost growth for existing projects 
but cost growth will reduce the funding available for the next round of 
solicitations. The CCPI program operates under the fiscal constraints 
of the Clean Coal Technology program, so the maximum allowable increase 
in the Government share to these projects is 25 percent over the 
Government's original estimate of costs. In the case of the Southern 
Company, Orlando IGCC project, this means a maximum increase in the 
Government share of $59 million, and $59 million in cost growth has 
been approved. In the case of the Western Greenbrier Cogen. WVa FBC 
project, this means a maximum potential increase in the Government 
share of $28 million, but no cost growth has been approved. Combined, 
the maximum potential net reduction in the planned fiscal year 2008 
CCPI solicitation is $87 million, of which $59 million has been 
approved.
    CCPI will complete the Round 3 solicitation using unobligated funds 
from projects that were selected but not awarded, plus appropriations 
that have not yet been committed to projects. We believe this 
cumulative amount is sufficient for proceeding with a Round 3 CCPI 
solicitation.
                       coal-to-liquids initiative
    Question. It is my understanding that the coal-to-liquids process 
is only commercially feasible when the price for crude oil is at $40 
per barrel or higher. What is the Department of Energy doing to provide 
price guarantees or other financial incentives for investors? Does the 
administration support legislation that promotes coal-to-liquids 
projects?
    Answer. The Department is closely following the response to the 
incentives established by the Energy Policy Act (EPACT) of 2005 which 
include coal-to-liquids deployment projects being eligible for 
incentives such as tax credits and/or loan guarantees as authorized in 
EPACT.
    The President has set a goal of increasing the supply of renewable 
and alternative fuels, including coal-derived liquid fuels, by setting 
a mandatory fuels standard to require 35 billion gallons of renewable 
and alternative fuels in 2017--nearly five times the 2012 target now in 
law. In 2017, this will displace 15 percent of projected annual 
gasoline use.
    The administration wants to work with Congress to allow coal-
derived liquids to be eligible under the proposed alternative fuels 
standard. The standard should be structured to allow the market to 
determine the most efficient way to meet the standard, including to 
what extent coal-derived fuels will be used.
    Question. I understand that there are environmental concerns 
associated with the coal-to-liquids process. What support can the 
Office of Fossil Energy provide to industry in identifying ways to 
incorporate the capture and storage of carbon dioxide emissions from 
the coal-to-liquids process and from using the fuel produced by the 
process?
    Answer. The Office of Fossil Energy is supporting industry in this 
area through its carbon sequestration technology development effort. 
This Carbon Sequestration Program includes laboratory and pilot-scale 
research aimed at developing new technologies and systems for 
greenhouse gas mitigation, which could be applied to coal-to-liquids 
processes as well as other industrial processes, though the primary 
objective is to apply them to power generation systems. In 2007, the 
program is beginning work on the ``highest potential'' opportunities 
for an initial expedited round of large scale sequestration tests 
(approximately 1 million tons CO2 per year for each site). 
DOE has provided additional funding in the fiscal year 2007 budget for 
the Carbon Sequestration Program to award several large volume 
sequestration tests.
impact of the fiscal year 2008 budget on the national energy technology 
                               laboratory
    Question. If this fiscal year 2008 budget is enacted, how many 
Federal, contractor, and construction jobs will be eliminated at the 
National Energy Technology Laboratory, which is based in Morgantown, 
West Virginia; Pittsburgh, Pennsylvania; and Tulsa, Oklahoma; with 
smaller offices in Tulsa, Oklahoma; and Fairbanks, Alaska?
    Answer. We are managing our human resources effectively to achieve 
our program goals and do not anticipate significant changes in staffing 
levels.
    Question. In the past, NETL has received approximately $2 million 
per year in General Plant Projects, which covers critical maintenance 
needs. Can you tell me why the past several Fossil Energy budgets have 
zeroed out funds for critical maintenance at the major NETL sites, all 
of which are more than 40 years old? Will this impact the health and 
safety of the workers?
    Answer. NETL received almost $2 million in fiscal year 2006 for 
General Plant Projects and $4 million in fiscal year 2007. It is 
anticipated that NETL has sufficient funds to continue these activities 
in fiscal year 2008.
               clean energy technology exports initiative
    Question. I initiated the Clean Energy Technology Exports (CETE) 
Initiative in the fiscal year 2001 Energy and Water Appropriations 
bill. The administration then completed a 5 Year Strategic Plan in 
2002. From fiscal year 2004-2006, I helped provide $1.6 million in 
funding to help further this initiative.
    Please provide me with a detailed account on how these appropriated 
funds were utilized.
    Answer. The Department remains committed to the goals of the Clean 
Energy Technology Export (CETE) Initiative. I have attached a matrix of 
our spending allocations in 2005 and 2006. In summary, we have funded 
programs that support direct partnership with industry, as well as 
programs that coordinate interagency efforts and improve the efficacy 
of Federal activities to support deployment.

                                                  CETE PROJECTS
----------------------------------------------------------------------------------------------------------------
                                                                                                  Funding Amount
        Activity/Short Title           Project Partners/ Leverage         Summary Comments        (In thousands)
----------------------------------------------------------------------------------------------------------------
          Fiscal Year 2005CETE Website........................  GETF........................  Provides central site for                $25
                                                                     CETE info dissemination,
                                                                     and to summarize
                                                                     opportunities from other
                                                                     donor organizations like
                                                                     EBRD, ADB and GEF. Allows
                                                                     both novice and
                                                                     sophisticated market
                                                                     players to find appropriate
                                                                     points of contact for
                                                                     questions. Could eventually
                                                                     be used to track
                                                                     performance metrics.
DOE-USAID Hydropower Partnership....  U.S. Hydropower Council for   Fiscal year 2005 focus on                100
                                       International Development.    project development and
                                       $200k from USAID and          closure in India, Mexico
                                       private sector.               and Guatemala. Track record
                                                                     of success. Multiple
                                                                     private sector partners.
Sustainable Finance.................  Resource Mobilization         Continue work in Poland and              175
                                       Advisors (RMA). $200k from    Mexico. Initiate work in
                                       U.K. Govt, NADBank and        Philippines to build
                                       World Bank.                   portfolio of viable EE
                                                                     projects for investment.
                                                                     Initiated study on
                                                                     Financing Mechanisms to
                                                                     support clean energy with
                                                                     input from private partners
                                                                     and U.S. agencies.
                                                                     Supported Resource Guide as
                                                                     outreach tool for U.S.
                                                                     exporters.
Management Plan.....................  ORNL........................  ............................              75
Tsunami Study.......................  Argonne.....................  ............................              75
Sustainable Communities.............  GTI.........................  ............................              35
Green Olympics/Beijing..............  ORNL........................  ............................              45
REEEP...............................  ............................  ............................              50
Africa Geothermal...................  ............................  ............................              15
                                                                                                 ===============
          Fiscal Year 2006CETE Website........................  Global Environment            Provides central site for                 40
                                       Technology Foundation         CETE info dissemination,
                                       (GETF).                       and to summarize
                                                                     opportunities from other
                                                                     donor organizations like
                                                                     EBRD, ADB and GEF. Allows
                                                                     both novice and
                                                                     sophisticated market
                                                                     players to find appropriate
                                                                     points of contact for
                                                                     questions. Could eventually
                                                                     be used to track
                                                                     performance metrics.
DOE-USAID Hydropower Partnership....  U.S. Hydropower Council for   Fiscal year 2006 focus on                150
                                       International Development.    project development and
                                       $400k from USAID and          closure in India and
                                       private sector.               Guatemala. Track record of
                                                                     success with more than $50
                                                                     million in projects
                                                                     finalized in the past 2
                                                                     years. Multiple private
                                                                     sector partners.
Sustainable Financing for EE........  Resource Mobilization         Expect to close on $10                   100
                                       Advisors (RMA). $500k from    million in EE project with
                                       Philippine Govt, NADBank,     U.S. partners in Mexico in
                                       USTDA and World Bank.         next 6 months. New deals in
                                                                     Poland and Philippines in
                                                                     next 18 months.
Africa Geothermal Mission...........  EERE, Govt of Kenya.........  Reverse trade mission                     30
                                                                     bringing officials from
                                                                     Kenya to U.S. Geothermal
                                                                     Conference to meet multiple
                                                                     vendors.
Energy Efficiency Initiative in       IRG, Govt of Ukraine. $600k   Create audit fund and                     50
 Ukraine.                              from USAID.                   project development support
                                                                     with U.S. ESCO's and local
                                                                     partners in Ukraine. CETE
                                                                     money will piggyback USAID
                                                                     to help engage U.S.
                                                                     technology vendors.
Clean Tech in Thailand with Southern  FE, SSEB, Govt of Thailand..  Good exposure to technology               40
 States Energy Board (SSEB).                                         vendors in 16 States
                                                                     through SSEB. Track record
                                                                     of success. Multiple SME
                                                                     private partners. Potential
                                                                     projects include biomass/
                                                                     coal hybrid and upgrades to
                                                                     existing thermal plants.
India Coal Beneficiation............  FE, Govt. of India..........  Builds on previous studies.               45
                                                                     Necessary to mitigate
                                                                     negative environmental
                                                                     impacts of near-term coal
                                                                     expansion in huge market.
                                                                     Multiple potential private
                                                                     partners. Could expand
                                                                     under Asia Pacific
                                                                     Partnership. Possible USAID/
                                                                     India buy-in.
China Ombudsman for Renewable.......  U.S. companies attending      Goal is to set up side                    29
                                       Renewable Conference.         meetings with interested
                                                                     parties in China around
                                                                     conferences where U.S.
                                                                     companies are participating
                                                                     and/or exhibiting. First
                                                                     event is in September 2006.
China Combined Heat and Power (CHP).  LBNL, U.S. CHP Association..  Seed funding to develop a                 45
                                                                     market plan, consider tech
                                                                     options and get U.S.
                                                                     vendors involved. Huge
                                                                     market potential.
Caribbean--New Energy sources.......  IDB, CARICOM, USAID.........  Support for new initiative                20
                                                                     to explore alternatives to
                                                                     fossil fuel in the broad
                                                                     Caribbean market. Launch
                                                                     Conference in September.
                                                                     CETE funding used to engage
                                                                     U.S. vendors for wind,
                                                                     hydropower and biofuels
                                                                     technology.
PI-Kazakhstan Nuclear power tour....  ORNL. Nuclear Energy          Responds to S-1 trip.                     45
                                       Institute (NEI), Govt of      Reverse trade mission to
                                       Kazakhstan.                   visit U.S. sites with
                                                                     potential vendors and
                                                                     investors. Large market and
                                                                     potential for U.S. sales.
PI-Kazakhstan Petrochemical Industry  GOK.........................  Responds to S-1 trip.         ..............
 Tour.                                                               Reverse trade mission. U.S.
                                                                     industry interest unclear.
                                                                                                 ---------------
        Total.......................  ............................  ............................             594
----------------------------------------------------------------------------------------------------------------

    In fiscal year 2006, we instituted performance metrics to measure 
the specific and tangible impact of the CETE program and we also 
solicited input on jointly funded projects. As a result, we are now co-
funding projects with USAID, TDA and the DOE Offices of Fossil Energy 
and Energy Efficiency and Renewable Energy.
    We have supported programs in 13 different countries in partnership 
with more than 20 private companies and 10 international organizations. 
Our funding is being leveraged at least 2:1 with other resources from 
private partners and other donor organizations.
    The programs we are supporting are intended to benefit multiple 
projects with multiple U.S. vendors and developers, and yet could not 
be accomplished by any one U.S. company acting alone.
    Regarding interagency coordination, we host CETE Working Group 
meetings on a quarterly basis. Representatives from all nine 
participating agencies regularly attend. We have also developed the 
``Clean Energy Exports Assistance Network'' (www.cleean.net) as a tool 
to better inform U.S. clean technology partners of specific energy 
market conditions and opportunities, and to better coordinate 
interagency resources.
    We also supported the preparation of a report titled ``Financing 
Mechanisms for Clean Energy Technology Exports'' with input from 
industry and CETE participating agencies. The report may be found at 
the website.
    Question. Because the Department of Energy has discretion to fund 
programs though the fiscal year 2007 Joint Funding Resolution, what is 
the Department doing to further develop and integrate the CETE 
Initiative into its overall international energy technology deployment 
strategies?
    What does the Department plan to do to continue to pursue the goals 
of the CETE Initiative in fiscal year 2008?
    Answer. The Office of Policy and International Affairs and the 
Office of Energy Efficiency and Renewable Energy are working together 
to define useful projects for fiscal year 2007 and an overall strategy 
for programs in fiscal year 2008. The goal is to focus on projects that 
may create lasting institutional abilities, and that have the potential 
to transform markets.
    Programs we are considering in fiscal year 2007 include further 
input to the website (www.cleean.net), and a training program on clean 
energy technologies for foreign service and foreign commercial service 
officials. We also plan to support industry events focused on new 
market opportunities in China, Central American, and the Caribbean.
    In fiscal year 2008, we want to pursue a strategy of integrating 
the CETE goals into our international programs by ensuring better 
industry participation and more effective coordination with other 
agencies and with large donor organizations such as the World Bank and 
the Global Environment Facility. We expect to narrow our focus to fewer 
strategic markets, and to support activities in those markets that 
offer the greatest potential for commercial implementation.
    Question. How is the Department and the administration integrating 
CETE with other administration activities such as the Asia-Pacific 
Partnership?
    Answer. As you know, the CETE program encompasses all clean 
technologies and is global in focus whereas the Asia-Pacific 
Partnership (APP) has seven technology-based working groups and is a 
partnership of six countries: Japan, Australia, S. Korea, India, China 
and the United States. Further, the goals of the CETE program are to 
support the efforts of U.S. industry, while the APP more broadly 
supports green-house gas emission reductions with participation by 
industries from all member countries.
    Question. How is the Department working with other Federal agencies 
as well as the private sector on all of these initiatives?
    Answer. Despite the differences in focus, we are coordinating 
efforts through the CETE interagency working group and on the website 
(www.cleean.net). Many of our industry partners under the CETE umbrella 
also participate in the APP. We anticipate that some projects supported 
under the CETE program in India and China may be good candidates for 
funding under the APP and vice-versa.
                               gao report
    Question. In December 2006, the GAO issued a report entitled ``Key 
Challenges Remain for Developing and Deploying Advanced Energy 
Technologies to Meet Future Needs.''
    The report summarized that despite the United States being more and 
more reliant on imported energy resources, the DOE's total budget 
authority for fossil energy R&D dropped from $1.9 billion (in real 
terms) in fiscal year 1979 to $434 million in fiscal year 2006. With 
the Energy Information Administration projecting that total U.S. energy 
demand will increase by about 28 to 35 percent between 2005 and 2030, 
GAO recommended that the Congress consider further stimulating the 
development and deployment of a diversified energy portfolio by 
focusing R&D funding on advanced energy technologies.
    I note with disappointment that DOE had no comment on this 
recommendation. Would you please provide me with your comments on GAO's 
recommendations?
    Answer. The GAO report provides valuable information that will be 
useful to the Department and the Government (in general terms) in 
connection with our research and development activities. Success in R&D 
is measured by its transition to commercial application. Examples in 
the oil and gas sector include down-hole telemetry, horizontal 
drilling, 3-D seismic analyses, and polycrystalline diamond drill bits, 
all of which have been adopted by the industry. Examples in the area of 
renewable energy are geothermal energy and hydropower, both now 
considered as fully developed technologies. The GAO report also notes 
that there is over $5 billion in tax expenditures (financial 
incentives) targeted at energy suppliers and users of advanced 
technology. The Energy Policy Act of 2005 augments these incentives 
with an estimated $11 billion worth of additional financial incentives 
over 10 years. The primary role for Government in this area is to fund 
high-risk, basic energy research, as was explicitly outlined by this 
administration in the Research and Development Investment Criteria 
issued in 2003. The GAO study fails to take stock of the increases over 
the last 2 decades in funding in this area, offsetting some of the 
declines in applied R&D. Taking into account all of these factors, we 
believe that DOE R&D is sufficient to meet our Nation's energy needs.
                     oil and gas price relationship
    Question. Would you please provide comments on EIA forecasts of 
natural gas and oil prices in its Annual Energy Outlook (2005 to 2007). 
It appears that each year, EIA significantly underestimates future 
prices of these fuels, specifically:
    In EIA's Annual Energy Outlook 2006 and 2007, natural gas price 
forecasts depart from a traditional price relationship to oil based on 
Btu parity, as demonstrated in the 2005 version. This departure is 
evident in both the reference case and the high oil price scenario. 
What is the basis for this significant departure? Why do industry 
analysts continue to stick with the traditional gas-oil price 
relationship while EIA sees the price ratio as almost doubling as in 
the high oil price case? (EIA)
    Answer. The historical record shows substantial variability in oil 
and natural gas prices and in the relationship between them. The ratio 
between the annual average prices of a barrel of West Texas 
Intermediate (WTI) oil and one million British Thermal Units (BTU) of 
natural gas at the Henry Hub has varied since 1990 from a high of 14.5 
to a low of 5.7.
    Historically, fuel switching between oil and gas was thought to 
have been a major contributor to the price relationship, but there has 
recently been some decline in the capacity to switch between these 
fuels in many end-use applications. While oil and natural gas continue 
to compete in some applications, oil and natural gas prices are also 
linked to the availability of alternative sources of supply; 
competition between coal, nuclear power, renewables, and natural gas as 
fuels for electricity generation; the availability and cost of inter-
fuel conversion technologies, such as gas-to-liquids; environmental 
restrictions; and the relative importance of transportation costs in 
the total delivered price of energy from each source, which affects the 
regional scale of inter-fuel competition. EIA expects there to be a 
relationship between oil and natural gas prices that varies somewhat 
depending on many factors, not necessarily a constant ratio of price 
between oil and gas that is closely linked to the ratio of their energy 
content that some industry analysts expect.
    Tighter markets, as we have experienced in recent years, result in 
greater price impacts from similar shifts in demand or supply than 
would be seen in looser markets. On the supply side, higher oil prices 
result in increased drilling for oil and thus higher costs for oil and 
gas drilling, placing upward pressure on gas prices. Higher oil prices 
also generally result in increased cash flow and the potential for 
greater investment in oil and gas prospects, placing downward pressure 
on gas prices. Over the longer-term, world markets will play a larger 
role in determining the relationship between oil and natural gas prices 
in the United States due to increasing trade in liquefied natural gas. 
This relationship will be influenced by worldwide fuel switching 
capability, exploration and production costs (E&P) costs, and the 
potential for a growing gas-to-liquids market.
    Numerous changes occur from one Annual Energy Outlook (AEO) to 
another. Nothing was specifically implemented in the model to change 
the oil-to-natural gas price relationship. For example, natural gas 
prices in the AEO2006 and AEO2007 are higher compared to the AEO2005, 
partially as a result of much higher costs. Higher prices resulted in 
slower projected growth in residential, commercial, and industrial gas 
consumption through conservation and inter-fuel substitution. In the 
power generation market, higher natural gas prices dramatically lower 
the future natural gas generation share and raise the coal share from 
what it might have been with lower natural gas prices. However, 
notwithstanding the possibility of significant policy changes affecting 
energy use over the next 25 years, AEO reference case projections 
generally assume that current laws and policies remain in place 
indefinitely, in order to provide a baseline for policy analyses 
requested by Congress and the administration. Should future policy 
actions to mitigate greenhouse gas emissions preclude significant 
growth in coal-fired generation, and if new nuclear power plants that 
would be economically attractive under such circumstances are blocked 
by other concerns, continued growth in gas-fired generation would 
likely reduce the future ratio of oil-to-natural gas prices from that 
projected in AEO2007.
                                 ______
                                 
            Questions Submitted by Senator Dianne Feinstein
                               elk hills
    Question. As compensation for the Federal Government's sale of the 
Elk Hills Reserve, Congress mandated in the fiscal year 1996 National 
Defense Authorization Act (Public Law 104-106) that 9 percent of the 
net sales proceeds be provided to California for its claims to State 
school lands located in the Reserve. Of the $317.7 million owed to the 
State under the terms of this settlement, approximately $300 million 
has been paid to date.
    The Department of Energy's fiscal year 2008 budget does not provide 
for the remaining compensation. It is my understanding that California 
has already agreed to allow the Department to hold $6 million of the 
remaining compensation as a ``worst case scenario'' to complete the 
equity finalization process. The State is willing to come to a 
compromise with the Department over the remaining payment, and has 
offered to complete the claim with a final appropriation of $9.7 
million. Would this be an acceptable solution to the Department, and if 
not, why?
    Answer. If the State of California wishes to submit a proposal to 
the Department, we are open to considering it.
    Question. What is the Department's timeline to complete this 
settlement with the State of California?
    Answer. The equity finalization process is a complicated matter, 
and thus the timeline is uncertain.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici
                          carbon sequestration
    Question. Mr. Shope, as you are well aware, coal is the most 
CO2 intensive source of energy. Today, 75 percent of coal 
reserves are held by the United States, Russia, China, India and 
Australia, and it is clear that coal will be a major energy provider 
for each of these nations for the foreseeable future.
    The recently released MIT report, The Future of Coal, stresses the 
importance of large-scale demonstration projects for carbon capture and 
storage technologies. The authors conclude that projects inject less 
than 1 million tons of carbon dioxide per year and will not be large 
enough to replicate the geological stresses that a full commercial 
scale operation would produce. I understand that the current carbon 
injection projects are on a much smaller scale.
    Do you agree that such large-scale demonstrations are needed, and 
in what timeframe? What is the Department doing to expand its R&D 
efforts in this area?
    Answer. The Department of Energy (DOE) agrees that large-scale 
projects are necessary to demonstrate that carbon sequestration 
technologies are necessary to replicate commercial-scale operations. 
DOE has been planning for large-scale sequestration tests since 2004. 
The Regional Carbon Sequestration Partnerships are currently conducting 
some smaller tests that are helping to build the infrastructure and 
demonstrate the technology on a small scale. In 2007, the program is 
beginning work on the ``highest potential'' opportunities for an 
initial expedited round of large scale sequestration tests 
(approximately 1 million tons CO2 per year for each site). 
DOE has provided additional funding in the fiscal year 2007 budget for 
the Carbon Sequestration Program to award several large volume 
sequestration tests. The DOE is in the process of negotiating these 
large volume tests with the Regional Partnerships and plans to make 
some of the awards by the end of fiscal year 2007. The Regional 
Partnerships have come forward with a portfolio of project 
opportunities, a variety of geologic conditions, and future 
commercialization opportunities.
    Question. Has the Department developed a R&D roadmap to address the 
challenges facing adoption of carbon capture and sequestration?
    Answer. The DOE Carbon Sequestration Program issues a revised 
roadmap annually in May. It contains a discussion of the program's 
structure, challenges, and goals for technology development. This 
roadmap can be downloaded from the following website: http://
www.netl.doe.gov/publications/carbon_seq/refshelf.html.
               china--carbon sequestration collaboration
    Question. The MIT study also calls for up to 10 other large-scale 
demonstration projects in other countries. China in particular is 
building coal-fired power plants at a spectacular rate.
    Would you support a major initiative to partner with China to 
develop carbon capture and storage technologies?
    Answer. The Department is actively engaged with China on the 
development of carbon capture and storage technologies. China is 
involved in the FutureGen Alliance. China is also a member of the 
Carbon Sequestration Leadership Forum, whose purpose is to make 
information on viable carbon capture and storage projects broadly 
available internationally and identify and address wider issues 
relating to carbon capture and storage. Finally, carbon sequestration 
is within the purview of the Asia Pacific Partnership's Cleaner Fossil 
Energy Task, in which both China and the United States participate. We 
look forward to continued collaborations with China in the area of 
carbon capture and storage.
    Question. In your view, how can we best encourage China to 
collaborate with the United States in developing these technologies?
    Answer. The Department of Energy (DOE) will continue to encourage 
China through involvement in the Carbon Sequestration Leadership Forum, 
the FutureGen Alliance, and the Asia Pacific Partnership on Clean 
Development and Climate. China is a member of the Carbon Sequestration 
Leadership Forum, whose purpose is to make information on viable carbon 
capture and storage projects broadly available internationally and 
identify and address wider issues relating to carbon capture and 
storage. China is also involved in the FutureGen Alliance. Finally, the 
DOE and China are members of the Asia Pacific Partnership on Clean 
Development and Climate, which has a mission to promote the technical 
transfer and demonstration of clean coal technologies. We would look 
forward to this continued collaboration with China.
                           carbon capture r&d
    Question. Developing carbon capture and storage technologies will 
require progress on several research fronts. First, the costs of carbon 
capture must be brought down to affordable levels. Second, the 
feasibility of injection technologies must be demonstrated at 
commercial scales. Third, monitoring and verification technologies must 
be developed.
    Which of these research areas do you believe to be the most 
challenging given today's technologies?
    Answer. The Department of Energy (DOE) believes that the 
demonstration of carbon storage at the appropriate scale and the 
development of low-cost carbon capture technologies are equally 
important. The need to demonstrate carbon storage at scale is needed to 
stress the injection operations and determine the effects on the 
storage formations. Different geological conditions and settings need 
to be assessed to show that the capacity and injectivity exists for 
full scale deployment. Protocols for the site selection, 
characterization, well construction, permitting, monitoring, and 
closure need to be developed from these projects so that full scale 
deployment can occur. Carbon capture technologies exist today in 
industrial applications, but have not been demonstrated at full scale 
in conjunction with electricity generation. In addition, the commercial 
systems that exist today would increase the cost of electricity by 
approximately 30 percent to 80 percent, for pre and post combustion 
technologies, respectively. Novel capture technologies are being 
researched in the laboratory and have the potential to reduce the 
increase in cost of electricity to DOE's goal of not more than 10 
percent. Continued research and demonstration of these technologies is 
needed at a pilot-scale and in full-scale integrated demonstration. 
Monitoring, mitigation, and verification technologies are necessary but 
new technologies are not critical to deployment of carbon capture and 
storage as a greenhouse gas mitigation technology. Existing 
technologies can be adapted for monitoring CO2 in geologic 
formations. Advancement in this area could improve our knowledge of the 
fate of CO2 and drive down the associated cost of 
monitoring.
    Question. In your view, how should the Office of Fossil Energy 
allocate its resources between these areas?
    Answer. The Department of Energy (DOE) has issued a roadmap for 
technology development, which is working to stage the funding 
requirements for the capture and storage demonstration projects. Early 
emphasis is on the demonstration of storage projects and bringing down 
the cost of CO2 capture. As the capture program has success 
in developing novel technologies for low cost capture, DOE is 
supporting pilot and demonstration tests to demonstrate that these 
capture technologies are ready for commercial deployment.
    Question. How should the Federal Government and the private sector 
share the cost burden of developing these technologies?
    Answer. The Department's Carbon Sequestration Program administers 
research and development awards through cooperative agreements, which 
require that participating organizations provide a minimum of 20 
percent cost share. For demonstration projects selected under a Clean 
Coal Power Initiative solicitation, the recipient would need to provide 
a minimum of 50 percent cost-share and agree to a schedule to reimburse 
the Government based on future revenues from sales of the 
commercialized technology.
                      taxation of coal r&d dollars
    Question. Under the Clean Coal Power Initiative, Round 2, the 
Department of Energy has authorized funding of various private sector 
projects to demonstrate advanced clean coal technology, including 
advanced gasifier technology.
    It is my understanding that the IRS has changed its long standing 
policy toward Federal research funding to make these funds taxable as 
corporate income. The practical effect of this policy change is that 
one branch of government is providing funding to encourage a public 
purpose activity, while another branch of government is reducing that 
funding by taxing it.
    I have worked too hard on this subcommittee and as Chairman of the 
Energy Committee to make Federal energy R&D research a priority. Now to 
have the IRS change it's policy to levy a huge tax on the Federal R&D 
funds would be devastating in our effort to increase our energy 
independence.
    Can you please explain the logic behind this decision and what 
impact it will have on Federal R&D efforts to have upwards of one-third 
of the funding going toward tax payments instead of research?
    Answer. I would refer you to the Department of Treasury for an 
explanation and rationale of their decisions.
    Question. Has Secretary Bodman contacted Treasury Secretary Paulson 
to discuss this matter?
    Answer. The Department of Energy has been in contact with the 
Treasury Department to understand the rationale behind this ruling and 
what options may be available under current law to utilize allocated 
research and development funding.
                                 ______
                                 
               Question Submitted by Senator Wayne Allard
             naval oil shale reserves royalty distribution
    Question. As you may be aware, when Congress transferred Naval Oil 
Shale Reserves (NOSR) Numbers 1 and 3 from the Department of Energy to 
the Department of the Interior in 1998 the legislation stated that DOI 
could not begin the ``normal'' process of royalty distribution until 
DOE was compensated for their ``original investment'' and for the costs 
of cleanup of the Anvil Points facility. To ensure this happened 
section 7439 (f)(2) of the Transfer Act stated that the Secretaries of 
Interior and Energy must jointly certify to Congress that the monies 
have been recouped prior to making revenue available for distribution 
to the State of Colorado.
    Oil and gas receipts collected from production within NOSR Number 3 
have now far surpassed the estimate of what was needed to fully 
reimburse DOE for their original investment as well as covering the 
cost of environmental remediation at the Anvil Points site. It is my 
understanding that the agencies will not agree to certification until 
the necessary clean-up is complete. As you and I both know, that will 
likely take several more years.
    I was serving in the Senate at the time and played an active role 
in the passage of this provision. It is my view that DOE and DOI have 
misread the intent of Congress in determining that the clean-up must be 
complete. Can you please tell me what this position was based on?
    Answer. Although the Department of the Interior assumed 
responsibility for the environmental remediation of Anvil Points, the 
Secretary of Energy must certify that there are adequate funds in the 
account to offset all costs incurred by the Government, including the 
Department of the Interior's proposed cleanup plan. It is our 
understanding that Department of the Interior has not finalized its 
cleanup plan; consequently the cost of that plan remains to be 
estimated.
    At such time as the Department of the Interior completes the plan 
along with the estimate of costs, the Department of Energy stands ready 
to quickly review and certify whether the funds generated exceed the 
total costs. We will continue to work closely with the Department of 
the Interior to facilitate the completion of the necessary measures to 
initiate the appropriate distribution of the royalty payments from the 
former Reserves.
                                 ______
                                 
                Questions Submitted to Kevin M. Kolevar
             Questions Submitted by Senator Byron L. Dorgan
                   consolidation of research programs
    Question. I have noticed that the Distributed Energy Systems has 
been renamed to Renewable and Distributed Systems Integration. The 
funding has been reduced and the focus changed to distributed 
generation technologies on the utility side of the meter. What has 
happened to development of technologies on the customer side of the 
meter? Has it been reduced, eliminated, or moved to another research 
area? Why was this done?
    Answer. The Office of Electricity Delivery and Energy Reliability's 
(OE) Distributed Energy Systems budget line has been renamed to reflect 
the fact that distributed generation technologies have been completed. 
The Distributed Energy Program has met its performance targets of: (1) 
achieving three integrated energy systems (combined heat and power 
systems) of greater than 70 percent efficiency; (2) demonstrating a 38 
percent efficient microturbine; and (3) demonstrating a 44 percent 
efficient reciprocating engine. The research efforts will now address 
Renewable and Distributed Systems Integration (RDSI), as reflected in 
the budget request. This research will concentrate on the integration 
of renewable and distributed energy technologies into the grid at the 
distribution system level.
    The successful demonstration of this integration could 
substantially increase the use of renewable and distributed energy for 
supplying power and other ancillary services during peak load periods 
in support of electric distribution operations. These projects will 
also demonstrate the ability of these technologies to reduce power 
required to the distribution feeder. This will be accomplished through: 
modeling, design, integration, and RD&D of renewables and distributed 
energy integration into the distribution system; low-cost sensors; 
advanced monitoring; and consumer information. The goal of RDSI is to 
demonstrate a peak load reduction of 20 percent by 2015 and improve 
asset management on distribution feeders. This will be accomplished 
through the implementation of distributed energy (including renewables) 
and energy management systems that are cost competitive with system 
capacity upgrades.
    The development of technologies on the customer side of the meter 
is the responsibility of the Office of Energy Efficiency and Renewable 
Energy. Currently, only renewable technologies that can be placed on 
the utility side of the meter are being supported in this office. The 
Distributed Energy activities were moved by Congress in the fiscal year 
2006 appropriations.
    Question. DOE has developed programs such as GridWise and GridWorks 
to facilitate grid systems integration while fostering development of 
the ``smart grid'' concept. Your office has restructured and 
streamlined your R&D programs in fiscal year 2007 and into fiscal year 
2008.
    Thus, what is the status of these efforts? What has your office 
done since the 2003 Blackout to address the role of advanced 
technologies to avoid similar situations and to coordinate with the 
private sector to shepherd these technologies into the marketplace?
    Answer. In fiscal year 2005, the Department issued a solicitation 
and awarded cooperative agreements in support of the Gridwise and 
Gridworks research plans. Some of these awards are completed and others 
are still in progress. The Department remains committed to completing 
the activities initiated under this solicitation for Gridwise and 
Gridworks. As a result of these activities, the Department has 
recognized the need to promote advanced grid control technologies 
(Gridwise) and improved hardware (Gridworks) in a systematic manner.
    We have identified the causes of the 2003 blackout and have made 
progress in implementing the recommendations made by the U.S.-Canada 
Power System Outage Task Force (Task Force). The most important 
recommendation of the Task Force was for the U.S. Congress to enact 
legislation to make compliance with reliability standards mandatory and 
legally enforceable, which the Congress did in the Energy Policy Act of 
2005. The Federal Energy Regulatory Commission implements this policy 
through oversight of the North American Electric Reliability Council as 
the Nation's ``Electric Reliability Organization.''
    The electricity delivery system is extremely complex and remains 
subject to combinations of mechanical and human failures. Although 
improvements have been made to the grid since 2003 in areas such as 
operator training, we can never entirely prevent blackouts from 
occurring. What we can do is improve our ability to identify and 
isolate problems on the grid when they arise. That is why my office 
works with transmission system operators on the next level of 
technologies that will increase the ability of operators to receive 
real-time information regarding transmission problems.
    It is also important that we are not just prepared for a blackout 
similar to that of August 14, 2003; we must be well-prepared for a 
wider range of possible events. The Office of Electricity's (OE) 
Infrastructure Security and Energy Reliability program provides hands-
on expertise to assist in the recovery of the transmission network, no 
matter what the cause of the failure. Finally, under authority from the 
Energy Policy Act of 2005, OE assists State and regional planners by 
identifying areas of electric congestion, coordinating Federal 
authorizations required to site new transmission, and where 
appropriate, designating national interest electric transmission 
corridors to enable the FERC, under certain circumstances, to site 
transmission facilities.
              high temperature superconductivity research
    Question. I note that the funding level for high temperature 
superconductivity research and development has been cut by 42 percent 
from the funding level in fiscal year 2006. Why such a significant cut? 
What technology applications are being reduced because of these cuts?
    Answer. The cut was to focus the high temperature superconductivity 
program on higher priority wire development and cable demonstrations 
(including fault current limiters). The cut in high temperature 
superconductivity reflects phasing out of motor research and completing 
flywheel cooperative agreements.
              electricity transmission and energy delivery
    Question. I have noted your office's work on determining areas of 
congestion and defining national corridors as well as your work in 
siting and permitting. North Dakota has a variety of energy resources 
that are stranded and that are not able to move to markets. What is 
your office doing to help promote and expand transmission delivery and 
efficiency in North Dakota and around the country?
    Answer. My office is involved in four major activities to help 
transmission delivery and improve efficiency in North Dakota and around 
the country.
    First, in August 2006, in accordance with section 1221(a) of the 
Energy Policy Act of 2005 (EPACT), the Department of Energy (DOE) 
released the National Electric Transmission Congestion Study 
(Congestion Study), which examined transmission congestion and 
constraints and identified constrained transmission paths in many areas 
(except Texas) that are facing growing demand. The congestion study 
identified three categories of congestion areas that merit further 
attention throughout the continental United States. The third type of 
congestion areas in the study, ``Conditional Congestion Areas,'' 
identified areas where congestion is not presently acute, but could 
become so if considerable new electric generation were to be built 
without associated transmission capacity. The region from the Dakotas-
Minnesota falls into this category because it contains potential 
locations for new large-scale wind and coal generation that could serve 
distant load centers.
    Second, in addition to fulfilling the EPACT requirement that the 
Department update the Congestion Study every 3 years, DOE will also 
issue annual reports in the interim that detail the progress made in 
addressing the congestion challenges as identified in the 2006 
Congestion Study. My office is preparing a draft for the Department's 
Congestion Alleviation Update that will be published in fall 2007. This 
update will detail the transmission, generation, and demand reduction 
activities that have occurred in the areas of transmission congestion 
that the Department identified in its August 2006 study.
    Third, my office is implementing two other areas of EPACT that 
relate to transmission delivery. One of these is in accordance with 
EPACT section 368 and is a joint effort with the Departments of 
Agriculture, Commerce, Defense, and Interior to designate energy 
corridors on Federal lands for oil, gas, and hydrogen pipelines in 
addition to electricity transmission and distribution facilities. A 
record of decision for the 11 contiguous Western States, is expected to 
be completed in fiscal year 2008. Corridor designation for the Eastern 
United States, Alaska, and Hawaii will begin in early fiscal year 2008. 
The second area of EPACT is in accordance with the new Federal Power 
Act section 216(h) created under EPACT section 1221(a). The Department 
is now beginning this process of coordinating all applicable Federal 
authorizations and related environmental reviews that are required to 
site an electric transmission facility.
    Fourth, my office has been and continues to support the efforts of 
States and transmission planners to work on a regional basis to better 
coordinate electric infrastructure improvements. For example, for a 
number of years we have given direct funding support, as well as in-
kind support from various technical analyses and studies, to the 
Western Governor's Association for its ``Committee on Regional Electric 
Power Coordination,'' which is an ad-hoc group of Western State 
officials who meet regularly to better coordinate and encourage needed 
electric infrastructure improvements in the Western Interconnection. A 
number of regional and sub-regional transmission planning and study 
groups in the West have emerged as a result of the encouragement of 
these State officials and their Governors. In fact, the Department 
reviewed many of the documents these groups have produced in conducting 
analysis for the Congestion Study. As a result of the Congestion Study, 
the western region, with oversight by a body of State officials, has 
now developed regional transmission planning through the Western 
Electricity Coordinating Council.
    Similarly, in the Eastern Interconnection, grid planners are 
undertaking efforts to conduct interconnection-wide analyses. The new 
Eastern Reliability Working Group has brought together all of the 
regional transmission operators, independent system operators, and 
reliability councils in the Easter Interconnection.
    The Office of Electricity also coordinates with the Office of 
Energy Efficiency and Renewable Energy to provide technical assistance 
to transmission planners and grid operators seeking to integrate wind 
generation into the transmission grid. This includes working with the 
Midwest Independent System Operator to identify possible transmission 
upgrades that will enable wind generation in North Dakota to be 
developed.
                        loan guarantee questions
    Question. Since the passage of the fiscal year 2007 Joint Funding 
Resolution, the Department has moved forward on several fronts related 
to the loan guarantee program. Please tell the committee where the 
Department stands in terms of setting up the new loan guarantee office, 
issuing final regulations for this program, and reviewing the pre-
applications submitted last year.
    Answer. The Department has advertised the position for the Director 
of the Loan Guarantee Program Office. A number of resumes have been 
received to date, and the Department will review the resumes for 
qualified candidates. In addition, two senior Department of the 
Treasury employees with experience in Federal loan guarantee programs 
have joined the Loan Guarantee Program Office on 6 month details to 
help establish the office. Once the Director has been hired, the 
Director will make a determination on required staffing expertise and 
those positions will be recruited.
    With respect to the issuance of final regulations, the Department 
is working to meet the August 2007 deadline contained in the Revised 
Continuing Appropriations Resolution, 2007, Public Law 110-5. A Notice 
of Proposed Rulemaking was published in the Federal Register on May 16, 
2007 and is open for public comment until July 2, 2007.
    Finally, the Department is completing a preliminary review of the 
applications to determine which applications are responsive to the 
solicitation. Guidance has been issued to program offices to begin the 
technical reviews of the pre-applications. Separately, the Loan 
Guarantee Office will be reviewing each pre-application for compliance 
with the financial, commercial, and other criteria set forth in the 
August 2006 solicitation and accompanying guidelines. Ultimately, the 
goal is to complete the pre-application evaluations this summer.
    Question. With all of these activities underway, when do you think 
that the Department can reasonably expect to make the public 
announcements regarding awards to industry?
    Answer. The Department anticipates that it will take until at least 
the first quarter of calendar year 2008 to issue the first loan 
guarantees.
    Question. In the fiscal year 2007 Long-term Funding Resolution, 
Congress provided funding to support establishment of a loan guarantee 
office. Congress authorized up to $4 billion in loan guarantees to be 
available immediately and directed that no loan guarantee awards can be 
made until final loan guarantee regulations are in place, 6 months from 
the date of enactment of the fiscal year 2007 Long-term Funding 
Resolution. Furthermore, in fiscal year 2008, the Department is seeking 
additional funding to support the loan guarantee office, and you are 
requesting $9 billion in additional authority with a caveat that this 
amount would be reduced from amounts previously provided.
    If the request is for $9 billion to be reduced by the amount 
previously provided, is that amount previously provided, the $2 billion 
the Department previously announced would be available late last year 
or the $4 billion that the Long-term Funding Resolution provided?
    Answer. As the Department anticipates that it will take until at 
least the first quarter of calendar year 2008 to issue the first loan 
guarantees, DOE anticipates issuing $9 billion in loan guarantees in 
fiscal year 2008.
    Question. Does the Department believe that new coal and nuclear 
power plants are very capital intensive and thus requiring additional 
assistance to construct first-of-a-kind technologies? The committee is 
aware of information that the costs of these plants are very large 
relative to the market capitalization of some of the utility companies 
that are interested in constructing such facilities.
    What is the Department's current assessment of the economic 
viability of new commercial coal and nuclear power plants?
    How would Federal loan guarantees affect the relative economics of 
these new coal and nuclear power plant projects?
    In view of the uncertainties and regulatory risks associated with 
the initial deployment of a new fleet of IGCC carbon capture-ready and 
nuclear power plants, in your judgment would the loan guarantee program 
play an important role bringing these planned projects to fruition?
    Answer. Advanced, environmentally friendly, clean coal technologies 
are poised to enter the market, but some require a price premium 
relative to more conventional technology. In spite of the higher cost, 
the private sector has shown great interest in these technologies. The 
2008 budget continues robust funding for the President's Advanced 
Energy Initiative to develop and accelerate the deployment of advanced 
energy technologies, including new coal and nuclear technologies. Long-
term regulatory drivers, such as the Clean Air Interstate Rule (CAIR) 
and the Clean Air Mercury Rule (CAMR), also provide an incentive for 
the private sector to invest in these technologies.
    The Department received 143 pre-applications requesting more than 
$27 billion in loan guarantee protection for this initial round of 
guarantees. Twenty-three projects, representing $16 billion in loan 
guarantees were for advanced fossil technology.
    Loan guarantees, along with other provisions in the Energy Policy 
Act of 2005, can play a role in accelerating the deployment of advance 
coal and carbon capture technologies.
                                 ______
                                 
                Question Submitted by Senator Jack Reed
                         distributed generation
    Question. Mr. Kolevar, the 2008 request essentially zeroes out the 
Distributed Energy Resource program, which used to be a $60 million 
program aimed at helping Combined Heat and Power and other clean and 
efficient technology get onto the grid. This program was shifted to the 
Office of Energy Distribution and Energy Reliability last year and now 
is slated for elimination. Has EDER abandoned its commitment to develop 
clean distributed generation, and focus only on transmission and power 
delivery issues?
    Answer. The focus on the development of distributed generation 
technologies has been completed. The Distributed Energy Program has met 
its performance targets of: (1) achieving three integrated energy 
systems (combined heat and power systems) of greater than 70 percent 
efficiency; (2) demonstrating a 38 percent efficient microturbine; and 
(3) demonstrating a 44 percent efficient reciprocating engine. The 
research has now shifted to Renewable and Distributed Systems 
Integration (RDSI) work. This research will concentrate on the 
integration of renewable and distributed energy technologies into the 
grid at the distribution system level. By successfully demonstrating 
this integration, the use of renewable and distributed energy in 
support of electric distribution operations should substantially 
increase for supplying power and other ancillary services during peak 
load periods.
    These projects will also demonstrate the ability of these 
technologies to reduce power required to the distribution feeder. This 
will be accomplished through modeling, design, integration, and RD&D of 
renewables and distributed energy integration into the distribution 
system; low-cost sensors; advanced monitoring; and consumer 
information. The goal of the RDSI is to demonstrate peak load reduction 
of 20 percent by 2015, and improve asset management on distribution 
feeders with the implementation of distributed energy (including 
renewables), and energy management systems that are cost competitive 
with system capacity upgrades.
                                 ______
                                 
            Questions Submitted by Senator Pete V. Domenici
      office of energy electricity delivery and energy reliability
    Question. Mr. Kolevar, I understand that your office has had the 
responsibility for complying with section 1221 of the Energy Policy Act 
that requires the Secretary to designate ``National Interest Electric 
Transmission Corridors''
    We all know how difficult it is to site electric transmission 
lines, but with a projected 19 percent increase in electricity demand 
over the next decade; we must work through the NIMBY issues.
    What is the status of this report and what are the next steps in 
designating these critical infrastructure corridors.
    Answer. Section 216(a) of the Energy Policy Act of 2005 authorizes 
the Secretary, in his discretion, to designate geographic areas where 
transmission congestion or constraints adversely affect consumers as 
national interest electric transmission corridors (National Corridors). 
On April 26, 2007, DOE issued two draft National Corridor designations, 
in relation to the two Critical Congestion Areas identified in the 
Department's August 2006 Congestion Study. The first is the draft Mid-
Atlantic Area National Corridor and the second is the draft Southwest 
Area National Corridor. If, after consideration of all comments on 
these drafts and consultation with the affected States, the Secretary 
of Energy decides that designation of either or both areas is 
appropriate, he will issue one or more orders doing so.
    DOE welcomes comments on the draft National Corridor designations 
and has opened a 60-day public comment period, which will end on July 
6, 2007. Please refer to the Federal Register Notice for information on 
the comment process. The full text of the notice is available at http:/
/nietc.anl.gov. During the public comment period, the Department 
intends to hold seven public meetings to discuss these drafts.
    In 2006, the Department announced that, in addition to the 
statutory requirement under section 216(a) of FPA that the Department 
release a congestion study every 3 years, DOE would issue annual 
progress reports in addition to the triennial studies. Accordingly, the 
Department is beginning a review of mitigation activities underway in 
each of the congestion areas identified in last year's Congestion 
Study. The activities that will be examined include the status of 
transmission projects that are proposed, permitted and completed since 
last August. We will also be identifying new or proposed local 
generation, demand response programs, and energy conservation and 
efficiency programs affecting congestion in the identified congestion 
areas. The Department intends to issue this congestion alleviation 
progress report in fall 2007.
                           energy storage r&d
    Question. Mr. Kolevar, your fiscal year 2007 spending plan provides 
only $5 million to support R&D storage. This level of funding is 
woefully inadequate considering the biggest challenge to the deployment 
of renewable generation is the intermittent nature of these 
technologies. It is vitally important that your office work with Asst. 
Secretary Karsner's team to ensure that energy storage R&D compliments 
the renewable research.
    Can you explain why this important R&D effort has received so 
little in spending? If Congress provided and additional $5 million or 
$10 million how would you spend this funding?
    Answer. Funding requests for energy storage research during the 
last 5 years have fluctuated between approximately $5 million and $3 
million. However, this amount has been augmented by up to $11 million 
in congressionally directed funding and by some $7 million in annual 
cost share from our State and utility partners. The program is 
considered worldwide as one of the leaders in this field.
    An extra $5 million or $10 million would expand the scope of OE's 
research program.
                     energy infrastructure security
    Question. Mr. Kolevar, your fiscal year 2007 spend plan recommends 
a significant increase in funding for infrastructure security, which 
was not included in your fiscal year 2007 request and it is unclear 
from the spend plan how this funding is being used and for what 
purpose.
    Is this funding being used to improve foreign energy infrastructure 
security--are these Middle East countries?
    Answer. In fiscal year 2007 the Office of Electricity (OE) has been 
tasked as the technical lead assisting the State Department in 
executing the Critical Energy Infrastructure Protection (CEIP) 
initiative, which is overseen by the National Security Council (NSC). 
The Department of Energy's (DOE) role is to assess and advise foreign 
countries who have requested U.S. assistance on needed improvements to 
their energy infrastructure security. Our teams of expert teams travel 
to the host country and assess current security measures and recommend 
improvements. The host country funds and implements the actual 
improvements that are identified in the development of a CEIP security 
program.
    The specific countries targeted by this program were selected by 
the intelligence community, were coordinated through the interagency 
process, and were provided in a report to the NSC. To date, CEIP 
Initiative activities have been limited to the Middle East, although 
DOE and the Department of Homeland Security have provided similar 
support to Canada and Mexico because of the interconnected nature of 
our energy systems.
    Question. Is this funding being cost shared by the nation that is 
benefiting from this security evaluation? Is there any reason why the 
country can't or should not pay for this activity?
    Answer. Each host country has shared the cost of the consultation 
with the U.S. Government, although specific cost-sharing mechanisms 
vary depending on the country. The Office of Electricity funds travel 
and lodging of U.S. Government employees and required security training 
for U.S. Government employees traveling to dangerous areas. It also 
provides for the participation of contractors with specific expertise 
relevant to energy security in a high-threat environment and Federally-
funded national lab experts and scientists. Finally, OE reimburses U.S. 
Embassies for their support efforts. All participating host foreign 
nations have agreed to pay for the technical experts' internal travel 
while in country. They have also provided aircraft and watercraft that 
the teams have needed and have supported the teams' security needs. 
While DOE helps to evaluate security requirements, the host country has 
the sole responsibility for funding all such security enhancements to 
the critical energy infrastructure.
    Question. Is this a free service we intend to provide to other 
countries in the future or, do we have a special obligation to these 
nations?
    Answer. The United States is not responsible for the entire cost of 
the consultation--the costs are shared with the host nation. The fiscal 
year 2007 initiative is limited to those nations the intelligence 
community has identified in a classified document to the NSC.

                          SUBCOMMITTEE RECESS

    Senator Dorgan. We thank the witnesses for appearing. This 
hearing is recessed.
    [Whereupon, at 4:15 p.m., Wednesday, April 11, the 
subcommittee was recessed, to reconvene subject to the call of 
the Chair.]
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