[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
ENERGY TAX INCENTIVES DRIVING
THE GREEN JOB ECONOMY
=======================================================================
HEARING
before the
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
__________
APRIL 14, 2010
__________
Serial No. 111-47
__________
Printed for the use of the Committee on Ways and Means
U.S. GOVERNMENT PRINTING OFFICE
63-079 WASHINGTON : 2011
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COMMITTEE ON WAYS AND MEANS
SANDER M. LEVIN, MICHIGAN, Acting Chairman
CHARLES B. RANGEL, NEW YORK DAVE CAMP, MICHIGAN
FORTNEY PETE STARK, CALIFORNIA WALLY HERGER, CALIFORNIA
JIM McDERMOTT, WASHINGTON SAM JOHNSON, TEXAS
JOHN LEWIS, GEORGIA KEVIN BRADY, TEXAS
RICHARD E. NEAL, MASSACHUSETTS PAUL RYAN, WISCONSIN
JOHN S. TANNER, TENNESSEE ERIC CANTOR, VIRGINIA
XAVIER BECERRA, CALIFORNIA JOHN LINDER, GEORGIA
LLOYD DOGGETT, TEXAS DEVIN NUNES, CALIFORNIA
EARL POMEROY, NORTH DAKOTA PATRICK J. TIBERI, OHIO
MIKE THOMPSON, CALIFORNIA GINNY BROWN-WAITE, FLORIDA
JOHN B. LARSON, CONNECTICUT GEOFF DAVIS, KENTUCKY
EARL BLUMENAUER, OREGON DAVID G. REICHERT, WASHINGTON
RON KIND, WISCONSIN CHARLES W. BOUSTANY, Jr.,
BILL PASCRELL, Jr., NEW JERSEY LOUISIANA
SHELLEY BERKLEY, NEVADA DEAN HELLER, NEVADA
JOSEPH CROWLEY, NEW YORK PETER J. ROSKAM, ILLINOIS
CHRIS VAN HOLLEN, MARYLAND
KENDRICK B. MEEK, FLORIDA
ALLYSON Y. SCHWARTZ, PENNSYLVANIA
ARTUR DAVIS, ALABAMA
DANNY K. DAVIS, ILLINOIS
BOB ETHERIDGE, NORTH CAROLINA
LINDA T. SANCHEZ, CALIFORNIA
BRIAN HIGGINS, NEW YORK
JOHN A. YARMUTH, KENTUCKY
Janice Mays, Chief Counsel and Staff Director
Jon Traub, Minority Staff Director
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
April 14, 2010
Page
Advisory of April 7, 2010 announcing the hearing................. 2
WITNESSES
The Honorable Michael Mundaca, Assistant Secretary for Tax
Policy, United States Department of the Treasury............... 7
Matt Rogers, Senior Advisor to the Secretary, United States
Department of Energy........................................... 37
T. Boone Pickens, Chairman, BP Capital........................... 96
Victor Abate, Vice President of Renewables, General Electric..... 110
Jeffrey Sachs, Ph.D., Director, The Earth Institute, Columbia
University..................................................... 122
Joseph Romm, Ph.D., Senior Fellow, Center for American Progress.. 130
The Honorable Karen Harbert, President and Chief Executive
Officer, Institute for 21st Century Energy, U.S. Chamber of
Commerce....................................................... 149
Stephanie Burns Ph.D., Chairman, President and Chief Executive
Officer, Dow Corning........................................... 186
The Honorable Reed Hundt, Chief Executive Officer, Coalition for
Green Capital.................................................. 190
The Honorable Rod Dole, Auditor, Controller, Treasury, and Tax
Collector, Sonoma County, California........................... 205
Mark Bolinger, Research Scientist, Lawrence Berkeley National
Laboratory..................................................... 210
The Honorable David Bohigian, Managing Partner, E2 Capital
Partners....................................................... 215
SUBMISSIONS FOR THE RECORD
American Forest & Paper Association, statement................... 235
AG Resources, LLC, letter........................................ 240
Alan P. Langford, letter......................................... 242
American Biogas Council, letter.................................. 243
American Farm Bureau Federation, statement....................... 244
American Meat Institute, letter.................................. 246
American Public Power Association, statement..................... 248
American Wind Energy Association, statement...................... 251
AO Smith, statement.............................................. 256
Associated Builders and Contractors Green, letter................ 259
Bechtel Power Corporation, statement............................. 263
Biotechnology Industry Organization, statement................... 264
BullDog BioDiesel, LLC, letter................................... 269
Capstone Turbine, letter......................................... 270
Climate Energy, LLC, statement................................... 276
Coal Utilization Research Council, statement..................... 278
Continental Resources, Inc., statement........................... 283
Domtar Corporation, statement.................................... 291
EC Oregon, statement............................................. 293
Edison Electric Institute, statement............................. 297
Electric Drive Transportation Association, statement............. 301
Encana Natural Gas, letter....................................... 304
Environmental Working Group, statement........................... 306
Excelsior Energy Inc., letter.................................... 312
FloDesign Wind Turbine Corp., statement.......................... 317
Friends of the Earth (FOE), statement............................ 319
Geothermal Energy Association, letter............................ 328
Griffith Ulum, statement......................................... 330
Growth Energy, statement......................................... 333
Historic Tax Credit Coalition, statement......................... 338
The Honorable Betsy Markey, statement............................ 344
The Honorable Erik Paulsen, letter............................... 345
Independent Petroleum Association of America, statement.......... 347
James Sebesta, letter............................................ 363
Large Public Power Council, statement............................ 364
Marathon Engine Systems, statement............................... 368
Michael R. Splinter, statement................................... 372
National Commission on Energy Policy, letter..................... 375
Nuclear Energy Institute, statement.............................. 384
Natural Resources Defense Council, letter........................ 389
National Alliance of Forest Owners, statement.................... 393
National Association of Home Builders, statement................. 399
National Association of Real Estate Investment Trusts, statement. 406
National Biodiesel Board, statement.............................. 415
National Hydropower Association, letter.......................... 420
National Roofing Contractors Association, statement.............. 423
National Rural Electric Cooperative Association, statement....... 427
Nature's Fuel, letter............................................ 434
Northeast Combined Heat and Power Initiative, letter............. 435
Northwest Pipe Company for Northwest PowerPipe, letter........... 437
Orion Advocates on behalf of Domtar Corporation, statement....... 439
Paper Industry Coalition to Save Energy and Main Street Jobs,
statement...................................................... 440
Plug Power Inc., Latham, New York, statement..................... 443
Plumbers and Pipefitters Local Union #589, statement............. 446
Polyisocyanurate Insulation Manufacturers Association, statement. 450
Puget Sound Energy, letter....................................... 454
Real Estate Roundtable, statement................................ 456
Renewable Energy Group, letter................................... 460
Renewable Fuels Association, statement........................... 462
Semiconductor Equipment and Materials International (SEMI),
statement...................................................... 470
Solar Energy Industries Association, statement................... 472
U.S. Green Building Council, statement........................... 481
U.S. Fuel Cell Council, statement................................ 487
United Solar Ovonic, LLC, a subsidiary of Energy Conversion
Devices, Inc., statement....................................... 489
Windustry, letter................................................ 493
ENERGY TAX INCENTIVES DRIVING THE GREEN JOB ECONOMY
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WEDNESDAY, APRIL 14, 2010
U.S. House of Representatives,
Committee on Ways and Means,
Washington, DC.
The Committee met, pursuant to notice, at 10:05 a.m., in
Room 1100, Longworth House Office Building, Hon. Sander M.
Levin (Chairman of the Committee) presiding.
[The advisory announcing of the hearing follows:]
ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS
Chairman Levin Announces Hearing on Energy
Tax Incentives Driving the Green Job Economy
House Ways and Means Committee Chairman Sander M. Levin today
announced that the Committee on Ways and Means will hold a hearing on
energy tax incentives and the green job economy. The hearing will take
place on Wednesday, April 14, 2010, in 1100 Longworth House Office
Building, beginning at
10:00 a.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only. However,
any individual or organization not scheduled for an oral appearance may
submit a written statement for consideration by the Committee and for
inclusion in the printed record of the hearing. A list of invited
witnesses will follow.
BACKGROUND:
Over the last several years, the Nation has benefited from an
unprecedented amount of both public and private investment in renewable
electricity production, energy efficiency, and renewable fuels,
ushering in the new, green economy as a driver for sustainable job
creation. A significant amount of Federal support for investment in
renewable energy and energy efficiency is provided through the Internal
Revenue Code. Within the span of 5 months during the Winter of 2008 and
2009, the Congress passed and the President signed into law
approximately $39 billion in provisions to stimulate demand for
renewable electricity and renewable fuels, provide assistance to
communities to make investments in energy efficiency, and assist
domestic manufacturers engaged in the production of advanced energy
equipment. These investments include approximately $17 billion in
incentives provided in the Energy Improvement and Extension Act of 2008
(Division B of P.L. 110-343) and approximately $22 billion in
incentives provided in the American Recovery and Reinvestment Act of
2009 (P.L. 111-5).
In announcing this hearing, Chairman Levin said, ``Investing in
energy efficiency and renewable energy has major potential to create
new jobs and help our economy recover. In recent years we have made
significant investments in policies to encourage and enhance domestic
manufacturing and production of renewable energy as well as the use of
more efficient fuel sources. This hearing will examine benefits
currently in place and discuss potential for new incentives to further
drive job creation, economic growth, and reduce our dependence on
foreign oil.''
FOCUS OF THE HEARING:
The hearing will examine the effectiveness of current energy tax
policy and identify additional steps that the Committee can take to
ensure continued job growth in this area while at the same time
advancing national energy policy focus on a discussion of current and
proposed energy tax incentives.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
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noted above.
Chairman LEVIN. The Committee will come to order. I will
give my opening statement, and then Mr. Camp, the Ranking
Member, will give his and then we proceed with the witnesses.
I think all of you know we have a full day scheduled, with
three panels. The contemplation is that we will proceed with
the first panel, and all of us will ask our questions. And then
the thought was we might have a brief break before the second
and the third panel.
So, there is a Ways and Means bill up today, probably
around 1:00, and that may affect the participation of some of
the Members. So, we will proceed on that basis with my opening
statement, and then, Mr. Camp, with yours.
The Ways and Means Committee is aggressively engaged in
advancing legislation that will support business expansion and
create new jobs here in the United States. In the past 2
months, the Committee has advanced two separate bills to
encourage businesses to hire new employees, provide tax relief
to small businesses so they can grow and expand and assist
local communities, finance infrastructure improvements that
support local community jobs.
Today, the Committee will examine ways that the Federal
Government can help boost the green jobs economy. Consider all
that is at stake: cutting edge technologies of the future,
manufacturing capacity to build these advanced technology
products, lower energy costs for families and businesses,
reducing our dependence on foreign oil, preserving the
environment for future generations.
The upside potential for our country is immense. But it
will not happen automatically. Unfortunately, while some
progress has been made in recent years, our country, in this
area, is playing catch-up. We have lacked an energy policy for
changing times and changing technologies. We have been behind
the curve. And we have been handicapped by those who feel it
should be done only by the private sector.
The governments of other countries have not taken this
view, and they are racing ahead to dominate in this area. While
we need a different partnership than those adopted by others,
an American partnership, the wrong answer has been that there
should be no partnership at all.
Take, for example, the electric vehicle GM is going to
bring to market on schedule. But initially, the battery packs
are being supplied from South Korea. Why? In part, because for
years the South Korean government had a strategy to financially
support this technology and its local industry. We are on the
cusp of changing that because of private sector investment and
accelerated public support for battery development.
A recent paper from the National Foreign Trade Council
says--and I quote--``Chinese planners have indicated their
intention, that eventually most or all of the renewable energy
equipment installed in China will be made in China. China has
emerged as a world leader in the manufacture of photovoltaic
technology, and could become the world's leading exporter of
wind turbines.''
Last year, the Recovery Act took important steps in
boosting consumer demand and investing in advance technology,
through grants and tax incentives for businesses, individuals,
and communities. We made the green jobs economy a priority, and
our actions are having an impact.
The combination of the Recovery Act and the 2008 energy tax
package provided long-term extensions of our main incentives
producing electricity from wind, solar, and other renewable
sources. We made these incentives work better by providing a
direct payment option.
The Energy Information Administration estimated that the
Recovery Act will result in twice as much electricity generated
from wind than would have been produced without the policies
included in the Act. Over the next 6 years, the EIA projected
that residential tax credits for solar equipment will encourage
more than 1.6 million solar units to be installed nationwide.
Tax credits for plug-in electric vehicles are expected to
bring 90,000 vehicles to market in the year 2015, alone.
However, we cannot rest. In particular, it is important to
identify ways that we can build on these efforts. In
particular, although we are making strides in generating long-
term demand for green technology, we have significant work to
do to make certain this demand is satisfied with goods produced
in our country.
Today we will hear testimony that the U.S. wind turbine
manufacturing industry is not currently capable of supplying
100 percent of the wind power capacity that would be
constructed with the support of Recovery Act programs. While
jobs are created when we construct a solar facility, still more
jobs are created when the components that are used in that
facility are manufactured here, in the United States.
If we are not aggressive about expanding our green
manufacturing capacity, these manufacturing jobs will be
created overseas, and the U.S. will become more reliant on
products that are produced outside of our borders.
The U.S. took a good first step toward supporting domestic
manufacturing in the Recovery Act when we provided 2.3 billion
of allocated investment tax credits for manufacturers that
established, equipped, and expand domestic manufacturing
facilities to produce advanced energy equipment.
Demand in this area far exceeded its allocation. U.S.
businesses put forward three times, or over 8.1 billion, of
investment tax credit plans under this program. The
Administration has proposed an additional $5 billion of these
tax credits for a new round of competitive awards.
What's at stake is clear: good jobs, advanced technology,
low energy costs, national security, and a cleaner environment.
What we need to make crystal clear is that the government is a
full, active, and effective partner in achieving that end.
I hope that we can proceed here today and beyond on a
bipartisan basis to achieve these goals. There are a number of
proposals for renewable energy incentives before the Committee
that have bipartisan support. And I hope, very much so, that we
can translate that into bipartisan action because action is
what is so clearly needed today and for the future of this
country.
I now yield to the Ranking Member, Mr. Camp.
Mr. CAMP. Well, thank you very much, Mr. Chairman. Clean,
renewable energy is something everyone on this Committee
supports. And I wouldn't be surprised if, at one time or
another, most every Member of the committee has signed on to or
voted for legislation to incentivize the production, purchase,
and use of alternative fuels. It has been and remains an issue
about our National security, our environment, and our economy.
And, clearly, we need to reduce our dependance on foreign
oil. We should continue to utilize new technologies to ensure a
clean, safe environment for future generations. And given that
the unemployment rate appears to be stuck pretty close to 10
percent, despite the President's promises about the stimulus
bill, we clearly need more jobs.
However, we should be realistic about the current status of
and prospects for the so-called green economy and green energy.
Over recent years, policy-makers at Federal, state, and local
levels have significantly stepped up efforts to subsidize
renewable energy through the Tax Code. And, despite this
investment as the chart on the screen makes clear, the
overwhelming majority of America's energy consumption continues
to be sourced from fossil fuels.
In fact, petroleum, coal, and natural gas supplied 85
percent of America's energy demand in 2007, with nuclear
supplying 8 percent. Renewable energy sources supplied only 7
percent, virtually unchanged from 2000. Even after a Federal
investment of nearly $40 billion in new tax subsidies for
renewables as part of legislation enacted in October of 2008,
and as part of the February 2009 stimulus package, these
relative shares remained about the same in 2009.
So, as the chart on the screen shows, in 2009 83 percent of
our energy came from fossil fuels, 9 percent from nuclear, and
8 percent from renewables. And as one executive told me, ``You
can't run an alternative energy manufacturing plant on wind and
solar energy.''
Again, how reliant our families and jobs are on traditional
sources of energy, given that situation, I am further
discouraged by the Administration's proposed tax increases on
the oil and gas and coal industries. President Obama's 2011
budget proposal would impose an estimated $40.7 billion in
punitive new taxes on domestic energy production by America's
oil and gas and coal companies. Most of the proposals targeting
oil and gas were also proposed in last year's administration
budget.
The coal proposals, however, are new. And among many
others, these include repealing the section 199 domestic
manufacturing deduction for oil and natural gas companies,
raising $14.8 billion over 10 years, repealing expensing of
intangible drilling costs, raising 10.9 billion, increasing the
amortization period for geological and geophysical costs of
independent producers from 2 to 7 years, raising $1 billion,
and repealing the section 199 domestic manufacturing deduction
for coal and hard mineral fossil fuels, raising $2.1 billion.
Additionally, the President's 2011 budget contains several
other revenue raisers. Repealing the last and first out, or
LIFO, accounting method raises $75.3 billion, modifying rules
for dual capacity taxpayers, raising $8.2 billion, and
reinstating superfund excise taxes and corporate environmental
income taxes, raising $19.2 billion. That would have a
significant effect on energy businesses, including oil and gas
production.
Simply put, it takes today's energy to power tomorrow's
technology. And these tax increases are dwarfed by the nearly
$900 billion national energy tax that the majority calls cap
and trade.
I should note that this bill has gone nowhere in the
Senate. Its prospects for revival are, thankfully, not very
good. So, while the focus of this hearing may be on the energy
of tomorrow and the tax incentives to encourage its
development--and I look forward to hearing that testimony--I
would strongly urge my colleagues to keep in mind the tax
increases that will be imposed on the energy of today to meet
the majority's rules are unacceptable. You cannot increase the
cost of producing 85 percent of the energy being used today and
expect consumers or employers to benefit from tax incentives
that are going to less than 10 percent of the energy being used
today. The math just doesn't add up.
So, with that, I yield back the balance of my time. I look
forward to hearing from our witnesses today. Thank you very
much.
Chairman LEVIN. Thank you, Mr. Camp. All right. Our first
panel, two very distinguished gentlemen: the Honorable Michael
Mundaca, who is the Assistant Secretary for Tax Policy at the
Treasury Department--welcome, Mr. Mundaca; and Matt Rogers, who
is a senior advisor to the Secretary, U.S. Department of
Energy.
Your full statements will be entered into the record. And
so, why don't you proceed for 5 minutes or so, as you wish. You
can follow exactly what's in your testimony or, if you want to,
summarize it and perhaps highlight certain points.
So, we will start off with you, Secretary Mundaca. Thank
you for joining us.
STATEMENT OF MICHAEL MUNDACA, ASSISTANT SECRETARY FOR TAX
POLICY, UNITED STATES DEPARTMENT OF THE TREASURY
Mr. MUNDACA. Thank you. Good morning, Chairman Levin,
Ranking Member Camp, and Members of the Committee. Thank you
for inviting me to testify today. I am going to focus my oral
remarks on the energy proposals and the President's fiscal year
2011 budget.
First, I will briefly discuss the Administration's overall
environmental and energy policy, in order to provide some
context for the energy proposals in the budget. The
Administration believes that our Nation must build a new, clean
energy economy, curb our dependence on fossil fuels, limit
emission of greenhouse gases, and make America more energy-
independent.
It is no longer sufficient to address our Nation's energy
needs solely by finding more fossil fuels. Instead, we must
take dramatic steps toward becoming a clean-energy economy.
These include encouraging the use of and investment in clean
energy infrastructure and energy efficient technologies.
The Recovery Act--and I thank the Committee for its
leadership on the Recovery Act--took an important step in that
direction, providing more than $80 billion for investment in
clean energy technologies. The energy provisions in there are a
real success story in the Recovery Act.
The Administration's budget takes us further by investing
in a variety of renewable sources of electricity generation,
energy conservation measures, supporting the construction of
new nuclear power plants, advancing the development of carbon
capture and storage technologies, and providing Federal
assistance for state, clean energy, and energy conservation
programs.
The President has also called on Congress to invest in a
new program of rebates for consumers who make energy efficient
retrofits.
In addition to direct investments in clean energy, the
Administration's budget proposes a comprehensive, market-based
policy to reduce greenhouse gas emissions from 2005 levels by
approximately 17 percent in 2020, and by more than 80 percent
in 2050. The policy will provide businesses the flexibility to
find the least costly and most efficient ways of achieving
greenhouse gas emission reductions, and address the needs of
vulnerable families, communities, and businesses in the course
of the transition to a clean energy economy.
With this background, let me turn briefly to the tax-
related provisions in our budget relating to energy. Current
law provides a number of credits and deductions that are
targeted toward oil, gas, and coal activities. These tax
subsidies are not designed to correct an existing distortion or
market failure, and therefore, lead to an over-allocation of
investment resources to these industries and an under-
allocation of resources to others. This distortion in resource
allocation results in inefficiency, and generally reduced
economic growth.
Moreover, the tax subsidies for fossil fuels must
ultimately be financed with taxes, and thus further result in
under-investment in other potentially more productive areas of
the economy.
Further, in accordance with the President's agreement at
the G-20 summit in Pittsburgh to phase out subsidies for fossil
fuels so we can transition to a 21st energy economy, the budget
proposes to repeal a number of tax preferences that are
currently available for fossil fuels. The budget also proposes
to limit the ability of taxpayers to claim the foreign tax
credit for levies that are likely to represent a payment for
the right to exploit natural resources, rather than the payment
of income tax, and proposes as well to reinstate the superfund
excise taxes, including the taxes on crude oil and imported
petroleum products.
The budget also proposes to extend through 2011 a number of
expired or expiring tax provisions related to energy, including
incentives for biofuel, renewable diesel, alternative fuels,
and alcohol fuels, increased tax credits for alternative fuel
refueling property, tax credits for hybrid automobiles and
other alternative motor vehicles, tax credits for energy-
efficient new homes, and tax credits for energy-efficient
improvements to existing homes.
Finally, the budget proposes to expand the Recovery Act tax
credit for investments in advanced energy manufacturing
facilities. The credit, under 48C of the Code is designed to
help America take the lead in the manufacture of wind turbines,
solar panels, electric vehicles, and other clean energy and
energy conservation projects.
The Treasury Department and the Department of Energy, as
Mr. Matt Rogers will go into in more detail, cooperated in
awarding the 2.3 billion of credits authorized by the Recovery
Act, awarding credits to 183 projects in 43 states, to support
tens of thousands of high-quality, clean energy jobs and the
development of a domestic, clean-energy manufacturing base.
The 2.3 billion cap on the credit has resulted in the
funding of less than one-third of the technically acceptable
applications that we received. The budget proposes an
additional 5 billion in credits that would support at least 15
billion in total capital investment, creating a partnership
between government and the private sector, and creating tens of
thousands of new construction and manufacturing jobs. Because
there is already an existing group of worthy projects and
substantial interest in this, the additional credit could be
deployed quickly to create jobs and support economic activity.
Mr. Chairman, this concludes my prepared remarks. I will be
pleased to answer any questions you or other Members of the
Committee may have.
[The prepared statement of Mr. Mundaca follows:]
Prepared Statement of Hon. Michael Mundaca, Assistant
Secretary for Tax Policy, U.S. Department of the Treasury
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Chairman LEVIN. Thank you.
Mr. Rogers.
STATEMENT OF MATT ROGERS, SENIOR ADVISOR TO THE SECRETARY,
UNITED STATES DEPARTMENT OF ENERGY
Mr. ROGERS. Good morning. Chairman Levin, Ranking Member
Camp, Members of the Committee, thank you for the opportunity
to appear before you today to report on the progress of the
Recovery Act, and specifically the tax credit and payments
programs under the Recovery Act.
It's been a privilege to collaborate with Assistant
Secretary Mundaca and his Treasury team, as well as the
talented team at the IRS on these programs, and on other
energy-related tax issues.
I will keep my remarks brief. This morning I have submitted
a more detailed testimony for the record.
It is a tribute to this Committee that the section 48C,
clean energy manufacturing tax credit, and the section 1603,
payments in lieu of tax credit programs, have been among the
most successful clean energy job creation and innovation
programs under the Recovery Act. Today, these programs are
putting Americans back to work, and positioning the U.S. to
regain leadership in high technology, clean energy
manufacturing and generation.
The competitive 48C manufacturing tax credit was so
successful and so over-subscribed, that the President has asked
Congress for an additional $5 billion to expand that program.
The 1603 program gave new life to renewable generation in the
United States, and should be evaluated as part of a
comprehensive energy and climate legislation.
This Committee's leadership has been important to the
success of the Recovery Act, and we look forward to working
with this Committee to ensure long-term U.S. leadership in high
technology, clean energy, manufacturing, and generation.
Across the Federal Government, the Recovery Act included
more than $90 billion in appropriations, including more than
$30 billion in tax programs to support more than $150 billion
in clean energy projects. The Recovery Act directed DOE to work
with Treasury to administer the $2.3 billion in competitive
clean energy manufacturing tax credits. And, likewise, the Act
directed DOE to work with Treasury to administer an estimated
$16 billion in renewable energy generation payments in lieu of
tax credits.
We work closely with our Treasury colleagues to manage a
detailed, competitive peer review process to select the 183
projects in 43 states to receive the $2.3 billion available in
clean energy manufacturing tax credits. The competition for
these funds was over-subscribed 3-to-1 with good projects, and
the competitive process allowed us to select a portfolio of
really great projects to help lead the renaissance in U.S. high
technology, clean energy manufacturing.
Likewise, we worked with Treasury so far to award $3.1
billion in payments in lieu of tax credits to 718 renewable
energy generation projects in 44 states. The 1603 program
directly addressed the freeze in the tax equity markets related
to the financial crisis, enabling these projects to close
financing and begin construction again. These tax incentives
help support a 39 percent increase in renewable generation
capacity in the United States last year. These tax programs
were particularly effective in getting money out the door
quickly to put Americans back to work on great projects that
otherwise would have been idled in the face of the Great
Recession.
The combination of the 48C program and the 1603 renewable
generation payments has put the United States on the path to
doubling both high technology and clean energy manufacturing,
and renewable generation capacity by 2012. These programs are
bringing private capital off the sidelines and back into the
clean energy financing markets. Importantly, these tax
incentives have made the United States globally competitive
again in attracting the best technology and manufacturing
investments to create jobs in the United States.
These Recovery Act investments are putting Americans to
work. The tax programs are not actually required to report into
Federalreporting.gov, but the 1603 fund recipients reported
that these projects created 12,000 jobs last year and, if they
continue as expected, would create 60,000 jobs across the life
of the program. Likewise, the 48C program applications
estimated that Federal dollars would support 17,000 jobs
directly, and more than 50,000 jobs generated by these selected
clean energy manufacturing projects.
The energy tax incentives under the Recovery Act have been
effective in creating jobs quickly, and restarting industries
that were on the verge of shutting down. These incentives were
also laying the foundation for a broad expansion in high
technology, clean energy manufacturing in the United States.
Thanks to this Committee, these programs are positioning
the United States to regain global leadership in these high-
growth markets. And these tax programs remain an important
policy tool for the future.
Thank you for the time this morning. I look forward to
answering your questions.
[The prepared statement of Mr. Rogers follows:]
Prepared Statement of Matt Rogers, Senior
Advisor to the Secretary, U.S. Department of Energy
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Chairman LEVIN. Thank you very much. I will ask a question
or two, and then, Mr. Camp, why don't you? And then we will go
down the line.
As I mentioned to Mr. Camp, there are almost twice as many
Democrats here at the opening as Republicans, so we will follow
a process that has been used in the past, two for one, and see
how that works.
So, let me ask the two of you and really, I think,
referring, Mr. Camp, to your charts. I'm not quite sure what
the message is from the charts, in terms of what the future is
going to be.
I noticed, for example, the estimate from the EIA, which
said early on in 2007 that the U.S. is expected to continue its
dependence on liquid fuel imports. But recently, what they have
said is that they expect--this is a more recent estimate, I
think--taking into account what we have been doing about
renewables, it's expected to continue to climb from the high
water mark--this is foreign imports of oil--of 60 percent
attained in 2005 and 2006 to 45 percent in 2035.
So, if you would, both of you comment on what you think the
larger picture is, in terms of a shift not only in terms of
imported goods and products, but in terms of renewable. Is this
talk about a significant shift over time simply rhetoric? Is it
necessary? Is it reality? Put in place what you think are the
ramifications of a chart that shows renewable 7 percent,
whether you expect a need for and realization of a substantial
shift over the next decade or so.
Who wants to start with that?
Mr. ROGERS. As we look forward across the next decade, we
see a significant shift in two primary consumption areas of
energy in the United States. If you look at the transportation
sector, one of the most remarkable changes that has already
occurred is that we probably saw the peak demand for gasoline
in the United States in 2007. And since then, the demand for
gasoline has been going down in the United States, and will
continue to go down for more than the next decade, as a result
of a combination of renewable fuels, cafe standards, and an
increasing electrification of the transportation fleet.
So, we are seeing in front of us right now a restructuring
of the transportation sector, to allow it to require
substantially less fossil fuel in the mix than it
historically--I mean you can actually see demand going down,
even as the economy continues to grow.
If you look at the power sector, we likewise are seeing a
significant shift in the composition of the power sector. We
are seeing, on current course, a doubling of renewable
generation, just in the first 4 years of this administration,
thanks again to the incentives that this Committee has put in
place.
And then, if you look more broadly at the investments that
the Department has put in place, we have things like a
commitment to renewing nuclear in the United States, and the
ability to grow that, which again reduces our dependence on
traditional fossil-based sources.
And so, again, you can see a relatively rapid shift in the
composition of the power sector across a decade in time. So if
you take a snapshot today you say we actually have a small
number. And what you see, though, is a rapid expansion in the
mix of renewable generation capacity in the United States that
is making our power sector substantially less carbon intensive,
and significantly more energy efficient.
Chairman LEVIN. Mr.--just briefly, if you would.
Mr. MUNDACA. Thanks. I will be brief, yes. Just to amplify
what Mr. Rogers said is we understand this is going to be a
transition. We look at these numbers that Mr. Camp put up, and
see an opportunity here. We have to increase our ability to get
energy from nuclear, from renewables. The President has
committed to both, as Mr. Rogers said. Loan guarantees with
respect to nuclear, we're talking today about some of the tax
incentives for renewables.
As you said, Mr. Chairman, this is necessary. This is
reality. We have to do this.
Again, with respect to the 48C credit, what we have to do
is make sure we are a leader in producing the goods that are
going to fund and move us toward a 21st century clean energy
economy that has a higher percentage from renewables. We need
to have that manufacturing base here in the United States, both
for our own needs, and to become a world leader.
Chairman LEVIN. Thank you. Mr. Camp.
Mr. CAMP. Well, thank you. Actually, the chairman started
questioning in the exact area I am interested in, as well, and
particularly Mr. Rogers.
As I said, if you look at administration data in 2009,
fossil fuels--which is petroleum, coal, and natural gas--
supplied about 85 percent of America's energy needs. And
nuclear was about 8 percent and renewable was about 7 percent.
Now, those figures are about the same as they were in 2000.
Now, this is after substantial investment from Federal, state,
and local governments in renewables.
What do you expect that breakdown, that profile, to look
like in 10, 20, and 30 years? If you could, give me a breakdown
of where you see those breakdowns occurring.
Mr. ROGERS. So, perhaps the best way to do that is in--I
can give you the detailed breakdowns at each of those points.
EIA has gone through a detailed assessment under various
scenarios of how the future plays out to take a look at that.
But, effectively, we see renewable generation growing north of
20 percent of the power--of the generation fleet as we move
forward over the next several decades, and we see----
Mr. CAMP. Is that in 30 years, 20 years?
Mr. ROGERS. So why don't I get you the exact----
Mr. CAMP. Yes, if you want to respond in writing, yes,
that----
Mr. ROGERS. Then we can have the precise data in front of
us.
Mr. CAMP. Because I think that's important to understand. I
mean, we all want renewables to grow. But I think we need to
understand. Are we getting value for the taxpayer's dollar?
But the real point I want to ask--and I think maybe this
probably should also go to Mr. Mundaca--I don't know how you
can tax 85 percent of energy consumption, from a policy
standpoint, and continue to grow our economy, when that is how
jobs are going to be created.
And, frankly, I don't think people--I don't think gas
consumption declined because everyone has moved to a hybrid
vehicle. I think a lot of people aren't driving to work because
they're unemployed. And I would really like to see the
background, in terms of that data.
But if you could, comment on this idea that we can tax 85
percent of America's energy consumption and still grow our
economy and, frankly, try to bring it back.
Mr. MUNDACA. Thank you, Mr. Camp, for the opportunity to
address that. What we are proposing to do is remove from the
Tax Code those subsidies for the oil and gas industry that
distort investment. So we are seeking to remove the special
preferences in the Tax Code with respect to the oil, gas, and
coal sectors.
Again, having no subsidies in the Tax Code leads to an
over-investment in those areas at the cost of some of the other
competing areas for investment. If you look at the effective
tax rates with respect to investment in oil and gas structure,
they are much lower than with respect to investment in other
structures.
Mr. CAMP. But aren't those important for exploration and
development? And particularly with the discovery of natural gas
shale all over the country, aren't we going to want to continue
to incentivize that as well as incentivize renewables? Aren't
we going to need both?
Mr. MUNDACA. We are certainly going to need both. Recall
the President's announcement to open up drilling offshore.
Again, we recognize this is a transition. But again, the focus
on removing from the Tax Code the incentives that we don't
think are operating right now to do anything other than to
lower the effective tax on these investments.
Mr. CAMP. But won't developing those resources help lessen
our reliance on foreign imported oil?
Mr. MUNDACA. The question is whether these tax incentives
are necessary and efficient to getting us to that point. We
don't see that they are. We don't see the need for them. We
think that right now what they are doing is incentivizing over-
investment into these, at the cost of investment into other
areas of the economy.
Mr. CAMP. Well, I just think there are many direct jobs
that are high-paying jobs directly in the oil and gas
industries. But so many industries depend on a level of--price
for energy. So it won't just be the direct jobs in the oil and
gas industry, and there are thousands--tens of thousands--of
those. But it will be the indirect effect on energy-intensive
industries that employ hundreds of thousands of Americans, that
you are going to be making it more expensive for employers to
continue to do business. And that means there will be fewer
jobs created.
I just--I think I see a problem of taxing what 85 percent
of America needs to grow our economy in this way.
Mr. MUNDACA. Again, thank you for the opportunity to
address those concerns. We are, in the Administration as a
whole, very focused on jobs.
I refer back to testimony before the Senate that the Chief
Economist of the Treasury, Dr. Alan Krueger, made a number of
months ago. The amount of the tax incentives we are proposing
to repeal are less than 1 percent of the revenues generated in
the oil and gas industry. We don't think it will have a
significant effect on prices, so we don't see that there will
be a significant effect with respect to employment.
Again, what the Administration is proposing to do with
respect to the shift to a clean energy economy--again, the
focusing, as Mr. Rogers said, creating good jobs for the next
century that can be sustained as we move to a 21st century
clean energy economy.
Mr. CAMP. Well, thank you. I see my time has expired. I
want to thank you both. And, Mr. Rogers, I look forward to your
letter. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Rangel.
Mr. RANGEL. Thank you, Mr. Chairman. One of the problems we
have in reforming the tax system is that if everyone agreed
that a subsidy, a tax incentive, was absolutely unnecessary and
we removed it, other people would be able to say it's a tax
increase. Because whenever there is an unwarranted benefit, if
you try to justify it, it's only because of concern of removing
something that we think is not justified.
My questions are that during the Carter Administration, he
was wearing a sweater and we couldn't put on Christmas lights,
and a lot of people were critical that the American way of life
was being adversely affected. I think it's safe to say that the
crisis that we face now is really affecting our foreign policy.
It really is a problem to do with war and peace and allocations
of resources that we have to protect.
Having said that, I don't see this feeling at all as
relates to the consumers. And I want the name of whoever is in
charge in either department that I can work with, because
everybody knows, if you go to any major cities, that the office
buildings are empty and lit up at night. The air conditioners
are working. The highways during daytime hours have their
lights that are on. I am so pleased in seeing our city
monuments and churches and synagogues all lit up with this new
creative lighting system, and there is no question that if you
take away my lights on Times Square I will be here fighting you
to the end, because it really supports tourism and makes our
lives easier.
Having said all of that, it's hard for me to believe that
the average consumer has a concern, even with incentives, that
we are talking about national security. We are talking about a
crisis. It's abundantly clear that these investments, everyone
should be frustrated, because it looks like to some an increase
in taxes. And the gains are fairly all--in terms of where we
would like to find the savings or the alternatives to fossil
fuels.
But can you share with me any--recently there was a 1-hour
shut-off of electricity or something. Are you familiar with
that? Do you have any idea what that saved, if anything? Do you
know what it takes to change behavior, in terms of consumption
of energy? Is there an effort to share with us? Because we have
the responsibility to share with our constituents how bad the
situation is, and to talk about some degree of discomfort.
Mr. ROGERS. Sir, as you described, the situation is urgent
from a national security standpoint. It's urgent from an
environmental standpoint. And, frankly, it's urgent from a
competitiveness and wealth creation standpoint.
One of the things that we found most exciting about the 48C
program was its re-establishing of U.S. competitiveness in high
technology, clean energy manufacturing, which we basically had
ceded to other countries over the last decade. And so, re-
establishing competitiveness in a set of high-growth industries
is quite important.
The second thing, interestingly, about how do we help
consumers do this better is partly around innovation. One of
the things that we get most excited about is the rate of
innovation in things like lighting. We funded a set of projects
that promised to make your average light bulb use one-tenth the
energy that it currently uses today for the same price.
And so, all of a sudden, you can have light, but it
actually doesn't consume nearly----
Mr. RANGEL. I don't mean to interrupt you, but time is
running out, and I think that's great. But I am trying to say
why would the lights have to be on, low wattages it may be, all
night long? You can go to any town, any city, and see--10:00,
11:00 at night--the air conditioners and these low-powered
lights are on.
Is there any effort? Just give me the name of somebody that
has the responsibility of educating the consumer that this is a
serious problem, just not lower light bills, but the crisis
that we face in terms of where we have to--feel that we have to
defend the future of America, in terms of blood and dollars.
Now, who--what part of our government would have that
responsibility?
Mr. ROGERS. So our Assistant Secretary for Energy
Efficiency, Cathy Zoi, has that direct responsibility and
charge. And she has been working, actually, with--what's
interesting in the United States is to work with the local
state Governors, each of whom has committed to the Secretary of
Energy to actually implement a set of changes in incentives and
behaviors at the state level, because a lot of these
requirements and structures are state-oriented.
And so, what Cathy is trying to do is educate the consumer,
and then work with the Governors to change the local
incentives.
Mr. RANGEL. Well, I don't think they have been very
successful. Could you promise me that you would have her to
send to me the efforts that are being made to educate the
consumer, which, of course, includes municipalities, local
governments, and state governments?
Thank you so much, Mr. Chairman.
Chairman LEVIN. Mr. Stark.
Mr. STARK. Thank you, Mr. Chairman, and I thank the
witnesses.
I guess my principal concern is allowing VEETC to expire.
And I wonder if either or both of you can give the Committee
some indication of what VEETC costs the consumer in higher food
costs and in higher inflation in their entire operation, and
whether also you have any figures on what the ethanol, in
effect, loses as a net energy--either or both of you can
comment on that. Mr. Mundaca.
Mr. MUNDACA. Thank you, Mr. Stark. Yes, you referenced we
have, in the Administration, a budget proposed to extend, as
part of a package of extenders, the provisions with respect to
ethanol. But obviously, we are certainly willing to engage with
you on--in the context of broad energy policy--what the future
should be with respect to various provisions that have been
extended year to year.
As we make a broader effort to understand what our energy
future is, and how the government role in that should proceed,
we should look at these individual provisions. And we are more
than willing to do so.
Mr. STARK. I guess I am curious if you understand them now,
as to what it costs the consumers--do you understand now what
it costs? Do you have to have a study?
Mr. MUNDACA. We have some revenue numbers on the provision,
as a whole. We can work on the specific provisions, with
respect to ethanol and what the revenue costs of those might
be.
Mr. STARK. You don't have them.
Mr. MUNDACA. I don't have them with me right now.
Mr. STARK. But they are available to you now?
Mr. MUNDACA. I believe we can get them, yes.
Mr. STARK. Could I get them tomorrow?
Mr. MUNDACA. I can't promise tomorrow, but we will get
them----
Mr. STARK. The day after?
Mr. MUNDACA. As soon as we possibly can.
Mr. STARK. All right, thank you very much.
Chairman LEVIN. Mr. Herger.
Mr. HERGER. Thank you, Mr. Chairman. Mr. Mundaca, in your
testimony you state that the Administration proposes to enact a
cap and trade program. Last year the House passed a cap and tax
bill that would have raised taxes by $872 billion. Many of my
constituents in rural northern California are already paying
some of the highest gas prices in the country, and can't
understand why Congress would be considering a massive, job-
killing national energy tax in the middle of a recession.
Even worse, the data shows that the 872 billion energy tax
won't have a substantial impact on global emission levels
unless China and other countries take similar action.
Mr. Mundaca, why should the United States impose energy
taxes, either in the form of a cap and tax scheme or direct
energy taxes, if China, India, Brazil, and other leading
emitters refuse to take similar actions to reduce their
emissions?
And if the United States unilaterally enacts stringent
emissions standards, aren't we just encouraging even more
domestic manufacturers and the jobs they support to move to
countries with less stringent emissions restrictions?
Mr. MUNDACA. Thank you for that question. As I mentioned in
my testimony, the Administration does support a market-based
approach to dealing with the reduction of greenhouse gases. We
do understand there are differing views on the best way to
achieve it. We are obviously more than willing to work with
this Committee and others to form the best way to do it, but we
do think we need to move ahead on finding the best market-based
approach to address the needed reduction in greenhouse gas
emissions.
We do understand the imperative to get other countries on
board with this effort, and those efforts are continuing. But
we do need to move ahead on this, we need to address this
problem. This Committee and this body as a whole has shown
leadership on this issue. We look forward to continuing to work
with you all on this.
Mr. HERGER. So even though these other countries show no
indication that they are going to do the same, you feel you
should move ahead?
I'm sure the Administration, you're aware that just
competitive forces will be driving many thousands, if not
millions, of jobs overseas where they will be more competitive?
Mr. MUNDACA. Again, I think we can't afford to stay still
on this. We do need to move ahead. But we understand the need
to have others with us on this effort. But we need to be in a
place to propose what it is we're going to do as we engage with
others in this effort.
Mr. HERGER. Well, thank you. Moving on to another question,
I would like to inquire briefly about the existing tax credits
for renewable energy.
Currently, the investment tax credit provides for a level
playing field among different renewable energy and energy
conservation technologies. However, the production tax credit
under section 45 provides some renewables such as open loop,
biomass, and hydropower with only half the credit amount that
is available to other technologies such as wind and geothermal
power.
This is of particular concern for mountainous areas like
the district I represent, where we have substantial biomass and
hydropower resources, but where wind power is less feasible.
Mr. Meek and I have offered bipartisan legislation--H.R. 2626--
that would provide the same production tax credit for all
electricity produced from renewable resources. We feel that tax
credit parity would ensure a level playing field for all types
of renewable energy production, and is consistent with the
Administration's goal of encouraging more investment and
renewable energy. I understand, Mr. Mundaca, that you're
probably not prepared to comment on this specific proposal
today, but I would appreciate it if you could get back to me in
writing with your thoughts on this legislation.
Mr. MUNDACA. We are certainly willing to work with you on
this. Again, as we move ahead with a comprehensive energy
policy, we look to review the different elements that make up
the policy today to see if they can be improved.
Mr. HERGER. Thank you very much. Thank you, Mr. Chairman.
Chairman LEVIN. Thank you Mr. McDermott.
Mr. MCDERMOTT. I have a simple question, and that is, if
energy conservation is the quickest way to make some changes in
the CO \2\ in the atmosphere, I would like to hear how you
think our tax policies are working in terms of encouraging
individuals to do the retrofitting of their houses, and how
these tax credits to green industries interact with bringing
production into the United States, rather than having us buy
solar panels from China.
If that's what the situation presently is, as it seems to
me from reading, I would like to hear how we can change that,
and change the balance of payments, clean up the energy, and
get on an even track with the Chinese. They are, it seems to
me, going to control the whole of the production of green
energy equipment in the future, if we don't start moving in
that direction.
So, I would like to hear what--California said, you know,
``Paint the top of your roofs white and reflect the energy, and
you can save a lot of energy.'' And that, in my view, is
where--I want to understand where the Tax Code can be used to
encourage that.
Mr. MUNDACA. I will start briefly, and Mr. Rogers may have
something to add.
We agree wholeheartedly we need to look at how the Tax Code
can incentivize both supply and demand, with respect to clean
technologies. As you mentioned, we have Tax Codes--provisions
now that incentivize for individual consumers to buy and
install solar panels. The President, with respect to the Home
Star program, is calling for additional incentives for
retrofits. Obviously, that's on the demand side to get
consumers----
Mr. MCDERMOTT. When is that legislation going to be ready?
Before election?
Mr. MUNDACA. I believe we're ready to work with anyone
interested in moving that immediately.
Mr. MCDERMOTT. You've got the language written----
Mr. MUNDACA. I don't know that we have the----
Mr. MCDERMOTT.--for the Home Star program?
Mr. ROGERS. Yes, the language is written.
Mr. MCDERMOTT. Thank you. Go ahead.
Mr. MUNDACA. That's on the demand side. And then,
obviously, the call for expanding the 48C program is to create
the manufacturing base here in the United States to supply the
solar panels, et cetera, that we are incentivizing consumers to
buy in order to make their homes, their lives, more energy
efficient.
So, again, it's a comprehensive program on both sides of
the equation. We recognize the concerns that other countries
for years have been incentivizing their own clean energy
manufacturing industries. We're playing a little bit of catch-
up. That's why the President has made the bold proposal for the
additional 5 billion under 48C.
Mr. ROGERS. My only addition would be that this is about
global competitiveness. The U.S. has among the most advanced
technologies, both in energy efficiency and in renewable
energy. Historically, we have innovated and then the
manufacturing has gone abroad.
What this Committee did, in terms of having the 48C
program, created an incentive to bring, just on the renewable
side, $10 billion of foreign direct investment into the United
States to create U.S. jobs over the last year. That----
Mr. MCDERMOTT. From outside?
Mr. ROGERS. From outside the country into the United
States, bringing the best technology and the best manufacturing
here. It's that kind of incentive that, all of a sudden, makes
the U.S. globally competitive again. We had lost
competitiveness, and now we are competitive again. Because
otherwise, you're right, China is going to end up wanting to
lead in this globally.
Mr. MCDERMOTT. What percent of the solar panels sold in the
United States today--or purchased in the United States today--
are made in the United States?
Mr. ROGERS. I don't have a number for solar. In the wind
sector it's 62 percent of the value added of the installations
under the 1603 program were manufactured in the United States.
So that--and what's powerful, again, about the incentives from
this Committee is 5 years ago that was 25 percent. So we have
now more than doubled the manufacturing capacity in the United
States.
And things like an expansion of the 48C program are the
single best approach that we can take to build U.S.
manufacturing, and make sure that when I buy a U.S. car, I buy
a Ford, I get a 72 to 74 percent domestic content. That's where
we can be, just with the 48C investments that we have already
made--and if we can continue that kind of investment program,
the U.S. not only can make for the U.S. market, but export
globally.
Mr. MCDERMOTT. Are you saying that we are taking back from
the Danes and the Chinese the actual production of the
generators?
Mr. ROGERS. We are taking back----
Mr. MCDERMOTT. You guys sometimes can baffle us with words,
okay, and we're not quite sure what you mean when you say 72
percent is American. You mean made in the United States----
Mr. ROGERS. We are bringing----
Mr. MCDERMOTT [continuing].----those generators?
Mr. ROGERS. That's right. We are bringing manufacturing
back to the United States from Germany, from Spain, from
Denmark, from China, as a result of the programs that this
Committee has put in place.
Mr. MCDERMOTT. Are there any problems with that program
that we need to fix to make it easier, to make it work more
efficiently?
Mr. ROGERS. Well, the chief problem that we encountered was
it was capped at $2.3 billion and we had three times the number
of really good projects that we would have liked to fund under
the first round.
And, if we have the opportunity to go out, there are others
that would now apply, because the technology continues to
evolve.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Lewis.
Mr. LEWIS. Thank you very much, Mr. Chairman. Let me thank
you for being here today for this hearing.
We need green jobs and we need them now. In my city of
Atlanta, Georgia, people hear about the green job economy. They
hear the money has been spent to create the green job economy.
But they do not see any changes in their everyday lives.
Could the two of you tell me what the Department of Energy
and the Department of Treasury--what are you doing to reach out
to the poor to see that they get their fair share when it comes
to green jobs?
Mr. ROGERS. One of the things under the Recovery Act,
broadly, that has been very important for building green jobs
in local communities has been the partnerships that we have had
with states and cities.
The Weatherization Assistance Program is spending more than
$5 billion working with community action agencies in every
community around the country. The Energy Efficiency
Conservation Block Grant program is sending funds through
cities to enable them to invest in energy efficiency at the
local level.
And as we go out and talk to communities, it is the ability
to bring local workers into these agencies--what we are trying
to do with these programs is to buildup a workforce, a trained
workforce in the local community, that then is able to serve a
broader market.
If you think about the combination of the investment in
weatherization, where we get people trained up, and then in
Home Star, what we are trying to do is invest in weatherizing
poorer people's homes, putting money back in their pockets with
people in the local community so that, as we then move into
Home Star, we have a trained workforce that is ready to go
across a much broader marketplace.
And so, those programs are, in fact, beginning to bear
fruit as we look at the jobs data that--the next jobs reporting
period closes here on Friday. I think we are going to be quite
pleased with the amount of jobs that we are seeing in the local
community as a result of this work.
Mr. LEWIS. Thank you.
Mr. MUNDACA. Thank you. Just to add again the President's
desire to expand the Home Star program. Again, I think it's the
best way to deliver benefits to local communities, because it
is very focused on individual consumers, then using local
workers with respect to the installation of these purchased
energy efficient products.
So, again, that may present the best opportunity to reach
down to the local communities. As Mr. Rogers mentioned,
partnering with the states is very important in this effort, as
well.
Mr. LEWIS. In many communities all across America you have
groups that have been funded by the Federal Government. At
least one group called Youth Build, where young people have
been trained to go out and help low-income individuals,
elderly, their families to rebuild, improve their homes. You
see a possibility of cooperating with organizations and groups
like Youth Build?
Mr. MUNDACA. I think there certainly is the possibility. We
should talk about the best way--outreach, again. I think the
program to date has worked with state and local governments,
but I think that could be expanded to individual outreach, as
well.
Mr. LEWIS. Thank you very much.
Chairman LEVIN. Thank you, Mr. Lewis.
Mr. LEWIS. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Johnson.
Mr. JOHNSON. Thank you, Mr. Chairman. Mr. Mundaca, I think
that in your testimony you speak about the President's budget
proposal to provide an additional $5 billion in advanced energy
manufacturing tax credits. And that would be on top of a $3.2
billion already awarded by the Administration.
I support having a cleaner, greener, more energy-efficient
economy, but it ought to be market-driven, not government-
directed. Back in my district I note that companies like Wal-
Mart have opened up a state of the art green facility. They did
it on their own. And they are doing so because it makes sense
for their bottom line.
I don't believe Washington bureaucrats ought to be picking
winners and losers, as is the case with this program. I think
it's a far better approach to lower our corporate tax rate,
which is currently the second highest among industrialized
countries, so that businesses--all businesses--have a stronger
incentive to invest and create so-called green jobs here at
home.
As the Assistant Secretary for Tax Policy, would you agree
that our high corporate tax rate, in effect, serves as a
penalty on businesses that successfully undertake green
investments here at home? And, moreover, the high corporate tax
rate negatively impacts job creation.
Also, given that businesses plan for long term, wouldn't a
permanent reduction in the corporate tax rate be far more
preferable, in terms of encouraging an economy-wide investment
in green, as opposed to a short-term credit that's doled out by
bureaucrats to a few select businesses?
Mr. MUNDACA. Thank you, Mr. Johnson, for that question. We
understand, and it's a policy behind the proposed repeal of
certain incentives in the Tax Code that the Tax Code should be
as neutral as possible, with respect to investment decisions.
We make the choice to include incentives when it is that we
recognize that markets may not be pricing in accordance with
the full cost of programs.
For example, there may be positive externalities with
respect to clean energy, the lower pollution produced by them
that warrants the Federal Government providing an incentive to
recognize those positive externalities.
Regarding the corporate tax rate, we do understand in the
Administration the role that that rate plays in our general
economic activity. We recognize that the rate is high. In the
context of more fundamental tax reform, where we look at all of
these issues--corporate tax, individual tax--we do need to
consider the fact that currently we have, on a corporate tax
side, a relatively high rate, as you identify--by some
standards, the second highest in the world after only Japan--
but a relatively narrow corporate tax base, such that the
effective tax rate on corporations in the U.S. is about average
for G-7, G-20 countries.
So, as we look to fundamental tax reform, we need to look
at the rate, we need to look at the base, we need to look at
the entirety of the tax system to come up with a tax system
that our country deserves, and can move us ahead, economically,
going into this century.
Mr. JOHNSON. And you believe the tax credit is better than
changing the Tax Code to help them?
Mr. MUNDACA. I think, as we proposed with respect to 48C,
those incentives are needed and necessary to transition us to a
clean energy economy. There is the larger question of other
provisions in the Tax Code that now are the corporate tax base,
and therefore necessitate to collect revenue at the higher rate
that we have.
Again, we need to look at that rate as compared to what the
base is, to decide what incentives are left in, what can be
taken out, and how the rate can be adjusted.
Mr. JOHNSON. Well, concerning tax increases that are also
being talked about, do you think that that could cost us green
jobs that the Administration cares about by raising taxes
instead of lowering them on corporate structure?
Mr. MUNDACA. Right now I don't think the budget has a
particular corporate tax general rate increase. The repeal of
the subsidies that we're talking about here today are--again,
getting back to your first point, that we do want the Tax Code
to be as neutral as possible, with respect to investment
decisions.
Mr. JOHNSON. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Rogers, did you--Mr. Johnson has a few
seconds left. Did you want to participate?
Mr. ROGERS. My only addition would be I also think there is
a notion about making sure that these tax incentives are
efficient. One of the things about the 1603 program that is,
indeed, benefiting some of the constituencies in your district
is the efficiency with which that can then be financed.
Because we need to make sure what the Tax Code says--and
then the banks actually show up and finance these projects.
What we had before was relatively inefficient; these are now
efficient programs, and I think the guidance that this
Committee has provided to make the Tax Code more efficient has
actually made a big difference, in terms of how the renewable
industry can grow.
Chairman LEVIN. Thank you. Mr. Neal.
Mr. NEAL. Thank you, Mr. Chairman. Mr. Mundaca, both your
testimony and that of Mr. Rogers speaks of the success and
growth of alternative energy manufacturing facilities.
In Massachusetts recently, the state pulled together more
than $20 million in grants to ensure a solar manufacturer would
locate a new plant within our state, the old Ft. Deven site,
only to watch it be lured away by China, which offered $30
million in government assistance.
How can the Committee be assured that our green energy
policy leads to green jobs and more jobs here in the United
States?
Mr. ROGERS. The 48C program is a simple one. In terms of
bringing manufacturing investments to the United States, it is
clearly working. We are actually taking market share away from
other countries, and bringing that manufacturing capacity here,
to the United States.
Our challenge, as we look forward, is the resources on the
manufacturing side are small, relative to the demand on the
development side. And so, what we need and what we've asked the
congress for, is the authority to expand that ability to bring
more manufacturing in, because I think, in terms of global
competitiveness, the ability to focus on manufacturing--
particularly high technology manufacturing here in the United
States--is essential for our long-term growth and
competitiveness.
Mr. NEAL. Mr. Mundaca.
Mr. MUNDACA. Yes, I would just say we do recognize the
challenges. As Mr. Rogers emphasized, this is a global issue.
We are in competition with other countries to bring these good
jobs and good technologies here, to the United States. I think
we do have the leadership in the production of the intellectual
property. We need to make sure we follow up with the hard
resources to get the plants here, to produce good jobs, to get
American-made parts into the clean technologies used here by
American citizens.
Mr. NEAL. My guess is you're familiar with the Deven issue?
Mr. MUNDACA. Yes.
Mr. NEAL. Yes, it drew a great deal of controversy and fire
across the state, and it was highlighted by local media for
days on end. So I think we need to be mindful of that as we
move forward, that these investments are to be as good as we
tell everybody they are to be, and we can't have them
outsourced based upon that competitive nature of one government
upping the ante toward the next.
Mr. MUNDACA. That's right. I think, as part of that as
well--and we need to address this in the context of
comprehensive energy policy--we do have to have some certainty
in what benefits are available, so that manufacturers and
others can know what benefits they are going to get, whether
they will be there in the future, so they can make the
decisions to locate here.
Mr. NEAL. And I think the corollary to that is we--with the
Recovery Act, we made a very important downpayment on U.S.
competitiveness in these industries. We now have the
opportunity and the challenge of making the pivot toward a set
of long-term incentives. That's why we need to put a price on
carbon pollution. That's why we need a comprehensive energy and
climate legislation. That's why, as we look at those, making
sure that the tax provisions create certainty as we move
forward will actually help the capital formation that is
essential to the success of these industries.
Thank you. Thank you, Mr. Chairman.
Chairman LEVIN. Thank you, Mr. Neal. Following our rules,
Mr. Becerra, you are next.
Mr. BECERRA. Thank you, Mr. Chairman. And, gentlemen, thank
you for your testimony. A couple of quick questions.
Do we do anything right now through the Tax Code that
essentially subsidizes American companies going abroad, outside
the U.S. borders, to try to explore, research, find, secure,
and return any sources of energy back to the U.S.?
Mr. MUNDACA. There are a number of elements of our Tax Code
that we in the Administration feel may incentivize investment
by American countries overseas, just through the tax treatment
of income earned overseas versus the tax treatment of income
earned here, in the United States. A lot of that does have to
do with intangible value and the transfer offshore.
The Administration has put forward a number of proposals in
the budget to deal with those issues, some specifically
targeted to intangibles, some more general with respect to our
tax system and how it treats foreign source income. I think we
do need to look at that as part of overall--more fundamental
tax reform. But these proposals we put forward, we think, can
be moved ahead even outside the context of fundamental tax
reform, because they address issues under our current rules
that do incentivize investment overseas at the cost of
investment here in the U.S.
Mr. BECERRA. And no one is saying that investment overseas
is not good. And certainly we need every source of energy that
we can find. And the sooner we can clean up the sources of
those energies, the better.
But to the degree that we have precious dollars to invest
through the Tax Code or elsewhere, should we try to focus those
on domestically oriented resources of energy?
Mr. MUNDACA. Of course. That's exactly right. We need to
make sure that our Tax Code does not give a rational U.S.
company the incentive to invest dollars overseas because of the
tax treatment of the return on that investment.
Mr. BECERRA. And do you believe, then, that the
Administration will put forth some good proposals to try to
help us try to move the incentives toward domestic production
before we start rewarding folks for doing production--
exploration and production--overseas to bring it back here to
charge us for it?
Mr. MUNDACA. We have done a number of proposals already. We
proposed to make the R&D credit permanent. We have proposed, as
we have talked about here, some specific energy incentives. We,
as well, have put forward a series of tax proposals with
respect to the taxation of income earned overseas, particularly
with respect to transactions that look to shift intangible
value overseas.
Again, it's part of a package. We think that rationalizes
our tax system, and makes the investment decisions more tax-
neutral, as opposed to now, where there are incentives to move
investment overseas, at the cost of investment here, in the
United States.
Mr. BECERRA. Well, I appreciate those words. And, Mr.
Chairman, I hope we are able to follow up with the Secretary
and others, to try to make sure that, as we provide those
incentives, we do have a rational approach to try to allocate
our precious resources principally here domestically, to search
for the--those sources of energy. And, where possible, if it's
a wise investment, to try to help American firms try to search
out for that energy wherever it may come from outside the U.S.
border.
So, thank you, the two of you, for your testimony. Mr.
Chairman, I yield back.
Chairman LEVIN. And thank you, Mr. Becerra. This is a
hearing that is a prelude to work on specific legislation. And
we will take that very much into account.
I think Mr. Linder--I mean Mr. Nunes and Mr. Tiberi wish to
exchange positions, is that--so that's fine. I think,
therefore, Mr. Tiberi, you are next.
Mr. TIBERI. Thank you, Mr. Chairman. And thank you both for
testifying today.
Kind of following up on what Mr. Camp talked about when he
spoke, we believe on this side of the aisle of an all-of-the-
above approach, and we believe that that will help create jobs,
just across the board.
Mr. Mundaca, you stated, in response to Mr. Camp, that you
didn't believe that the provisions in the President's proposal,
in his budget proposal, his energy proposal, would not impact
jobs in the domestic oil and gas industry. People in the oil
and gas industry couldn't disagree with you more in Ohio.
In Ohio, we have 50,000 people that work in the oil and gas
industry, mostly employed by small, family owned businesses. In
Ohio, since the stimulus bill passed, we have lost literally
hundreds of thousands of jobs. So jobs in Ohio right now is a
big issue. It's the biggest issue. And this budget that the
President has proposed has a lot of people worried, with
respect to the issue of jobs.
Let me quote from a constituent of mine, who is in the oil
and gas industry, with respect to this proposal that you have
talked about today. He says--and I quote--his work ``will
stop,'' and his industry ``will evaporate overnight'' if the
President's proposals that you testified about are enacted.
Now, again, we have over 50,000 men and women in this
industry. And the irony is when their businesses go away, when
their employees go away, we will then rely more on foreign,
out-of-the-country sources to supplement what is going to be
lost in Ohio.
How does that jive with what you just talked about? How do
you respond to that? This is a guy who is actually on the
ground, an employer working in the industry, and he is not
alone in saying that they will stop.
Mr. MUNDACA. Well, thank you for that. We can certainly
engage further on what specific proposals may be impacting a
particular taxpayer. Again, when we crafted these proposals and
we looked at their effects, the overall effect on the industry
is small. We don't expect the job effects to be significant. We
look at this as an entire package of provisions to take out of
the Tax Code, the tax preferences for fossil fuels, while we
transition to a clean energy economy.
Again, we are very focused on jobs, and the Administration
in general are concerned about the loss of jobs and getting us
back on the path to creating jobs here in the United States.
Again, I would be willing to talk to you further about any
of the specific proposals that may be creating these issues.
But again, when we formulated these, we looked at those
incentives, those subsidies in the Tax Code, that we could not
see as being effective, and therefore, led to an over-
allocation of investment to certain sectors at the cost of
investment in others.
Mr. TIBERI. Well, reclaiming my time, in conjunction with
this hearing, the Joint Committee on Tax issued a pamphlet in
connection with the hearing that says that increases in the
price of domestic fossil fuel could--and I quote again--
``primarily result in substitution of foreign fossil fuel
sources for domestic sources.''
So, essentially, what you are doing in the budget
proposal--you called it incentives--you are going to raise
taxes on domestic oil and gas producers in Ohio and in our
Nation, taxes that would not be raised on foreign sources.
So, if you are raising taxes on these small businesses, and
essentially businesses, jobs that exist today that will no
longer exist tomorrow, how does that help our economy? How does
that help our domestic energy business, when not only do
employers and employees in my district in this industry say
that, but Joint Tax even says that?
Mr. MUNDACA. Again----
Mr. TIBERI. And, by the way, it's kind of common sense.
Mr. MUNDACA [continuing]. Again, we look at this as a
package of proposals. We have----
Mr. TIBERI. But aren't you raising taxes on just the
domestic side and not the foreign side?
Mr. MUNDACA [continuing]. We have a number of provisions in
here, as I mentioned, that address those subsidies we see in
the Tax Code. There is also a provision in there with respect
to those domestic U.S. companies that have operations overseas
that are taking a foreign tax credit, with respect to payments
we think really represent royalties, as opposed to foreign
tax----
Mr. TIBERI. Reclaiming my time, last minute. Let me just
give you his comments here, and I want you to address this. He
says that you are repealing, specifically for small businesses,
the percentage depletion, the marginal well tax credit, the
intangible drilling costs. And also, the intangible drilling
cost tax credit is necessary because that gives small
businesses like his the edge, the ability to compete with the
big guys.
How would you address that? If you take those away, he is
gone.
Mr. MUNDACA. Again, we are looking to remove those
provisions in the Tax Code that advantage one sector over
another, that lead to an over-allocation of resources to one
set of taxpayers, as opposed to another.
Mr. TIBERI. So you won't deny the fact that if you give
the--if you take those away from small businesses, they say
they no longer exist. Foreign competitors aren't impacted by
it. Then how does that advantage employees in my state?
Mr. MUNDACA. Again, they're a package of proposals with
respect to energy provisions. There are proposals we have
included with respect to the foreign operations of U.S.
companies where we think there may be too rich a tax credit
available, with respect to foreign levies that are assessed
against them. We also have, as we have talked about, incentives
for transitioning to a clean energy economy.
We think the package, overall, is fair. It tries to remove
from the Tax Code those provisions that are leading to
distortions in investment and again, transition us to a clean
energy economy.
Mr. TIBERI. So what do I tell my constituents who are out
of a job, then?
Mr. MUNDACA. Again, we are willing to talk to you further
about what particular aspects of the proposals may be impacting
individual taxpayers. But again, we have identified those
provisions that we do think lead to distortions in investment
and over-allocation of resources, and prevent us from this
transition we do need to make.
Mr. TIBERI. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Tiberi, we will be talking about that
within our committee.
Mr. Doggett, you are next.
Mr. DOGGETT. Thank you, Mr. Chairman. And thank you,
gentlemen, for your leadership in trying to move us from
fossilized thinking and a fossil-based economy. I think it's
particularly appropriate that you are here to testify about
this in this Committee, since Federal policy, as a whole, on
energy has relied much more on tax expenditures with
preferences and exclusions and credits in our Tax Code than it
has on appropriations and direct expenditures to advance energy
policy.
As--just with reference to the last question you've been
responding to, Mr. Mundaca, I would say I see a distinction
between an Exxon Mobile, which last year reported over $45
billion of profits and reported a tax liability of 0 on that
$45 billion in profits, no doubt helped by the fact that it had
20 wholly owned subsidiaries to help it avoid tax liability in
the Bahamas, Bermuda, and the Cayman Islands.
I see a distinction between that and a small, independent
operator somewhere in the country responsible for finding most
of the new--particularly natural--gas that I think is important
to help us transition to a more clean energy economy. And I
think we have to consider that as we review your budget
proposals.
But we certainly need to look at all of these issues if we
are going to have both our tax expenditure policy complement
our direct expenditure policy in moving us to our clean energy.
Let me ask you, Secretary Mundaca, specifically with
reference to the ongoing discussion that we have in the
extenders legislation that is pending here before Congress, you
have called for extending certain expired provisions, but
letting temporary incentives that benefit fossil fuels expire.
As we consider these provisions that are in current law,
would you support efforts to improve these provisions in ways
that are consistent with the goal of having a clean energy
economy? That is, without getting into all of the specifics, do
you welcome attempts by our Committee to improve these
provisions, to continue the transition from a dirty energy
economy to a more clean energy economy?
Mr. MUNDACA. Thank you for that question. Yes, we do
certainly welcome that effort. We do need, I think, to have
everything that we can look at on the table to look at, as we
try to make these improvements, and we try to make these
transitions.
As you know, the Administration proposed to extend, in
whole, certain particular expiring provisions of the Tax Code.
But we certainly do welcome the effort to look underneath some
of those provisions to see if there are elements that should be
improved as we look to extend.
Mr. DOGGETT. Well, and as we look at the various provisions
we have--and not all of these, of course, are in the
extenders--but we have here 132 pages of present Federal tax
provisions dealing with energy that we are reviewing, as a
committee, from the Joint Tax Committee today. And I think what
we do need is more information in order to make an intelligent
evaluation of which of those incentives work and which don't.
One of the most important pieces of information--and our
colleague, Earl Blumenauer, is really principally responsible
for this--is the request that there be a carbon audit done that
I know you're familiar with, that Treasury has now engaged the
National Academy of Sciences, but we need that information, and
we need it soon to be able to provide a careful evaluation of
this.
And then, as I look down the list of incentives that are in
your testimony, we've got a dollar a gallon for biodiesel
that's pending. I have at least one plant that's on cold start,
about to close down, because there hasn't been an extension of
that. On the other hand, I have got some folks that are saying
that's diverting feed stock from other industries.
We've got $.50 for alternative fuels, $.45 for alcohol
fuels. Whether those are the appropriate levels for the credit,
and what good those credits are doing, is something we really
don't have very good information on. It's one of the reasons
that, on the extenders, I proposed a study to review the
efficiency of these. But whether $.45 is the right level for
one--for alcohol fuels, or whether it should be $.60 or whether
it should be $.25 or should be 0 is something we need to look
to Treasury and the Energy Department for more information on
than we currently have.
I see your testimony is basically saying, ``This is what
was in the extenders bill,'' or, ``This was what was in the
stimulus bill,'' or current law, and, ``Let's give it--let's
extend it a little longer.'' There may be justification for
doing that, but I don't think we should extend it much longer
without better information on both the carbon characteristics,
and we need the Energy Department and the Treasury Department
both more involved in that process of giving us the information
to compare and contrast these incentives, all of which are not
created equal.
Would you--either of you--care to respond about the role
your departments can play in helping us provide that
information and evaluate these tax expenditures in energy?
Mr. MUNDACA. Yes, I will. We understand the importance of
reviewing all of these, and obviously, reviewing them on the
basis of solid information.
Again, I thank the Committee for their leadership on these
issues, for getting us the funding for the study that we're now
talking to the National Academy of Sciences to do, with respect
to a carbon audit of the Tax Code. It's an important step
forward in getting the information we need to make these
important decisions in a fully informed manner.
Mr. ROGERS. We value the opportunity to collaborate with
Treasury on the 48C and 1603 programs. We look forward to other
opportunities to do that. We feel a responsibility to justify
our appropriations as part of the budget, and we feel a
responsibility to help Treasury on the tax expenditures, as
well.
Chairman LEVIN. Mr. Thompson.
Mr. THOMPSON. Thank you, Mr. Chairman, and thank you to the
witnesses for being here.
I want to follow up on one part of what my colleague, Mr.
Doggett, mentioned, and that's the importance of Treasury to be
able to help us quantify where we go.
One good example of this is in our efforts through the
Recovery Act to pursue renewable energy policy, we put in place
some tax measures that would actually grow renewable energy in
this country. And some of it has been extremely successful.
At the time, a number of us were concerned that that policy
agenda would help drive jobs overseas. Specifically, by the
expansion of renewable energy equipment that is good for this
country, we were concerned that that equipment would be made in
China and Japan and Germany, and were able to put language in
the bill--and it's been referenced here; I think the chairman
talked about it, the manufacturing tax credit component, which
sadly is going to expire.
But that's an example of something that the Department can
do on the front end to help identify these unintended
consequences. We caught this one, and it was--what we did was
good, we just need to continue to do it.
So, if we could get--or maybe hear from you today--some
sort of commitment as to how we would continue to be able to
work together and rely on you as a resource for that, I think
that would be important.
And, Mr. Chairman, if it's appropriate, I have got some
letters. As you know, I am trying to expand that, and I have
got some letters here that state what it means for jobs in the
United States of America if, in fact, we do expand that
manufacturing tax credit. And I would like to submit those for
the record.
Chairman LEVIN. Excellent. Without objection.
[The information follows:]
Mr. THOMPSON. Thank you. And if you could add anything to
that, I am all ears.
Mr. MUNDACA. Thank you. We recognize, as both Mr. Rogers
and I have testified, the importance of and success of the 48C
credit. And again, we thank the Committee for their leadership
on this, their continuing support of this program.
Again, as we discussed, we have the incentives for
individual consumers and businesses to buy this equipment. But
we did need to provide the incentives to have the manufacturing
facilities here in the U.S. to produce that equipment that
we're incentive to buy. It's been a great success. We look
forward to this important expanding, and again, thank the
Committee and the House for what it did in the Recovery Act, in
taking these important steps.
Mr. ROGERS. The only thing that I would add to that is the
linkage between project development, manufacturing, and
innovation is central to the competitiveness of the U.S.,
globally. And sometimes we forget a piece of that linkage. But
what this Committee has clearly done is to link the project
development and the manufacturing with 1603 and 48C, and then,
with the R&D tax credit, the innovation side of this.
And if you think about those three pieces fitting together,
good jobs grow and stay when you put those three pieces all
together. If we lose a piece of that equation, all of a sudden
we just get the development, we lose the manufacturing. By the
way, the innovation goes too.
And so, one of the things we have to be cognizant of is how
we keep those three pieces in balance in the Tax Code and in
our incentive structures over time.
Mr. THOMPSON. Do you have any data that would give us an
idea of what kind of job growth has been accomplished because
of these tax--because of the tax policy that we put forward in
the Recovery Act?
Mr. ROGERS. Sir, the direct jobs attributable to the 1603
program and the 48C program, to the best of our knowledge, are
60,000 for the first and 50,000 for the second--60,000 for the
1603 program across its life; 50,000 for the 48C program across
its life. Those are the estimates, going in. Obviously, we will
have to know what it is, ex post. But that is our best estimate
at the current time.
Mr. THOMPSON. And that--and you drilled down pretty deep to
get that? That goes all the way back to the----
Mr. ROGERS. That goes down to the specific projects and
building up from the----
Mr. THOMPSON. But how about all the way back to the
equipment used to manufacture the----
Mr. ROGERS. So we are then not going back all the way--if
you then take a broader look at what's going on across the
supply chain, the number is much larger, in terms of the total
jobs generated. Those are just the jobs on the projects that we
have been able directly to----
Mr. THOMPSON. Will you be able to get a more accurate and
more inclusive number for us?
Mr. ROGERS. This is something we are working closely with
the Council of Economic Advisors on, is how do we estimate the
jobs across the full supply chain. And we can do it for pieces,
and we will provide you with the pieces where we have good
data.
Mr. THOMPSON. Thank you. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Thompson, excellent question. And I
hope that we will have that information as we discuss specific
legislative proposals.
Mr. Nunes, I think it is now your turn.
Mr. NUNES. Thank you, Mr. Chairman. Mr. Mundaca, I want to
follow up just quickly on what Mr. Thompson was talking about.
Those--I think, to use your words--he said ``incentivize,'' or
you said that these are incentives for manufacturing these
green technologies? So these incentives--yes. Wouldn't those be
the same thing as, say, incentives for domestic oil producers
to produce oil here in this country?
I guess my question is, why is it--what's the difference?
Why is it okay to have incentives for green technologies, but--
I think you said a little earlier that to incentive the oil
industry, that that has no effect on domestic oil production.
Mr. MUNDACA. There are two points to consider, and what we
considered when making these proposals. One is the
effectiveness of what it is that we are proposing, what the
effect of these incentives/subsidies are, and secondly, what
they are trying to address.
We feel, as a general matter of tax policy, the Tax Code
should be used to incentivize or subsidize an investment where
the market itself is not providing the proper incentives, where
the cost of an investment isn't an accurate representation of
either the benefits or the cost of that investment.
So, for example, on green technologies, what we don't have
built into the price is the positive externality, to use an
economics term, of the lower greenhouse gas emissions, less
pollution, et cetera, but we don't----
Mr. NUNES. Well, I want to get into this. So that--I just
had that quick follow-up, but I'm going to get into something
similar on this.
So, my question about--I want to discuss China here. And
you are very concerned about how we're losing our edge to China
in green technology.
Mr. MUNDACA. Yes.
Mr. NUNES. So, I just--we often hear this, and there are
rhetorical statements that we often hear repeated by the
Administration in the news media, but I just want to go into a
few. We never talk about the actual numbers, okay? So--and
these are just quick questions here, and I am sure you're aware
of these, but I want to get them on the record.
So, in 3 years, 2005, 2006, and 2007, China built 273
gigawatts of electrical generating capacity, while the U.S.
built 32. You're aware of that?
Mr. MUNDACA. Yes.
Mr. NUNES. Okay. Of the--225 gigawatts that China built
were coal-fired power plants, 225 in 3 years; 40 gigawatts was
hydroelectric; and only 5.5 gigawatts were wind and solar in
China. You agree with those numbers?
Mr. MUNDACA. I don't know the specific numbers, but I----
Mr. NUNES. I think it's from the energy information----
Mr. MUNDACA. Right, I think the general breakdown is as I
understand it, yes.
Mr. NUNES. So, during those years, the U.S. added twice as
much wind and solar as China, even though China added nine
times as much energy as we did, right, during the same
timeframe.
Mr. MUNDACA. Yes.
Mr. NUNES. Okay. So now, the Administration basically--and
everybody--says that we are going to have to increase, in the
next 25 years, you know, to meet demand, we are going to have
to increase our--I have the number here, it's about 270 or so
gigawatts in the next 25 years that we are going to have to--
somehow we are going to have to get this energy from somewhere.
So, I mean, we're not doing a very good job, if you look at
the gigawatts we produce in the last 25 years. So, for the next
25 years, it just seems to me like--I mean do you guys believe
that energy use and energy consumption is related to gross
domestic product?
Mr. MUNDACA. Yes. And when we talk about, as you stated, we
are losing our edge to China, I believe those statements are
made in the context of the manufacturing facilities that
produce the clean technology.
So, when a company is going out to buy the windmill
turbines, for example, where can they look to purchase them?
China has made huge investments in that sector of its economy,
with respect to the manufacturing capabilities of----
Mr. NUNES. But you do agree, though, that GDP and energy
consumption are tied together.
Mr. MUNDACA. Yes.
Mr. NUNES. So how is it when--I don't want to--I'm just
going to paraphrase what the President said before the--I think
it was the San Francisco Chronicle during the campaign. But he
said that under his plans, that energy prices would skyrocket.
You remember that quote, right?
Mr. MUNDACA. I don't remember the skyrocket part, but I do
remember a discussion of----
Mr. NUNES. Well, I know he used the word ``skyrocket,'' I
know that.
So, you believe that GDP is tied to energy consumption. The
President says that, under his plans, that the energy crisis
will skyrocket. How, if we're going to increase prices of
energy, how are we going to grow GDP?
Mr. ROGERS. Maybe I could address this. If you take a look
at--wealth creation is tied to productivity across the economy.
It's also tied to energy productivity. The United States is
substantially more energy productive than China today, so the
relationship between our GDP growth and China's GDP growth
advantages us.
One of the things that we want to be able to do over time
is to continue that advantage, to make sure that U.S. GDP
growth continues with greater and greater energy productivity,
because that, in fact, makes us more competitive, globally. It
drives more wealth creation over time. And that's where these
innovation-driven energy agenda really comes to roost.
What we are able to do is increase our productivity in the
energy sector faster than a global economy, and create the----
Mr. NUNES. So my time is up. So with all the--I mean, but
at the end of the day, the last 25 years and looking at the
next 25 years, I mean we're not doing anything but talking
about how much energy we are going to create. And you know, at
some point somebody is going to call this what it is.
I mean it's almost like we're--the Administration is paying
more attention to the actual tree, and they can't see the
forest through the trees.
Mr. ROGERS. So this Administration----
Mr. NUNES. I mean we're not--no nuclear plants, I mean, no
major sources of power. I mean at some point--Mr. Mundaca said
that GDP is tied to energy use. And if we don't produce more
energy, don't you guys think we are going to have some serious
problems?
Mr. ROGERS. What this Administration has already done in
the first 18 months is to re-establish the nuclear industry of
the United States to fund, with a loan guarantee, the first
nuclear power plant in the last 30 years. We are already on
course to double renewable generation capacity in the first 4
years of this Administration. We are taking action now to
actually change that equation that has existed, as you
described----
Mr. NUNES. Right. So you are taking credit for nuclear
power plants that were started under George Bush. But so--which
is fine. But let's not--I don't want to get into a partisan
debate here. But at the end of the day, China has 100 or so
nuclear power plants on the drawing board, and we are talking
about two.
I mean, this isn't a partisan issue here. I mean
Republicans and Democrats got to figure out how we're going to
grow our energy in this country, our energy, not just our--it's
not going to happen through solar and wind, guys. Is it? You
guys believe we can add all this energy with just solar and
wind and two nuclear plants?
Mr. ROGERS. Again, the Administration is on record for
asking for loan guarantee authority to fund the next 10 nuclear
units, again putting in place the dollars behind making the
first nuclear plants happen in the last 30 years. We also are
on the record and have committed the funds to more than double
renewable capacity in the United States.
Mr. NUNES. Right. But if we double renewables and we build
10 nuclear plants, it still doesn't get us to where we have to
go.
Mr. ROGERS. And dramatically increase the energy
productivity of the U.S. economy, so that we continue to be an
advantage against China in a global race to--for wealth
creation for U.S. citizens.
Mr. NUNES. Thank you, Mr. Chairman.
Chairman LEVIN. It's been, I think, useful. You went over,
but I think a useful exchange.
And now we turn to Mr. Larson.
Mr. LARSON. Thank you, Mr. Chairman.
Chairman LEVIN. And then Mr. Blumenauer will be next, and
then Ms. Brown-Waite.
Mr. LARSON. I want to thank you both for your testimony and
your service to the country.
And along a similar theme that has been struck as it
relates to manufacturing--and I appreciate the efforts both by
the congress and certainly by the Administration to invest in
alternative forms of energy--I have a specific concern about
fuel cell technology.
And again, I compliment the Administration, to the extent
that they have moved forward in this area. But I would note in
alternative fuels, with respect to projects that were funded
through 48C, as you have discussed earlier, and in section
1603, only 7 programs were fuel cell-related, whereas in
section 1603, over 350 projects focused on solar electricity.
And while I clearly recognize the importance of other
alternative fuels, I note that nations like Germany, nations
like Korea, the aforementioned China and others, are moving
aggressively forward in these areas. And while Congress has
provided a health tax incentive, I would like to further
understand the Administration of--the Department of Energy's
commitment along these lines, which is a value-added
manufacturer that the United States really--we will lose
manufacturing capability and our innovation capability if we
continue to cede ground to other nations.
Recognizing that transitions to a hydrogen economy may be
down the road, but not that far down the road, and stationary
fuel cells already are used in--all across our Nation, and it
just seems to me that, especially with a value-added
manufacturing base like this, that we need to have more of an
emphasis there. Would you care to respond?
Mr. ROGERS. Thank you, Congressman Larson, for that. The
role of fuel cells is actually quite important. The stationary
fuel cells and the efficiency that they bring today is actually
something we were pleased that, under the 48C program, that UTC
was one of the manufacturers who was successful in that.
We would look forward to opportunities to expand fuel cell
manufacturing capacity as part of an extension of 48C. It's one
of the areas where we would like more applications to be able
to fund more manufacturing. We were quite limited, both in
applications and in the ability to fund.
And so, that's a specific area where we see significant
upside, particularly around the stationary fuel cell
capability. This is an area that you have been quite helpful in
your leadership on, and the Secretary clearly understands the
role that those can play, and the efficiency of those
technologies now, and the innovation that that technology can
support, going forward.
So, clearly something that we understand the role of. We
would like to see more of it in the portfolio. Right now we are
actually limited, in terms of the dollars, as we looked at the
manufacturing side of that, and would welcome the opportunity
to work with the Committee to extend that.
Mr. LARSON. Are you--excuse me, Mr. Rogers--is there
something we should be doing, as a Committee? Are you
suggesting that there is more that we could do in this area,
specifically, as it relates to manufacturing in this vital----
Mr. ROGERS. The specific thing that we could do is the
President has asked for $5 billion in addition to--which would
enable us both to fund more of the applications that originally
came in that were good applications that we were unable to fund
because we only had $2.3 billion in manufacturing. So we have
actually already gone through the process of ranking the rest
of those, and so we could move that out the door quite quickly.
That's one block.
And, as we go forward, we have the opportunity to target
sectors that were under represented in the first round of
solicitations in the next round of solicitations.
Mr. LARSON. Well, I hope you will consider fuel cells, in
that they were vastly under represented in the awards that were
made. And I look forward to working with the Administration on
that.
And I don't know if Mr. Mundaca would like to respond----
Mr. MUNDACA. Not much to add, except again to continue to
make the plug for the additional funds for the extension of the
48C program. We think it was very successful. We did leave a
lot of great projects on the table. We know there is interest
from people who didn't apply to come back forward now.
So, again, we would greatly encourage the continued
leadership of the committee on this issue.
Mr. LARSON. And, last, I know we're going to hear from
another panel, and particularly from Boone Pickens, but the
Administration's position on natural gas and the great
resources that we have in this country--most recently, I guess,
statements from people like Morgan Stanley, that there are
being close to 200 years of reserves in shale.
Mr. ROGERS. The U.S. natural gas resources are an
extraordinary endowment, one with--and it's been one of the
most exciting developments, really in the last decade, is the
depth of the resource that's available here, in the United
States. It is clearly part of the U.S. solution for a long time
to come, and we are quite excited about the developments that
have occurred here.
It is one of the less-told stories. The Department of
Energy spent 10 years investing in unconventional gas
technology. In the nineties the industry said, ``Hey, this is
pretty good,'' and it was ready to go, and the industry took it
from there. And it's been a great collaboration between
government and the private sector, to open up vast new
resources.
Mr. LARSON. Thank you.
Chairman LEVIN. Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I would just begin
by seeking your help to assist Mr. Camp in finishing his chart,
which I thought was very useful, but it doesn't tell the story
about what has happened in the course of the last 2 years. He
has a little tiny increase in renewable energy, but he doesn't
talk about what the impact was in installed energy. Installed
energy in the last 2 or 3 years, we have seen renewables go up
dramatically. We haven't seen any new coal plants. We haven't
seen nukes in 25 years or more. No new hydro.
But what we have seen--my understanding is, and there is
some great information from Pew; I know you have it--if we
could just have the next chart that talks about what's happened
with the incentives that we have had through the Tax Code,
through the economic recovery package, that has produced
something like 22.5 percent compound increase in wind, for
instance, in the United States. That's the story. I think it's
three times renewables over coal in 2009.
So, let's--if we could help Mr. Camp finish the chart, I
think it would illustrate why what we're talking about is so
important.
I am pleased in your testimony you talk about re-
implementing the superfund tax. As it happens, I have
legislation before this Committee that would reimpose the
superfund tax that was allowed to expire, and has turned our
superfund program into a stall, sue, and study program. And all
of us have superfunds in or near our district sites that could
benefit from this. I am hopeful that you will work with us on
the Committee, so that we can have a hearing and get busy on
enacting this specific provision that you are interested in.
In the main, I think those proposals make a lot of sense. I
would ask for some evaluation about one of them, where you're
talking about taking away the deduction for tertiary
injectants, because we are in a--have a serious problem dealing
with coal, carbon capture, and sequestration. This is an
example of where some in the petroleum industry are able to
sequester carbon, squeeze more productivity out of existing
wells, and we are removing it from the atmosphere.
I think we have the potential of learning a way to deal
with coal capture and--carbon capture and sequestration. This
might actually be a negative. And I would respectfully request
that you help us analyze what the impacts are.
I have got a concern about the way Treasury is valuing
certain grants in lieu of the solar ITC. And because time is
limited, I won't bother you with it now. But I would like to
submit a vexing question that I got from one of my constituents
about trying to make this program work, and being able to
discuss this with your staff to see if we understand it right,
he understands it right, and what might come forward.
Finally, I am--I have legislation, H.R. 4599, to create a
direct payment program for the Recovery Act section 1603. I
don't think we are going to be in a position where we want to
just have a grant that may or may not continue over time that
can be disrupted and actually doesn't necessarily go as broad.
The legislation I have would make it possible for other
potential investors to be involved, like real estate investment
trusts and tax-exempt entities opening up new avenues of
capital. And I would love to have a chance to work with you
folks in the Administration to analyze whether this might be a
way to be able to do it more efficiently, expand the number of
players that are involved, and do something that might be a
little better in the long run than the Recovery Act's grant
program under 1603.
And I welcome any comments that you would have about
reimplementing the superfund or other aspects touched on in
sort of this fuselage that I have thrown your way.
Mr. MUNDACA. Well, thank you for that, Congressman
Blumenauer. A couple of things. You raised a lot of very good
points.
On tertiary injectants, there are other incentives for
carbon sequestration technologies. We should work together to
make sure those are operating properly, and perhaps there is a
way to have the tertiary injectants proposal, which we have, as
you mentioned, proposed to repeal, work properly with the
carbon sequestration incentives we would like to make
available.
On, I think, the issue you raise under 1603 with respect to
certain solar projects and valuation, we are aware of that
issue. I believe there are meetings at Treasury today with an
affected taxpayer who is questioning the methodology used for
valuation. We will continue to engage on those, but welcome the
opportunity to brief your staff and engage on that, if you
would desire.
And then, as well, with respect to 1603, yes, we would very
much like to speak about if there is a way to have that program
made more effective.
Chairman LEVIN. Thank you very much. Ms. Brown-Waite.
Ms. BROWN-WAITE. Thank you, Mr. Chairman. And I thank the
gentlemen for being here this morning.
The Senate climate bill now is apparently going to have
some increases in gasoline taxes. Where is the Administration
on this proposal of increasing gasoline taxes? And either one
of you could----
Mr. ROGERS. We haven't seen the Senate climate bill as yet,
so we are looking forward to it, as I'm sure this Committee is,
as well. And at that point we will be able to evaluate the
various elements in it. But we are not familiar with the
provisions, currently.
Mr. MUNDACA. Yes, we haven't seen it yet, and we will
assess it in the context of looking at the overall bill.
Ms. BROWN-WAITE. Okay. So the Senate, in a vacuum, has come
up with this. They haven't consulted with Energy Department at
all. Is that what you're telling me?
Mr. ROGERS. We have, from time to time, had conversations
with various senators about various provisions, but we are not
familiar with the provisions of the Senate bill that you
described, and specifically the gasoline tax provisions. We
read about them, too.
Ms. BROWN-WAITE. Well, at a time when, you know, the
economy is struggling, this would be the least positive time to
ever add a tax increase on gasoline.
The other question I have is I have a nuclear power plant
in my district. And they have applied for an--to build another
one about 10 miles away, also in my district in Florida. And
what they wanted to do to ``create jobs,'' because I thought
that's what this Administration was about, they sought
permission to do some pre-construction, basically ground
moving, and were denied.
How can we say that we are encouraging nuclear power, when
this kind of obstruction exists in the building, in the
construction of nuclear power?
And then I have another question about a tax break. So if
either one of you gentlemen would like to, respond to that.
Mr. ROGERS. So I'm not familiar with the specific decision
in the case of the plant in your district. I am aware that the
works are actually being constructed on several nuclear power
plants in the United States currently. And so I suspect there
are some unique situations there, but I'm not familiar with the
specific case you cite.
Ms. BROWN-WAITE. It happens to be Progress Energy. If you
would like to look into it and get back to me, I would
appreciate it.
The other thing is I've got several small renewable diesel
refineries. I have one in my district and another one near my
district. And the owners of these two businesses were led to
believe that if they bet their life savings to invest in
renewable energy, that the tax credits would be there to make
this business model viable.
Well, we all know the Senate failed to pass the extenders
bill. And many of those businesses actually had to stop
production of that renewable diesel almost immediately, and the
other one has limped on for months. The owner that was
contacted, his name is Stu Lin, and he has tapped his remaining
savings to service the company's debt and keep 30 people
working for him, off the unemployment rolls.
After speaking with Mr. Lin on Tuesday, the issue became
crystal clear. Here is what he said to me, and I'm going to
quote him, ``If extenders aren't done in 30 days, I am closing
my doors. I am not kidding. I have tried my best. I just cannot
rely on the government as a business partner any more.''
And he went on to say, ``The government makes a big deal
about consumer confidence surveys. Why on Earth would 30 guys
working for me have any confidence?''
You know, I think we need to realize that when we're
talking about jobs, it's important that, you know, it's not
just talking about them, but helping out there in the private
sector to create these jobs. Now, obviously, these two firms
are--had created jobs. One of them is still holding on to 30
employees.
But when I'm back in my district and people say to me,
``Where are the jobs,'' I tell them, ``Unfortunately, it's up
here in Washington, because the bureaucracy is growing.'' It's
not the private entrepreneur down there who is getting any
help.
Could--I would like to hear from you. And I know that this
is a follow-up to Mr. Doggett's question. You know, why aren't
we pushing this more? Why isn't the Administration pushing that
more in the Senate so that these businesses can continue?
Mr. MUNDACA. Thank you for that. I share your desire to
move the extenders bill as quickly as possible, and we are
doing all that we can. I think if you have suggestions about
what more we can do, we are certainly willing to talk.
But we would like that bill to be completed as soon as
possible. We have had some encouraging signs. But again, I
think there are still major issues with respect to offsets that
need to be discussed. We have been involved in those
discussions in trying to supply as much as we can to move this
forward.
But again, I do share your desire to get that bill done,
and on the President's desk as soon as possible.
Ms. BROWN-WAITE. These are real jobs. Thank you, Mr.
Chairman. I know I went over a little bit.
Chairman LEVIN. Okay. If I might add, I am hopeful that the
extended bill could pass before Memorial. And I would hope we
could have bipartisan support for it, which hasn't been true.
There is the issues which need to be worked out, but
clearly that bill--which has now passed the Senate, as well as
having passed the House--needs to be worked out. And we are
trying very diligently to work out the issues and see if we can
pass it here in the House, and to pass it in a--one form or
another. And the Senate is going to require 60 votes there. And
I would hope we could work together on a bipartisan basis.
Up until now, the extended bills haven't passed on a
bipartisan basis here, and it did pass in the Senate with, I
think, five or six Republican votes. So let's work on it, and
try to get it done well before Memorial break.
All right. Next--and thank you for raising that--next, Mr.
Kind.
Mr. KIND. Thank you, Mr. Chairman. Thank you for holding
this important hearing, and I want to thank our witnesses for
your presence and testimony here today, and the
Administration's strong support in trying to work with us and
the American people to develop a new energy policy for a new
century. And one way of doing it is obviously through tax
incentives and the code that we have working with us.
But even outside of the issue of climate change or global
warming, this is the right thing to do for our Nation, as far
as getting the economy back on track, creating good paying
jobs, for national security implications, to be better stewards
of the natural resources that we have, and empowering people in
their own communities, so they have more control over their
energy destiny. And through a combination of this, and
hopefully working in a bipartisan fashion--not only on the
extenders bill, but also hopefully with a future tax incentive
bill that we will have coming up before this Congress--and
working with the Administration, we can put those policy
proposals in place in order to achieve the desired results.
Let me just cite a quick study for you. And I want to ask
both of you for your comment on this. But last year McKinsey
and Company issued a report which states that the U.S. could
cut its energy use up to 23 percent below the projected U.S.
demand level by 2020, just by boosting efficiency, and saving
over $1.2 trillion in energy costs.
And I believe one of the best ways to create jobs and
improve energy efficiency is by creating incentives for
conservation like energy-efficient retrofits such as is the
basis of a couple of bills that I have introduced, one with
Mike Thompson, H.R. 4455, Expanding Industrial Energy
Efficiency Incentives Act, and H.R. 4226 that I have introduced
with Representative Reichert from Washington, Expanding
Building Efficiency Incentives Act, just by creating the
incentives for buildings to be more energy efficient, improving
the bottom line of most companies, which I think is going to
lead to direct job growth, then, which is exactly what we need
in this country.
And I am wondering what the Administration's position is on
incentives for increased building efficiency, as being offered
in a couple of the bills that I have cited, and other ideas
that are percolating around here.
Mr. ROGERS. Energy efficiency is sometimes referred to as
the first fuel. It is the highest return investment that we can
make in reducing greenhouse gas emissions, and in reducing our
dependence on foreign oil and other sources that are at risk.
So, clearly, a focus on energy efficiency is enormously
important. The President has talked about the Home Star
program, and I understand that that's actually ready to be
introduced here in the House today.
The opportunities in the industrial sector are enormous.
One of the programs that we funded additionally under the
Recovery Act are a set of industrial energy efficiency audits
that go out and give businesses, if you will, ``Here is the
menu of investments that you can make.'' These turn out to be
high-return investments for businesses. One of the great things
is if you give a business owner a way to save money, they act
on it very, very quickly. And so it's one of the things that we
have been quite excited about.
Same thing is true in the building sector. We have a
building stock that is not efficient on a global basis. Where
the investment opportunity puts money back in people's pockets,
it makes the environment cleaner. And so these are high-return
investments for the U.S. economy. I actually worked on some of
the earlier pieces of that in my former life, and believe that
this is one of the highest return investments that we can make,
as a Nation. It makes us healthier, it makes us wealthier, it
makes us safer, all at the same time.
Mr. KIND. Well, I have been in conversations. Obviously,
one of the largest manufacturers in my district in western
Wisconsin, a train company producing high efficiency chillers,
and they indicated to me that with the right incentives, there
is no reason why that plant can't expand, create jobs right in
the domestic market in order to meet an increasing domestic
demand, as long as, you know, the standards for efficiency get
updated and the incentives are in place. So, again, I think
this is a tremendous opportunity for job creation right in my
area.
But what I have also noticed in western Wisconsin is an
increase in investment and production of biogas, methane gas
from landfills and that. What is the Administration's thought
as far as that being a part of the energy puzzle that we're
moving forward on?
Mr. ROGERS. So two observations. First, the--one of the
opportunities we had under the 48C program was to invest in at
least 25 different appliance manufacturers, because the
opportunities, whether it's air conditioning or consumer
appliances to improve efficiency, is very, very high. And the
U.S. has a set of the leadership positions in these
technologies. We really want to extend that.
In terms of biogas, clearly an important part of the
equation, both from the energy side and from the environmental
side. The methane emissions are quite large. That has serious
CO \2\ implications. And so again, you get a double benefit:
you reduce pollution and you improve the energy balance. And
the technology has moved a long way to making that compatible,
just with the existing gas grid.
Mr. KIND. Let me finally ask you--I wish I'd brought the
article along; I just read it and I forgot--it was a Wall
Street Journal about how Europe is way out ahead of us in
regards to landfill use for energy purposes, and why the United
States is lagging in that area. And I guess maybe we can follow
up with you at some point and find out why that is, because I
think we're missing a great opportunity here.
Thank you, Mr. Chairman.
Chairman LEVIN. Thank you. Mr. Pascrell.
Mr. PASCRELL. Thank you, Mr. Chairman. Mr. Chairman, the
credit we have been talking about here in section 1603, Mr.
Mundaca, the sole requirement to get the credit or grant is
that the alternative energy facility be in the United States of
America. That's the sole requirement. There is no incentive,
there is no requirement, for domestic content that I can find.
Taxpayer dollars have been and are being used to fund the
purchase of foreign-manufactured goods and components for use
in such projects.
I want to go back to what my good friend from Wisconsin
just talked about. How can you have an energy policy and you
not have a manufacturing policy? It would seem to me that both
of them go hand in hand, that if you do not have a strong
manufacturing national policy to stabilize the base of the
infrastructure, the infrastructure continues to crumble and
continues to be out of the 21st Century and still back in the
19th century.
I think that this is a critical message to take back to the
Administration, that they must develop a manufacturing policy
to ensure manufacturers in this country that they are serious
about this, that this is not simply an esoteric thing we're
talking about, when we talk about energy policy.
In light of the reports of foreign parts making up the bulk
of 1603 projects, what steps is the Administration taking to
see that a domestic content incentive or requirement is
included as part of the 1603 program, going forward?
Mr. MUNDACA. Thank you for raising those important points.
Again, the Administration did and does recognize the importance
of addressing the manufacturing aspect of this, the supply
side, not just the demand. 1603, as you mentioned, is the
demand. You're buying the components. The 48C that we have been
talking about, that the Administration is proposing to more
than double, is with respect to the construction in the United
States and the manufacturing facilities that are going to
supply the components that people need to transition to clean
energy.
Mr. PASCRELL. Well, what would it take to provide in 1603
such a provision? Because, you know, I can cite some projects
under this 1603, these projects, where most of the parts of
that particular project came from China, or came from another
country. I don't see what the purpose of that is, if we are
trying to create jobs here, and trying to strengthen our
manufacturing policy.
Now, look. You can talk all you want about strengthening
the manufacturing policy. I am asking you a very direct
question. Show me where you're talking more--you're doing more
than talking, this Administration, about establishing a
manufacturing policy whereby--and I will repeat, if I may, Mr.
Chairman--you are stabilizing the infrastructure of the
manufacturing sector of our economy. Show me.
Mr. ROGERS. So when the Vice President asked for the
additional $5 billion for the 48C program, he explicitly did
that in the context of a view that said we have to grow
domestic manufacturing. It is not enough just to grow domestic
development. We have to grow development, manufacturing, and
innovation together, because unless we do that, all of a sudden
we innovate and the jobs go overseas, or we develop and we
import.
So, it is clearly the Administration's position that we
need to be making that investment in manufacturing. That is why
we have asked for the additional funds.
Mr. PASCRELL. And it would seem to me to make sense, then,
based upon what the Vice President has said, that we provide a
portion of 1603 to direct that those parts be manufactured in
the United States of America. Otherwise, we are defeating the
very purpose of what we are trying to do. Aren't we?
Mr. ROGERS. The vast majority of parts under the 1603
program are, in fact manufactured in the United States. And
what the 48C program is doing is enabling us to raise the
domestic content, systematically.
The challenge that we face is if we were--the U.S.,
particularly against certain components, has significant
limitations in domestic manufacturing capacity today. So if we
were to impose a buy American provision on it, what it would do
is it would actually restrict the number of projects that we
can do. Our task is to grow that manufacturing base.
Mr. PASCRELL. Mr. Chairman, I hope you were listening to
the very distinguished panelists, both of them that we have.
They are saying that we don't--he is saying that we don't have
the capacity to build the parts that we need in manufacturing
in this country, which is my very point, because we have shut
down manufacturing in this Nation, for a number of reasons--
which is not the subject of this panel.
But what the gentleman is saying--what Mr. Rogers is
saying; excuse me--is that we don't have the capacity, even to
manufacture these parts. And yet we know we had the capacity to
manufacture these parts at one time. We don't have a
manufacturing policy, Mr. Chairman, period. And we can't
compete with China unless we do that.
Chairman LEVIN. And the purpose of 48C is to help develop a
manufacturing policy in the U.S. And we will talk another time
about what requirements there may be in terms of our WTO
obligations. That's a different issue, though it's a very
relevant issue.
So, if we might go on--and we will talk a lot about it--48C
is an effort, a major effort, to develop what has not been true
here, a manufacturing policy for the United States.
Now, let me suggest this. Those who haven't questioned have
been very patient. I think this is going to work out okay. We
are supposed to start the next panel at 1:00. We are supposed
to have a lunch break. There is lunch available for those who
want to grab it across the hall. And I'm not sure when the
votes will be on our tax bill. It's a Ways and Means bill
that's on the floor now, I think, and that's why I think Mr.
Camp is not here.
Mr. DAVIS, you are next.
Mr. DAVIS of Kentucky [continuing]. Thank you, Mr.
Chairman. I think Mr. Pascrell brings up a very germane point
on the issue of slating manufacturing and energy policy
together.
I have a very strong belief, based on my professional
experience in manufacturing, that we do have the capacity to
produce these parts. But from a regulation and energy
standpoint, it's prohibited.
You know, one statement that I think ties in Mr. Nunes's
comments, that are very complimentary to what Mr. Pascrell
said, is that--dealing with the issue of increasing GDP and
increasing energy costs at the same time. You can't do that.
It's not possible.
You know, when the President made the statement that his
cap and trade program would ``necessarily cause utility rates
to skyrocket,'' he has moved to enact on that, but what we're
seeing, in fact, is a reduction in manufacturing capacity, to
Mr. Pascrell's point, in the very heavy industrial areas, the
machine tool operation areas, that would complement the so-
called green energy program.
And I think we run into a substantive issue here, that
alternative energy is multiples of three, four, or five times
the cost per kilowatt hour for industrial electricity to
produce these same goods.
If I could shift subjects slightly to another aspect of
industrial energy, the EIA has predicted that OPEC will have
increased influence over the world market in 2010 and 2011,
basically because of decreased production from the non-OPEC
markets, including the United States. In the short term energy
outlook, they go on to state that OPEC's share of world liquid
fuels market is going to grow to a stunning 42 percent by the
end of next year. And, in addition, what that would do is
increase their ability to increase prices, because they control
more of the supply chain.
Well, I'm glad the Obama Administration has shown some
interest in expanding our offshore production. I'm a little
confused why the vast majority of our resources are still off
limits, and I am concerned about this, in conjunction with the
reactionary restrictions on coal mining permits, and the
Administration-backed proposals that support $39 billion in tax
increases on fossil fuels over the next decade. It's only going
to hamper our effort to reduce dependency on foreign energy and
maintain affordable electricity for millions of Americans.
Coming from a part of the country that has among the lowest
utility rates in the Nation, our senior citizens are being
faced with an across-the-board 40 percent rate proposed
increase because of these very regulations right now.
Here is my question for Mr. Rogers. Do you think that
restricting and limiting domestic energy production from proven
energy resources like coal, and increasing taxes on domestic
fossil fuels, will better enable us to reduce our dependency on
foreign energy?
Mr. ROGERS. I think the set of programs that we are
beginning to put in place under this Administration go a long
way toward reducing our dependence on high-risk sources of
energy.
Mr. DAVIS of Kentucky. I----
Mr. ROGERS. We have made a set of commitments to
restructuring the transportation sector and changing the fuel
mix in ways that will drive down gasoline demand.
Mr. DAVIS of Kentucky [continuing]. If I could reclaim my
time, sir, just one question. You talk about higher-risk
sources of energy. How is it going to be--I'm trying to
understand. Are you putting coal, which is the majority of
energy production in the United States--are you going to say
that's high-risk energy production? Just yes or no.
Mr. ROGERS. There is a good deal of pollution risk from
coal. There are important risks on different sources of energy.
But clearly, coal is a risky energy source.
Mr. DAVIS of Kentucky. Even though coal production will
comply with EPA clean air standards.
The question then, though, that you haven't answered is, by
limiting their production, how are you going to enable us to
reduce our dependency?
If I see my constituents having a 30 or 40-percent increase
in their utility rates, that's not having a positive effect on
the region that actually makes goods and produces energy and
grows food in the United States. I am trying to understand
this.
Mr. ROGERS. So under the Recovery Act, we are investing
$3.4 billion to try to demonstrate that carbon capture and
sequestration is economical within the next decade. So we are
clearly trying to make sure that the coal that we produce in
this country we can use in this country, both economically and
environmentally and in appropriate fashions.
So--and I think the other part is if you take a look at the
broad base of proposals we put forward, driving energy
efficiency across the board for American homeowners, should
reduce homeowner bills and----
Mr. DAVIS of Kentucky. If that's the case, then, every
Democrat on the Committee voted against the $7,500 tax credit
for the purchase of energy star-rated home energy items in the
stimulus bill last year in the energy title. It was my
amendment. And I think there is a dissonance in terms of the
stated priorities and what is actually being put in operation.
I think, finally, you know, if you feel that sacrificing
fossil fuels for green energy is necessary, I think the real
question is why would the Administration choose to pick winners
and losers when the technology is clearly not there, A, to
provide this cost incentive? And then, B, just as a follow-up,
why, in fact, would we impose these increased rates, saying
that it, in fact, is going to cut overall costs, when in fact
it creates a disincentive for investment?
Chairman LEVIN. I think, Mr. Davis, your time is up. If you
don't mind, let's move on so everybody can finish, unless--
well, how about 10 seconds' worth, Mr. Rogers.
Mr. ROGERS. The good thing is we're not choosing winners
and losers. We're running a great competition in the history of
American entrepreneurship that has really created a competitive
playing field across innovative technologies that will position
the United States for long-term leadership across a range of
energy technologies.
Chairman LEVIN. All right. Some liked your answer, and I
think some probably did not.
Mr. DAVIS of Kentucky. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Crowley, you are next. And then, Mr.
Davis, you are next, unless two others come before your turn.
Mr. Crowley.
Mr. CROWLEY. Thank you, Mr. Chairman. Let me first thank
you for continuing this Committee's and this congress's vote to
develop incentives for our Nation to wean itself off of foreign
oil.
Pollution is an issue. We need to create green jobs in the
new economy. Like Democrats said in the nineties, it is vital.
But I believe the most important reason is our national
security. The more we export our dollars to hostile oil-
producing nations, the more we export our security and our
national sovereignty. Green jobs isn't just a cute catch
phrase, it's one of the most important national security
actions we can take.
And I want to start my questioning about the programs set
up by the Federal Government to increase domestic production of
green energy at home, and create jobs here in the U.S., while
having the great effect of weaning the U.S. off of foreign oil
and making us more energy-independent.
One program encourages green manufacturing domestically,
including--that's what my colleagues have alluded to--
legislation that I am in the process of developing with
Congressman Scott Murphy of New York, who is both a businessman
who has real-world experience in creating jobs in this country,
but also someone who sits on the House Armed Services
Committee, and knows the threats that our Nation faces every
day.
Assistant Secretary Mundaca, how did Treasury, with the
consultation of the Department of Energy, determine which
projects would be chosen for the 48C domestic manufacturing
program that was alluded to throughout many questions this
morning? I have noticed a lack of awarding to the fuel cell
community, as Mr. Larson alluded to earlier. Was there a list
of those that had previous private sector venture capital
investment consideration?
I believe that the American Government should help
incentivize private sector manufacture in the U.S. So what were
the lessons that were learned in this process, both positive
and negative, from this tax incentive program? And before you
answer that, I just want to--because time is--so keep that in
the back of your mind, and time is of the essence here.
I want to get--my other question is I want to touch on the
issue of ethanol, which was discussed privately before, and the
Government incentives for the ethanol program in the Tax Code.
Last year I introduced the Affordable Food and Fuel for America
Act, which would phase out the $5 billion a year subsidy for
gasoline refiners who blend corn ethanol into gasoline,
eliminate a tariff on imported biofuels, and increase funding
for the cellulosic biofuel production tax credit.
I introduced that bill because I am concerned about the
impact of the subsidy on our food prices, as well as our
overall deficit, and as well as the impact that it has on green
energy.
As the renewable fuels standard requires oil companies to
buy and blend 12 billion gallons of ethanol into gasoline this
year, and 15 billion gallons in the year 2015, we already have
a mandated requirement for the consumption of ethanol in the
U.S. So is this tax incentive for the production of ethanol
still needed?
And, if you could, answer both those questions.
Mr. MUNDACA. Well, thanks. I will try to be brief. We look
forward to working with you. This issue on ethanol has been
raised, as you know, by a number of different congressmen, and
we look forward to engaging on this as we take forward a more
comprehensive review of energy policy and energy incentives in
the Tax Code.
I am sure Mr. Rogers will have more to add on the criteria
used for the 1603 program. We follow the statutory provisions
that--we looked to a number of criteria in assessing the
projects. As we mentioned, we had a lot of great projects that
didn't get funded, not because they weren't good projects. You
know, we simply ran out of money, which is why, on the 48C, we
are looking to get additional money for that.
Fuel cells were some of the projects that were not funded
but, again, technically met the requirements, just didn't get
the funding.
Mr. ROGERS. And just quickly on the process, this was a
broad-based competitive peer review process. We had almost 400
reviewers involved. We had technical reviewers, we also had
business reviewers. And so each proposal got three reviews.
Those that made it across a certain threshold then went through
a set of peer--merit review panels to get two more reviews
before we could make the final selection decisions.
And then, the only other piece that we layered on was the--
on the margin we tried to make sure that we were focusing
marginal dollars in high unemployment districts. And so, as a
policy factor, what we tried to do is if the manufacturing
facility was in a high unemployment area and it was on the
margin, we brought it in.
Mr. CROWLEY. Let me just ask if you can further define a
``high unemployment area.'' Was that areas that had job loss
recently, or was it communities that have sustained job loss
over a period of time, many years, considered as well in that?
Mr. ROGERS. We were looking at the absolute unemployment
rate in each of the different counties that----
Mr. CROWLEY. As defined by the Department of Statistics,
or----
Mr. ROGERS. As defined--I believe it's a Department of
Labor statistic.
Mr. CROWLEY. That's what I'm saying, labor statistics. So,
okay. I would like to talk a little more about that with you at
some other point, and not to take up the Committee's time. But
thank you, Mr. Chairman.
Chairman LEVIN. Under the rules, Ms. Schwartz is next, and
then Mr. Boustany. We know you have to go to the floor. So
you----
Ms. SCHWARTZ. All right. We will try and do this relatively
quickly. Two points I wanted to make, and I wanted to thank you
for your testimony. I actually feel like this should be a
little more exciting hearing, and--because I think some of the
comments you have made are really important in how we are
really moving ahead toward a cleaner, greener economy, and the
producers of alternative sources, and it does it in a smart
way.
So, I think we should be--I think, Mr. Rogers, you actually
expressed this several times, about what the future brings and
how we're really moving in a very different direction. While
continuing, obviously, to use fossil fuels, we are really
looking in other ways, both through clean technology and also
energy efficiency.
So, one quick comment and then--which I would like you to
consider. Some testimony has been submitted by some groups I
have been working with on--they're usually referred to as
historic tax credits. We are interested in--and I have been
working with them. I have legislation to modernize the historic
tax credits.
One of the best, most efficient things we can do is use
older buildings, rather than build new ones, and I have--one of
the pieces of my legislation actually provides additional
incentives for more energy-efficient retrofits of older
buildings. I think this fits in very well with what the
Administration is trying to do. I would ask the Administration
to take a look at that, in working with the Committee, to
possibly move ahead. Love that to fit into one of these pieces
of legislation, moving forward.
Also, renovation of older buildings actually creates good
jobs. It's reuse. We ought to make them more energy efficient
at the same time. So I would ask you to take a look at that.
The other piece I wanted to talk about was really being
able to extend the 1603 provisions to bio-refineries. I
mentioned this to both of you earlier. You had talked about how
important the biofuels production industry is, can be, should
be, in terms of really adding job growth and also real economic
value, and really using not food sources, but biomass that
would be able to be turned into cleaner energy. We know that
there are a number of industries--some in Pennsylvania--that
are moving ahead on this.
One of the barriers is the high cost of building
refineries. My understanding is, looking through the list of
the very successful use of 1603, is that it has not been used
for bio-refineries, and it's not really able to be.
So, my real question for you to look at--again, whether we
could do that in legislation moving forward here or in any jobs
package or in a future energy bill--is, is there a way for us
to use tax incentives and grants, particularly in lieu--these
are not companies that are making money, and so they really
need to be able to get--use some of these kinds of provisions--
for them to be included, these--the building--really moving to
production.
This is for other kinds of biomass. We know this is
potentially a great source of homegrown clean energy. And I
want to see us be able to move ahead, use some of these tax
provisions. And I think, Mr. Rogers, if you could, just briefly
answer how you see that fitting in to some of the provisions we
already have used so successfully in other areas.
Mr. ROGERS. So, first observation is that the 1603 and 48C
programs, again, are among the most successful programs under
the Recovery Act for job creation.
Another program under the Recovery Act has put more than
$600 million into 19 biofuel facilities to really establish the
economics of cellulosic and next generation biofuels. The
ability of the United States to take a leadership role--
biofuels are enormously important for what we're trying to do
in the transportation sector. The ability to reach the next
generation of biofuels with the new technologies available is a
very exciting area of innovation that we have been funding with
the grant programs, and we would be happy to work with Congress
to figure out what the appropriate tax structures are to move
that forward.
The only other observation I would make is our general
counsel has worked very closely with the states on historic
preservation, trying to make it easier to do energy efficiency
in historic buildings, and we have actually established some
things with the Council of Environmental Quality to make that
much easier for historic buildings. And so we would be happy to
work with you on that, as well.
Ms. SCHWARTZ. That would be great. Thank you very much, and
I yield back.
Chairman LEVIN. Thank you.
Mr. Boustany.
Mr. BOUSTANY. Thank you, Mr. Chairman. Mr. Mundaca, let me
start with just a yes or no question. Is it the official
position of the Obama Administration that we have an over-
production of oil, U.S. oil?
Mr. MUNDACA. I don't think there is any official position
on the level of production of oil.
Mr. BOUSTANY. Well, because it's in your written testimony,
it is riddled throughout the budget proposal. And also, I
received a letter from Secretary Geithner about a year ago that
has the same statement. It basically says, ``To the extent that
credits''--referring to fossil fuel credits--``encourage over-
production of oil, it is detrimental to long-term energy
security.'' So, I find a little bit of an inconsistency here,
and I have deep concerns.
We all want to get to a comprehensive energy policy. We
know there are some very exciting biofuel possibilities down
along the horizon. But the key question for this Committee is
the transition strategy. How do we transition? And we need to
have a realistic transition strategy.
And, Mr. Rogers, I was very encouraged to hear that you are
excited about the new developments of shale, natural gas. And I
think many experts in the field believe that natural gas is
going to be a key component of our short-term transition
strategy.
So, is it the position of the Administration to penalize
American natural gas production? That's my next question.
Mr. MUNDACA. With reference to the tax provisions, again,
as I have mentioned, what we are seeking to do is remove those
subsidies from the Tax Code that we think are inefficient
that----
Mr. BOUSTANY. I have heard that. But I think there is a
little bit of a disconnect, as probably has been mentioned by
Mr. Tiberi and others earlier, in that when you talk to our
independent oil and gas producers, these are the small
companies. These are the ones that have been responsible for a
lot of our domestic production, whether it's oil or gas--and
particularly, natural gas now. They are going to be penalized
by these provisions.
I have talked to a number of companies and just to put it
in real terms--this is anecdotal, but I suggest you really need
to go and listen to these folks. A small producer says, ``I
will produce 10 gas wells under current law.'' If these tax
provisions, a repeal of these certain tax provisions occurs as
proposed in the Obama budget, I will go from 10 wells to 1
well. So that's going to hurt our natural gas product of
which--97 percent of it is domestically produced. It's going to
hurt American jobs, American energy production.
And so, I have a deep concern about this, and I think
before the Administration and this Congress moves forward with
the repeal of these types of provisions, we better really
understand the facts on the ground.
Now, I heard you earlier, in response to a question, saying
that overall there would be no effect on energy production, or
a very small effect. And by implication, on job production. I
don't think that's right. I agree with what Mr. Tiberi said
earlier, and I would urge you to speak to those who are in the
business of doing this, to understand what the real impact is
going to be.
I sent a letter to Secretary Geithner last year, asking
what would be the impact on American energy production jobs,
and it's not just the producers, but it's the welders and the
mechanics and all the others, a lot of blue collar jobs, good
paying blue collar jobs. And I have yet to get an answer. And
your statement earlier is not really backed up with any
substantiation with regard to what this impact would be on
jobs.
So, again, getting back to my original point, we need a
realistic transition strategy. And I understand where they're
trying to go with biofuels. The third and fourth generation of
biofuels is very exciting. But we can't penalize current energy
production without having all of this ready to go. You need the
proper sequencing.
So, I would urge you, please, to speak to the industry
directly to understand what the impact is going to be on
American energy-producing jobs, and energy production in this
country.
Mr. MUNDACA. Well, thank you, Congressman. We are more than
willing to engage with anyone who has suggestions about the
effects of these proposals.
I believe when Dr. Alan Krueger, Chief Economist of
Treasury, testified before the Senate last year, his analysis
indicated again less than 1 percent effect, with respect to
production on oil and gas from these proposals, I think less
than one half----
Mr. BOUSTANY. And there have been rebuttals to his
suppositions and proposals.
Mr. MUNDACA. I understand, yes.
Mr. BOUSTANY. And so, I think it's incumbent upon the
Administration and this congress to get the facts, and get the
facts on the table.
Mr. MUNDACA. We understand.
Mr. BOUSTANY. Thank you. Mr. Chairman, I yield back.
Chairman LEVIN. And thank you. Mr. Davis of Illinois, and
then Mr. Etheridge.
Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman.
And I want to thank the witnesses for their endurance.
Job retention, job creation. No matter who I talk to, if
they're involved in public policy decisionmaking, are very much
concerned about these issues and have them high on their
priority list of problems that have to be met and resolved in
our country. So there is a great deal of hope riding on energy
conservation, green technology development, finding new sources
of energy. And when people talk about where will new jobs come
from, or where can we get jobs, this is one of the places that
we seriously look.
Two questions. One, why should Americans really be so
optimistic that this new emphasis will actually create jobs and
work opportunities for those who find themselves lacking and
wanting?
And two, many argue that labor supply in what we call
disadvantaged areas, disadvantaged communities, are among
minority populations, often don't have the skills necessary to
actualize the opportunities that may very well exist. And so,
my question there becomes what is the Administration doing or
proposing that will provide the training opportunities to make
sure that these affected groups can, in fact, make use of this
new opportunity that we are all hoping is going to be created?
Mr. ROGERS. Let me take one shot at that, Representative
Davis. The--we should be optimistic, because this is, at its
core, what the United States is best at doing. This is about
innovation, entrepreneurship, and being ahead of the curve.
And the opportunity that we have, particularly in the clean
energy arena, is a set of technologies where the United States
has a clear global leadership position, where we have not
historically converted that into the kind of manufacturing
leadership position that creates the kind of long-term,
sustainable, good-paying jobs that this country was built on in
the post-World War II period. And our challenge is to really
recapture that leadership, recapture leadership in
manufacturing. And this Committee has been essential for making
that happen.
To your point, if we can get the capital formation,
particularly on manufacturing, we then have the challenge of
making sure that we have a world class workforce that's able to
take advantage of these opportunities. And so, we've been
working very closely with the Department of Labor. Secretary
Chu actually was out last week, talking about $100 million that
we were going to spend to train people to be able to implement
the smart grid investments that we laid out, the smart grid
investment grants, because it's quite clear that what it takes
to maintain a smart grid infrastructure is very different than
what it took to maintain grid infrastructure that was built on
technologies from the forties.
And so, we are investing, in that case, $100 million in
partnership with the Department of Labor in a set of specific
communities, trying to build those capabilities. And we have
got to do that in multiple other areas to make sure that we
have the workers who can take advantage of these opportunities.
Mr. DAVIS of Illinois. Is the collaboration also taking
place with Treasury, in terms of the tax incentives that are
part of the overall effort?
Mr. MUNDACA. They are. What we try to do--and some of it is
longer term, some of it is shorter term--is carry out the
President's focus on education and worker training. There are a
number of tax provisions addressing that. The American
Opportunity Tax Credit that was part of the Recovery Act,
again, part of the longer term efforts to get American labor
supply skills up to where they need to be.
And again, as well as incentivizing hiring of persons in
disadvantaged communities, and disadvantaged categories, a work
opportunity tax credit as well. So again, the Administration is
very focused on this issue of increasing the skills in labor
supply, and providing incentives for hiring people from
categories that perhaps are disadvantaged.
Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman.
Thank you, gentlemen.
Chairman LEVIN. Mr. Van Hollen, your turn.
Mr. VAN HOLLEN. I thank you, Mr. Chairman, thank both of
you gentlemen for your testimony. I am going to submit, in
writing, a technical question regarding the scope of the
residential renewable energy tax credit. I would appreciate if
you could get back to me on that.
Two questions, one related to biofuels. And as we move
toward the next generation of biofuels, based on non-food
feedstock, many of us believe that the federal incentives
should be technology-neutral. So, for example, algae in other
sort of next generation biofuels, would be on a level playing
field with cellulosics. And I assume the Administration shares
that position, that as we try and design these incentives, they
should, in fact, be technology neutral, so we are not providing
a bigger subsidy, arbitrarily, to one or the other, that it's
based on the science and the technology. Is that right?
Mr. MUNDACA. That's right. We look forward to working with
you. These are difficult technical decisions to make about the
level of subsidies that are in parity across different
technologies. And again, we look forward to engaging on that to
make sure we have done that right.
Mr. VAN HOLLEN. The next issue relates to the amount of
investment as a Nation that we need to be making in clean
energy technology in order to meet our goals, our National
security goals, our jobs goals, our climate change goals.
And as much as we are doing now, it seems to me we need to
take a quantum leap forward if we're really talking about the
kind of jump that we want to make in this technology, and to be
able to compete with the Chinese and others that are making
enormous national investments in this area. In this connection,
I want to commend the Administration, the Department of Energy,
for working to get out the door the section 1703 loan
guarantees, and those who are originally part of the 2005
energy legislation. And more of those projects have been
financed in the last year than in the previous 4 years. So I
commend you on that, and also commend you on working with the
new authority under section 1705 as part of the recovery bill.
But my question is, just looking at those two programs and
at least the amounts of money currently allocated to that,
doesn't it make sense to look at how we can create a mechanism
that will allow a lot more, in terms of leveraging private
investment?
Clearly, I think we've done a good job when it comes to
providing incentives for cutting edge technologies, but I am
focused more on established technologies that have already been
proven effective, where you have lots of people looking for
capital on the sidelines. And as part of the energy bill that
passed the House, we had a clean energy bank idea. There are
different proposals floating around.
But I just want to get your sense about whether or not,
given our current level of programming, you believe we can
leverage what I believe is probably hundreds of billions of
dollars of private investment that will be needed if we're
going to reach the goals that we set out nationally, and that
the President set out. What is your view of that path toward
the future?
Mr. ROGERS. With the Recovery Act, we were able to make a
downpayment on the Nation's energy and environmental future.
And the 1705 program was critical to enabling us to begin to
make loans.
The capital formation challenge ahead of us is very large.
Energy has historically been one of the sectors that has been
slower to innovate, in part because of the scale challenges and
the capital formation challenges.
And so, as we look forward, we want to build on the
successes of things like 1603 and 48C that this Committee has
been so important in leading, because that created a tax
incentive structure for driving us forward. And we need to make
sure that that links up with how the capital markets create
capital behind that.
And so, you know, as we have talked with the congress, we
are looking for ways to make things like loan capabilities over
a long period of time. Right now, we have a set of funding
under the Recovery Act. We are going to run out of that. We've
asked for more funds on nuclear, we've asked for more funds on
renewable energy. And that's going to sort of take us through
another budget period.
I think the opportunity and the challenge is, how do we get
capital formation on a consistent and systematic basis across
the next decade or two decades? And that, I think, is the
opportunity both in the Tax Code and then, you know, as you
described more broadly, the capital formation challenge is
something we have to think about holistically.
Mr. VAN HOLLEN. Right. Well, I am looking forward to an
ongoing conversation on that, because I think that what we have
done is a very good start, and we would not be as far along as
we are without the efforts that have been undertaken to date.
But I still think we've got to take a quantum leap forward,
especially in finding ways to get a lot of the private capital,
which I think is interested in moving into this area, but
understand some of the risks. But given the fact this is a
national priority, for security reasons and for jobs reasons,
and for a whole range of other reasons, including the climate
change issue, it seems to me we need to supercharge this
effort, and we look forward to working with you on that. Thank
you, Mr. Chairman.
Chairman LEVIN. Thank you. Under our rules, Mr. Heller, you
are next. And then it will be Mr. Etheridge, Mr. Higgins, Mr.
Pomeroy, and Ms. Berkley. So, Mr. Heller?
Mr. HELLER. Thank you, Mr. Chairman. I want to----
Chairman LEVIN. Unless you want to yield to--no, you don't
want to do that.
Mr. HELLER. I feel sorry for him, I really do. Thank you,
Mr. Chairman. And I want to thank the witnesses for being here
today. And there is some light here at the end of the tunnel,
so thanks for hanging in there for some of us here in the end.
I want to shift our attention briefly here to geothermal
energy. In the State of Nevada, of course, it's a huge source
of potential energy, and it's a safe, clean, and effective
source that can be used for large-scale commercial or even
small-scale residential. So it's very versatile.
I had a meeting in my office 2 days ago with the National
Association of Counties. Mostly the smaller counties, the more
rural areas in Nevada, and this could be effective in six or
seven other western states. But this is their concern. I am
glad you're here, because I told them I would bring this to
your attention, and that is in last year's interior
appropriations bill it essentially repealed the provision in
the 2005 Energy Policy Act that allowed for revenue sharing
with local counties. And the royalties are about 25 percent.
When you have a community of 20,000 to 25,000, or a local
county of 20,000 to 25,000, $2 million to $3 million can be
pretty--it's a large amount of money. And they use that for all
sorts of issues, whether it's for education or health care or
some of the other welfare causes, but they also use it to
develop these renewable resources.
And so, there is some consternation right now that I am
seeing with these counties because of the lack and the loss.
And they are even more concerned, because the Administration,
in this year's proposed budget, continues to promote this
policy of removing these royalties to these local governments.
So, the question is this. And being here from the Treasury,
Mr. Mundaca, to promote green jobs and renewable energy, would
you agree that the goal of creating green jobs is negatively
affected by this policy?
Mr. MUNDACA. I would have to look at it more carefully. I
am not familiar--I don't know that there is a tax component to
it, but I can certainly look into what the revenue sharing
provision is that you are concerned about.
Mr. HELLER. Okay. To clarify, though, it is 25 percent. So
it goes to these small counties, and they use it, of course, to
develop this energy.
I have a bill out with Mr. Thompson, a bipartisan bill,
that would reinstate these royalties. And I am certainly hoping
to get the support from the Administration moving forward, so
that we can help develop this.
Mr. Rogers, you mentioned something about wanting to double
in 4 years. I think this really stunts the growth of geothermal
energy if these smaller counties can't share in the revenue
produced with this energy.
I want to touch on one other issue quickly, because I know
my time is short. But that also has to do with transmission
lines. Transmission lines are important, especially in large
rural areas, in getting this energy from rural areas to the
more urban areas. And we are making decisions with this
Administration that runs contrary to the ability to put these
transmission lines in place.
As an example, we have just listed as potential on the
endangered species list a sage grouse. And sage grouse is
currently a bird that is being hunted regularly in Nevada, and
yet it's about to create massive--nearly insurmountable--
hurdles to develop renewable energy in getting that power to
the urban centers.
So again, I guess the question is similar to the above in
stating one goal of promoting renewable power, and then acting
in a completely different direction and counterproductive
fashion.
So, I guess the question remains, what is the
Administration's plan, if there is one, to address transmission
lines needs in the west, and wouldn't you agree that this sort
of management and conflicting policy goals is a problem? Mr.
Rogers, I will leave that with you.
Mr. ROGERS. So, Secretary Salazar, Secretary Chu, Chairman
Wellinghoff have been actually working quite closely together
on both the transmission siting issue and on the renewable
siting question, because it involves all three of those
different departments in making those decisions. One of the
things that is actually working quite well is the collaboration
across those departments, to make sure that we get some
coherence across those programs.
So, we have been accelerating, as I think you may have
seen, the siting of renewables in--through the bill of land
management. And there has been a very important collaboration
that has expedited the pacing of that to move much faster than
it historically had.
We are also doing the same thing around transmission. There
is a very clear--in the west, the Western Governors Association
has provided terrific leadership, in terms of creating an
architecture for what the transmission system needs to look
like in the west, and we are working very closely with them to
make sure that that actually comes to pass. We started under
the Recovery Act, actually through the Western Area Power
Authority, making loans to one transmission line so far, and we
have another set ready to go.
Mr. HELLER. Thank you. Thank you, Mr. Chairman. My time is
up.
Chairman LEVIN. Mr. Etheridge.
Mr. ETHERIDGE. Thank you, Mr. Chairman. Let me thank both
of you for your perseverance.
Mr. Davis talked about jobs, and let me carry that a bit
further, because it's more than about jobs, it's really about
jobs, the economy, and really, the long-term future. But I come
from a state and from a district that has a lot of farmers, a
lot of rural, small business people and communities that really
rely heavily on energy. And the truth is, we have a designed
policy in this country to have cheap energy. I mean that's what
has driven our economy for a long period of time.
And so, an issue that will profoundly impact everybody back
home is what happens to energy and how it goes up and down, and
we know what's happened.
And it also has a significant impact on our economy. And
it's been estimated that renewable energy, or energy efficient
industry, has created or supports about 10,000 jobs, just in
North Carolina alone. And so, whether you call it green energy
or whatever you call it, it's win-win.
So, my question--because I think it does two things, it
helps the economy and it also frees us from the grip of foreign
oil. And in just one example, I have one company that happens
to be in my district that was in the 31st year in a little
small rural county, and they produced a substantial amount of
the enzymes for alternative fuels. And they employ about 500
people and the whole global biofuels market operation, the R&D
and Department of Energy projects, and others.
So, my question is this. These projects will be
cornerstones, or projects like them for the next generation of
domestic production in advanced biofuels, bio-based
productions, specialty chemicals, et cetera. Can we expect the
Administration to increase funding for programs such as bio-
refinery assistance programs? Because I think that's a critical
part of it, to expand this to include production of bio-based
materials, chemicals, and products. I think we have to get
beyond just fuels, but get to chemicals and products related to
it.
Mr. ROGERS. We are clearly looking forward, Congressman
Etheridge, to working with Congress to figure out what the
scope of any provisions going forward are. Advanced biofuels
are an important part of meeting our energy and environmental
goals. Clearly, the enzymatic components to that are an area
where U.S. innovation is putting us ahead.
And I think the opportunity, going forward, is to really
structure both comprehensive energy and climate legislation and
tax policies as part of that, to really make sure that we are
advancing the state of the art quite quickly, and making sure
U.S. leads both in innovation and in manufacturing of each of
those pieces.
Mr. ETHERIDGE. Because those chemicals are a critical part
of that right now.
Mr. Mundaca, you ran down a whole list of tax proposals
that the Administration is looking at, as far as pulling back
some of those brakes. And it looks like my time is out. But I
would just say, what does the Administration have in place as a
safety valve? Because as we start to move down this road, if we
see huge spikes in energy costs, we're going to have a huge
pushback, and we've got real problems.
Mr. MUNDACA. I will be brief. Yes, we do understand that.
Again, our analysis of the ones we have proposed to pull are
less than one half of 1 percent effect on production prices, et
cetera. But obviously, we are open to further discussion of the
effects of what we've proposed.
Mr. ETHERIDGE. Thank you, Mr. Chairman. I look forward to
that opportunity.
Chairman LEVIN. Mr. Higgins, would you like to inquire?
Mr. HIGGINS. Thank you, Mr. Chairman. The United States has
5 percent of the world's population and about 28 percent of the
world's economic growth. We're leaders in virtually every area
of innovation. But I think in the development of alternative
energy sources, we have fallen behind. And I think the rest of
the world is rising behind us.
And I think the reason for that is that our tax incentives
are highly fragmented. We have a lot of stops and starts. In
order to send a price signal to the financial markets and to
manufacturers to embrace this new technology, I think you have
to have a very aggressive and sustained tax incentive program
to get them to embrace this new technology.
Give you an example. It's a great American company called
Applied Materials. Applied Materials makes the machinery that
makes microchips that are in our computers. The Chief Executive
Officer of Applied Materials about 6 years ago saw the
volatility in the chip market. So he figured he had to add
something new to the business line. Using nanotechnology, using
silicon, Applied Materials decided to make the machinery that
makes solar panels. A highly successful business. They have 14
factories throughout the world. Problem is, 95 percent of their
business is outside of the United States.
Last year, the industry brought in--or that company
realized $1.2 billion in revenues. So why is it that there is
this great American invention by an American innovator, but yet
there doesn't seem to be the market in our country, which
should be leading in this regard, relative to the product, the
machinery, that he is creating?
As everybody has said here, you know, we use these tax
incentives to signal to the markets. So they have to be
stronger in both depth and duration to provide the private
sector the kind of tax incentives that are necessary to embrace
this economy, and create real jobs with a real future.
And I think, to underscore the importance of this, over the
next 40 years we will add 2.5 billion people to the global
population, and they will all consume energy. This is an
opportunity that Germany has taken advantage of. This is an
opportunity that China has taken advantage of. And this is an
opportunity that quite--it's perplexing that the United States
is not as effective in embracing this early on, and creating
the kind of jobs in this economy.
Mr. ROGERS. So, thanks to this Committee, we are increasing
U.S. competitiveness globally in these key areas.
I think, as you described, consistency in the tax message
and a clear price on carbon and other pollutants are essential
for making sure that we continue that competitiveness over a
long period of time.
Mr. MUNDACA. Yes, I will be brief. We have heard the same
concerns, even from Applied Materials themselves. They have
come in to see us about the uncertainty in the Tax Code, the
fact that there are changes from year to year, provisions
expire. The Administration is very cognizant of the effects of
having these temporary provisions on long-term planning.
We propose to make the R&D tax credit permanent. I think in
the context of a comprehensive energy policy, we need to think
about building in more permanent incentives, so that planning
can continue, the businesses can know the incentives that are
there today will be there in 5 years--most of them don't plan
year-to-year, they plan at least 5 years out. They need to know
what it looks like 5 years out on the tax side.
Mr. HIGGINS. Thank you.
Chairman LEVIN. Mr. Pomeroy, would you like to inquire?
Mr. POMEROY. Thank you. Thank you, Mr. Chairman. I
represent North Dakota. We have coal, oil, wind, ethanol,
biodiesel. We have it all, and I have got, therefore, 45
minutes of questions for you to get in in 5 minutes.
Let's start. Is basically increasing energy self-
sufficiency a central tenant of the Administration's energy
policy?
Mr. ROGERS. Yes.
Mr. POMEROY. Perfect. In that regard, let's talk about the
biofuels, to begin with. The tax credit in support of biodiesel
has expired. Does the Administration support restoration of
this tax credit?
Mr. MUNDACA. We propose to make the tax credit available
through the end of 2011.
Mr. POMEROY. That's good enough for right now. The tax
credit for ethanol is expiring at the end of this year. Does
the Administration support steps to continue to some
dimension--we will talk about how long--the continuation of the
ethanol tax credit, or does it favor having it lapse at the end
of this year?
Mr. MUNDACA. Again, it's part of the general extender
package that the Administration included in the budget. I have
heard here today there are a lot of different views about that.
We have offered to engage on that, but the budget proposal,
again, was to extend it through the end of 2011----
Mr. POMEROY. Well, this was--to 2011. In this respect, the
budget proposal is very well taken--maybe modest, but well
taken. There are very strong feelings on both sides of the dais
in favor of biofuels. We either have completely--the promise
they propose, in terms of ramped up production, creation of
discernable--you know, making a difference in our energy
supply, increasing prosperity across rural America, putting
people to work, generating throughout the entire distribution
chain positive economic activity in excess of 100,000 jobs with
ethanol alone, at the time we need it.
The--in addition to that, I--so I strongly favor continuing
a policy that supports ethanol and domestic ethanol. That would
mean continuing tariffs, as well. If you are moving toward
self-sufficiency--if self-sufficiency is a central tenant of
our goal, we don't want to move to imported ethanol, like we've
been so dependent on imported oil.
Now, on to fossil fuel production. Mr. Rogers, your
background in this area, senior partner at McKinsey, the oil--
American petroleum practice a substantial part of what you did
with McKinsey, I think you can give us some technical
information that would be helpful. This business of intangible
drilling costs actually--I don't know where the word
``intangible'' comes from, but this is--these are basically
expenses of putting in the well and paying for people to do it,
is that correct?
Mr. ROGERS. So I'm not an expert, actually, on oil and gas
tax policy. So I would actually defer to Mr. Mundaca on that.
Mr. MUNDACA. That's right, they are the costs with respect
to the planning going into the drilling. And the tax issue, as
I'm sure you know, is whether those need to be included in the
cost of the asset produced, and therefore depreciated over
time, or whether they are immediately expensable.
Mr. POMEROY. My sense is that--and I don't mean to--I see
that my time has elapsed. It deserves extensive discussion. But
even wages, under the Administration's proposal, would be
amortized. That makes no sense. I mean I don't believe we take
the package of tax proposals relative to oil, as recommended by
the budget, advance them without having a substantial impact on
our continued developing domestic production.
The President now talks about offshore drilling. Well,
offshore drilling? How about onshore drilling like places like
North Dakota? These are heavily supported with the present tax
structure. And I believe that the financing and the
considerations of continuing this kind of development,
especially with independent producers, will be impacted by the
proposal. Thank you, Mr. Chairman, I yield back.
Chairman LEVIN. Ms. Berkley, you have been so patient. You
have the last.
Ms. BERKLEY. Mr. Chairman, thank you very much for your
patience, and thank you both. I represent Las Vegas, Nevada. We
are a state with one major industry, and that isn't doing very
well right now. So I look at energy independence and the
development of renewable energy as a lifeline for the State of
Nevada for many reasons.
One is I think developing renewable energies is important
for our national security interests. I think it's important for
our environment. But I think it's--it could be very important
for our economy. We can create a whole new economy based on
green jobs and green technology. You know that our senior
senator, the Majority Leader, is very engaged in these issues,
and I support his efforts.
I am a former utility company attorney. I worked for
Southwest Gas Corporation in a prior life, so I am a big
advocate for natural gas, and I am glad that we are moving in
that direction. But I want to talk to you about harnessing sun
and wind and geothermal, as my colleague from northern Nevada
spoke of, and the need to develop the--or create the
transmission lines.
We, the State of Nevada, could become an exporter of green
energy to the other western states, and we are very excited
about that, as well. So I am glad that we are moving in that
direction. We need to move there with all deliberate haste.
But there are a couple of things I wanted to bring up
that--what I would like to see, and discuss this with you very
briefly. I would like to see a modification of the combined
heat and power, CHP, investment tax credit to include waste
recovery systems, also known as recycled energy. As you know,
recycled energy creates emissions-free clean power and
currently receives no tax benefits.
I also would like to see a CHP tax credit increase from 10
percent to 30 percent for highly efficient systems. I have a
letter that I would like to submit for the record that has--in
support of this from 85 corporations, industry associations,
and so forth.
I would also like to see----
Chairman LEVIN. Without objection, it's entered into the
record.
[The information follows:]
Ms. BERKLEY. Thank you very much, Mr. Chairman. I would
also like to see the creation of a 30 percent tax credit for
energy efficient motors. I have witnessed them personally at
McCarran Airport in Las Vegas, and at our Las Vegas Convention
Center. We have energy efficient motors powering the
escalators. It has saved these public entities a small fortune
in energy costs. We need to develop that. And if we can
incentivize it with a 30 percent tax credit, it will not only
lower our energy costs, but it will create very important jobs
that certainly the people in my district can use with 13.9
percent unemployment in the State of Nevada.
What do you think about those two proposals?
Mr. ROGERS. Industrial combined heat and power facilities
are very important for the competitiveness of U.S.
manufacturing facilities. The opportunity in the United States
for expanding that is very large, and it's something that we
actually had $100 million under the Recovery Act to fund. We
were 10 times over-subscribed with great projects. This is an
area that really is important for making U.S. manufacturing
more competitive.
Similarly, things like high efficiency electric motors are
quite important for the ability of U.S. manufacturers to lower
their energy costs. Very high return investments. And to your
point, I think the key question is how do we make sure that
those manufacturers have the--and building owners--have the
capital in order to fund those kind of projects.
Ms. BERKLEY. And the legislation that we will be
considering, do you think that we will be able to put--do you
think it's worthy of our consideration to put the tax credits
in for energy efficient motors in our CHP?
Mr. MUNDACA. I have a copy, I think, of the letter you
referenced with the list of the companies supporting and with
the legislation, I think, from Representative Tonko and
Representative Inslee as well, and we will certainly take a
close look at that.
Ms. BERKLEY. I appreciate it. And one other comment in
closing. For those of my colleagues who are so gung ho on
nuclear power, if they can figure out what we can do with the
nuclear waste, other than putting it in the State of Nevada, I
would be more than glad to consider expanding nuclear power.
But until we figure out what we're going to do with the waste,
it's a no-go as far as the people that I represent are
concerned.
Chairman LEVIN. And with that further example of the
tenacity of our colleague from Nevada, to put it mildly--
tenacity we admire--we want to thank you for your tenacity.
From Treasury, you have been so helpful, and from the
Department of Energy, we want to thank you for being here for
so long.
I think this has been an eventful hearing, and has laid the
groundwork and our panels will follow for some further
legislation building on what has been undertaken in recent
times.
So, thank you. I think what we will do is to adjourn--
recess for 7 minutes, sending word out to everybody, our
colleagues, that we will start with the second panel at 1:15.
And thanks again to both of you.
[Recess.]
Chairman LEVIN. The Committee will come to order. Thank
you. It took an extra 5 minutes to have a cookie for lunch.
Just wait a minute so our colleagues can gather.
All right. We have had a really interesting morning. We
planned this so that our distinguished second panel did not
have to be here for the entire morning.
I am not sure if you had reports on the testimony, but it
was very germane, I think. We had some effective back and forth
between our colleagues and the two representatives of Treasury
and Energy.
Let's begin. Under our procedures, we will follow the same
order, I guess, as we did this morning in terms of those who
inquire.
I have been told that the Minority agrees we will try to
limit our inquiries to 4 minutes instead of the five. Is that
okay? We will try. I will try to enforce it.
Here we go. Thanking all of you on this very distinguished
panel. I will introduce each of you, kind of go down the row.
Then if you will just take over one after the other and submit
your testimony. It will be in the record, but follow whatever
procedure you would like in terms of referring to it.
First, no stranger to this place, we welcome you, Mr.
Pickens, T. Boone Pickens, who is Chairman of BP Capital of
Dallas, Texas.
Victor Abate, Vice President of Renewables with General
Electric. We had the pleasure of visiting with the Chief
Executive Officer of General Electric yesterday. He could not
be here, but we are pleased, Mr. Abate, that you could be here.
Next, Dr. Jeffrey Sachs, who is known to many of us, who is
the Director of The Earth Institute at Columbia University.
Next, Dr. Joseph Romm, who is a Senior Fellow at the Center
for American Progress.
Finally, we also look forward very much to your testimony,
the Honorable Karen Harbert, who is President and Chief
Executive Officer of the Institute for 21st Century Energy at
the U.S. Chamber of Commerce.
Welcome, all of you. More of our colleagues will be coming
in shortly.
Mr. Pickens, welcome. We look forward to your testimony.
STATEMENT OF T. BOONE PICKENS, CHAIRMAN, BP CAPITAL
Mr. PICKENS. Thank you. Chairman Levin, and I have to
mention my friend, Chairman Rangel, there on your right,
because we have worked on this in the past, as you well know.
Chairman LEVIN. We did.
Mr. PICKENS. Chairman Levin and Members of the Committee,
thank you for the opportunity to testify here today.
Let me begin by telling you something my father once told
me. He said son, a fool with a plan can be a genius with no
plan. He and my mother were worried at that point that they
were raising a fool that had no plan.
America has not had an energy plan for 40 years. Every
President since Richard Nixon has pledged to reduce our
dependence on foreign oil. President Obama had pledged to
eliminate our dependence on OPEC oil in 10 years. We can do
that. It is not easy, but we can do it. If we do, President
Obama will be the only one, the only President, to have made
good on that promise.
We are witnessing the greatest transfer of wealth in human
history, sending more than $1 billion a day to foreign
countries for oil. Not only that, but because this Committee
has jurisdiction over trade, I know you will be interested in
this.
In January 2010, our trade deficit for the month was $37
billion; $27 billion of that money was spent overseas to import
oil. That means foreign oil is responsible for approximately
three-quarters of our trade deficit.
When do we stop investing in OPEC and start investing in
America?
With the plan I have outlined and spent a good bit of time,
money and energy in promoting, we will enhance the economy,
improve the environment and resolve the national security
threat inherent on our dependence on foreign oil, much of it
from OPEC and many nations who do not have our best interests
at heart.
The Pickens Plan has 1.6 million members. They are the new
energy army and they are with me here today watching this
hearing on the Internet.
We have to go American for power generation. That means
renewables like wind and solar, nuclear, natural gas and clean
coal.
I am for anything that is American. Two-thirds of our
foreign oil is used as transportation fuel. Building more
nuclear plants or more solar wind farms will not make a dent in
dependence on foreign oil. However, they will help, not on
foreign oil though.
The only way we can solve the OPEC oil threat is by
replacing their expensive dirty fuel with cleaner, cheaper
American natural gas. Natural gas or anything else that is
American. Ethanol. Anything American, I am for.
Study after study shows we are awash in natural gas. We
have well over a 200 year supply by current estimates. We are
going to look like fools if we do not use natural gas for
transportation.
You have the legislation, the Natural Gas Act, H.R. 1835.
It will provide tax credits to fleet owners to offset the cost
of going to natural gas trucks as they retire existing
vehicles.
The best group outside of the Marines--if we start out to
give a mission to some group in America, the best group you
could give it to would be the Marines. The Marines are not
available for this mission, but this mission could be carried
out by America's truckers. I think America's truckers look like
Marines. Give them a job and they will do it.
If you Members of Congress point the way, we will start to
solve our foreign oil problem.
Let's dismiss two concerns I hear over and over. First,
Government does not have a role in this. Let the free markets
work, they say. If you think OPEC is a free market, you are a
sap.
China is using state owned banks to finance state owned oil
companies to lock up decades of oil production all over the
world, including Iraq.
This really does annoy me, that we went to Iraq 8 years
ago, we spent $1.5 trillion. We got 31,000 of our people
injured and 5,000 were killed. We left Iraq with nothing that I
can see.
Who got the oil? China. China did not put a dime into that.
They did not lose one person. They are going to develop two oil
fields in Iraq. One is the largest oil field in Iraq, which is
Rumaila. It is 15 billion barrels. The largest oil field we
have ever had in America is Prudhoe Bay, 14 billion barrels.
They are going to be given a field that is as large as the
largest oil field America ever had, and we leave there with
nothing.
Second, the skeptics say there is no natural gas fueling
infrastructure. Forget it. Let's look at our free enterprise
system. If you create the market, the private sector will build
it.
Can you imagine what would have happened if we had told
Henry Ford forget about building a Model T, there are no
filling stations.
It is easy. That part is the easy part. The resource is the
hard part and we have the resource.
This is about jobs. There is a lot of talk about the
economy. We estimate the Natural Gas Act will put 236,000 clean
natural gas trucks on the American roads. You will displace 5
percent of the foreign diesel demand each year and create more
than 600,000 new permanent jobs, roughly the same number of
temporary jobs created for the 2010 Census.
Each Class 8 truck, identified Class 8, that is a heavy
duty 18 wheeler, Class 8, the heaviest of heavy duty, converted
to natural gas creates six jobs. Each truck creates six jobs.
This is just the start of it. The worse thing you can do,
and I know this came up in a meeting I was in today, but do not
tax the industry at this point. It is not time to tax the
domestic oil industry.
If you want to tax something, tax either foreign oil or tax
gasoline, but do not take away from this industry and this
country at a critical time when we are trying to get off OPEC
oil and get on our own resources.
I urge your action and I want to close with this. The best
time to plant a tree was 20 years ago, no question. I have said
that and you have, too. I should have planted a tree 20 years
ago.
Just in case you did not plant it, and we do not have an
energy plan in America and have not had for 40 years, so if you
did not plant the tree 20 years ago, the second best chance to
do it is today.
We have got to have an energy plan for this country. We
cannot--I am running out of time. I will be 82 years old next
month. I have to get the energy plan fixed for America because
we cannot leave this to generations in the future.
My grandchildren and great grandchildren, and I have 13 of
them, I cannot go out of here without having an energy plan,
and we have the resources. We have the resources. All we have
to do is a plan and you have to introduce it to America, and I
promise you, we can carry it out.
Thank you.
[The prepared statement of Mr. Pickens follows:]
Prepared Statement of T. Boone Pickens, Chairman, BP Capital
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Chairman LEVIN. Thank you very much.
Mr. Abate.
STATEMENT OF VICTOR ABATE, VICE PRESIDENT OF RENEWABLES,
GENERAL ELECTRIC
Mr. ABATE. Mr. Chairman and Members of the Committee, I am
Vic Abate, the Vice President of Renewables at GE Energy, and
thank you for the opportunity to testify before you today.
On behalf of GE, I would like to commend the Committee for
its productive, pro-active positive steps over the past 5
years, and especially those taken at the height of the recent
financial crisis.
The Energy Improvement and Extension Act of 2008 and the
American Recovery and Reinvestment Act of 2009 made crucial tax
policy changes that avoided a forecast 50-percent decline in
wind installations and related jobs and resulted in a
surprising record year of more than 10,000 megawatts of new
capacity added to the U.S. grid in 2009.
GE has been a significant contributor to this growth, since
nearly one out of every two wind turbines installed in the U.S.
is a GE wind turbine. Our $6 billion wind business supports
over 7,000 direct and supplier jobs in 30 states. This is more
than a twofold increase from 2005 and has been driven by
supportive renewable energy tax policies.
For example, two of our key suppliers, TPI Composites, a
blade supplier in Iowa, and DMI, a tower supplier in North
Dakota, are utilizing the advanced manufacturing tax credit
program created in the Recovery Act to increase their
capabilities to meet our growing demand.
Sustained tax support for wind has also helped increase
U.S. domestic content from about 20 percent in 2005 to 50
percent for projects that were created in 2009. This was done
while quadrupling production. This equates to an eight-fold
increase in U.S. made wind components since 2005.
The Energy Improvement and Extension Act and the Recovery
Act include significant tax incentives for combined heat and
power, energy efficient components, manufacturing and smart
grid deployment.
Another example of how these tax credits have worked can be
seen at one of GE's appliances facilities. GE's Bloomington,
Indiana refrigerator plant was slated to close in January of
this year, potentially eliminating 547 full time jobs. Instead,
the plant remains open today to produce high efficient
refrigerators.
Over the past 5 years, tax credits have been very effective
by adapting to a changing environment.
The environment going forward for green energy deployment
will be especially challenging. The demand for wind generation
to meet standards at the state level is down. Electricity
demand is down. Natural gas prices are down. As a result, our
wind customers are finding it extremely difficult to sign
purchase power agreements with utilities at levels that can
support project economics.
The challenges facing developers have flowed down to the
turbine manufacturers who have seen new turbine orders decline
significantly from the pre-crisis levels.
In this environment, the convertible tax credit is critical
to stabilizing wind production for the next few years.
The section 1603 program of the Recovery Act is available
through 2012 for wind installations, so long as construction
begins no later than this year. Treasury guidance requires a
detailed tracking system to satisfy the 5 percent safe harbor
provision.
For a manufacturer that is mass producing 3,000 units a
year, this represents a tremendous tracking challenge.
Without a legislative solution, we can see a 50 percent
drop in wind installations in 2011 and 2012.
In the spirit of continued green energy tax policy
innovation, I have included in my written testimony policy
changes that the Committee may wish to consider, and that can
have an immediate impact on green energy growth, U.S.
manufacturing, and job creation.
Some of these are simply the safe harbor requirement in
section 1603, making available an additional $5 billion in
advance manufacturing tax credits, extending the manufacturing
tax credit for energy efficient appliances, and creating a 30
percent ITC for highly efficient combined heat and power
projects.
The ability of the U.S. to keep up in the global race for
leadership in green energy investment, manufacturing and job
creation is tied to our ability to be innovative with our tax
and other energy policies.
We appreciate the opportunity to share some of our ideas
with the Committee, and thank you for your time.
[The prepared statement of Mr. Abate follows:]
Prepared Statement of Victor Abate,
Vice President of Renewables GE Electric
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Chairman LEVIN. Thank you.
Dr. Sachs.
STATEMENT OF JEFFREY SACHS, PH.D., DIRECTOR, THE EARTH
INSTITUTE, COLUMBIA UNIVERSITY
Mr. SACHS. Mr. Chairman and Members of the Committee, thank
you for the opportunity to be here with you. This is an
unusually complicated topic because we do not have one
objective here, we have at least three fundamental American
objectives here.
The first is energy security. Second is U.S. technological
leadership, and the third is a low carbon economy.
If we do not aim for all three of these, we are not
achieving any kind of real solution for this country, and many
of the solutions that you hear and that are proposed are
solutions for one or solutions for the other of these, but they
do not reach the full range of the three core solutions that we
are going to need.
Let me also say while job creation is obviously part of
this, the way to understand job creation in this is that a
sound energy policy will make a sound economy. The direct jobs
at stake are very small relative to the size of the economy,
but energy is fundamental for the health of the economy and
fundamental for our competitiveness.
If we do not have plentiful energy, if we do not have
secure energy, if we do not have environmentally safe energy,
we will have devastation for tens of millions of jobs.
This is not in my opinion principally about creating jobs
for the individuals who sell wind turbines, with all respect. I
love GE but that is not where the big issue of employment comes
from. The big issue is whether we have a sound energy policy in
this country that allows for our economy to grow and to create
plentiful jobs.
Fortunately, the United States has many alternatives right
now, and arithmetic is extremely important here because the
alternatives must be large scale to be meaningful. There are a
hundred ways to produce energy, but there are only a few ways
that count for an economy that is the size of the U.S. economy
and in the context of the world economy.
Those include large scale deployment of solar and wind
power, the revival of the nuclear industry, the safe deployment
of large scale natural gas deposits that have been found, and
major technological changes, for example, the transition to
electric vehicles and the flexibility that would allow to our
energy system.
These technology options are extremely exciting. They each
involve 10 to 20 year national efforts. They are not something
that can be accomplished from 1 year to the next. This, I
think, is extremely important to note.
I will not describe these individual options although one
can mention and probably I should mention very quickly, in
scalability, solar, wind, nuclear carbon capture and
sequestration, something we have talked about for a decade but
have not really done almost anything on, conversion to electric
vehicles, and energy efficiency in a variety of ways, smart
building, smart grids, smart machinery.
I do not believe, by the way, that biofuels passes this
test. Certainly not the first generation biofuels which are
ecologically and from a food supply relatively a disaster. They
just do not pass muster when one looks either at any aspect of
it, carbon, ecology, food price impacts and all the rest.
These large scale technological transformations are not
easy to achieve because they are a mix of market incentives and
many other things. They are the development of pre-commercial
technologies, complementarities of public infrastructure and
private investment.
We have a very unclear regulatory framework on nuclear,
very unclear on carbon capture, very unclear on large scale
grid issues. We have very unclear public acceptance and we
completely lack a road map.
I want to agree with what Mr. Pickens said. We have
absolutely no plan right now. I listened to the Administration.
There are 100 good ideas, but there is no plan. This, I think,
is the most damaging part for our country, that we do not have
a framework that comes close to getting this right.
What is a plan? In my view, it is a clear national
commitment with targets and time tables, public funding of R&D
for pre-commercial technologies guided by a long term strategy,
public funding for pre-commercial demonstration projects, such
as electrical vehicle deployment.
In targeted cities, carbon capture and storage, long
distance transmission grids. Long term tax and other market
incentives for targeted energy systems.
I would strongly urge that this Committee urge, even
insist, that the President and the Administration set forth for
the first time an overall strategy designed to meet the three
goals of energy security, technological leadership and
transition to a low carbon economy.
Within that, it would be possible to identify strategies in
each of these respective areas.
I think at this point, Mr. Chairman and Members of the
Committee, we just do not know the net effect of our policies
right now. We do not have in almost any major area of
technology a clear road map, and we are paralyzed.
We have been paralyzed in many of these areas for more than
a decade, and we will not get out of the paralysis until we
have a plan, and that, I think, within that framework, then the
tax policy will find a natural role because it is extremely
important at a number of places.
We are nibbling around the edges right now without a real
national strategy and we are not making the large scale
technological transformation that we need to do the arithmetic
right for our country.
With all respect, if you look at the arithmetic, how much
energy we use, what it means for China to be doubling every 8
to 10 years in size, today's article about China becoming a
major coal importer, what all of this really adds up to for our
security in the next 20 years, we have not gotten started yet
frankly on organizing a proper scaled, significant 10 year
effort of an integrated strategy.
Thank you very much.
[The prepared statement of Mr. Sachs follows:]
Prepared Statement of Jeffrey Sachs, Ph.D.,
Director, The Earth Institute, Columbia University
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Chairman LEVIN. Thank you very much.
Dr. Romm.
STATEMENT OF JOSEPH ROMM, PH.D., SENIOR FELLOW, CENTER FOR
AMERICAN PROGRESS
Mr. ROMM. Chairman Levin, Members of the Committee, thank
you for inviting me to testify.
I worked in the House as a Science Fellow and I served as
Assistant Energy Secretary. My message here and in my book
``Straight Up,'' is simple, our energy policy is a Ponzi
scheme. Michigan and the country face ruin if we do not change
it.
Let's start with oil. Why do the majority of veterans of
the Iraq and Afghanistan war support clean energy and climate
legislation? Because they know we cannot keep sending $1
billion a day overseas to buy oil.
In October, Deutsche Bank forecast $175 a barrel of oil
price in 2016. The International Energy Agency's chief
economist said in August bluntly, ``We have to leave oil before
oil leaves us.''
More domestic production will not solve the problem.
President Bush said in 2006 ``America is addicted to oil. You
do not break your addiction to alcohol by switching from
imported beer to domestic.''
Same for our oil addiction. Last year, the Energy
Information Administration analyzed opening the entire outer
continental shelf to drilling. The result? In 2030, U.S.
gasoline prices dropped a mere three cents a gallon. Three
cents a gallon, from opening the entire outer continental shelf
to drilling. Not the solution.
In 2005, President Bush said ``I will tell you, with $55
oil, we do not need incentives to the oil and gas companies to
explore.'' That was $55 a barrel. Today, we are at $80 a barrel
and rising.
We just do not need those oil incentives, yet last month
the Senate passed a tax incentive bill that includes subsidies
for completion of oil wells, low sulfur diesel, refined coal
facilities, and fuel from coke. Why? Why are we doing this?
Every year, fossil fuel consumption kills over 20,000
Americans from air pollution alone and causes half a million
asthma attacks, according to the American Lung Association.
A 2008 study found prenatal exposure to coal burning
emissions was associated with significantly lower average
developmental scores and reduced motor development for 2 year
old children.
Three year old children like my daughter, they do not vote.
It is up to us to stop subsidizing harmful fossil fuel
pollution.
The worse idea yet is subsidizing coal to liquids. I sat
through many liquid coal briefings for the Defense Science
Board Taskforce. No independent group has yet found a net
societal benefit for making liquid fuel from coal. Any
significant production of liquid fuel would use up increasingly
scarce water resources. Worse, it would all but guarantee the
worse case projections for climate change.
When my brother lost his Mississippi home in Hurricane
Katrina, I started talking to the Nation's top climate
scientists. What they told me then is what the scientific
literature says now--keeping our current energy policy risks a
staggering nine degree Fahrenheit warming and five or more feet
of sea level rise by century's end.
If we did not have any greenhouse gases, the planet would
be 60 degrees Fahrenheit cooler. Carbon pollution traps heat.
That is why they call it a ``greenhouse gas.'' Think of it like
a blanket. Some people claim that if you keep putting more
blankets on, you will not keep warming. They just want us to
stay addicted to fossil fuels.
Carbon pollution is also poisoning the oceans, threatening
all marine life. As a recent documentary on ocean acidification
put it, imagine a world without fish.
Senator Lindsey Graham said in January ``The odd thing is
you will never have energy independence until you clean up the
air, and you will never clean up the air until you price
carbon.'' He also said ``Every day we delay trying to find a
price for carbon is a day that China uses to dominate the green
economy.''
Our competitors understand the fossil fuel Ponzi scheme.
They understand that in the future, we are not talking about a
few million clean energy jobs, all jobs are going to be clean
energy, or else we are just not going to have a livable
climate, and that is why their governments outspend us.
They are trying to corner the market in the technologies
that we invented. We invented the modern solar cell. They are
dominating the market.
We cannot make an economy just inventing stuff and letting
other people deploy and manufacture it. That is not the road to
high wage jobs for millions of Americans.
Until we have a carbon price, we need tax incentives for
clean energy. The good news is those tax incentives work.
The multi-year tax incentives for clean energy that the
Committee supported in 2008 and 2009 helped save the U.S.
renewable energy industry during the harsh recession.
They helped increase the share of domestically manufactured
wind turbine components in U.S. wind farms from under 30
percent in 2005 to over 50 percent today, an amazing
turnaround.
We need to add or extend several incentives, including the
section 48(C) clean energy manufacturing tax credits, the cash
grant in lieu of investment tax credit, and incentives for
energy recycling.
Finally, let me just end by saying the Center for American
Progress' Action Fund just released two reports, one on energy
taxes and one on natural gas for heavy vehicles that I would
like to request you place in the record.
Thank you.
[The prepared statement of Mr. Romm follows:]
Prepared Statement of Joseph Romm, Ph.D.,
Senior Fellow Center for American Progress
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Chairman LEVIN. Without objection. You are next.
[The information follows:]
STATEMENT OF KAREN HARBERT, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, INSTITUTE FOR 21ST CENTURY ENERGY, U.S. CHAMBER OF
COMMERCE
Ms. HARBERT. Thank you. Thank you, Chairman Levin, Ranking
Member Camp, and Members of the Committee.
I am Karen Harbert, President and Chief Executive Officer
of the Institute for 21st Century Energy at the U.S. Chamber of
Commerce.
I am delighted to let you know that in 2008, the Institute
actually submitted a comprehensive plan to secure America's
energy future, to improve its environmental stewardship and
grow our economy, and we would be delighted to continue to work
with this Congress to actually implement those concrete 90
recommendations to put us on a more concrete path for our
energy future.
Let me commend you on the timing of this hearing because
just last week, Doug Elmendorf, the Director of the
Congressional Budget Office, highlighted a report that forecast
an increase in public debt from $7.5 trillion at the end of
2009 to $20.3 trillion at the end of 2020, if President Obama's
fiscal year 2011 budget is enacted.
As we are examining energy policy, it is more important
than ever that we look to options that do not further burden
the taxpayer and provide the affordable energy that we need to
restore the 8.2 million jobs we have lost in the current
recession and create the more than 12 million jobs our Nation
will need over the next decade.
Recognizing the U.S. energy demand will increase by
probably 20 percent between now and 2030, we need a realistic
plan that transitions us to a low carbon future while keeping
our Nation strong and competitive.
It will take time. It will take investment. It will take
technology, some of which we do not even have yet.
Investment on the order of 1.5 to $2 trillion is needed in
the electricity sector alone to keep it reliable for our
economy, and for our transportation sector, we are still 94
percent dependent on oil, and to date, we do not have a
substitute for oil. Today, less than 1 percent of U.S.
passenger vehicles are plug in hybrid electric vehicles.
What are we going to do? First, we have immediate low cost
benefits which can be realized by focusing on energy
efficiency, particularly in the building sector and in the
appliance sector.
We released a report yesterday about how Federal policy can
encourage that, and rather than going through that report
today, I will just ask that it be included for the record.
Chairman LEVIN. Without objection.
[The information follows:]
Ms. HARBERT. Let me talk a little bit about renewables,
such as wind, solar, biomass and waste energy, and they are
going to be playing an increasingly important role in our
energy supply, yet today, wind and solar comprises less than 2
percent of our electricity.
We have to be realistic about the achievable expansion of
this important and valuable natural resource.
Even under the Energy Information Agency's modeling of the
Waxman-Markey bill and its significant carbon constraints, by
2030, it forecasts that wind and solar will only comprise 6
percent of our country's portfolio.
The history of fiscal incentives for clean energy in our
country is basically checkered with a boom and bust type
philosophy. We instead would propose that we extend the
production tax credits for renewable energy for 8 years
followed by a 4 year phase out, which would provide for longer
term certainty for investors, but also provide a definite
sunset, which would ensure that tax dollars do not continue to
support technologies that are not commercially viable.
If you look at the U.S., when subsidies across the U.S.
sector are compared, renewable resources continue to receive
the largest percentage of Federal dollars, and the subsidies
for wind and solar per unit of production are 80 times greater
than that of natural gas and 25 times larger than that of
nuclear.
Let's examine some other mechanisms which actually
facilitate investment without further burdening the taxpayer.
Regulatory streamlining. Nearly every single energy project
in our country is facing burdensome siting problems. We are
suffering from a plague in our economy which is called the
``banana syndrome.'' Build absolutely nothing anywhere near
anything.
The Chamber has begun to catalog these projects, all the
energy projects proposed over the last 3 years. We have
recorded 380 projects, representing 250,000 jobs, and $560
billion worth of capital investments that is on the side lines
because of abuse of the permitting process. No type of project
is immune. Over 40 percent of these projects are in the
renewable area.
Congress can eliminate many of these obstacles by
streamlining the approval process and giving investors the
needed certainty.
One clear example where Congress can be very helpful is in
interstate transmission. Getting approval to site and bid a
transmission line can take upward of 10 years. We need to fix
that by giving FERC the authority it needs.
Securing our energy future is in large part tied to the
degree we are able to accelerate the deployment of capital. The
Department of Energy's loan guarantee program is a good start,
but we would like to see the endorsement for a clean energy
bank like that discussed in the Senate.
It would be authorized to provide loan guarantees and other
financial products and ensure projects which the conventional
markets today try to avoid. A Federal approach that focuses on
addressing market inefficiencies rather than competing with
existing investors is an appropriate role for Government.
There are two other areas I would like to briefly
highlight. One is nuclear. It is very important to recognize
the tremendous benefits that nuclear provides for our economy,
not only is it 70 percent of our emissions free electricity,
but it is an economic engine with each plant contributing more
than $430 million to its local economy, employing 700 workers
at wage rates about 36 above the local average.
We estimate that if the 26 plants that are currently
pending before the Nuclear Regulatory Commission are built,
240,000 jobs would be created.
In the oil and gas phase, the oil and gas industry today
employs about 9.2 million in the United States, and it would
employ thousands more and it would contribute more in revenue
if it was allowed to do so.
We want to reduce America's dependence on foreign oil and
yet the proposals from the Administration will do the exact
opposite, constrain domestic production and increase imports.
First, they are proposing huge new taxes, $80 billion of
new taxes on the oil and gas industry. We tried this back in
the 1980s, and what happened? In 1986, imports jumped 19
percent.
The Joint Committee on Taxation's report to this Committee
for today's hearing notes the potential for that to happen if
these taxes are levied on the industry today. That is a
dangerous signal for our economy.
Second, the proposal to actually expand production actually
does not expand production. It only commits to studying future
production and actually takes leases off the table.
In conclusion, to lay the ground work for our Nation's
energy security, our environmental protection and our economic
prosperity, we need to pursue policies that put more energy
options on the table for America, do not pick winners and
losers, and certainly do not add to our exploding Nation's
debt.
Thank you.
[The prepared statement of Ms. Harbert follows:]
Prepared Statement of The Honorable Karen Harbert,
President and Chief Executive Officer, Institute
for 21st Century Energy, U.S. Chamber of Commerce
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Chairman LEVIN. Thank you. We are each going to take 4
minutes. Let me throw out a question that I hope might flush
out what I think may be differences underlying different
approaches.
If you do not mind, Ms. Harbert, I am going to take a
sentence or two out of your testimony and go down the line and
ask each of you to comment on it.
This is the quote. ``Investing in research and development,
especially deployment of new technologies, will ultimately pay
major dividends, but it is important to remember that
government should not be in the business of picking technology
winners and losers, and that research and development, while
critically important, takes time.
The role of the private sector in our future energy
security is paramount, and we should not seek to crowd out
their participation, capital, innovations or expertise.''
We heard earlier from some of our colleagues warning
against picking winners and losers. If I might ask, starting
with you, Mr. Pickens, just comment briefly. I think there are
differing underlying assumptions here that need to be
discussed.
Mr. Pickens, your comment, and then you will have the last
word, Ms. Harbert, if my 4 minutes are not up.
Mr. Pickens, your comment on what I just read.
Mr. PICKENS. It is not picking winners or losers because
you only have one resource. It is already picked. There is only
one resource we have in America that can move in an 18 wheeler
other than diesel, which is imported. It is natural gas. You
cannot move it with a battery.
I had this conversation with Senator McCain in August of
2008. He said we cannot be put in a position to pick winners. I
said it is not a multiple choice question, Senator. There is
only one resource. You need to understand it, embrace it,
explain it to the American people and move forward and get an
oar in the water.
We have to get something going. We cannot continue to talk
about this subject forever. Now we are down to a point where we
only have one resource. It is abundant. Fortunately, it is
abundant.
You have four thousand trillion recoverable gas. J.P.
Morgan says eight thousand trillion in place. You cannot
recover all that. They know that. Four thousand trillion would
give you the barrels of oil equivalent of three times what the
Saudi's claim they have, which I do not think they have what
they claim they have.
You will be three times in equivalent barrels of oil. You
will have it in a cleaner, cheaper domestic fuel than the oil
you are importing.
Chairman LEVIN. Mr. Abate. In your testimony, you seem to
be picking winners and losers. What is your comment?
Mr. ABATE. The comments were more about where the market is
today. When you look at the energy system and our energy
resources long term, it is about diversification. The way we
see it right now is with alternative energy being less than 2
percent, the question is is it going to be everything? No. It
clearly can be more, 5-10-15 percent, and that is a journey
that we can go down.
When you look at alternative energy, there is a portfolio
of ideas in there. As a technology company, we have invested $1
billion in wind. The cost of wind power has come down 80
percent in the last 25 years. It is now the most commercially
scalable alternative resource globally.
That happened with research that was d1 years ago and then
market support and the ability to deploy.
When you look at the alternative energy space, I do not see
a problem that we cannot solve. The question is we just have to
make it very clear as to the journey we are on that this is a
space we want to continue to penetrate with, and you will see
companies step up to the plate and continue to invest and build
out.
You will see solar get more competitive. You will see other
technologies become more competitive, as long as there is a
long commitment that this is a journey from a diversification
and security perspective that the country wants to be on.
Chairman LEVIN. Briefly, Dr. Sachs.
Mr. SACHS. Yes. Of course, we target technologies and have
for decades. We would not have the Internet. We would not have
a computer industry. We would not have a biomedical industry if
we had not engaged heavily in federally supported targeting of
technologies.
Here, we have many areas where we know we need to go. With
electric vehicles, we know, for example, the battery technology
is so important, but there are many other parts of the electric
vehicle transition that needs Federal support.
Solar, wind, nuclear, the new grid, carbon captures,
sequestration, are all very important large scale areas where
we will have private and public research and development
efforts that need to be complimentary to get the job done.
It is complimentarities. That is how large scale
technological change happens throughout our economy, and it is
how it has happened for decades.
Of course, we aim at many opportunities. Which one ends up
being the big winners, you are never quite sure. It is not to
go one way. If we only drove 18 wheelers, maybe there would be
one answer, natural gas, but we drive lots of things. We use
energy for lots of things as well. We need to go down many
different pathways.
Chairman LEVIN. My 4 minutes are up. I will leave it to
others. Mr. CAMP says I can take more than 4 minutes.
[Laughter.]
Chairman LEVIN. Mr. Romm, be brief, if you would.
Mr. ROMM. I have heard the phrase ``we cannot pick winners
and losers'' from back when I was at the Department of Energy
in the nineties. The trick is not to pick winners and losers.
The trick is just to pick the winners.
We know what the winners are. The winners are the
technologies that give us clean air and clean water and that
get us off oil.
The question is where do we spend the next dollar. Do we
keep cropping up the technologies that are polluting the
environment and have most of the market share or do we start
vetting on the technologies of the future, the ones that China
and Europe and Asia are trying to corner the market on, the
ones that are going to generate all the high wage jobs.
At some point, governing is about making choices. I think
we want to choose clean air, clean water and clean energy jobs.
Chairman LEVIN. Ms. Harbert, I quoted you, so you have the
last word.
Ms. HARBERT. Thank you. I think actually everybody has made
very good points. We are talking about a healthy economy, and a
healthy economy depends on a diverse set of energy resources
going forward.
Our investment strategy to spur the broad sweep of new
technologies, those types of strategies should be diverse as
well. Strength and diversity.
When government tends to get in there and manage those
choices, it tends to pick the losers, actually not the winners,
as we have seen by past government failures.
What we want to see is actually have investments made in a
broad set of technologies and then to let the market eke out
the efficiencies and the most competitive technologies rise to
the surface.
That is good for the economy. It is good for the consumer,
and ultimately it is great for exports.
We want to make sure that we are leveraging financial
resources from Government along with private capital and
expertise and not have one crowd out the other.
Chairman LEVIN. Thank you. Mr. Camp.
Mr. CAMP. Thank you very much. There has been a lot of good
testimony today. One of the things that troubles me about what
I hear is somehow oil and gas production tax credits do not
work but they are fantastic when they come to wind, solar and
renewables.
I guess my concern is given the pamphlet that the Joint
Committee on Taxation gave us that said that if you increase
the price of domestic fuels, and I am quoting, ``It will
primarily result in substitution of foreign fossil fuel sources
for domestic sources.''
You are not going to go to renewables. You are going to go
to importing more foreign oil. Obviously, one of the things we
want to try to achieve is energy independence here.
I guess I would ask Mr. Pickens and Ms. Harbert, how would
increased taxes on domestic oil and gas producers affect our
dependence on foreign oil in your opinion?
Mr. PICKENS. Excuse me. I did not hear you.
Mr. CAMP. How would increased taxes on domestic oil and gas
producers affect our dependence on foreign oil in your opinion?
Mr. PICKENS. It will not. Take the IDC, the intangible
drilling costs, and remove that, it cuts your cap X for the
industry by 30 percent. There go jobs. There go wells drilled.
There are reserves un-found.
The industry has gotten us in a spot where we are
competitive. It is up to us now to go ahead and execute, which
we have not done. You need to point to the natural gas and say
this is going to go into transportation fuel.
I know a comment here about eight million 18 wheelers is
not going to fix energy for America. No. Some place, you have
to start. You have to start.
Let's say you do the eight million 18 wheelers. That is
what we have in the country. Those go to natural gas. It is the
largest target with the smallest number of people to carry it
out.
If that happened overnight, it will not, but it will happen
over 7 years, if that happened over 7 years, we would cut OPEC
in half. That is 2.5 million barrels a day with only eight
million 18 wheelers.
I am going after the most attractive, quickest target.
Mr. CAMP. I understand. Ms. Harbert, it is going to be some
time before you can power a manufacturing plant with wind or
solar.
Ms. HARBERT. That is absolutely right. You cannot put wind
and solar in your gas tank yet.
Mr. CAMP. Not yet, and you cannot power a large
manufacturing facility, whether it be an automobile plant or
other manufacturing plant, with wind or solar yet.
If these incentives for domestic manufacturing of oil and
gas and domestic production of oil and gas are taken away, as
proposed in the President's budget, what effect will that have
on our domestic oil and gas industry and our dependence on
foreign oil and job creation?
Ms. HARBERT. I think it has three immediate impacts. The
first is it is hard to explain if we want to decrease our
dependence on foreign oil, why would we make domestic oil and
gas more expensive, because what that sends to the market is a
signal that says take your money elsewhere. That means take
your jobs elsewhere.
If we take our money and our jobs elsewhere, that is bad
for the economy. It also then does not bring more domestic
resources of which we know now we have even more than we
thought we had, and those resources will not be brought to the
benefit of our economy, so we will import more.
As I said, in 1986, we saw what happened when we enacted
the windfall profits tax, on the very companies we are talking
about. We increased our imports by 19 percent. We are still
paying for that bad mistake. Do we want to pay for it again?
Mr. CAMP. Thank you. I see my time is expiring. Thank you,
Mr. Chairman.
Chairman LEVIN. Mr. Rangel will inquire.
Mr. RANGEL. Thank you, Mr. Chairman.
Mr. Pickens, let's not talk about your age in terms of how
we have to expedite doing the right thing because it scares me.
You are going to live a long time but our time to get this time
is short. I want to thank you for the great contribution you
have made.
I just want to ask you quickly, since everyone seems to say
that your program in terms of natural gas makes a lot of sense,
have you run across any arguments that you would like to
present or to state that we should be looking out for?
Is there any downside as to why we should pay more
attention and provide incentives for the discovery of natural
gas?
Mr. PICKENS. The natural gas is the cheapest----
Mr. RANGEL. We are with you. I am asking you have you heard
anything contrary that you would want to share with us.
Mr. PICKENS. No. Let me add this one point. When somebody
does say Boone, you do not know what you are talking about or
Boone, there is something else, I always ask them okay, what is
better than what I am talking about.
Then they say, well, I do not like yours. I say then you
like foreign oil.
Mr. RANGEL. Makes a lot of sense. My time is going too
fast.
Do you think there is a need for incentives for the oil
industry to produce more oil?
Mr. PICKENS. I did not hear the question.
Mr. RANGEL. Do you think that it is necessary for the
United States to continue to provide incentives to increase the
production of oil?
Mr. PICKENS. Well, oil is not natural gas. You know that.
Mr. RANGEL. I know my question. I am concerned about your
answer.
Mr. PICKENS. My answer is the incentives as you have given
have not increased oil but has increased natural gas.
Mr. RANGEL. Do you believe it is necessarily to subsidize
oil any further and we should concentrate on natural gas?
Mr. PICKENS. I would leave the industry as it because it is
providing what we want. We have an abundance of natural gas.
Mr. RANGEL. Would you ever think that we should target
these incentives and subsidies in other industries such as
natural gas and alternatives and not consider just removing
some of the subsidies as an increase in tax?
Mr. PICKENS. If I was going to tax anything, I would tax
foreign oil. I would not tax your domestic industry.
Mr. RANGEL. Okay. Very good. Dr. Sachs, let me say publicly
how proud I am of the work that you have done over the years in
so many areas and certainly America and the world has
complimented you for these initiatives.
It seems that you agree with Mr. Pickens that we do not
have a plan and that we should have one. I am certain the
Administration would think they do have a plan.
Honorable Harbert, your testimony, is that on behalf of the
U.S. Chamber of Commerce? I know it is mentioned in your
testimony. Have they adopted the so-called ``plan?''
Ms. HARBERT. This is a plan that we have presented on
behalf of the Institute and the Chamber to the Administration
and the Congress.
Mr. RANGEL. Dr. Sachs, have you had a chance to see or hear
about the plan that the U.S. Chamber would have?
Mr. SACHS. Unfortunately, I do not know the details of the
Chamber plan. I liked many things that I heard just now, but I
do not know----
Mr. RANGEL. Could you help us out in the Committee by
reviewing her plan and any other plans that has broad based
support and see whether you can take the initiatives that the
Administration has presented and see whether you could tie that
up into something we could call a ``plan'' and that the
Committee could look at, and feel free after we get that--we
can feel free to see where people think priorities should be
given so we can work with the Administration and tell them that
what they have done may be a little bit disorganized, but we
are going in the right direction? That would be very helpful.
Mr. SACHS. Congressman, I would be happy to do that. Let me
add they acknowledge they do not have a plan at this point.
Mr. RANGEL. All the more reason I will be depending on you
and anyone else that you would be willing to share your
reputation with, and maybe we can get a plan going.
Mr. SACHS. Wonderful. Sounds good.
Mr. RANGEL. I yield back.
Chairman LEVIN. Thank you. Mr. Stark.
Mr. STARK. I thank the panelists for their input. I have
two issues. Dr. Sachs and Dr. Romm are the only other MIT
trained persons here.
I am concerned that under a cap and trade policy, economics
being what they are, that extra amounts could be allocated and
we would run into a trading frenzy in Iran or something else.
In other words, the cap and trade thing could become a market
fiasco. I think there has been some evidence of that where it
just got too complex and carried away. That is a concern.
My other concern is that my suspicion is that my idea 20
years ago of a carbon tax might be a lot simpler. Some of you
might like it. Some of you might not. I wonder if any of you
would care to comment on that, Mr. Sachs, Dr. Romm and Ms.
Harbert, whether that fits in.
Mr. SACHS. Congressman, I am not a fan of cap and trade. I
think it would be a very cumbersome, complicated way to
accomplish things that can be accomplished in a more
straightforward and with more powerful incentives.
A carbon tax, for example, is a far more persuasive policy.
The reason we do not advocate it in our politics is it has the
``T'' word in it, not because it is a poor policy.
Mr. STARK. Or a fee, whatever.
Mr. SACHS. Some combination of clear subsidies for low
carbon and taxes for emissions is far superior from an
administrative point of view, a transparency point of view, and
an incentive point of view than the cap and trade, which is
unpersuasive on all three counts.
Mr. STARK. Can the Chamber live with that, Ms. Harbert? Go
ahead, sir.
Mr. ROMM. I think the central point is the outcome which is
to reduce pollution and clean up the air. From my perspective,
you need a price on carbon. You need a shrinking cap on
emissions and a rising price.
The House already passed a bill that is called ``cap and
trade.'' It is not a perfect bill. I actually think it is a
very good bill and it would transform the U.S. economy.
It is entirely possible to design that system so that Wall
Street does not get rich. You simply do not allow--you only
allow the industries that are regulated to own permits. You do
not allow anyone else to own permits.
Obviously, the term ``cap and trade'' has been quite
successfully demonized. I think the people who do not want to
take action to preserve clean air, clean water and a livable
environment are going to go after any system and demonize it.
I think one has to keep one's eyes on the prize, which is
making polluters pay for their pollution and using that revenue
to jump start the transition to a clean energy economy.
I do not really care what you call it. I think the House is
to be commended for the bill that it passed. We will see
whether you can get 60 votes in the Senate for anything like
that.
Mr. STARK. Ms. Harbert.
Ms. HARBERT. I will just make two quick points. I think you
raise a very, very good point, that people should be very
concerned about. We are talking about creating the biggest
market ever in the history of our Nation.
There is a great deal of concern that can be manipulated,
that it will be very non-transparent, and there needs to be
significant effort given to the oversight, not just of the
market but also of the industries that have to comply with the
market.
Second, the Waxman-Markey bill that was alluded to, if that
is the cap and trade mechanism that people would want to
support, let's look at what the EI said that would achieve in
terms of renewable energy expansion. It would take renewable
energy, wind and solar, from 2 percent to 6 percent. We are
creating a huge expensive market and we are just going to
triple renewable resources.
What are we really achieving?
Mr. STARK. Thank you, Mr. Chairman.
Chairman LEVIN. Mr. Herger.
Mr. HERGER. Thank you, Mr. Chairman.
Ms. Harbert, in your testimony, you explain how difficult
it is to get any type of energy project built, specifically,
you noted that over 380 projects representing 250,000 direct
jobs and $560 billion of capital investment have not been
brought online because of regulatory barriers.
Of those 380 projects, I believe you testified that 40
percent were renewable energy projects. Can you give us a sense
of just how significant these regulatory barriers can be?
Ms. HARBERT. They are almost insurmountable. If you talk to
anybody in the energy industry, anyone in the manufacturing
industry and other facilities that are applying for permits
from the Federal Government and state governments, it is nearly
impossible to break through this hugely burdensome process.
If we are going to be competitive and globally competitive
with countries like China, we have to be able to get things
built in this country, whether it is a wind farm, a solar
array, a natural gas pipeline, a natural gas facility, we
cannot get anything built.
Capital is on the side lines. Jobs are not being created.
It is a huge, huge problem.
Mr. HERGER. Ms. Harbert and Dr. Sachs, you both mentioned
in your testimony the need to expand the use of nuclear power
as part of a comprehensive energy security plan.
I think this is a very important point that deserves to be
discussed. I am a big believer in the ``all of the above
approach.'' We need to step up domestic production of all
sources of energy and that includes renewable, but the fact is
according to the Energy Information Administration, we get more
energy from nuclear power than from all types of renewables
combined.
At the same time, we are far behind other countries in
maximizing our nuclear capacity. France, for example, gets over
75 percent of its energy from nuclear power versus about 20
percent here in the United States.
What are some of the specific policy measures either on the
tax or regulatory side that would be effective in encouraging
greater use of nuclear power in the United States?
First, Ms. Harbert.
Ms. HARBERT. Thank you for the question. You are right.
There is a huge opportunity to expand the use of emissions free
nuclear power in this country. Right now, it takes, one
estimates, since we have not done it in a very long time, about
10 years to get a project through the permitting process, and
in France, it takes five. In China, it takes five. We need to
streamline the permitting process to get these new facilities
to enter into our economy.
We also need to raise the loan guarantee authority that is
currently within the Department of Energy so we can get more
than the two or three that are going to be permitted with the
current loan guarantee authority.
We also need to make sure that the risk insurance program
that was authorized by this Congress is actually utilized and
in sync with current capital costs, since they have gone up
since this Congress initiated that program.
Let's streamline it. Let's make sure the loan guarantee
authority is properly financed, and let's ultimately make sure
that the manufacturing capability is brought back to this
country so we can manufacture the components here in this
country to supply what is a badly needed new supply of clean
emissions free electricity.
Mr. HERGER. Thank you. Dr. Sachs.
Mr. SACHS. Congressman, I agree with those statements, but
I would say that broadly, this is a matter of public acceptance
and therefore, it is fundamentally a matter of political
leadership, and that is as part of what I believe is vital, a
comprehensive national plan with the arithmetic in it, mind
you, so that we really see where we are going quantitatively.
The President could and should explain to the American
people why nuclear power has a safe and important role as part
of an energy strategy. With that, I think we would make much
faster advances on the specifics that were just referred to.
Mr. HERGER. Thank you.
Chairman LEVIN. Mr. McDermott.
Mr. MCDERMOTT. Thank you, Mr. Chairman. Dr. Sachs, Dr.
Romm, I agree with my colleague, Mr. Stark, or I think I do,
that you are not going to get anywhere in this country unless
the Congress sends a very powerful signal, either cap and trade
or a carbon tax. You can comment in a second.
I have a second question I want you both to respond to. I
want you to be policy wonks at the moment, not politicians. Do
not bring in politics.
Tell me why you would spend one more dime on coal and clean
coal technology and all this nonsense with all the water it
takes and all the problems.
In the New York Times today, Germany has a story about the
villages do not want to do carbon sequestration under the
Earth. You already have the problems in the first plant built
in the world to do this.
I would like to hear one reason why we should spend another
dime on coal in this country.
Mr. ROMM. From my perspective, obviously coal has 50
percent market share in electricity or almost 50 percent. It
has been declining in recent years.
I do not think as a matter of public policy that you throw
a lot of money at 19th Century technologies that fundamentally
are dominate in the marketplace.
The point of public policy is (a) is there some benefit
like public health or the environment that is missing in the
market or (b) do you have a new technology you are trying to
get into the marketplace.
Coal has many detrimental effects and many health
consequences for both the workers and the people who have to
breathe the air.
I have a lot of questions about that. The only interesting
technology in the entire arena of coal is carbon capture
storage. Can you gassify coal, split out the carbon and bury it
underground?
I think it is worth pursuing that as one of many
technologies. I think the evidence is it is unlikely to play a
major role for two decades. I would want to make one point very
clear.
If we are not going to price carbon, I would not spend a
nickel on carbon capture storage. If you do not price carbon,
carbon capture storage will never ever make sense. It will
always be cheaper to just vent the carbon dioxide.
Mr. MCDERMOTT. You are basically saying if we do not have
either a cap and trade market or a carbon tax, coal, there
should not be another penny spent on it?
Mr. ROMM. Honestly, I do not see why; no.
Mr. MCDERMOTT. Dr. Sachs.
Mr. SACHS. Congressman, quantitatively, coal is so
important for the world energy supply, including our own, that
if we were to rule out coal, our prospects economically would
be far, far grimmer than if we can include coal.
We really need to check whether coal can be used safely,
and we do not know that yet because in the last 10 years, we
have not succeeded in making one real scaled project on carbon
capture and sequestration.
Mr. MCDERMOTT. Why? Tell me why that has not happened.
Mr. SACHS. Because the previous Administration did not work
hard enough at it.
Mr. MCDERMOTT. They were in the oil company pockets.
Mr. SACHS. I think one could have a lot of theories but
they did have a future gen project which in 7 years, nothing
ever happened.
I think this is a tragedy because this is the same amount
of time that it took us to get a man to the moon and back, and
we could not build one coal fired power plant to test carbon
capture and sequestration during that period.
I would say, Congressman, it would be of the gravest
consequence if we cannot use coal because it is by far the most
plentiful fossil fuel on the planet, but we cannot use it the
way we are using it now safely into future decades. We need
absolutely to invest in analyzing the answer to your question,
which is an unknown answer at this point.
Since China is going to use its coal, absolutely. Since
India is going to use its coal, since countries around the
world are going to use their coal, we better find out whether
this is safe.
Since we have 25 states which produce coal, let me
predict--you asked me not to--let me predict as a politician,
we are going to use our coal, too. We better find out whether
it is safe to use.
Let me say as a policy wonk, a carbon tax is so much more
straightforward, simple, predictable, and will drive the
results where we want, and the only reason we have not done it,
they both do the same thing in terms of pricing, but we have an
allergy to a word and we have twisted for 15 years our public
discussion because of an allergy to a word.
They both have the same effect on consumer pricing.
Mr. MCDERMOTT. Thank you.
Chairman LEVIN. Mr. Neal.
Mr. NEAL. Thank you, Mr. Chairman.
Mr. PICKENS., I was intrigued by your comments that a good
environmental policy can be a good policy for our economy as
well. Like most in this town, I enjoy Tom Friedman's columns,
and he has argued that reducing our dependence on foreign oil
is geostrategic, geoeconomic, capitalistic, and patriotic.
You have cited a strategy that China has committed to with
respect to acquiring oil and meeting their future energy needs.
Could you talk to us a bit about what China is doing and
how it would impact their economy and where do you think the
U.S. should be?
Mr. PICKENS. First, China has a plan and we have no plan.
They are carrying out their plan. In the last 18 months, they
have either bought or made loans that tie up oil around the
world.
They made loans to Brazil. They have equity interests in
Northern Alberta, which was announced yesterday, bought $4.8
billion of the oil sands oil from Conoco-Phillips there.
They have loans to the Venezuelans. They have loans to the
Iranians. They have equity deals, $64 billion worth of equity
in oil they have purchased, and they spent over $200 billion.
I mentioned the Iraqi deal. I am telling you, these guys
are everywhere. They will look at any oil deal in the world. A
deal that has not been announced but will be shortly, they are
buying 20 percent in the Santos Basin in Brazil.
What does that mean? Why did they not buy 100 percent? All
they need is 20 percent to get in a position to control the
other 80 percent.
They have a plan. What is going to happen, what we are
going to find is in 2 or 3 years, that oil that would have been
on the market is going to China. They have already made a deal
for it. They are not in the market trying to buy it. They have
bought it or tied it up in some fashion or another.
If we go out 10 years from where we are today and do
nothing, we will be importing 75 percent of our oil and we will
be paying $300 plus a barrel for it.
We cannot stand it. That is $1 trillion a year that will be
going out of the country where today we are only spending $350
billion.
It will be three times what we are doing now to buy oil for
America. You know, you all talk about carbon and coal and these
other things. This is a security issue that is absolutely--it
will be a crisis state in less than 3 years.
This has to be addressed. How we get off oil from the
enemy.
Mr. NEAL. Thank you, Mr. Chairman.
Mr. STARK. [Presiding.] Mr. Johnson from Texas.
Mr. JOHNSON. Thank you. I agree with everything you have
said, Boone. I wish people would listen.
Ms. Harbert, you state the role of the private sector in
our future security is paramount. I think we agree. We ought
not to try to crowd out their participation, capital
innovations or expertise.
From your perspective, is the private sector currently
being crowded out by Government policy and control?
Ms. HARBERT. I think we are at a crossroads, Congressman,
because at the moment we have the potential of being taxed and
regulated into very uncompetitive positions, whether it is
through the oil and gas industry and putting punitive taxes on
a single industry that the other parts of our economy currently
enjoy or whether it is on picking a winner and overly
subsidizing for an endless amount of time another part of our
economy or it is in the banana syndrome, where we cannot get
anything built, so our capital markets are frozen because we
cannot get anything built because of a burdensome regulatory
process, or a very litigious society, where every project is
brought to the court system.
There is more energy policy being set in the courtroom
today than in the halls of Congress. That should be of grave
concern to you as every project is being litigated in the D.C.
Court, the Court of Appeals, to see whether we can take it
forward.
We do have the prospect of being taxed and regulated and
litigated into a very uncompetitive position.
Mr. JOHNSON. That is just Government control. You think the
private industry can take care of themselves if we give them a
chance without taxing them to death?
Ms. HARBERT. In every major crisis in the past, we have
delved into the deep well of American innovation and we have
succeeded. We have developed the technologies to solve whatever
challenge we had, and that would equally apply to our energy
and environmental challenges.
If we are allowed to innovate, if are allowed to deploy
these resources, we have the markets and we actually have been
able to break down the tariff and non-tariff barriers around
the world to actually export our technologies.
We worry today about imported oil. We should be worried
about imported intellectual feedstock, because unless we
innovate and develop the technologies and sell them, the
inverse will be happening.
I think it is a warning bell to the government that the
private sector is looking to other markets. We have companies
in the State of Texas, in the drilling area, that are moving to
Europe, because it is easier to compete there, and they have
less of a tax burden in Europe than they do in the United
States, because of double taxation.
Mr. JOHNSON. You are saying we ought to lower taxes and not
put some kind of higher tax on. Even incentives, I do not
think, work as well.
Thank you very much for your comments. Boone, I appreciate
what your comments have been. I agree with everything you have
said. Mr. Chairman, I yield back.
Mr. STARK. Thank you. The Chair recognizes Mr. Yarmuth.
Mr. YARMUTH. I thank you very much, Mr. Chairman.
I want to ask Mr. Abate, as you know, GE's plant in
Louisville, in my District, announced last year that it would
bring back from China production of a hybrid heat pump, water
heater, electric water heater, and begin manufacturing that
high efficiency product and appliance part.
How can Congress help GE and other companies continue to
increase U.S. production of great products and create more
green producing jobs?
Mr. ABATE. Yes, Congressman. We are excited about that. As
you know, there are several appliances that fall under this
incentive. Currently, that incentive expires this year.
We would like to see that extended. We think it
accomplishes a couple of great goals. One is energy efficiency
and technology leadership.
If you look at what we are doing now with our appliance
products, they are leading the world as far as energy
efficiency, and as a result, reducing the demand, which is part
of this whole climate problem as well.
We would like to see that program continue, and that is
what we support.
Mr. YARMUTH. Thank you.
Mr. STARK. The Chair recognizes Mr. Doggett.
Mr. DOGGETT. Thank you very much. First, I agree fully with
the emphasis that my fellow Texan, Mr. Pickens, has placed on
energy independence, on reliance on American natural gas as a
vital transition fuel, as we move to a cleaner energy future.
I think it is particularly important for places that are
relying on coal to move to natural gas as well as some of our
transportation fleets, and I also recall that the original
Pickens Plan placed a great deal of emphasis on American wind
power. I think it is clearly a vital component of our future.
I find any significant reliance on coal--I have always
viewed the term ``clean coal'' to be a little like the term
``dirty poison'' or ``safe poison,'' a conflict in terms. A bit
more problematic.
I support fully the effort of President Obama and his
budget to eliminate wasteful tax expenditures for the coal
industry, but find particularly problematic--you referred to
this, Dr. Romm, in your testimony--the addition of provisions
by the Senate in 2008 that they have stuck on the extender's
bill that we passed over here, specifically coal to liquids and
the refined coal credit.
Let's talk about coal to liquids first. That seems to me to
be--you referred to it in your written testimony--a good way to
waste a substantial amount of water, a substantial amount of
tax money, tax resources, and to generate a product that is
more polluting, carbon polluting, than if we just used the
petroleum based products that we already have.
Mr. ROMM. No question about it. Like I said, I have sat
through as part of the Defense Science Board actually a
taskforce on Defense Department energy strategy, because the
Defense Department itself is trying to figure out how to come
up with secure liquid fuels.
There is just no study, no independent study that finds any
net significant public value from coal to liquids. These are
staggeringly expensive technologies.
It cost $5 billion just to build a coal to liquids plant
capable of producing 80,000 barrels a day.
Mr. DOGGETT. I think we can put a lot of natural gas trucks
on the roadway for that.
Mr. ROMM. For that kind of money, you can get a lot of
clean energy. You can get a lot more natural gas, and I am
certainly a supporter of natural gas as a bridge fuel.
The other thing about coal to liquids is it uses a
staggering amount of water. It is something like five to seven
gallons of water are necessary for every gallon of diesel fuel
that is produced, and double that if you co-produce diesel fuel
and electricity from coal.
This country is not making more water. In many parts of
this country, they are suffering with more and more water
shortages.
I just do not think it makes a lot of sense as a matter of
public policy to be subsidizing coal to liquids. I have a
figure in here, a chart in here, which shows from the
perspective of heat trap and greenhouse gases, coal to liquids
is more than double that of regular diesel fuel and almost any
conceivable alternative, including just turning natural gas
into liquid diesel fuel, which would also make a great deal
more sense, frankly, than turning coal.
Mr. DOGGETT. This refined coal credit, it was the second
one added on. It sounds a lot like the boondoggle that was
called the ``syn fuel credit'' back in the 1900s where people
would spray on a little coal tar or pine tar or starch
theoretically to change the substance of the coal to milk the
Treasury.
Can you comment on this refined coal credit and whether it
offers any benefits?
Mr. ROMM. I just would like to say----
Chairman LEVIN. [Presiding.] Do it briefly. I have just
been told we are going to have votes fairly soon. We are going
to face a dilemma.
Mr. ROMM. I think it does not make any sense to incentivize
the greater use of coal. The only context in which it makes
sense is a climate bill that places a price on carbon and then
you do want to find out if carbon capture and storage is
viable.
These other coal tax credits are just subsidizing the
combustion of a fuel that harms human health directly.
Mr. DOGGETT. Thank you.
Chairman LEVIN. Mr. Thompson.
Mr. THOMPSON. Thank you, Mr. Chairman. Thank you all for
being here to testify.
Mr. Abate, one of the issues that I am interested in is the
storage of renewable fuels. It is a problem right now. If we
are able to solve it, we can do a lot of good, I think, by
being able to address peak demand times and the like.
I would be interested to know what your company, GE, is
doing to advance the storage of renewables and what you think
Congress should be and could be doing to help along those
lines.
Mr. ABATE. Yes, Congressman. I think you are correct to be
talking about storage. Clearly, it is going to be a challenge
that has to be addressed.
In our view, on a massive scale, it is more of a 2015 and
beyond timeframe, other than places like Hawaii or other land
constrained regions. The country currently has the ability to
put in a lot of renewable power over the next several years and
manage it with the system we have.
If you look at what we are seeing as the wind is continuing
to get installed, it is very complimentary to natural gas.
This country has built hundreds of billions of dollars of
tremendous gas turbine generation, very efficient combined
cycle systems, so the way we are storing wind energy today is
we are essentially leaving the gas in the ground or leaving the
coal in the ground, and there are control systems to make that
all work and they are really part of the focus we have now.
Longer term, we are investing in battery storage and other
technologies. We just announced a battery plant in Schenectady.
We are looking at this more as an R&D effort.
I think the question is the cost effectiveness going to be
there. Today, if I sold a turbine to a customer that had
storage capability, I do not think they would pay me twice the
price for it, and you need to get to a point to be able to pay
for the equipment that goes in it.
It is going to be cost challenged. Tax credits to support
to continue the investment but long term, companies are going
to need that to be able to get the penetration levels over 10-
15-20 percent on a big scale.
Mr. THOMPSON. Thank you. Dr. Romm, we are told we can save
about $50 billion in energy costs by providing greater
efficiency for energy industrial and manufacturing sectors.
What do you think Congress should be doing to help promote
that?
Mr. ROMM. I think there is no question about that. I think
a couple of these tax credits, the combined heat and power, the
recycled energy, expanding that, I think that is critical.
The amount of energy that is wasted and wasted heat that
goes up our smoke stacks is equal to all the energy Japan uses
for every purpose.
Capturing some of that energy in industry and power
generation is critical. Of course, the manufacturing tax credit
that was in the stimulus, I think, has been very successful. It
needs to be extended and expanded. I think there is probably
general consensus on that.
Mr. THOMPSON. Mr. Pickens, you had mentioned that if you
had to tax something, you would tax imported oil. I have heard
from a lot of folks in my district that is something they think
we should be doing, that will help drive us away from there,
capture those tax dollars, and then use that to address our
energy issues, use that money to address our energy issues
here.
If we could do that and without running afoul of some of
the trade stuff that we have to deal with, do you see any
problems that might accrue from that, any externalities that
might surface?
Mr. PICKENS. No, but I think you may have the trade problem
on taxing the foreign oil, but I would not be opposed to taxing
gasoline.
I think we are going to need money from somewhere. We know
that. Gasoline tax, no question, it would cut consumption, and
that would be good if we did that.
The cars would become more efficient. We will go to light
duty, more to a hybrid, which is good.
Once again, anything that is American, I am for. If we
could cut, for instance, let's say we could cut OPEC in half in
7 years, that would recover for us $100 billion a year back
into the United States.
I do not know valuable that is. Let me take you back to a
point I want to make. I may not get a chance to do it. Go back
to the security issue for 30 seconds. That is all I need.
The State Department recommends that we not travel to
countries that we get 40 percent of our oil from, excuse me, 40
percent that the OPEC oil is from. Forty percent, they
recommend we not travel there.
If that is not getting oil from a questionable source, I do
not know what it is. Just say that 40 percent of the OPEC oil
cut us off, you would be talking about two million barrels a
day. You would be looking at 200 to $300 a barrel of oil in a
minute if that happened to us.
We have got to get loose from this.
Mr. THOMPSON. Thank you.
Chairman LEVIN. We are going to have four votes. I think in
fairness to the panel, we should try to finish.
Mr. REICHERT, you are next. There are three or four others.
Do you think you would agree to 3 minutes so we can finish?
Let's try, okay?
Mr. REICHERT. I always seem to be in this position. I am
just pleased to be here, sir. Thank you.
Chairman LEVIN. So am I.
[Laughter.]
Mr. REICHERT. Thank you, Mr. Chairman. I am pleased to take
3 minutes.
I want to focus on the job question. Ms. Harbert, if I
could direct my question to you. We are here today to consider
some tax incentives to spur development of new energy.
Americans want jobs. They want new energy, but they want
that energy, as Mr. Pickens has said, to be American energy.
If it is natural gas or whatever else we can imagine into
the future as the new energy source to power our vehicles and
our factories, boy, would it not be nice to be secure, as Mr.
Pickens also said, to have that security, have jobs, have the
economy going, so there is a balance here that we have to
strike, I understand.
I just want to ask you a question. We have been working
together. The American people also need to know there is
bipartisanship occurring here in this Committee.
Mr. KIND and I are working on a bill that actually puts
together a package of tax incentives for energy efficient
retrofits of homes and buildings. It is H.R. 4226, if you on
the panel are interested in looking at it.
Not only is Mr. Kind a part of this, but Mr. Davis of
Kentucky, Mr. Blumenauer, Mr. Thompson, Ms. Schwartz and
others.
The question I have is you have noted the savings that such
efficiency measures can produce, can you comment on the job
creation potential of incentives for energy conservation and
how retrofitting homes and buildings can get more Americans
back to work, and second, still focusing on the job issue,
which is the number one issue for Americans today, in terms of
creating more immediate and sustained jobs in the near term,
would you say energy efficient tax incentives bring a greater
return on our investment compared to other energy incentives or
large scale subsidies?
Ms. HARBERT. Thank you for that question. I will try and be
brief. First of all, on energy efficiency, the next best source
of energy is the one we currently waste every day, so we need
to make it attractive for people who are moving new commercial
buildings and are in existing buildings to actually put in the
infrastructure necessary to save energy, and that will create
manufacturing jobs here.
It will create the development of technology, some of which
is GE and others, they will be selling the technologies and the
appliances, et cetera, to improve the efficiency of what
consumes a significant amount of energy here in the United
States.
It is an opportunity to create some jobs and certainly to
save energy.
On the broader question about creating jobs, we need to
think about this, not just about creating green jobs, but about
creating a healthy economy. We need to create 20 million jobs
over the next 10 years, and clearly not all of those are going
to be green jobs.
We have to be realistic about what percentage of those are
going to be in the energy industry versus how much are actually
going to be in unrelated industries.
We need to make sure we have affordable energy, reliable
energy, that will underpin a healthy economy and not self
select which parts of the economy and which parts of the energy
economy we seek to stimulate.
Mr. REICHERT. Thank you. Mr. Chairman, I yield.
Chairman LEVIN. Thank you very much. Mr. Larson and then
Mr. Blumenauer.
Mr. LARSON. Thank you, Mr. Chairman. Thank you for this
thoughtful and provocative hearing. I want to thank all of the
panelists.
I especially want to give a shout out from the people at
Augie's and Ray's in East Hartford to Mr. Pickens and thank him
for being there back in November.
It seems as though there is great unanimity amongst the
panel that we do not have and have not had for more than 40
years a plan as it relates to energy. It also seems there is
general consensus about the need to be comprehensive in our
approach.
There also seems to be an awful lot of consensus that in
terms of natural gas, there is unanimity that this is
definitely a way we should go.
Mr. Pickens raised an intriguing point. He said he was not
opposed to taxing gas. Mr. Neal raised the point early on about
Thomas Friedman and his articles about how we continue to
export dollars abroad that essentially go into the hands of our
enemies who essentially arm the very terrorists who are going
after our troops.
A question to the panelists, and we will start with Ms.
Harbert, would you agree with Mr. Pickens that if we are
looking at something to tax, that gasoline perhaps is the way
to go?
Ms. HARBERT. I will go back to something that Chairman
Bernanke said earlier this week, which is we are in such dire
financial straits, we are going to have to raise taxes or cut
spending or do both.
I think before we decide what we are going to tax, we need
to fully explore all the options so that we do not increase the
burden on the American taxpayer.
Mr. LARSON. Would you be opposed taxing gasoline?
Ms. HARBERT. I think we are talking about how much and what
the revenue would be used for. If it just evaporates, then it
is not seeking to do anything useful for the economy.
Mr. LARSON. Let's say the revenue is put into building 18
wheeler trucks and powering them with natural gas, the plan Mr.
Pickens has laid out?
Ms. HARBERT. I do not know how you actually put that
revenue there. I think it is an excellent question. The
question for policy makers to think about is how much in this
economy and what would the money be used for ultimately.
Mr. LARSON. Let me go down the list of the panelists. I
know our time is brief.
Mr. ROMM. I tend to prefer to raise the price on pollution
rather than one particular fuel. I think the revenue should
largely be given back to the consumers and businesses. Some
used for clean energy. At some point, we are actually going to
have to reduce the deficit, but I think the focus has to be on
reducing pollution and promoting clean energy at this point.
Mr. LARSON. Mr. Sachs.
Mr. SACHS. I think a gasoline tax makes sense, but one that
I do not think is fully reflected in our conversation today is
the incredible opportunity with electric vehicles to absolutely
affect positively many of the dimensions that we are talking
about right now.
If we go to electric vehicles in a significant way over the
next 15 years, our oil dependence drops considerably. We get
clean vehicles. We have a much more flexible power system, and
we get storage, by the way, of intermittent power sources
because the batteries of a vehicle fleet will vastly provide
the storage that we are going to need to smooth out the peaks
of demand.
One thing that any comprehensive energy plan should have in
this country is attention to the conversion of our fleet, the
automobile fleet, not the 18 wheelers, but the automobile
fleet, to electric vehicles. That is within reach and that is
where America should take a technological lead, and this
committee should help to do that, I think.
Mr. LARSON. Mr. Abate.
Mr. ABATE. I would just comment that relative to security
and pollution, diversity and domestic content, I think there
are many aspects and many ways you can go at this. The question
is what problem are you trying to solve.
I would look at this more holistically than just one
particular target.
Mr. LARSON. Mr. Pickens.
Mr. PICKENS. It was my idea. I like it.
[Laughter.]
Chairman LEVIN. I think that ends that discussion. That is
the best short answer we have heard in quite a while.
Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. I appreciate the
reference. I think it may have been Dr. Romm talking about the
water limitations, something that has not come forward.
Our ethanol costs 28 gallons of water per mile. One of the
big limitations in nuclear, and it is going to be a bigger
problem in the future, is that it is the most water intensive
of our energy sources, and in a time of global warming climate
change, reducing snow pack, it is going to be harder to have
the water to do it.
I have been taken aback a little bit by some of the
conversation here today about picking winners and losers. I
appreciate some of our panel pointing out that the United
States has been in the business of picking winners and losers,
starting with the transcontinental railroads through the
Internet and according to Mr. Abate's testimony, it looks like
our efforts at betting on a green economy is paying some
dividends right now in terms of diversity of energy supply and
creating jobs.
I like the notion that several of you mentioned, Mr. Sachs
and Mr. Pickens, about having a vision for how this fits. Not
just an energy policy. I would be prepared to argue that it is
for how we rebuild and renew America, transportation, water,
energy, all of this ought to fit together.
There is a way to finance it. I am pleased Mr. Pickens
talked about gas tax. Others of you did. The Chamber has
testified here before this committee that they would favor a 5
or 10 cent a gallon increase now.
I am hopeful that we can think a little different about the
cost equation, because a lot of costs get swept away. We have
had reinforced in the last 10 days the cost of coal production,
100,000 Americans have lost their lives in the coal industry.
How we factor in mining lives, air pollution deaths of coal,
bulldozing mountain tops into streams, there is a lot going on
here.
The thing that is most vexing for me is I am hearing that
somehow if we make a small adjustment in some of the subsidies,
that it is going to destroy our oil and gas industry in the
United States.
My recollection is our per barrel price in the last 3 days
has varied from about $84 to about $85.94. That, I think, is a
global price for a fungible product.
I would like to know what any of our witnesses think would
happen to the global oil price and global oil production if a
few hundred million or a few billion dollars are factored out
of what for the United States is two-thirds of $1 trillion a
year, in a global oil market.
What is really the impact that is going to be and who is
going to get the benefit? Global oil markets or it will be
somehow just the United States?
Mr. Sachs, do you have something you want to say? Others
can chime in. And if you think we do not have a global oil
market.
Mr. SACHS. We definitely have a global oil market and if I
understand your point, Congressman, small changes that we make
domestically are not going to be the main drivers of the global
oil price. That is absolutely certain.
Mr. BLUMENAUER. Does anybody else here dispute that? Mr.
Pickens.
Mr. PICKENS. I am not going to dispute it. I would like to
comment.
Mr. BLUMENAUER. I want to get the point here, that it is a
global price and oil companies are going to go where they can
make money on the oil price, the global oil price.
Mr. PICKENS. Let me just comment. If you get on natural
gas, your own resource, you can bring the price of oil down,
but as long as you go back to the global market for more and
more oil, all you do is send a signal that you are there and
you are going to have to pay for it.
There is 85 million barrels of oil produced every day in
the world. We are using 21 million. We are using 25 percent of
all the oil with 4 percent of the population.
Mr. BLUMENAUER. I agree with your point. I want to get to
the notion that somehow if $1 billion is lost out of all these
subsidies, that somehow that is going to have a profound effect
on the global oil price, and if it works, we are going to lower
the price of the oil for people around the world.
Ms. HARBERT. Congressman, that is two different questions,
I think.
Mr. BLUMENAUER. Mr. Chairman, I would welcome a written
follow up.
Chairman LEVIN. Yes, let's do that.
Mr. BLUMENAUER. I would really welcome the facts on that.
Thank you.
Chairman LEVIN. I think this is going to work. Mr. Boustany, you are
next, and then Mr. Pomeroy.
Mr. BOUSTANY. Thank you, Mr. Chairman.
Chairman LEVIN. It is Mr. Boustany, Mr. Davis and then Mr. Pomeroy.
There are three of us left to inquire before those bells ring.
Let's try to do it in 3 minutes each. Thank you.
Mr. BOUSTANY. Thank you, Mr. Chairman. Dr. Sachs, I
appreciate your very succinct statement of the three goals. I
think that is important, and the fact that we lack a strategy
and we need a strategy. I think there is a big difference
between strategy with regard to energy versus just policy.
Also, the need for a realistic transition strategy. I think
we all have been talking a little bit about natural gas. I know
Mr. Pickens has made that a big focus.
I am very concerned because we have the appeal of certain
tax provisions in the President's budget proposal with regard
to the oil and gas industry, and these will hit our smaller
independent operators, American producing companies, that hire
a lot of folks in my State of Louisiana and Texas and the Gulf
Coast.
We know what happened in 1986 with the windfall profits
tax. We lost a lot of really good workers who dispersed around
the globe. We lost a lot of technical know-how, and our
imports, as Ms. Harbert pointed out, jumped 19 percent.
We have to make a distinction between oil and natural gas.
I am concerned about these tax increases that will also have an
impact on our natural gas industry. Natural gas is at a pretty
cheap price right now. If you put these taxes on the natural
gas producers, it makes it less likely they could extract gas,
particularly from shale, which is more expensive.
Mr. Pickens and Ms. Harbert, I would like you to comment on
that. I know with hydraulic fracturing, there is a lot of talk
about making it more cost prohibitive for the regulations on
it.
This is going to hurt our energy security in the long run,
would you not think?
Mr. Pickens, if you do not mind?
Mr. PICKENS. If you increase taxes, it will cause a
problem. Of course, it will. We have the cheapest natural gas
in the world today. We are cheaper than Mideast natural gas. It
is obvious that the industry has delivered on the natural gas.
The technology has been advanced. Everything has worked in
this way.
I do not think it is time to tax them. If we get on the
natural gas, it is the cheapest--let me give you a quick
comparison. For one MCF of natural gas, it equals seven gallons
of diesel. One MCF. That is $4. Seven gallons of diesel is $21.
We are paying $21 for foreign diesel and we have a resource
in America that we could replace it. By the way, the natural
gas is 33 percent cleaner than diesel. You get every advantage
here at a fraction of the cost.
Mr. BOUSTANY. Ms. Harbert.
Ms. HARBERT. I think you have three immediate impacts.
There would be a disincentive to produce. There will be a
disincentive to innovate and develop technologies that will
increasingly allow us to produce these resources cleanly, and
it will drive the smaller guys out of business. That is bad for
America.
Those businesses cannot leverage that risk in other
operations and other parts of the world where some of the
larger companies can. The smaller guys go away. We reduce the
ability to produce and we certainly take away the incentive to
innovate.
Mr. BOUSTANY. Thank you.
Chairman LEVIN. Thank you. Mr. Davis.
Mr. DAVIS of Illinois. Thank you very much, Mr. Chairman.
Dr. Sachs, you state rather succinctly in your written
testimony that energy policy will not solve the short term job
crisis over the next 18 to 24 months, but unless we have a
sound energy policy, the short term crisis is going to become a
long term crisis.
How impactful do you think our energy policy or lack of is
on the overall job crisis that we face?
Mr. SACHS. I think that already the lack of a clear energy
and climate strategy, remember, I am talking about the mix, is
weighing heavily on our capacity to generate good jobs over a
time horizon of 5-10-20 years.
I am very worried about the fact that we cannot decide what
kind of power plants to build. We cannot decide what kind of
industries to sponsor right now. We cannot decide what to do
with electric vehicles, to really make it work.
That is where we are going to lose lots of jobs down the
road. What I am saying is I do not think in the next 18 to 24
months any of this is decisive, but 5-10-15-20 years, how
viable is our economy going to be if we are facing instability,
soaring prices, and we have not resolved any of our
technological leadership in these areas, then it will be very
serious.
Mr. DAVIS of Illinois. Thank you. Mr. Pickens, you make a
real case for increased use of natural gas. Why do you think it
is so difficult to have your thoughts, ideas and concepts
really become a core part of our energy policy?
Mr. PICKENS. I did not hear the last part.
Mr. DAVIS of Illinois. I like your positions. Why do you
think it is so difficult?
Mr. PICKENS. The reason we are in the spot we are in, very
simply, is we have never had the leadership that said let's use
our own resources, but in defense of that decision or the lack
of a decision, we have had cheap oil.
Cheap oil keeps coming to us and it is so easy to have it
and to use it, but go back to Nixon in 1970. He said at the end
of the decade, we will not import any oil, any oil in the
seventies. At that point, it was 24 percent. At the end of the
decade, it was 28. Today, it is 68. We will be in 10 years at
75.
Because of cheap oil, we keep drifting and drifting. All at
once, whether it be in the closer I get to the end, not of my
remarks but of my life, the closer I get to the end, the more I
realize that divine intervention does show up from time to
time.
This is exactly where I see us today. We got lucky. We got
lucky and came up with four thousand trillion cubic feet of
natural gas. It is cleaner. It is domestic. It is competing
against foreign dirty and it is cheaper.
How in the world did that ever happen? I just gave you the
reason I think that.
Mr. DAVIS of Illinois. Thank you very much.
Chairman LEVIN. Mr. Etheridge, I think you are next and
then Mr. Pomeroy, and if we each take 3 minutes, we will be in
good shape.
Mr. ETHERIDGE. Thank you, Mr. Chairman.
Mr. Pickens, let me ask you a quick question. I remember
before I came to this body, I was a state superintendent of
schools in North Carolina. I had a few buses on natural gas. I
assume they are still operating.
My question is broader than that, not only are we talking
about buses and trucks, what do you see as the challenge,
because the bulk of the fuel used in this country really is in
automobiles and small vehicles, but what do you see as the
challenge if you move to natural gas in those as well?
Mr. PICKENS. The light duty?
Mr. ETHERIDGE. Yes, sir.
Mr. PICKENS. This is the way I see it unfolding. Go ahead,
and we are hunting with a rifle here, not a shotgun, so we are
going after the eight million heavy duty. Go ahead and go after
those. Go after them hard and let's do it quickly.
Then let the good tentacles that will come out of that go
wherever they want to go into the transportation, and do not
pick winners in this. I think there is a very good chance that
light duty will go to the hybrid or go to the electric car. Let
it go. Get off the OPEC oil.
Go ahead and give your model at the top, the biggest users
using 20,000 gallons a year per vehicle, go for those, knock
them off, and then I think natural gas will just have to
compete for the light duty with whatever else is available. For
heavy duty, we only have one choice.
Mr. ETHERIDGE. Thank you. Mr. Abate, you spoke about how
important it is giving businesses the ability to plan with
renewable energy production tax credits over a period of time.
As you know, there has been tremendous growth in green jobs
since some stability was put in the tax credits. What are the
prospects of continued growth in these areas if that is
instituted and we put together a plan for the long term?
Mr. ABATE. If we have a plan for the long term, you will
see this industry continue to grow. I think right now, there
are a lot of challenges, as I stated in my testimony. I think
clearly the next couple of years, we are living more off the
backlog versus a new order activity and project development
occurring going forward.
I think everybody is waiting for a plan similar to Europe
with a 20/20 or the directive in China--a 100 gigawatt
commitment. Once that commitment is made, this country is going
to build out a real infrastructure and you will see investments
in factories happen very fast.
We have right now 12 suppliers that we want to bring to
this country, but by the time they come online, those projects
will be operating in 2013. There is no policy for renewable
energy in 2013. They will not make that investment until that
timeframe is extended.
Mr. ETHERIDGE. Thank you. Mr. Chairman, I yield.
Chairman LEVIN. Mr. Pomeroy, you get the last.
Mr. POMEROY. Thank you, Mr. Chairman. I thank the panel for
their long indulgence.
Mr. Abate, I would just observe that North Dakota with its
fabulous wind source as well as a magnificent blade
manufacturer, as well as a magnificent tower manufacturer, is
only missing a turbine manufacturer. This is not a question. I
just note it for the record.
Mr. Pickens, you electrified the audience with your vision
of greater roles of wind and natural gas. I want to ask, we did
not get a chance to discuss it extensively on that occasion.
I will direct a question here while you talk to Charlie. I
will come back, Boone.
Ms. Harbert, you indicated, I think, an important point,
that advancing the tax proposals of the Administration relative
to fossil fuels, oil, especially, would hurt production, hurt
innovation, and diminish the participation of independent
players in developing this resource.
In North Dakota, just to put a case study on what you have
said, we have had principally independent oil producers,
basically through extraction innovation, horizontal drilling
and the fracking, untap the miracle, that means four billion
barrels of recoverable oil in North Dakota alone, domestic
supply.
Clearly, this has been built on the Tax Code as it
presently is, and as we build out development of this major oil
play, bringing greater oil sufficiency to our marketplace,
abolition of these provisions of the Tax Code would clearly
reduce the rate we recover this domestic supply now made
available in part because of the structure of the existing Tax
Code.
Is that correct?
Ms. HARBERT. These are long term investments that need
certainty, and introducing and changing the type of contractual
underpinnings would be very, very bad policy and it would have
very big implications on production and innovation and the size
of the businesses you are talking about.
We have huge reserves. Why would we be doing something to
constrain the production for the benefit of our economy right
now?
Mr. POMEROY. Mr. Pickens, as someone with such long
involvement in the industry, I would like your comment on that
for the balance of my time.
Mr. PICKENS. Long involvement is right. I got out of school
in 1951 as a geologist and I have been in it ever since.
The Bakken and Williston Basins, North Dakota, of course,
is part of the Williston Basin. That again, you have a
question, that oil showed up at a funny time in America. I mean
a funny time, a good time, a fortunate time for us.
Four billion barrels is a lot of oil. It is a lot more oil
than we found in the last 10 years in the United States.
You are going to find technology is going to advance us a
long way, but you do not want to slow down the industry at this
point. Turn them loose. Let them go. Try to fix the problem.
Mr. POMEROY. Thank you very much.
Chairman LEVIN. Mr. Camp.
Mr. CAMP. I also want to thank the panel. This was a very
helpful panel. I appreciate all of your time and effort and
your good testimony. Thank you very much.
Chairman LEVIN. I want to very much say to all of you very,
very busy people involved in so many activities, many, many
thanks. It has been informative, and I think really a brilliant
panel.
I think it helps lay the foundation for further work of
this Committee.
We will stand in recess. The third panel has been very
patient. My guess is we will be back in about half an hour to
45 minutes. Around here, you are never quite sure. We stand in
recess. We will start with the third panel as soon as we are
back.
[Recess.]
Chairman LEVIN. The Committee will come to order. Mr. Camp
and I and our colleagues are really very sorry. There was
intervening business and it made the delay any longer. You are
the most patient people in town, at least at the moment.
What we will do is start the hearing, and we will make sure
your testimony is very well distributed. We will take extra
steps to make sure what you present is considered.
We will go down the line. Stephanie Burns, Dr. Burns, is
Chairman, President and Chief Executive Officer of Dow Corning
in Midland, Michigan.
The Honorable Reed Hundt, Chief Executive Officer of the
Coalition for Green Capital. Welcome to you.
The Honorable Rod Dole, who is the auditor, controller,
treasurer, tax collector, four hats, of Sonoma County, and I
think Mr. Thompson, you want to say a special hello.
Mr. THOMPSON. Just that he is a great guy. We have worked
together for a long time, known each other for a long time. If
anybody can handle all of those hats, he is the guy that can do
it, and I am really glad you are here testifying on the great
work that you are doing in Sonoma County on an issue that we
all care a great deal about.
Mr. DOLE. The respect is mutual. Thank you, Mike.
Chairman LEVIN. Mr. Thompson reminds everybody as to where
he comes from and the issues that matter most to him.
Mark Bolinger is a Research Scientist with the Lawrence
Berkeley National Laboratory, also in Berkeley, California.
The Honorable David Bohigian is the Managing Partner of E2
Capital Partners in Bethesda, Maryland.
We give you a special welcome. I think, Mr. Bohigian, you
have the least far to go after sitting here all day. We really
doubly thank all of you for taking the time.
You probably were able to hear some of the last panel. I
hope you were not here for the first panel, which means you
would have been here all day.
Again, a special thanks. I think, Mr. Camp, you agree, this
has been a particularly informative panel, so we will be doubly
sure that your testimony is well distributed and we hope well
understood.
I think we will start with you, Dr. Burns, and just go down
the row, and if each of you would take 5 minutes. If you want,
you can refer to your testimony. In any event, it will be
entered into the record.
STATEMENT OF STEPHANIE BURNS, PH.D., CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER, DOW CORNING
Ms. BURNS. Thank you very much, Chairman Levin and
Representative Camp, for the opportunity to be part of this
third panel, an important panel today, and to represent
Michigan.
As to the growth of renewable energy in America, in
particular, solar is very important to me personally and
professionally, as a scientist and as a Chief Executive
Officer.
I really do believe our country is at the dawn of a new
energy era, a transformation that will provide more clean
energy, options like solar, wind and other renewable sources,
as well as energy efficiency products that will change the way
we purchase and use energy in our lives and in our businesses.
Dow Corning is one of the world's leading manufacturers of
silicon based products, contributing technology and materials
along the entire solar value chain. Most notably, at the very
beginning of the manufacturing process, with polycrystalline
silicon.
We are also involved in a number of energy efficiency
technologies from automotives to appliances and especially in
green building construction.
As a result, I know firsthand that America's energy
transformation is inextricably linked to our Nation's economic
and manufacturing future.
This transformation calls for new partnerships, requiring
the joint leadership and investment of the government and
private industry. Working together, we can achieve innovative
policies and prescriptions that address education and workforce
development, advancement in manufacturing, technology
deployment and market readiness.
With forward thinking leadership and management, this
transformation will bring with it new industries, hundreds of
thousands of new jobs, a sustainable source of economic growth
and a reduced carbon footprint, all good for our country and
for our global environment.
For our part, Dow Corning has announced more than $5
billion in investments in solar technology and manufacturing
capability in the past 5 years.
While most of that is in capital for advanced manufacturing
operations in polycrystalline silicon and in saline for
flexible thin film solar applications, it also includes
research and development to improve the performance and cost
efficiency of solar cells and modules, and investments in
training and education in our local communities.
We have been on the receiving end of economic development
offers from other nations, nations that have aggressive
policies to support the growth of renewable energy in their
country.
Companies like ours predisposed to manufacture in the
United States are attracted by foreign tax structures that
encourage them to do otherwise.
It is time for America to enact policies that will
essentially assure this industry growth here. If we have a tax
structure that encourages investments and job growth, coupled
with an increase in domestic consumer awareness and demand for
renewables, the U.S. will win.
The advanced energy manufacturing tax credit included in
the American Recovery and Reinvestment Act was a significant
first step toward establishing that winning combination.
The tax credit is encouraging companies like mine and our
joint venture, Hemlock Semiconductor, to manufacture solar and
other renewable energy components here in America.
As a result, we are seeing thousands of jobs in
construction, engineering, science and skilled trades.
I am pleased to tell you that Dow Corning benefits from the
advanced energy manufacturing tax credit. Our customers are
benefiting and green jobs in our operations are real and
affecting real families.
As you know, this tax credit was capped at $2.3 billion,
and was significantly over subscribed. That is a good thing.
Both the White House and the Department of Energy indicate that
many qualified projects were not funded.
With that in mind, I hope this credit can be made permanent
or at least long term in any energy climate or jobs bill now
under development.
The permanency will help businesses, large and small, plan
for capital investments in the U.S., and more importantly, it
signals that this country is serious about leading in the
global renewable energy sector.
To build on that and to truly implement the transformation
before us, Dow Corning proposes a four point plan to address
technical legislative regulatory manufacturing and workforce
related factors that influence America's ability to develop a
thriving domestic renewable energy industry.
First, we encourage Congress and the Administration to
enact new Federal policies and regulations that will encourage
the rapid development and deployment of energy efficient and
renewable energy technologies.
We can create new jobs and businesses and promote U.S.
competitiveness in the global markets and improve the
environment and increase our energy security.
We propose a robust Federal renewable energy standard and
Federal interconnection and net metering standards, all part of
the larger effort to increase the adoption by Americans.
I have already mentioned the immediate need for Federal tax
incentives to spur domestic manufacturing and compete in the
strength of foreign offerings.
Despite anticipated domestic growth in renewable energy
installations, the majority of manufacturing occurs outside the
United States, in such countries as China, Germany, Malaysia
and the Philippines, roughly 40 percent of the manufacturing
tax credits in high demand markets.
Let's make sure when a corporation is looking to build a
manufacturing facility the competition is between the states
here at home and not countries overseas.
Second, we advocate for increased Federal funding for
research and development to accelerate solar technology
innovation and to advance solar manufacturing capabilities.
We are already today ready to provide seed moneys for an
American solar research consortium. Dow Corning has spearheaded
this concept. We have customers, shareholders and universities
ready to join us in this consortium, even the State of Michigan
is committed to providing funds. However, the state requires a
Federal match.
Today, $6 million in Federal matching funding would move
this consortium from a concept to immediate ground breaking,
and this consortium would move solar technology faster to the
marketplace.
Third, we support the need to develop green collar
workforces by supporting training programs, like the programs
we are already co-sponsoring with Delta College in Michigan and
with Austin Peay State University in Tennessee, as well as
training partnerships with non-profit organizations and centers
of excellence at academic institutions nationwide.
Fourth, we need the Federal Government to lead by example
in the implementation of clean technologies, through
procurement of on-site generation, building retrofits for
energy efficiency, and new green building standards.
Finally, but certainly no less important, Congress must
ensure that new policies to reduce greenhouse gas emissions do
not inadvertently discourage growth in the manufacturing and
production of renewable energy sources.
Yes, we are in favor of a Congressional solution to the
greenhouse gas regulations.
I am proud to be one of the more than 10,000 Dow Corning
employees who are coming to work every day energized to be part
of the solution. We are committed to a climate of
collaboration, creativity and urgency for greater energy
security.
As a global company, we know that it is fundamental to
protecting our Nation's competitiveness in the decades to come,
and fundamental for our economic growth.
We are hopeful that Congress will continue to do its part
by enacting policies and incentives to encourage private sector
investments.
I look forward to working with each of you as we move to a
clean energy economy that protects our environment and secures
energy independence.
Thank you.
[The prepared statement of Ms. Burns follows:]
Prepared Statement of Stephanie Burns, Ph.D., Chairman,
President and Chief Executive Officer, Dow Corning
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Chairman LEVIN. Thank you very much.
Mr. Hundt.
STATEMENT OF REED HUNDT, CHIEF EXECUTIVE OFFICER, COALITION FOR
GREEN CAPITAL
Mr. HUNDT. Good afternoon, Mr. Chairman and Ranking Member
Camp. I am here as the Chief Executive Officer of the Coalition
for Green Capital.
On a personal note, I would like to recognize the
importance of Michigan on both the Republican and Democratic
side. I was born in Ann Arbor and I will be going back there
with my wife for the graduation of our son from the Ross School
of Business in 2 weeks, assuming the President squeezes us in
along with the rest of the crowd.
I met many of the Members of your Committee a decade ago, a
decade and a half ago, when I was the Chairman of the Federal
Communications Commission. I mention that because not at all
exclusively because of Federal regulation, but significantly
because of the 1996 Telecom Act, a bipartisan measure, that of
course started in the House and eventually got through the
Senate.
Because of that, American entrepreneurs, private equity
investors, investors from all over the world spent about $1
trillion building a new America's communications network.
Everything that we know today, whether we are Twittering or
Blackberrying or making a cell phone call, is almost always on
a network that was built some time between 1995 and today.
That tremendous colossal private sector investment created
about one-fifth of all of the jobs created in the 1990s, the 20
million new jobs that made the 1990s the best decade in our
lifetime for American workers.
It is that same rebuilding of our buildings in America so
they are energy efficient and our electricity network, so that
it is founded on a clean basis and a renewable basis, instead
of a carbon emissions intensive basis, it is that same
rebuilding in both respects, in the way we use energy and in
the way we produce it that we will do two things.
It will create again about five million new jobs, and it
also will lead to absolute national security and world
leadership in the effort to have a clean economy.
In very, very broad terms, if we invest about $250 billion,
private sector investment, in replacing existing building
materials with energy efficient building materials, and about
$250 billion, the same number, in replacing our carbon
emissions intensive generation with the less carbon emissions
intensive generation, those two numbers added together, $500
billion, should produce about five million new jobs, and should
give us a reduction of about one-third of the total CO \2\
emissions per year in the United States.
That would take us into world leadership in terms of having
a clean economy and in terms of carbon abatement.
Right now, we are 11th in the world in the percentage of
our GDP that we invest in the change to a clean economy, and we
are dropping. China is getting farther and farther ahead.
There are three problems, but first I am going to tell you,
if you will permit me, I just want to urge two things of the
many good things that could be mentioned, I want to urge that
this Committee give serious support to extending Section 1603,
the grant in lieu of the ITC, for as long as you can see a way
to do it, and second, I urge this Committee support, as the
Members have already done in the past, the creation of a green
bank, such as introduced by Congressman Van Hollen in March of
2009 in the Green Bank Act, and as Congressman Van Hollen
knows, whom I had the pleasure of voting for every 2 years,
that provision was passed in the Energy and Commerce Committee
51-6. It is a truly bipartisan measure.
Those are the two suggestions I am going to make. I would
like to confine my remarks to describing the problem that I
think those two measures would go a long way to solving. It is
a three part problem.
Problem number one. Because of the tremendous drop in the
total output of the economy, starting with the events of 2008,
we now have in the United States little or no natural market
driven new demand for electricity.
There are a few states that are exceptions, but in most
states, we have more potential output than we have demand,
because our total overall consumer demand and business demand
has dropped so far so fast.
Therefore, if we depend on the market to demand new forms
of electricity, we have to wait 6, 7, 8 or 9 years before that
demand will materialize.
Lucky China has the fastest growing demand market in the
world and anybody can sell almost anything in that market. In
the United States, we have to find a way to replace, not wait
for new demand.
Number two, electricity, of all the identical goods and
services in our economy, none varies more in price state by
state than electricity. It varies by as much as four times. The
price in Kentucky, where Congressman Yarmuth is versus
Connecticut, is almost a four times difference.
That is because unlike beer and soap and telephone service,
you cannot send it over a distance without a great expense, and
also unlike many goods, you cannot really store it.
Consequently, it needs to be made locally and it is
consumed locally, which is why the prices vary so much on a
state by state basis.
The sad paradox is this. Where emissions are high and
unemployment is high, the two places you would love to see jobs
and see the emissions taken out, typically, that is where
electricity is low priced. Michigan, Ohio, Kentucky, Illinois.
Somehow, we have to find a way to create incentives for
firms to put in emissions reduction technologies, for
businesses to invest in that, and create jobs, precisely where
electricity prices are low.
One thing we cannot do, I think, as a practical matter, is
say to the people in Michigan, at this particular point in
their history, we know you are paying 9 cents a kilowatt hour,
why do you not pay 14 cents as a base the way they do in
California, why do you not pay 17 cents as they do in
Connecticut, why do you not pay 24 cents the way they are doing
in Hawaii.
I would suggest to you that would not be a bipartisan
measure.
Somehow, we have to address these problems on a local state
by state basis, and the third and last problem is this, it is
just a fact that to have carbon capture for coal facilities or
combined cycle natural gas or solar or wind, today, the unit
economic costs are higher than if you were to build a coal
generation facility.
They will come down when firms like Dow continue to have
scale and continue to innovate, but today, it is higher.
Somehow, we have to lower the price of clean electricity
and create a way for people to invest in those particular
products and bring them into the market without saying to the
consumer you have to lose, and without saying to the
shareholders of utilities you have to lose. We do not want the
consumer to lose. We want the consumer to win. We do not want
the utilities to be punished because we want them to invest in
this new activity.
That gets me to the conclusion, which is as Congressman Van
Hollen outlined in his Green Bank Act, if we create an
institution that for 20 years, that was the chartered time in
that Act, for 20 years would provide low cost long term
financing, and if we make a commitment through tax policy,
particularly the Section 1603 grant, then those two concepts
put together mean that it is possible for new investment and
clean electricity generation, and new financing investment in
replacing building materials with new efficient product.
We can have those investments take place so that profit can
be made and the consumers can be protected.
Thank you very much.
[The prepared statement of Mr. Hundt follows:]
Prepared Statement of The Honorable Reed Hundt, Chief
Executive Officer, Coalition for Green Capital
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Chairman LEVIN. Thank you.
Mr. Dole.
STATEMENT OF ROD DOLE, AUDITOR, CONTROLLER, TREASURY, TAX
COLLECTOR, SONOMA COUNTY, CALIFORNIA
Mr. DOLE. Chairman Levin, Ranking Member Camp, other
Committee Members, on behalf of Sonoma County, it is a pleasure
to be before you. We are really honored for this opportunity.
I am going to tell you a story. I am trying to see how I
can bring my PowerPoint up.
What I am going to do--I would like to tell you a little
story first, a little background. In 2008, California passed
Assembly Bill 811. It was authored by Assembly Member Levin in
California, I thought you would enjoy that, and basically what
it did, it took a 100-year system, a 100-year process, that
exists in California and across this Nation, and it said for
property assessments, where normally we would fund streets,
highways, curbs, et cetera, we will expand that ability to
energy efficiency, renewable energy, and water conservation.
That is called ``PACE,'' property assessment clean energy.
It was mentioned by Vice President Joe Biden in one of his
recent speeches.
It is again a 100-year process that was authorized to
include these other abilities, and Sonoma County took that bill
and implemented it.
What I am going to show you is a simple process, and I am
going to show you the results of that process. Basically, on
the ground proof that what we have been talking about works.
A program basically is authorized for $100 million. We have
financed that ourselves. We are looking to long-term finance
this program at low interest rates, and we will talk about
that.
In 12 months, we have taken in $41 million in applications.
We are a half a million population county. This is a
partnership between our cities and the county, nine cities and
the county. We have processed and dispersed into our community
over $23 million. We have paid for $23 million worth of
projects, and we have $41 million worth of applications going
through our process.
We offer this program at 7 percent fixed interest rate, and
the program is set up to pay for itself, just like any bank. We
borrow the money at 3 percent. We lend it to the property owner
at 7 percent, and the 4 percent spread goes toward the
operating costs of this program.
That is how we have established this program. We finance
water conservation, energy efficiency and renewable energy, and
renewable energy includes solar, wind, geo-exchange.
This just shows a map of Sonoma County. Hopefully, you have
been to the wine country. Mike talks about that probably, and
so do I.
All nine of our cities are members of this program.
One of the things we are impressed with is the value this
is adding to the property. The property owners realize that if
they volunteer, and this is a volunteer program, they enter
into an application process, they agree, if you will, to tax
themselves for the next up to 20 years in order to finance
these improvements to their properties.
What we have shown here is how that is broken down. Over
half of the people are electing to do retrofit on their
property, and a little less than half are doing solar or
renewable energy.
To date, we have actually generated 2.9 megawatts of new
energy for Sonoma County. Basically, we could power up 800
homes for an entire year with what has been generated over the
last 12 months with this program.
This is just to give you a sense for the growth. The top
line there is our applications on a weekly basis. We have been
following this program from the beginning. Our first concern
was that no one would come through the door and no one would
fill out an application.
We did a professional marketing survey, and we found out
that over 20 percent of our property owners would sign up with
this program currently. What we really need is 50 to 80 percent
of our property owners because we know one of the huge carbon
emitters is property.
The blue line there is our actual disbursements monthly. We
make disbursements every month. As I said, we are over $23
million at this point. We are growing at a rate of about $2.5
to $3 million per month.
This is just a breakdown. One of the side benefits to this
is retail sales. In order to make improvements of property, you
have to buy the materials. It is improving both goods and
services in the area.
This slide shows the growth in employment. The blue lines
are the funded projects as they came in on a monthly basis. The
red line is the jobs as shown to us by the California
Employment Development Department of increase in green building
jobs during that same period.
The other way that we thought we would predict this is ARRA
has estimated at the Federal level that every $92,000 put into
the economy will generate a job. Our program to date should,
under that guideline, have generated 252 jobs. That is just
little Sonoma County.
We are looking for a partnership. We need help in basically
three areas, all of them in funding. We need long-term low cost
funding. We need what we call ``warehouse funding;'' in order
to sell bonds, we have to have volume. We have to have $20,
$40, $100 million in contracts in place.
What we are doing in Sonoma County is we are financing that
until there is enough volume that we can sell long-term bonds,
and there are investment firms and banks interested in buying
those bonds, but there is some interest rate risk there.
Many jurisdictions do not have the startup money for
starting this program. It is relatively easy to replicate, but
it needs startup money.
In the case of Sonoma County, that startup was a line of
credit for $1 million. We are probably going to use about half
of that.
The long-term funding, Congressman Thompson has been very
helpful and very close to our program. He has sponsored H.R.
3525, which would allow tax exemption for these PACE bonds.
We are also offering that maybe PABS expand the definition
of ``capital expenditure'' to include PACE bonds; it might be a
better avenue.
The energy bank is exciting to us because again it would
provide low cost financing.
The intent here is to pass low cost interest rates down to
the property owner and make this even a better, more motivated
program.
With that, I am open to any questions.
[The prepared statement of Mr. Dole follows:]
Prepared Statement of The Honorable Rod Dole, Auditor-Controller-
Treasury-Tax Collector of Sonoma County, County of Sonoma
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Chairman LEVIN. Thank you very much. Very interesting,
indeed.
Mr. Bolinger.
STATEMENT OF MARK BOLINGER, RESEARCH SCIENTIST, LAWRENCE
BERKELEY NATIONAL LABORATORY
Mr. BOLINGER. Thank you, Mr. Chairman and Members of the
Committee. My name is Mark Bolinger, and I am a research
scientist at Lawrence Berkeley National Laboratory, where I
conduct research on renewable electricity markets and policies,
with funding from the U.S. Department of Energy.
The purpose of my testimony is to summarize findings from a
preliminary Berkeley Lab evaluation of the first year of the
section 1603 Treasury cash grant program.
As you know, this is a Recovery Act program that enables
renewable power projects to elect cash payments in lieu of tax
credits.
Berkeley Lab's selective review of this program was
prompted by this Committee's request for assistance in
evaluating the program's effectiveness, and I am submitting as
part of my written testimony a recent Berkeley Lab report that
responds in detail to the Committee's request.
Just to be clear, neither the Berkeley Lab report nor my
testimony today advocates any particular policy position with
respect to the section 1603 program.
I should also note that the Department of the Treasury,
which administers the program, did not participate in this
evaluation other than as a data provider.
With those preliminaries out of the way, our first key
finding is that the Section 1603 program has been heavily
subscribed, particularly by wind power projects.
As of March 1 of this year, wind power had received 86
percent of the nearly $2.6 billion in grants that had been
dispersed through this program, followed distantly by
geothermal at 6 percent, solar at 4.5 percent, and biomass at
2.8 percent.
In capacity terms, wind power accounted for nearly 3,900
megawatts of the 4,250 megawatts of all renewable power
technologies supported by the program as of that date.
In addition, the Department of the Treasury has indicated
that as of March 1, another 2,300 megawatts of wind power that
were built in 2009 had applied for but had not yet been awarded
cash grants under this program.
In total, roughly 6,200 megawatts or about 62 percent of
all wind power capacity built in the U.S. in 2009 had applied
for grants as of March 1. More broadly, with the high
proportion of both geothermal and biomass projects also
choosing the grant, it is clear that the majority of all
renewable power capacity built in 2009 elected the grant in
lieu of either the production tax credit or the investment tax
credit.
Some projects that have elected the grant have appeared to
have done so opportunistically rather than out of necessity.
For example, we estimate that if a section 1603 program did not
exist, perhaps 3,800 megawatts of wind power that had applied
for the grant as of March 1 would likely still have been built
in 2009 using the production tax credit.
However, the costs imposed on the U.S. government by this
opportunistic behavior consist primarily of the difference in
the present value of the grant versus the production tax
credit, which is a difference that we find relatively modest on
average.
Moreover, the flip side of this issue is that many
renewable power projects built in 2009 do appear to have been
motivated at least in part by the grant program.
We estimate that as many as 2,400 megawatts of wind power
representing almost one-quarter of all wind power capacity
installed in the U.S. in 2009 may not have been built last
year, absent the section 1603 program.
These 2,400 megawatts of incremental wind power have helped
to retain or create jobs in the U.S. Using the National
Renewable Energy Laboratory's Jobs and Economic Development
Impact model, or JEDI, we estimate that these 2,400 megawatts
of wind may have supported approximately 51,600 short term full
time equivalent gross job years during the construction phase
of these projects, and 3,860 long-term full time equivalent
gross jobs during the operational phase.
Moreover, the JEDI model estimates that the majority of all
wind industry jobs supported by the section 1603 program are
located right here in the U.S.
Now, I do want to emphasize that these jobs estimates are
based solely on modeling runs and are therefore inherently
uncertain. One must also recognize that these estimates are of
gross rather than net jobs. In other words, the JEDI model does
not account for the fact or the possibility that job gains in
the wind industry will come at the expense of job losses in
other parts of the energy sector or broader economy.
A more fairer employment analysis would therefore need to
consider such macroeconomic influences and focus on net rather
than gross job impacts.
Finally, the Berkeley Lab analysis touches on a number of
issues and possible concerns with the design and implementation
of the section 1603 program.
One of these potential concerns is that the 30 percent
grant rewards investments rather than efficient employment,
which might call into question the types of incentives being
created by this program.
Based on the data currently available to us, however, we
find no reason at this time for widespread concern with respect
to either the cost or performance of projects that have
received section 1603 grants.
With that, Mr. Chairman, I conclude my statement and I
would be happy to answer any questions you may have.
[The prepared statement of Mr. Bolinger follows:]
Prepared Statement of Mark Bolinger, Research
Scientist, Lawrence Berkeley National Laboratory
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Chairman LEVIN. Thank you very much. Your report was
requested by you, Mr. Rangel.
Mr. RANGEL. Stellar job. Thank you so much.
Chairman LEVIN. In February of 2010.
Mr. BOLINGER. That is correct.
Chairman LEVIN. That is a fairly prompt response.
Mr. BOLINGER. Yes.
Chairman LEVIN. Thank you.
Mr. Bohigian.
STATEMENT OF DAVID BOHIGIAN, MANAGING PARTNER, E2 CAPITAL
PARTNERS
Mr. BOHIGIAN. Thank you, Mr. Chairman and Ranking Member
Camp and Members of the Committee for the opportunity to appear
before you today to discuss some key issues, and I want to say
how impressed I have been with the Committee today and engaging
in substantive discussion, and with all the panels, in what has
been, I am sure, a long day for you.
I am a small businessman. I am working to establish a firm
that will deploy energy efficient equipment throughout
commercial and industrial properties in the United States.
What I am talking about is HVAC systems, lighting systems,
windows, and climate control systems, that I am allowing the
end user to avoid the up front costs, and we all share in the
savings as that equipment is being used over years.
My partner and I started this company because we believe
there is enormous opportunities to do well and to do good. We
need to solve key market barriers that have prevented the
deployment of the cleanest form of energy, which is invisible,
but it is there, it is energy efficiency.
This business model has been proven to work in government
buildings and in municipalities, universities, schools,
hospitals. We are looking to extend that to the private sector,
where most of the buildings are.
Our success will not depend upon government grants, tax
incentives or subsidies. Each of our projects has a positive
rate of return without using taxpayer dollars. In fact, if you
look at McKinsey's studies on this, energy efficiency and the
positive rates of return there in fact help pay for a number of
the renewable energy technologies that we talk about.
By using existing energy efficient technologies, that pay
for themselves, the United States could cap its increase in
energy demand and greenhouse gas emissions.
While policy makers and the public are primarily focused on
renewable energy, I believe minimal consideration has been paid
to projects that deploy commercially proven equipment into
existing commercial industrial buildings.
Over my lifetime, energy efficiency has accounted for
nearly three-quarters of the demand for new energy services.
Today, energy efficiency alone is twice the size of the
renewable energy market and can continue upon that pace for
years to come.
Businesses understand they must conserve energy to remain
competitive. Although the benefits of energy efficiency are
well documented and the demand for energy efficiency continues
to grow, companies frequently choose not to deploy energy
efficient equipment.
In addition, vendors are not structured to finance their
customers. In fact, the Department of Energy found that even
with the median pay back of 1.3 years, more than half the
projects they recommended were not accepted by industrial
customers. This is not a credit story for the past 2 years.
This is a 20 year survey of over 40,000 projects they
recommended.
Of those projects that were rejected, a majority were
rejected for financing reasons.
Thousands of energy efficient projects are being deferred
every year. Realizing the potential of energy efficiency
requires overcoming some of these obstacles.
When the U.S. Government has focused on energy efficiency,
it has primarily focused on retrofitting its own buildings,
which I commend, as well as the residential sector, which I
commend, but I would also like to talk more about how to
incentivize the commercial and industrial sectors.
I would also like to say it is my belief that I do not
think our national goal should be trying to choose specific
energy production or energy efficiency technologies to receive
taxpayer assistance.
I believe it should be generating measurable and
identifiable and verifiable savings in energy intensity.
In addition, while tax incentives have a role, I believe
other mechanisms may be better suited to encourage the private
sector and private investment without additional burdens to
taxpayers.
Our business model relies on measured and verifiable
savings that create income streams without taxpayer assistance.
Some public policy would be helpful, and I want to list
five measures that I think could help. We have heard about the
PACE program and allowing commercial building owners to pay for
energy efficiency equipment through an annual assessment on
their tax bill.
This model being adopted in Sonoma and other state and
local levels in this country have been primarily targeted at
residential development. I would like to see that expanded to
include the commercial sector as well and see if there is a
Federal mechanism that might be able to help on the tax bill as
well.
In addition, the Title 17 loan guarantee program has been
helpful, but it is targeted on new energy efficiency
technologies rather than proven technologies. I believe looking
at that program and seeing which technologies could actually
help reduce our energy use and improve our energy intensity
bears consideration.
I believe that extending and potentially expanding the
energy efficient commercial building tax deductions could be
helpful.
I think allowing more rapid depreciation of capital
equipment and energy efficiency retrofits would also spur the
market, and last, while it is typically a state and local
responsibility, helping to develop model building codes that
encourage energy efficiency through retrofits would be helpful.
Building owners and policy makers at all levels understand
that improving energy efficiency is the key to our
competitiveness.
I have talked to manufacturers and contractors and vendors
in lighting, windows, heating, insulation, and other fields
across the United States that have the ability and the desire
to serve this market that are going to help create
manufacturing jobs and insulation jobs in this country.
I thank you for your time today and know that we stand
ready to assist Congress in making American businesses become
more efficient, competitive and create the jobs for the future.
Thank you.
[The prepared statement of Mr. Bohigian follows:]
Prepared Statement of The Honorable David Bohigian,
Managing Partner, E2 Capital Partners
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Chairman LEVIN. Thank you very much. I have a question. Let
me suggest, Mr. Rangel, why do you not go and then Mr. Camp and
then our colleagues, Mr. Johnson and Mr. Van Hollen, and then I
will wrap it up with a question if you have not covered it.
Mr. Rangel.
Mr. RANGEL. First, let me thank all of you for your
patience. This is rather unusual that we would have invited
guests to come here and then we have to spend so much time on
the Floor. I hope you heard me thank you generally without the
mike.
I also, Mr. Bolinger, would like to thank your outfit for
the speedy action that you have taken and sharing with us
whether these programs are working or not.
My question is to try to get a feel as to where our country
is as it relates to conservation of energy. I think it goes
unchallenged that as it relates to dependency on fossil fuel,
climate, health, and all these things, that the urgency is well
known by the political, manufacturing and economics' circles.
As it relates to the consumer, I am not convinced that on
the issues that they think are important, that this even gets
on the scale of what they want economists to do.
I also believe that our country has put a lot of men and
women in harm's way in order to protect oil because of our
dependency on this fuel, so there is no question that our
national security, our foreign policy, our economic decisions
are based on what we are talking about today.
I do not know how many of you actually have driven down the
highways during the days in every major city and see the lights
are on. I do not know how many of you go to our towns and
villages after 6:00 or 8:00 or 10:00 and see every light on,
the air conditioner and the heat, whatever it may be.
I do not remember hearing, except when my grandfather would
give me hell saying put out that light, you are wasting
electricity, which of course, it was a cost issue, and I have
never forgotten it.
All that we are doing in terms of providing tax credits and
removing subsidies from oil, people get critical about what it
means about their pocketbook.
We had an experiment, I think, that we asked people to cut
off electricity for 1 hour or 1 day of a year to see what the
impact would be. Can any of you give me just a baseball park
percentage of the waste of energy in terms of the American
consumer?
I do not want to get back to the Carter days and tell
people they cannot have Christmas lights and they have to wear
a sweater, and I do not want to put all the lights out in Times
Square because it is a tourist attraction, and we need the
money.
I do not really think that people think we have a crisis to
the extent that people are dying on the battlefields as well as
with health problems because of this serious problem that all
of you have studied, investigated, and thank you for the work
that you are doing to put us on the right track.
But are there any ideas about consumption that strike you
that we are not doing? Mr. Dole.
Mr. DOLE. One of the reasons we tried this program is we
really felt the community was ready for a cultural change. They
were thinking along the line that you were. One is that we need
to conserve on energy. Two, we need to do the right thing.
What we associate it with is sort of like recycling.
Nowadays the communities, the population, they have an aluminum
can in their hand, they're looking for a recycle center. Our
program is raising that consciousness, that culture, to turn
off the lights. But even more importantly, to be more efficient
in their use of energy. And that's what our program has shown.
Mr. RANGEL. Mr. Dole, your program is very unusual, and you
provide the incentives, out-of-pocket expenses, improvement,
and property, and a whole lot of things that a guy living in an
apartment house in Harlem--besides that electricity bill.
But there is no sense in America that there is a national
crisis. And I'm saying that we're paying for this dearly, and
the threats, in terms of what happens to our economy in the
future, and China, and all of these other things, and we're
concerned about annoying our constituents and talking about
taxes and climate control, and all the things they don't
understand.
Do you think our government is doing enough there? Do you
think Members of Congress are doing enough? Is the message out
there, that conserving electricity--I mean it's one thing to
say, ``We give you a tax incentive, you can buy the appliance
and it costs less,'' and people say, ``Hey, if I can save a
couple of bucks,'' but I don't see anybody lecturing their kids
or grandkids about this being a national or international
issue. I don't.
And make no mistake about it, come election times we want
to do what our constituents want us to do. And if this is not
on their agenda at the town hall meetings, we will wait until
after we are reelected for the educational bit. But the
priority is going to be getting reelected. And we just hope
when we tell them this they don't think that we're just
lecturing to them.
And I feel there is a vacuum. Does anyone agree? Do you
think Americans are sufficiently educated to know how serious
the problem is?
Chairman LEVIN. Anybody want to take a brief crack at that?
Mr. DOLE. I would like to agree with Mr. Rangel. I think
that the fundamental problem is that in order to have more
efficient windows, or more insulation in the ceiling or
whatever is the specific step, if you go to the consumer or to
the business in the building, the proposition right now is,
``Please take money out of your pocket, invest it in this
structure, and over the course of time there will be savings
and you will be glad you made the investment.''
But, Mr. Rangel, you are absolutely right. A renter doesn't
really do that math and say, ``I would like to spend the
money.'' If your mortgage on your house is bigger than the
value of the house, you're not thinking, ``I want to put more
money into this house. Maybe I won't even be able to stay in
this house.'' If you might lose your job, you are thinking, ``I
need to save the money for food. I don't have time to make an
investment that won't pay off for 5, 6 or 7 years.''
The overwhelming majority of Americans, they can want to
save that money on the electricity bill, but they have done the
math in a variety of ways, and they've reached the conclusion
that they just can't do it.
So, one of the virtues of a green bank would be to loan
money at the kind of low rates that we were just told about in
the PACE program, and to loan it to the people who will have
the incentive to make these investments over a long-term, to
loan it to commercial real estate owners, to loan it to
utilities who are then able, over the course of time, to hire
people to go in and do the projects, to loan it into the kinds
of businesses that Dow not only is, but also that constitute
Dow's customers.
Mr. RANGEL. That works.
Mr. DOLE. That will work.
Mr. RANGEL. And I appreciate it. But how could we go on a
highway and see the lights on, as all of you have seen during
the daytime without saying, ``My God.'' He's not a terrorist,
but somebody is letting America down.
How do we see buildings with no one in them closed, and all
the lights on? There has to be something about consumption,
that we just ignore that as we go after the homeowner and give
incentives. I'm just saying I don't think America really knows
how serious this problem is. And I want to thank you for what
you're doing.
If you are satisfied there is nothing else to be done in
terms of national education, then I will have to find another
panel someplace else. But right now, I want to thank you for
your contributions. What you are doing is important, but I
think it's a drop in the bucket, in terms of how urgent the
problem is. Thank you.
Chairman LEVIN. Mr. Camp.
Mr. CAMP. Well, thank you. Thank you, Mr. Chairman, and I
want to thank all of you for being here, and for your
testimony. I just have a couple of questions.
Mr. Bohigian, can you just elaborate a bit on the types of
measures--just quickly, because I know time is very limited
here--on the measures you can take to reduce energy consumption
in buildings and industrial facilities, as you testified, and
compare that--the environmental benefits and net reductions--
and compare that to converting a building to an entirely
different type of energy.
Do you have any--or if you can't quickly answer that, if
you could, get back to me in writing on a comparison of the two
approaches, because we have heard a lot about alternative forms
of energy, and I would just like to see the cost and benefits
of moving forward on the approach that you have outlined.
Mr. BOHIGIAN. Well, on a national scale I will give you an
idea. As we talk about 2 to 4 to 6 to 8 percent as our
percentage of renewables that we're using in the economy, our
typical projects are 20 and 30 percent savings at the building
level.
So, it's clear to me, as I said, over the past 40 years,
energy efficiency continues to account for the lion's share of
energy savings in this country, and the generation and
renewables simply can't match that in the short term.
Mr. CAMP. All right, thank you. And, Dr. Burns, I know that
Dow Corning and their joint venture, Hemlock Semiconductor,
manufacture solar and other energy-related products. And I know
that's a very energy-intensive industry. And I know that--and I
think, for example--I have heard this, if this is accurate--
that Hemlock Semiconductor is the largest single point user of
energy in the entire state of Michigan.
Ms. BURNS. Either the largest or second, yes.
Mr. CAMP. Yes, up there in--one of the top. Can you tell me
how sensitive you are, as a company, to higher energy costs and
the comparisons between costs, both regionally and
internationally?
Ms. BURNS. Yes. I mean, this industry is extremely
sensitive to energy costs, because it takes a lot of energy to
produce this very pure material that goes into the solar cells
and modules.
On average, the energy that we use is converted into energy
savings of about 10 to 15 times that. So, these solar cells
that last 20, 25, 30 years obviously save a lot of energy in
their lifetime. But the actual production of the raw material
takes a lot of energy. We are very sensitive to it. It is one
of the top components, in terms of deciding where to locate our
manufacturing plants.
And, fortunately, we were able to choose Michigan and
Tennessee, primarily because of the incentives and the good
rates that we were offered. But on a globally competitive
basis, that is clearly something that other companies are
looking at. About 100 new polysilicon plants are announced to
go into China right now. And a lot of that is driven by labor
costs. A lot of it is driven by the government's priority on
solar and renewables, and on attractive energy rates that
clearly are coming through government support.
Mr. CAMP. Well, I think that's an important point. While
the actual facility is a high-energy user, as you go downstream
into the actual manufactured product you see significant energy
savings with the use of the solar products that are
manufactured.
Ms. BURNS. Correct.
Mr. CAMP. So, as you look just at one entity, you might
view them as a high-energy user. But as you get further down
the chain, it changes dramatically.
I also wanted to mention--I have just a few minutes left--
the Manufacturing Jobs Creation Act that Congressman Mike
Thompson has introduced, and a number of Members of the
Committee are cosponsors, including Chairman Levin and myself.
The bill, obviously, would make capital investments in plants
and machinery eligible for a 30 percent investment tax credit
already offered under section 48.
Can you just comment on the investment and employment
impact you might expect such a credit would have?
Ms. BURNS. Yes. I think it would be huge, and I am a strong
supporter of this proposal. We are the very first step in the
value chain. Most of the intermediate steps are not done in the
United States of America. Most of our product that is shipped
offshore is converted into cells and modules and then for the
U.S. market, it gets shipped back.
We have customers who want to invest in America. They want
to put their manufacturing plants here, because this is where
the growing market is for solar.
This will help them make that decision. This will be an
incentive that is more globally competitive. It will give them
certainty in their investments and predictability in terms of
their returns.
We have many customers who would like to co-locate in
Michigan and Tennessee because our material shipment to them
would be extremely efficient.
Many of them are Asian customers who do not know how to
maneuver in the regulatory and political environment in the
U.S. And are seeking our help and support and partnership to do
this.
I think it would be huge and I strongly encourage it.
Mr. CAMP. Thank you very much, Mr. Chairman.
Chairman LEVIN. Thank you. Mr. McDermott.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
I served in the state legislature in the 1970s and 1980s
during the era of ``oops,'' and I watched utility guys come in
and tell me--they would draw these lines about how demand was
going to continue to go up.
You are saying, Mr. Hundt, that it is a little off at the
moment for whatever reason and those lines do not make much
sense, and it seems to me the conservation part of this is
really what is most important at this point to really get up on
top of not only from a green jobs standpoint but from an
availability of energy at the moment.
I would like you and Mr. Dole to talk about both the
qualified residential energy efficiency bonds and the credit
bonds, in terms of is there anything we need to do to make them
work better or make them more usable by local governments?
I sponsored this stuff when we put it in before. For me, it
is an oversight question. Is it working? Please tell me.
You can talk about Sonoma County, but you can talk about
the country. That is why I wanted the two of you.
Mr. HUNDT. Yes is the answer. First, as to electricity
demand, normally, it goes right with GDP. In the year we have
just gone through, this very difficult year, it is down about 3
percent. You would expect it to be up about one to 2 percent
every single year, not enough demand to cause a lot of
investment really in anything new.
It is going to be necessary, if we want to take the CO \2\
out of the air, it is going to be necessary to replace building
materials that are already installed with something more
efficient, and to replace carbon intensive generation with
something that is less carbon intensive.
We have a replacement story in the United States and a
growing economy like China, they have a meet new demands story,
which is why they are on a path to be number one in solar and
in wind and in hydro and in coal and in nuclear.
Mr. MCDERMOTT. Is our tax structure tailored to the
question of replacement rather than new demand?
Mr. HUNDT. No, it is not. When we talk about--it is
certainly true that this Committee in the last 18 months has
done many, many important things that have re-tailored the
structure, but in order to say for the next 10 years and
starting right away so you can really build projects that can
come on stream in the next 10 years, do we have that kind of a
commitment yet? Predictable long-term, large scale? We do not.
Do they have that in China? Absolutely, they do.
In terms of international competitiveness.
Mr. MCDERMOTT. Competitiveness, and in terms of putting our
people to work right here in our own country, making that long-
term, large-scale commitment to a beneficial tax policy and a
very favorable financing environment. That's the special
province of this extremely important committee. It is also an
absolute necessity in the United States.
Very, very specifically, the green bank, as designed in Mr.
Van Hollen's bill, would have the power to--and I think
absolutely should, among other things--make loans to PACE
programs so that some of the startup costs that we heard about
could be provided from that particular green bank. Otherwise,
you're asking too much of local entities, in terms of just
doing it on their own.
Mr. DOLE. I believe your second question--and thank you for
that question--regarding the QUIBS. The issue for us was that
our allocated portion of the QUIBS was, like, $5 million.
Mr. MCDERMOTT. Nothing.
Mr. DOLE. As you could see, our disbursements per month are
running about $2.5 million to $3 million. So we would have gone
through a lengthy process, but only have received $5 million.
The reality was----
Mr. MCDERMOTT. Why was it allocated that way? Was it the
capital----
Mr. DOLE. It's allocated based on population. So each state
gets a share, and then each local jurisdiction got a share.
When we did the math, our share was $5 million. We realized
early on that, in order to have a viable program that could
actually sell bonds later on to the markets, we needed to build
a volume of at least probably $100 million to $200 million in
contracts.
So, it was very helpful. Unfortunately, the amount was so
small that we just needed a larger share. We had hoped and
discussed with other organizations about the idea of maybe
creating a competitive process.
So, in other words, if Sonoma County wanted to show the
leadership, could demonstrate that it could use a larger
allocation and bring around more change, then maybe that
competitive process would work in order to bring around----
Mr. MCDERMOTT. Sort of a ready kind of process----
Mr. DOLE. Exactly, exactly.
Mr. MCDERMOTT. And you have enough flexibility, once you
have the bonds, to do what you need to do?
Mr. DOLE. Yes. What we are finding is that if we can
provide a reasonable interest rate, the property owner--and we
finance both commercial and residential property--if at a good
interest rate they will participate in the program--right now
we're at 7 percent, we're right on the border line. We probably
have about a 6 to 7 percent withdrawal ratio right now. We
figure if we could bring in, like, prime mortgage rates--say 5
to 6 percent--our participation could as much as double at that
point.
So, the instrument that you offered is very favorable to
local jurisdictions. It just needs to be larger in order to
bring around sufficient change.
Chairman LEVIN. Thank you.
Mr. MCDERMOTT. Thank you.
Chairman LEVIN. Mr. Thompson.
Mr. THOMPSON. Thank you, Mr. Chairman, and thank you to all
of you who have come to testify today.
I just want to make one remark on the political issues that
Mr. Rangel raised. Even folks who don't get a direct benefit
from a program such as the one that's running in Sonoma County
get other benefits. There are business owners--Rod just
mentioned the commercial guys participate in this. That means
that the cost to those businesses are kept down so they can
keep more employees on, they can pass that savings along. In
this economy, any time you can push that cost curve down, it's
beneficial.
And Mr. Rangel has wineries up in his area, and I know that
the wineries in my district have been using not this particular
program, but they have been moving to the renewable energy
innovation. I've got one winery that went from a $40,000
utility bill a month to a $4,000 utility bill a month.
And right now, when--you know, the wine industry is having
a real tough time right now, and that makes a difference in who
is keeping employees on. And it's a lot like--why some seniors
say, ``I don't have any kids in school, why should I pay for
taxes to go to school;'' I think the whole community benefits
from this.
And, Rod, I want to commend you, you've done a great job on
the program. One area that I would like to hear some more
about--and I hear it, representing multiple counties, and I
hear it from surrounding counties--the advantage Sonoma County
is experiencing today in the home improvement sector, the jobs
that they are creating. I know one county told me, said, ``How
do we get in on this,'' because Sonoma County is running away
with the jobs in that particular sector. And the building
numbers, home building numbers I think, are even better in
Sonoma because of this program than they otherwise would be.
Can you comment on that a little bit?
Mr. DOLE. Thank you, Congressman Thompson. Yes. What we
have experienced is about a 7.5 percent growth in green
building jobs during the period since we started this program,
neighboring counties--unfortunately, in your district--have
experienced 2 and 3 percent declines in those jobs.
Now, we can't take all credit for that, for our program,
I'm sure there is other reasons. But we know that during that
period of time we put well over $23 million into the economy at
that time.
We have--the other side benefits to this is we actually
have the building industry changing their business model. We
have Pinnacle Homes, for example. They do high-end development
homes. They have changed their business model to now make
alterations. They have, if you will, educated their people to
be more technically capable of evaluating homes, determining
what savings could be done and then, if you will, creating a
plan, an energy plan, for both commercial properties and
residential properties. They have taken their business and
changed that business model. That, for us, is exciting because
they are now successful in two fields, not just one field.
We have had a number of companies that have partnered with
us. One of our biggest partners for marketing this program is
the installers, contractors, businesses. We have a couple of
businesses--Sun, Light, and Power, also Solar Works up in our
area--they conduct presentations to the community, both the
commercial and residential, with me and present this program.
They have become huge advocates--if you will, my marketing
staff. And they have also become very responsible to the
consumers. One of the things that has impressed me is they want
to make sure their industry doesn't blow it. This is a great
program, could be even greater program, but they don't want to
blow it. They know the rest of the Nation is watching this
program. Seventeen other states have passed this legislation. I
get calls every day from new jurisdiction planning to implement
this. There is a blog that is sponsored by UC Berkeley to help
other jurisdictions startup this program. It's been a cultural
change for us, it really has.
Mr. THOMPSON. Well, I hope you respond to all those calls,
and I hope my colleagues represent areas that want to do the
same thing and emulate this program. And there are just a lot
of benefits to it. You heard--you named some, but there are
others, as well.
I know I have--up in Hopland, I've got a place that trains
solar installers. So they are training people for jobs, and
retraining people who have lost jobs. So I hope to see this
spread across the country, and I appreciate all that you have
done to make it such a success.
Mr. DOLE. And thank you for all your support.
Chairman LEVIN. Thank you. Mr. Thompson was eager that you
come, and you've come a long way. So thank you very, very much.
Mr. Blumenauer.
Mr. BLUMENAUER. Thank you, Mr. Chairman. And I appreciate
Mr. Hundt reminding us of the Michigan connection with you and
the ranking member. And I am slow off the mark with the
Michigan suck-up. I should have mentioned my son graduating
from the business school at Michigan. I will get more into
this.
Chairman LEVIN. And the first----
Mr. BLUMENAUER. He's already done it, but I'm going to
claim credit for it anyway.
I must say that this panel was worth waiting for, in terms
of reviewing the material and some of the items that are laid
out before us.
I appreciate, Ms. Burns, your forthright testimony, sort of
your oversight, your five-point plan, particularly the
government leading by example as the largest consumer of energy
in the world, that things that we can do right now by
administrative fiat, procurement process, we can help jump-
start so much of this, working with the private sector, and
saving the government money.
You've got a lot of certified smart people in your company
and others in the industry, and I would just extend an
invitation to you to help us think through how we change the
Federal Government budgeting rules, so it recognizes present
value accounting. If we can do that, we can break through a
number of these barriers. And each energy performance contract
doesn't have to be one off negotiated with some colonel in Camp
Whatever, and it can be incorporated into GSA, which manages
365 million square feet.
And so, if we could posit that as a request for
assistance----
Ms. BURNS. Okay. We will take it on. I hope we can provide
that assistance. And I think it is very critical, when you
think about the government leading by example, and it gets to
the point that you made. I don't think that there is one or the
other. It has to be both. It has to be efficiency, it has to be
greener buildings and the right standards around those and the
right procurement practices. And it has to be the right
incentives for renewables.
Mr. BLUMENAUER. We are in agreement. This would help us.
Ms. BURNS. Great.
Mr. BLUMENAUER. Mr. Reed [sic], your point about energy
being generated--electricity being generated and delivered
locally I thought was interesting. And I love the variation.
But I am struck by the fact that you are only looking at the
cost per kilowatt hour, not the burden on households, because--
I would invite you to work with us to talk about what people
actually pay. Because in California, they actually, per
household, because they employ many of these things, they end
up paying less.
And, in fact, I find it striking that some of the--that
West Virginia, with the lowest cost in the country, has the
highest household cost, if you prorate as a percentage of
household income. There is something that's at work here that I
think is an argument for incentives, and I would invite you to
help us strategize that, as well.
Mr. Dole, I love what you're talking about. One of the
areas that would be--that we could do this almost overnight
with little or no Federal legislation would be working with the
51 separate utility regulators around the country, and the
5,000 electric, gas, and sewer and water utilities that touch
90 percent of the American public every month, have access to
capital, have the infrastructure, and have the relationships
with all the contractors that you're talking about.
Isn't it possible to do this through a regulatory process
directly with utilities? Or do you have to be in the business?
Mr. DOLE. We could certainly use the help. Thank you for
the question. We don't understand why the utilities have not
gotten engaged at this point.
One of the reasons why government needs to run this program
is it runs through the property tax system. That's very
efficient----
Mr. BLUMENAUER. Right, but if you had a regulatory that
allowed it to be on the utility bill----
Mr. DOLE. Right.
Mr. BLUMENAUER [continuing].--wouldn't it accomplish the
same thing?
Mr. DOLE. Yes, it would. The----
Mr. BLUMENAUER. Time is short. I apologize here, but I
wanted to get to Mr. Bolinger, because I've got a piece of
legislation that would, in fact, extend the act's section 1603.
But I think it's going to be very difficult to weave this
through the process like it happened last time, which is shared
jurisdiction between Ways and Means, Appropriations, Commerce.
We don't have anything else like this in the Tax Code.
I would invite your attention to H.R. 4599 that would
extend it for another 3 years. Do it like--right through the
Tax Code directly. It wouldn't be quite as lucrative, maybe,
for some of the attorneys and consultants that would have to
wait a little longer. But the people who are in the business
would be able to do it through their annual filing. And our
legislation would extend the number of partners to real estate
investment trust, to publicly owned--public pension funds.
So, there would be a much bigger audience, simpler to get
enacted, more partners. And I would hope that there may be a
way for you to take a look at H.R. 4599 to see if we're on the
right track, and any thoughts you or others of the panel might
have to keep this valuable program, but actually get it
reauthorized and get it reauthorized for another 3 years.
Chairman LEVIN. If you have some thoughts, do give them to
us.
I think we are going to close now with someone who has been
especially innovative in this whole area. Mr. VAN HOLLEN, you
have the last crack at it.
Mr. VAN HOLLEN. Thank you, Mr. Chairman. I want to thank
all of you for your testimony, as well, and share the view of
my colleague, that all of you were well worth waiting for. So
thank you for your patience.
I think, Mr. Bohigian, in your testimony you identify some
facts that underline the challenge that we all face. You have
mentioned the Department of Energy's industrial assessment
center's finding, that even with a pay-back in less than 1.3
years, 53 percent of projects were rejected, and that over the
20-year period, more than 5,000 end users evaluated that almost
40,000 projects were rejected for financing reasons. That's
true in the commercial building sector; it's often true in the
residential sector, which is why creative programs like Sonoma
County's and others work, because they find a way around that
financing problem.
And you specifically, among your recommendations, identify
the Department of Energy loan guarantee program, and suggest
that it should not only apply to new technology, but to proven
equipment. And I think that that's fundamental across the
board, because we do have good incentive programs for some of
the cutting edge technologies, but we continue to have a
financing impediment with respect to on-the-shelf technologies
which, if they were deployed today in a large fashion, would
help us dramatically improve energy efficiency and also begin
to improve the deployment of some renewable energies. But
especially in the area of energy efficiency.
And I stand to thank Mr. Hundt, Reed Hundt, because he has
worked with us on this idea of trying to create a mechanism to
establish some form of low-cost capital loans. Loan guarantees,
of course, are one form. You can have some other forms of that.
And if--Mr. Hundt, if you could, just elaborate a little
bit on how you would see the green bank, the clean energy
deployment authority, whatever you want to call it, that we
have talked about that passed the House in that piece of
bipartisan--how that would help have more Sonoma Counties, and
in fact, help, you know, that differential that Mr. Dole talked
about, and maybe talk about Mr. Bohigian's situation. Then I'm
interested in your comments on creating that kind of mechanism.
So, thank you.
Mr. HUNDT. So thank you very much, Mr. Van Hollen. The
green bank would, for example, be able to lower the interest
rate, the 7 percent that Rod was talking about. It reasonably
could be down in the neighborhood of 6 percent or 5.5 percent.
These percentage differences, everybody in this committee
knows, these are not trivial. These are the difference between
somebody saying, ``Yes, I'm going to invest,'' and, ``No, I
can't afford to do it.'' And so, that is an example.
The PACE programs in the 17 states--I believe we would have
them in 50 states if we had that Federal support. I don't mean
that we should take over their job. Rod told us really clearly
that you do want somebody on the ground doing the work in the
county, talking to the people in the county, and having them,
as Mr. Rangel said, get with the culture here.
But it's the Federal Government that has the capability to
lower the overall interest rates by the 1 and 2 percent that
make all the difference, in terms of businesses, in terms of
real estate property owners, in terms of whole communities
saying, ``This is what we want to do,'' in terms of being more
efficient.
And in the same point, when we turn to generation, if we're
going to bring the solar electricity that's based on the
products that Dow is inventing, and is a world leader in
inventing way back up at the research level, if we're going to
translate those into the market, I think over the next 5
years--let's just talk about the next 5 years--you can say the
following to the people, ``Pay $.15, $.16, $.20 a kilowatt
hour.'' No one is going to do it. You're not going to get
regulators to say, ``I really want to raise those prices to
that level,'' you're not going to get businesses to say, ``I
can build a business around that kind of a price,'' you're not
going to get consumers to say, ``I really can afford to do
that.''
Even with efficiency measures, you can't inflict a 40 and
50 percent price increase on the whole country in a recession,
and we are looking at 10 million to 15 million people who need
to find work in order to get us to full employment. But when
you provide the low-cost financing, when you bring that into
the story, you then say, ``You don't need that kind of a price
in order to get the investors to invest,'' because they have
affordable, long-term financing.
And so, they will put their equity into projects. And we
have been working--with your encouragement, we have been
working with all the major financial institutions in the United
States on this project.
The one thing I am absolutely convinced of after 15 months
that we have been doing this, Mr. Van Hollen, with you and your
office and other Members up here, one thing I am convinced of
is this. The money is there if the economics work. And the low-
cost financing will turn a spigot, and we will see, literally,
$50 billion, $100 billion a year invested in the economy in
efficiency and generation that we're not seeing right now.
Every billion that is spent is 10,000 new jobs.
Mr. VAN HOLLEN. Mr. Chairman, I don't know if there is time
for the other gentleman just to comment quickly on how this----
Chairman LEVIN. Okay, you might want to end on that note
about all the new jobs. But, please, Mr. Bohigian.
Mr. BOHIGIAN. I will be brief, and thank you for your
patience.
What we have found, and studies have found over the past
several decades, is that for commercial and industrial users,
it's avoiding that capital expenditure that is so key.
Regardless of the savings that might be there, whether that's
at 4, 5, 6, or 10 percent, people like to not, up front, use
capital expenditure budgets on HVAC systems and lighting
systems. They would rather spend it on retaining employees and
research and development.
So, to the--to Congressman Rangel's point earlier, it's not
just about the conservation, it's about being able to continue
to build your workforce. And the issue that has been on the
structuring side, which PACE bonds start to address, is that,
in the commercial sector especially, people don't know where
they stand on the capital structure. They say, ``We're
financing equipment,'' but that's behind the tax bill, it's
behind the mortgage. And I can't tear out an HVAC system very
easily if I need to, if they're not paying.
So what PACE and other mechanisms allow that to do is be
ahead of the mortgage and solve this financing issue that I
think could result in billions of dollars in deployment in the
very near term, and thousands of jobs very soon. Thank you.
Mr. VAN HOLLEN. Thank you all.
Chairman LEVIN. Well, thank you very, very much. This has
been a remarkable third panel in a long and, I think, fruitful
day. I think, Mr. Camp, you very much agree.
So, since you have been so productive, as well as patient,
we very much want to thank each and every one of you. And I
think we will be seeing more of each other.
With that, I guess we are now, at 5 after 6:00, adjourned.
Thank you very much.
[Whereupon, at 6:05 p.m., the Committee was adjourned.]
[Submissions for the Record follow:]
American Forest & Paper Association, Statement
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AG Resources, LLC, Letter
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Alan P. Langford, Letter
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American Biogas Council, Letter
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American Farm Bureau Federation, Statement
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American Meat Institute, Letter
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American Public Power Association, Statement
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American Wind Energy Association, Statement
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AO Smith, Statement
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Associated Builders and Contractors Green, Letter
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Bechtel Power Corporation, Statement
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Biotechnology Industry Organization, Statement
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Capstone Turbine, Letter
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Climate Energy, LLC, Statement
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Coal Utilization Research Council, Statement
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Continental Resources, Incorporated, Statement
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EC Oregon, Statement
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Edison Electric Institute, Statement
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Electric Drive Transportation Association, Statement
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Encana Natural Gas, Letter
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Environmental Working Group, Statement
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Flodesign Wind Turbine Corporation, Statement
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Friends of the Earth (FOE), Statement
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Geothermal Energy Association, Letter
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Griffith Ulum, Statement
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Growth Energy, Statement
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Historic Tax Credit Coalition, Statement
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Honorable Betsy Markey, Statement
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Honorable Erik Paulsen, Letter
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Independent Petroleum Association of America, Statement
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James Sebesta, Letter
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Large Public Power Council, Statement
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Marathon Engine Systems, Statement
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Michael R. Splinter, Statement
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National Commission on Energy Policy, Letter
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Nuclear Energy Institute, Statement
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Natural Resources Defense Council, Letter
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National Alliance of Forest Owners, Statement
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Statement of Manning Feraci, National Biodiesel Board,
Vice President of Federal Affairs
Executive Summary: Biodiesel is a renewable, low carbon diesel
replacement fuel that is widely accepted in the marketplace. It is the
only commercial scale Advanced Biofuel produced in the U.S. The
biodiesel tax incentive has allowed the U.S. to achieve the significant
economic, environmental and energy security benefits associated with
expanded domestic production and use of biodiesel.
Due to volatile commodity prices, unfavorable market conditions,
difficulty accessing operating capital, and uncertainty regarding
federal policy, the U.S. biodiesel industry is facing severe economic
challenges. In particular, the lapse of the biodiesel tax incentive on
December 31, 2009 has had a detrimental impact on the industry, and the
domestic production and consumption of biodiesel has been significantly
curtailed. Plants nationwide have already ceased production, trimmed
payrolls and laid off employees, and the 23,000 jobs nationwide
supported by the industry will be in increasing jeopardy the longer the
tax incentive is allowed to lapse. Accordingly, the U.S. biodiesel
industry asks Congress to address this immediate issue and act in a
timely manner to retroactively extend the biodiesel tax incentive.
In addition, it is difficult for entrepreneurs and investors to
make long-term business decisions based on year to year extensions of
the biodiesel tax incentive. Thus, a multiple year extension of the
incentive is needed to provide certainty and stability in the
marketplace. In addition, the U.S. biodiesel industry supports
reforming the biodiesel tax incentive by changing the current blenders
excise tax credit to a production excise tax credit. This will improve
Administration of the incentive, eliminate potential abuses and enhance
tax compliance.
__________
Chairman Levin, Ranking Member Camp and Members of the Committee, I
thank you for the opportunity to submit written testimony on behalf of
the National Biodiesel Board (NBB) regarding the need to retroactively
extend and reform the biodiesel tax incentive.
About NBB: NBB is the national trade association representing the
biodiesel industry as the coordinating body for research and
development in the U.S. It was founded in 1992 by state soybean
commodity groups who were funding biodiesel research and development
programs. Since that time, the NBB has developed into a comprehensive
industry association, which coordinates and interacts with a broad
range of cooperators including industry, government and academia. NBB's
membership is comprised of biodiesel producers; state, national and
international feedstock and feedstock processor organizations; fuel
marketers and distributors; and technology providers.
Background and Industry Overview: Biodiesel is a diesel replacement
fuel that is an Advanced Biofuel under the Renewable Fuels Standard
(RFS2) program. The fuel is made from agricultural oils, fats and waste
greases and is refined to meet a specific commercial fuel definition
and specification. The fuel is produced by reacting feedstock with an
alcohol to remove the glycerin and meet the D6751 fuel specification
set forth by the American Society for Testing and Materials (ASTM
International). Biodiesel is one of the best-tested alternative fuels
in the country and the only alternative fuel to meet all of the testing
requirements of the 1990 amendments to the Clean Air Act. There are
currently 173 biodiesel plants in the U.S. with a combined production
capacity of 2.69 billion gallons.
Biodiesel is primarily marketed as a 5 percent (B5) blending
component with conventional diesel fuel, but can be used in
concentrations up to 20 percent (B20). It is distributed utilizing the
existing fuel distribution infrastructure with blending occurring both
at fuel terminals and ``below the rack'' by fuel jobbers. Biodiesel is
beginning to be distributed through the petroleum terminal system. To
date, biodiesel is available in over 72 fuel distribution terminals.
Last year, two major pipeline companies successfully tested B5 blends
in pipelines, and the biodiesel industry has committed funds to
continue to study the technical needs required for moving biodiesel
through U.S. pipelines. Already, biodiesel is moved through pipelines
in Europe, and expanding that capability in the U.S. would
significantly increase biodiesel penetration in the U.S. diesel fuel
market.
Status and Background on the Biodiesel Tax Incentive: The biodiesel
tax incentive was enacted in 2004 as part of the American Jobs Creation
Act (P.L. 108-357). The incentive was subsequently extended through
December 31, 2008 as part of the Energy Policy Act of 2005 (P.L. 109-
190). H.R. 1424, the Emergency Economic Stabilization Act of 2008 (P.L.
110-343), again extended the incentive for 1 year through December 31,
2009. The biodiesel tax incentive has expired, and the current lapse in
the biodiesel tax incentive has had a detrimental impact on the
domestic biodiesel industry.
On December 9, 2009, the U.S. House of Representatives approved
H.R. 4213, The Tax Extenders Act of 2009, by a 241-181 margin. This
legislation, among its provisions, provides a 1-year extension of the
biodiesel tax incentive. The U.S. Senate voted to approve its version
of H.R. 4213, The American Workers, State, and Business Relief Act of
2010, on March 10, 2010 by a 62-36 margin. H.R. 4213 as approved by the
U.S. Senate provides a 1-year retroactive extension of the biodiesel
tax incentive.
The biodiesel tax incentive is designed to encourage the production
and use of biodiesel by making the fuel's price competitive with
conventional diesel fuel. In general, current law allows taxpayers to
claim the biodiesel tax incentive as either a $1.00 per gallon general
business income tax credit or as a $1.00 per gallon blenders excise tax
credit. To qualify for the biodiesel tax incentive, the fuel must by
statute meet both the ASTM D6751 fuel specification and the
Environmental Protection Agency's (EPA) registration requirements under
Section 211 of the Clean Air Act. The income tax credit can be claimed
either as a biodiesel mixture credit, which provides the incentive for
each gallon of biodiesel that is blended with conventional diesel fuel,
or as a B100 biodiesel credit for each gallon of pure biodiesel that is
used as a fuel.
The biodiesel tax incentive also provides a biodiesel blenders
excise tax credit. The credit is $1.00 for each gallon of biodiesel
that is blended with conventional diesel fuel. The blenders excise tax
credit differs from the biodiesel mixture income tax credit and the
B100 biodiesel income tax credit in that the blenders credit can be
used to offset excise tax liability, and is refundable to the degree
that the credit exceeds excise tax owed by a taxpayer. The B100
biodiesel credit and biodiesel mixture income tax credit are
coordinated to take into account amounts claimed via the blenders
credit. The vast majority of biodiesel tax incentives are claimed as a
blenders excise tax credit.
Lastly, current law provides for a small agri-biodiesel producer
income tax credit. The credit is 10 cents per gallon and can be claimed
by taxpayers with less than 60 million gallons of cumulative annual
production capacity. The credit is limited to the first 15 million
gallons of annual production. To qualify for the small producer credit,
fuel must be produced from either virgin vegetable oils or animal fats.
Biodiesel Public Policy Benefits: The biodiesel tax incentive has
helped achieve the worthwhile policy goal of increasing the production
and use of biodiesel in the U.S. In 2004, when the incentive was
initially enacted, the U.S. produced 25 million gallons. In 2009, that
number rose to 545 million gallons. There are compelling public policy
benefits associated with the enhanced production and use of biodiesel
in the U.S.
The Biodiesel Industry is Creating Green Jobs and Making a Positive
Contribution to the Economy: In 2009, the U.S. biodiesel industry
supported 23,000 jobs in all sectors of the economy. This added $4.1
billion to the Nation's Gross Domestic Product (GDP) and generated $828
million in tax revenue for federal, state and local governments.
By conservative estimates, there is domestic feedstock available to
support 1.77 billion gallons of annual biodiesel production in the U.S.
The domestic industry has the capacity to support this level of
production. The production of 1.77 billion gallons of fuel would
support 78,619 jobs; add $6.660 billion to the GDP; generate $1.345
billion in revenue for federal, state and local governments; and reduce
greenhouse gas emissions by 27.4 billion pounds--the equivalent of
removing 2.38 million passenger vehicles from U.S. roads.
Biodiesel Reduces our Dependence on Foreign Oil: Biodiesel plays a
constructive role in expanding domestic refining capacity and reducing
our reliance on foreign oil. The 1.9 billion gallons of biodiesel
produced in the U.S. since 2005 has displaced an equivalent amount of
diesel fuel with a clean-burning, efficient fuel that reduces lifecycle
carbon dioxide emissions by as much as 86 percent compared to petroleum
diesel fuel and creates 4.56 units of energy for every unit of energy
that is required to produce the fuel.
Biodiesel is Good for the Environment: Biodiesel is an
environmentally safe Advanced Biofuel, and is the most viable
transportation fuel when measuring its carbon footprint, life cycle and
energy balance. The U.S. Department of Agriculture (USDA)/Department of
Energy (DoE) life cycle study shows that biodiesel yields a 78 percent
reduction in direct lifecycle CO \2\ emissions compared to petroleum
diesel fuel. The EPA's RFS2 life cycle analysis shows that biodiesel
reduces greenhouse gas emissions by as much as 86 percent. One billion
gallons of biodiesel will reduce current life cycle greenhouse gas
emissions by 16.12 billion pounds, the equivalent of removing 1.4
million passenger vehicles from U.S. roads. In 2009 alone, biodiesel's
contribution to reducing greenhouse gas emissions was equal to removing
over 774,000 passenger vehicles from America's roadways.
Biodiesel's emissions significantly outperform petroleum diesel.
Biodiesel emissions have decreased levels of all target polycyclic
aromatic hydrocarbons (PAH) and nitrited PAH compounds, as compared to
petroleum diesel exhaust. These compounds have been identified as
potential cancer causing agents.
Biodiesel is the only alternative fuel to voluntarily perform
Environmental Protection Agency (EPA) Tier I and Tier II testing to
quantify emission characteristics and health effects. That study found
that B20 (20 percent biodiesel blended with 80 percent conventional
diesel fuel) provided significant reductions in total hydrocarbons,
carbon monoxide, and total particulate matter. Research also documents
the fact that the ozone forming potential of the hydrocarbon emissions
of pure biodiesel is nearly 50 percent less than that of petroleum
fuel. Pure biodiesel typically does not contain sulfur and therefore
reduces sulfur dioxide exhaust from diesel engines to virtually zero.
The Biodiesel Industry Stimulates Development of New Low-Carbon
Feedstocks: The feedstock used to produce U.S. biodiesel has
increasingly diversified, with waste products such as animal fat and
used restaurant grease (yellow grease) making up a larger portion of
the feedstock used to produce fuel. Biodiesel production is currently
the most efficient way to convert lipids into low-carbon diesel
replacement fuel, and as a result, industry demand for less expensive,
reliable sources of fats and oils is stimulating promising public,
private and non-profit sector research on second generation feedstocks
such as algae.
Algae's potential as a source of low carbon fuel has been well
documented, and a stable, growing biodiesel industry is necessary if
the U.S. is to eventually benefit from the commercial scale production
of algal-based biofuels. The NBB estimates that for every 100 million
gallons of biodiesel that is produced from algae, 16,455 jobs will be
created and $1.461 billion will be added to the GDP.
U.S. Biodiesel Industry is Facing Severe Economic Hardship: Despite
recent growth, the industry is in the midst of an economic crisis.
Plants are having difficulty accessing operating capital. Volatility in
commodity markets and reduced demand for biodiesel in both domestic and
global markets are making it difficult for producers to sell fuel.
Lastly, uncertainty relating to federal policy that is vital to the
industry's survival--in particular the current lapse of the biodiesel
tax incentive--is sending inconsistent signals to the marketplace and
undermining investor confidence in the industry.
If prolonged, this downturn will lead to a severe retraction in
U.S. biodiesel production capacity. Because of the lapse in the
biodiesel tax incentive, the price of biodiesel is significantly higher
than petroleum diesel. This has made it nearly impossible for biodiesel
plants to produce fuel at a profit, and as a result, U.S. production
and consumption of biodiesel has been severely curtailed. If this
situation is allowed to persist, the energy security, environmental,
and job creation benefits that the Nation realizes from biodiesel
production will be lost.
Multiple Year Extension of a Reformed Biodiesel Tax Incentive is
Consistent with Sound Tax and Energy Policy: The biodiesel tax
incentive has helped the nascent U.S. biodiesel industry reach
commercial scale production of renewable, low carbon diesel replacement
fuel. This in turn has allowed the Nation to realize the energy
security, economic and environmental benefits associated with the
domestic production and use of biodiesel. It is, however, difficult for
entrepreneurs and investors to make long-term business decisions based
on year to year extensions of the biodiesel incentive. Thus, a multiple
year extension of the biodiesel tax incentive is needed to provide
certainty and stability in the marketplace.
NBB also supports a structural reform of the tax incentive.
Specifically, the U.S. biodiesel industry supports changing the current
blenders excise tax credit to a production excise tax credit of equal
value. This change will streamline Administration of the credit and
promote tax compliance while preserving the elements of the existing
incentive that have effectively incentivized the production and use of
biodiesel. This reform proposal is encompassed in H.R. 4070,
legislation introduced by U.S. Representative Earl Pomeroy (D-ND) and
U.S. Representative John Shimkus (R-IL) and S. 1589, The Biodiesel
Reform and Extension Act of 2009, introduced in the U.S. Senate by
Senator Maria Cantwell (D-WA) and Senator Charles Grassley (R-IA).
There are several shortcomings associated with the current
structure of the biodiesel blenders excise tax credit that would be
remedied by restructuring the incentive as a production excise tax
credit. Specifically:
Current Blenders Excise Tax Credit Structure Presents
Administrative Difficulties: Blending biodiesel with diesel fuel, the
event that triggers the blenders credit, can occur at multiple stages
in the fuel distribution chain. This significantly increases the number
of registrants eligible to claim the credit and makes it difficult to
ensure that only fuel that qualifies for the benefit claims the
incentive. Changing the blenders excise tax credit to a production
excise tax credit would allow the incentive to be claimed at either a
biodiesel plant or at an Internal Revenue Service (IRS) registered
terminal, making it easier to ensure that only fuel meeting the ASTM
D6751 fuel specification receives the tax incentive while preserving
the incentive's underlying economic benefits.
Existing Blenders Excise Tax Credit Does Not Work Well with the
U.S. Department of Treasury's Excluded Liquids Rule: Under existing
regulations, for purposes of the 24.3 cents per gallon diesel fuel
excise tax, diesel fuel does not include ``excluded liquids.'' Among
other things, liquids with less than 4 percent paraffin content are
considered an excluded liquid. Existing IRS regulations allow B99.9
biodiesel blends and other blends to qualify for the biodiesel blenders
excise tax credit, even if the blend is an excluded liquid not subject
to the federal diesel fuel excise tax. B99.9 blends do not have 4
percent paraffin content, and thus, are not currently subject to the
diesel fuel excise tax. Because biodiesel is typically used as a lower
level blend component in the marketplace that is eventually subject to
the federal diesel fuel excise tax, this leads to a situation where
excise tax liability is triggered at varying points ``below the rack.''
This makes collection of the 24.3 cents per gallon diesel fuel excise
tax burdensome for both taxpayers and the IRS.
In an attempt to address this issue, the IRS issued a proposed rule
on July 29, 2008 that would modify the Excluded Liquids rule in a
manner that would subject B99.9 biodiesel blends to the federal diesel
fuel excise tax. This change, however, would further complicate the
taxation and distribution of biodiesel in fuel terminals. For example,
under the proposed rule, a B99.9 blend sold by a biodiesel producer to
a position holder in an IRS registered terminal would be subject to the
24.3 cents per gallon diesel fuel excise tax. When the B99.9 fuel is
further blended to a B5 through B20 level and is sold at the terminal
in a taxable sale, the biodiesel component of the blend would again be
subject to the diesel fuel excise tax. Though there is an existing
regime that would allow for the refunds, this system is not timely and
is difficult for taxpayers to navigate. As a result, this change would
again have the unintended consequence of artificially inflating the
price of biodiesel in the marketplace on account of the fuel being
subject to double taxation and could cause cash flow issues for fuel
marketers and terminal operators who sell and promote biodiesel in the
marketplace. Further, terminal operators who handle both B100 and B99.9
biodiesel blends would be forced to expend capital to purchase
additional storage tanks and other infrastructure to handle biodiesel,
again serving as a deterrent to the expanded use and sale of biodiesel
through the Nation's fuel terminals.
The IRS is also in the midst of a process that would incorporate
biofuels, including biodiesel, in the existing ExStars fuel reporting
system. ExStars is a fuel excise tax compliance reporting system that
tracks the flow of fuel through IRS registered terminals. In an effort
to collect the 24.3 cents per gallon diesel fuel excise tax owed on
biodiesel blends ``below the rack,'' the IRS envisions significantly
expanding the number of taxpayers that must file reports under the
ExStars system to include small ``below the rack'' fuel marketers. This
would impose an onerous regulatory burden on small businesses.
To remedy this issue, H.R. 4070 and S. 1589 would treat pure
biodiesel as diesel fuel for tax purposes. In general, the reform
proposal would provide that the biodiesel tax incentive would be
claimed and the diesel fuel excise tax would be paid when biodiesel was
sold by the plant. The proposal would also allow for the sale of tax-
exempt, non-credit claimed fuel to an IRS registered terminal, and the
credit would be claimed and excise tax paid at the terminal. This
structure would avoid the complexities associated with subjecting B99.9
blends to the diesel fuel excise tax under the current structure of the
biodiesel tax incentive. In addition, this would significantly improve
tax compliance and remove the need for the IRS to impose onerous below
the rack ExStars reporting requirements on fuel distributors and
marketers.
Change to Production Excise Tax Credit Would Stop Potential
Transshipment Schemes: P.L. 110-343 contained a provision designed to
give the IRS the statutory authority to stop so-called ``splash and
dash'' transactions. A ``splash and dash'' transaction occurs when
biodiesel produced in a foreign country is sent to the U.S., splash
blended with diesel fuel to claim the U.S. biodiesel blenders excise
tax credit, and then sent to a third country for final use as biodiesel
or diesel fuel at any blend level. P.L. 110-343 clarified that
effective May 15, 2008, fuel produced outside the U.S. for use outside
the U.S. does not qualify for the biodiesel tax incentive. There is
clearly no energy or tax policy justification for this sort of
transaction, and the NBB was fully supportive of efforts to close this
unjustified and unforeseen tax loophole.
Though Congress closed the ``splash and dash'' loophole, the
current law blenders credit could inadvertently allow for other
potential abuses associated with the transshipment of foreign fuel
through the U.S. to claim the blenders credit. In addition, further
refinements to the blenders excise credit to address these issues are
likely to run contrary to U.S. WTO commitments. A change to a
production excise tax credit would thwart any potential transshipment
abuses in a WTO-consistent manner.
Transition to Production Excise Tax Credit Could be Accomplished
with Minimal Marketplace Disruption: Under current law, a blend of 99.9
percent biodiesel and .1 percent diesel qualifies for the biodiesel
blenders excise tax credit. Biodiesel plants are currently permitted to
claim the incentive. Thus, for practical purposes, the current
incentive in these instances functions as a production credit. A change
to a production excise tax credit would preserve the incentive's
liquidity and could be easily administered by both taxpayers and the
IRS.
Conclusion: The biodiesel tax incentive has helped achieve the
desired goal of increasing the domestic production and use of
biodiesel, and in turn has helped the U.S. realize the energy security,
economic and environmental benefits associated with displacing
petroleum with domestically produced renewable fuels. These benefits,
however, will be lost if Congress does not act in a timely manner to
address the immediate issue facing the industry and retroactively
extend the biodiesel tax incentive. In addition, to provide certainty
and improve the incentive, the U.S. biodiesel industry urges Congress
to reform the biodiesel tax incentive as a production excise tax
incentive and provide a multiple year extension of the reformed
incentive.
Chairman Levin, Ranking Member Camp and Members of the Committee, I
again appreciate having the opportunity to submit written testimony on
this issue of significant importance to the U.S. biodiesel industry.
National Hydropower Association, Letter
April 16, 2010
The Honorable Sander Levin The Honorable David Camp
Chairman Ranking Minority Member
Committee on Ways and Means Committee on Ways and Means
1102 Longworth House Office Building 1139E Longworth House Office
Building
Washington, DC 20515 Washington, DC 20515
Dear Chairman Levin and Ranking Member Camp:
The National Hydropower Association \1\ (NHA) appreciates this
opportunity to comment on the need for continued federal investment in
the Nation's hydropower system to support the ambitious renewable
energy goals set by Congress, the Administration, as well as the
states.
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\1\ NHA is a non-profit national association dedicated exclusively
to advancing the interests of the U.S. hydropower industry, including
conventional, pumped storage and new ocean and other hydrokinetic
technologies. NHA's membership consists of more than 170 organizations
including public utilities, investor owned utilities, independent power
producers, project developers, equipment manufacturers, environmental
and engineering consultants and attorneys.
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Significantly increased renewable energy generation has many short-
and long-term benefits, such as reduced emission of greenhouse gases
and other pollutants. However, to meet these aggressive goals and reap
the benefits, aggressive federal policy support, particularly in the
form of expanded tax incentives, is needed.
NHA believes the U.S. hydropower industry is primed for responsible
growth and can play a significant role in the effort to increase
renewable energy generation. Numerous opportunities are available to
expand this country's hydropower base while at the same time providing
responsible environmental stewardship of the Nation's rivers.
These opportunities have grown dramatically with Congress'
enactment of the Energy Policy Act of 2005 (EPAct 2005), and more
recently, the American Recovery and Reinvestment Act of 2009 (ARRA).
However, policies remain unfinished or not addressed by these statutes
that would provide the long-term certainty needed by utilities and
project developers to attract investment in the hydropower sector and
to finance new development.
NHA commends to the Committee the following items for inclusion in
any tax package as part of a jobs stimulus or energy and climate bill:
Section 45 Production Tax Credit Parity for
Hydropower and Hydrokinetic Resources Internal Revenue Code
(IRC) Section 45 provides for a production tax credit (PTC) for
electricity produced from certain renewable resources. Under
current law, the PTC discriminates between technologies,
picking winners and losers. Certain facilities, such as wind
and geothermal power, are eligible to receive the full PTC,
while other qualified facilities, including qualified
hydropower, small irrigation power and marine and hydrokinetic
power receive only 50 percent of the full PTC rate.
All of the technologies that qualify for the PTC play an
important role in expanding the Nation's use of renewable
electricity and reducing the effects of climate change. The
disparity in the PTC distorts market dynamics and makes it
difficult for facilities that receive only a 50 percent credit
to compete with those that receive the full amount of the
credit. It is critical for Congress to provide technology-
neutral tax incentives to promote the growth of all clean
electricity resources. (See introduced bipartisan parity
legislation--H.R. 2626, the Renewable Energy Parity Act.)
In ARRA, Congress recognized the need for equal tax
treatment for renewables by allowing all renewable energy
project developers to elect the 30 percent ITC. NHA recommends
Congress extend the same treatment to the PTC, which would
harmonize the policies and ensure there is no slanting of
investment in favor of any one technology over another.
Extension of Section 1603 Grants Section 1603 of ARRA
created a Department of Treasury grant program that provides
for a 30 percent cash grant in lieu of the IRC section 48 ITC
for specified energy property (a) placed in service in 2009 or
2010 (regardless of when construction began), or (b) placed in
service after 2010 but before January 1, 2017, but only if the
construction of such property began during 2009 or 2010.
Although the grant program has been very helpful in
providing access to financing for qualified energy facilities
during the Nation's economic downturn, a 2-year extension of
the grant program would ensure the creation of additional
facilities to expand production of renewable energy and create
thousands of new green technology jobs. NHA also recommends
adoption of a mechanism that allows public power to utilize the
Section 1603 program.
Increase Funding of CREBs. Clean Renewable Energy
Bonds (CREBs) are tax credit bonds that provide the equivalent
of interest-free loans to provide financing for capital
expenditures for qualified public power projects. Additional
funding of the CREBs program is critical to ensuring that
qualified projects have access to capital to construct new
facilities.
Expansion/Extension of the IRC Section 48C Advanced
Manufacturing Credit. ARRA created a new IRC Section 48C 30
percent ITC for qualified investment in projects that re-equip,
expand or build manufacturing facilities used to produce
certain specified advanced energy property. ARRA provided for
$2.3 billion in credits to be awarded through a competitive
application process. President Obama has proposed increasing
funding for the program to $5 billion in order to expand the
Nation's green energy manufacturing capacity and create high-
paying new green technology jobs in the U.S.
Pumped Storage Investment Tax Credit and CREBs
Eligibility. Pumped storage of electricity is a proven, viable,
large-scale method of storing energy and is an ideal option for
firming the variability of other renewable energy resources,
such as wind and solar. Pumped storage provides several grid
reliability benefits, including energy storage, load balancing,
frequency control, and incremental and decremental reserves.
There are approximately three dozen new projects under
consideration--almost entirely in the western half of the
country. These proposed facilities are situated in key areas
where new development of variable resources is occurring at a
rate that will challenge the capabilities of the transmission
system and existing flexible generation resources to manage.
Pumped storage is also the largest-capacity form of grid
energy storage currently available. Projects generally range in
size from 500-1500 MWs, an important factor considering the
tremendous increase in variable renewable generation,
particularly wind, which is growing at a rate of thousands of
MWs per year.
Legislation has been introduced that would provide a 20
percent investment tax credit and CREBs eligibility for energy
storage property, including pumped storage. Enactment of this
bipartisan legislation, H.R. 4210, the Storage Technology of
Renewable and Green Energy Act, would help to significantly
expand the Nation's capacity to provide the reliability and
grid stability benefits pumped storage provides.
Long-Term Extension of PTC and ITC. With ARRA, the
Congress extended the production and incentive tax credits
through 2013. This multi-year extension has been critical for
the hydropower industry to utilize the credits as the
development and deployment timeline of larger, more capital-
intensive hydropower projects is longer than that of other
renewables. To date, over 4 dozen projects have been certified
for PTCs and several other projects are looking to utilize the
ITC or were resurrected after being put on the shelf because of
the ITC availability.
All of these projects though, involve adding new capacity at
existing hydropower facilities. Also eligible under the PTC and
ITC are new hydropower facilities at existing non-powered dams.
Currently, only 3 percent of the country's 80,000 dams have
power facilities. However, these projects are required to
complete a licensing process that takes 5 to 5.5 years, on
average, with additional time needed for construction and
equipment manufacturing. A further extension of the credits for
hydropower facilities is needed to ensure that these larger
projects with longer lead times have the certainty of the
incentives. Otherwise, investment will continue to flow, by
default, to those technologies that can deploy in less time.
NHA appreciates the opportunity to submit this statement for the
record. We believe there are tremendous opportunities to accelerate
deployment of hydropower resources to realize our national clean
energy, jobs, and environmental goals by utilizing the benefits
hydropower provides. However, policy matters, and we strongly encourage
the Committee to adopt the recommendations outlined above.
Sincerely,
Linda Church Ciocci
Executive Director
National Roofing Contractors Association, Statement
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National Rural Electric Cooperative Association, Statement
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Nature's Fuel, Letter
April 27, 2010
Ways and Means Committee
U.S. House of Representatives
Washington, DC 20515
Honorable Members of the Ways and Means Committee:
My name is Glenn Johnson. I am the Chief Operating Officer and
President of Nature's Fuel located in Fort Wayne, Indiana. I am writing
in response to the House Ways and Means Committee hearing entitled,
``Tax Incentives Driving the Green Job Economy,'' to offer my
perspective on current Federal tax incentives and express my concern
over certain inequities related to recently-expired renewable fuel
incentives.
Nature's Fuel currently has a plant operating in Atwood, IN that
produces bio-oil and bio-char made from pyrolyzed wood waste from the
recreational vehicle industry. We have just permitted a plant at the
landfill in Huntington, IN that will process and pyrolyze municipal
solid waste, tires, wood and construction and demolition waste and
other non-hazardous wastes to make low-sulfur renewable oil, bio-char,
and eventually an ultra-low sulfur renewable diesel. At this facility,
100 percent of its intake will be made into renewable energy, renewable
building products or recycled and sold to remake into other commercial
products using an environmentally-friendly process. Nature's Fuel bio-
oil can be used as a clean feedstock for biodiesel, as clean heating
oil or as renewable diesel using the Fischer-Tropsch process.
While incentives are a powerful tool in shaping our country's
energy future, they can also skew private sector outcomes. It is my
understanding that the House Ways & Means Committee has serious
concerns with the Alternative Fuel Tax Credit (AFTC) because coal-to-
liquid fuels would be incentivized by the $.50 per gallon AFTC. My
company simply has a different feedstock and business plan. Before the
expiration of the AFTC in 2009, Nature's Fuel was eligible to receive a
$.50 per gallon credit for the bio-oil produced from discarded wood
waste. Please be assured that the AFTC was critical to our investment
in our first and second plants.
Nature's Fuel is advancing its technical capability to produce
Renewable Diesel and/or Biodiesel. Therefore, my company strongly
supports the conversion of the blender tax credits to producer tax
credits. Production is simply a harder part of the business and
requires a much higher degree of capital investment. Finally, it is
much closer aligned with the public policy goal of incentivizing more
domestically produced transportation fuels to displace our foreign oil
imports from the Middle East.
Moving to a producer tax credit will directly result in new
construction that will help create jobs in our country and helps to
further develop the renewable and biodiesel industries. Finally, this
proposed change in federal law will also help eliminate ``splash and
dash'' activity.
Thank you for your consideration of this timely and crucial matter.
Please do not hesitate to contact me if you have any questions.
Sincerely,
Glenn W Johnson
COO-President, Nature's Fuel
Northeast Combined Heat and Power Initiative, Letter
April 27, 2010
The Honorable Sander Levin The Honorable David Camp
Ways and Means Committee Ways and Means Committee
1102 Longworth House Office Building 1139E Longworth House Office
Building
Washington, DC 20525 Washington, DC 20515
Dear Chairman Levin and Ranking Member Camp:
On behalf of the members of the Northeast Combined Heat and Power
Initiative, we are writing to urge your consideration of an important
bill to support residential combined heat and power in the United
States.
The Northeast Combined Heat and Power Initiative (NECHPI) is a
volunteer organization dedicated to accelerating the deployment
of clean, efficient combined heat and power in the Northeastern
United States. NECHPI leads the Northeast Region in encouraging
the implementation of CHP technologies and drives CHP roadmap
action items in support of the U.S. Department of Energy's
(DOE) programs. NECHPI is an alliance which includes the DOE,
the North East Clean Energy Application Center, The U.S.
Environmental Protection Agency CHP Partnership, CHP developers
and equipment manufacturers, State and local governmental
organizations and others involved with energy and the
environment. NECHPI provides for coordination and
communications among the various stakeholders in the region,
including but not limited to federal agencies, state agencies,
utilities, project developers, equipment manufacturers, CHP
users, universities, research institutions, and public interest
groups.
Congress has an opportunity to make American homes more energy
efficient, save homeowners thousands of dollars on rising energy bills,
reduce emissions associated with the residential sector, and create
jobs by creating incentives to promote the installation of residential
CHP systems. The residential sector represents 22 percent of energy
usage in the United States, and now homeowners can reduce energy usage
by installing cogeneration systems that have been developed for the
home. Micro-combined heat and power (micro-CHP) technologies, which are
increasingly used in Europe and Japan, can greatly improve energy
efficiency in a majority of U.S. homes while creating thousands of new
green energy jobs across America.
Based upon EIA 2010 Annual Energy Outlook data, if one-half of the
electricity delivered for residential consumption could be replaced by
electricity produced on-site by micro-CHP, total U.S. energy
consumption can be reduced by approximately 5 percent or five
quadrillion Btus due to electricity related losses that are avoided.
This represents both an enormous efficiency opportunity and cost
savings.
We ask you to support a bill that will enhance America's
residential energy efficiency and help establish further micro-CHP
manufacturing in the U.S. Micro-CHP, which recaptures heat created in
the electrical generation process and uses it to heat the home,
currently, receives no tax benefits. We urge Congress to pass Rep.
Higgins' bi-partisan H.R. 2328 which would establish a 30-percent tax
credit for the installation of highly efficient micro-CHP systems in
homes in the U.S.
In today's economy, having the opportunity for homeowners to save
on their utility bills while utilizing less energy and producing fewer
emissions is part of a bold and necessary energy action plan. Micro-CHP
systems will strengthen our electric utility infrastructure through
increasing the amount of distributed generation, and will promote
energy independence by utilizing our domestic sourced natural gas.
A tax credit for homeowners who install residential
CHP systems would encourage energy efficiency and create
investments by utilities, financing authorities, heating and
cooling manufacturers, and many other residential home
industries.
The tax credit would result in the immediate and
long-term creation of thousands of jobs across many industries,
including the manufacturing, sales, installation, maintenance,
and service of micro-CHP systems in the U.S.
The tax credit would encourage owners of the 3-4
million central heating systems installed each year in the U.S.
to consider adding cogeneration to their homes, vastly
decreasing fuel use and harmful air pollutants.
Thank you for your consideration of this tax credit that will
create jobs, encourage homeowners to save money, reduce fuel use and
emissions, and help to establish a micro-CHP industry in the United
States.
Sincerely,
John Rathbun Thomas Kelly
Chairperson Vice Chairperson
Northeast CHP Initiative Northeast CHP Initiative
Submitted by:
John Rathbun
Chairperson
Northeast CHP Initiative
[email protected]
516-545-3863 office
516-659-6431 cell
Northwest Pipe Company for Northwest PowerPipe, Letter
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Orion Advocates on behalf of Domtar Corporation, Statement
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Paper Industry Coalition to Save Energy
and Main Street Jobs, Statement
Submitted by: The Paper Industry Coalition to
Save Energy and Main Street Jobs
Appleton Papers Old Town Fuel & Fiber
Boise Incorporated Port Townsend Paper Corp.
Buckeye Technologies Sappi Fine Paper North
America
Domtar Stratex Energy
Finch Paper LLC Thilmany Papers
Glatfelter Verso Paper Corp.
Lincoln Paper & Tissue LLC
The use of renewable energy resources to reduce reliance on foreign
fossil fuel sources and secure American jobs is a laudable and
worthwhile goal, and one that our forest products industry coalition
wholeheartedly encourages.
Forest products firms--in particular pulp and papermaking
companies--have been leaders in the use of renewable, green energy for
decades. We use every part of the tree. What is not made into paper is
recycled into a major source of clean, renewable, and essentially
carbon-neutral energy used to help power the mills. As a result, U.S.
pulp and paper mills are, on average, 65% energy self-sufficient. The
environmental benefits of this commitment are significant. We've
eliminated the need for approximately 6.5 billion gallons of fossil
fuels annually that would otherwise have been burned to power the
mills. Waste streams have been reduced and air quality improved.
Customers have had continued access to environmentally friendly,
sustainable products because U.S. mills have continued to produce
products from responsibly harvested trees grown in well-managed
forests. The alternative is buying lower-cost pulp imported from
countries with less stringent forestry restrictions and practices, such
as Indonesia, Brazil and China, involving the harvesting of rainforests
and requiring millions of gallons of fossil fuel to be burned to ship
the products to the U.S.
To expand production of green energy in the United States, protect
valuable American manufacturing jobs in rural communities, and
encourage investment in environmental protection and efficient
manufacturing, the Paper Industry Coalition to Save Energy and Main
Street Jobs--in partnership with the United Steelworkers--strongly
supports the Green Energy Paper Manufacturing Act of 2009 (H.R. 4389)
sponsored by Representatives Scott Murphy, Michael Michaud, Steve Kagen
and David Roe. The bill would provide a tax credit to help level the
playing field among producers of wood-based bioenergy, and require
reinvestment in domestic mills to help protect American manufacturing
jobs.
The paper industry leads the world in the production and use of
renewable energy, and H.R. 4389 would allow paper companies to continue
to invest in green energy processes--advancing improved environmental
efficiencies in paper manufacturing and renewable fuels use.
As Congress looks to further encourage the use of renewable energy
resources, it must be mindful of the impact of government incentives
that choose winners and losers in the use of renewable energy. While
the government can play an important role in helping to promote the use
of green technologies, to incentivize one industry at the expense of
another undercuts the goal of job stability and creation.
Technology-neutral incentives, such as H.R. 4389, provide an
equitable benefit to users of biomass-based renewable energy, while
retaining and expanding manufacturing jobs that are critical to meet
the dual goals of reducing dependence on foreign energy and improving
the stability of domestic manufacturing.
Current incentive programs treat the same tree in vastly different
ways, depending on who is using this renewable resource. Significant
tax advantages are provided to certain producers that burn the wood
only as a biofuel. Companies that make value-added products, like
paper, from the same kind of fiber--and use the waste fiber to fuel a
large part of the manufacturing process--are not eligible for these tax
incentives. In addition, those incentives are raising the cost of raw
materials for pulp and papermakers.
Wood fiber prices are highest in the Northeast, where regional
incentive programs played a key role in pushing up wood fiber prices in
2008 three times higher than the price for similar wood in the South,
where there are far fewer incentive programs. Comparable wood is still
typically 30 percent to 40 percent more expensive in the Northeast
today.
Inequitable incentive programs mean the same wood fuel used by
paper mills and the same technology to burn it (biomass and biomass
boilers) are treated differently than at stand-alone biomass plants,
effectively undercutting pulp and paper energy production. Generating
both electricity and heat through cogeneration--the most efficient
means of wood energy recovery--at paper mills is given less
encouragement than simple cycle plants. Stand-alone biomass plants
selling electricity to third parties are eligible to receive more than
1 cents per kilowatt hour of production as an incentive, whereas pulp
and paper producers receive no such benefit for use of the same
biomass-based power in creating steam and electricity to make paper.
The Green Energy Paper Manufacturing Act of 2009 (H.R. 4389) is a
technology-neutral tax incentive program that provides a level playing
field for the industry, and should be part of the government's final
package of green energy tax incentives.
The coalition strongly supports this bill because it would provide
a modest production tax credit of $4 per million BTU of energy derived
from biomass fuels, on par with the open loop biomass production tax
credit of $2.94, and lower than the current equivalent tax credits of
$5.92 per million BTUs for ethanol; $6.15 for wind and $13.29 ($1.01
per gallon) for cellulosic ethanol.
The bill calls for:
A production tax credit of $4 per MMBTU of energy derived
from biomass fuels;
A cap of $25 million annually per facility, to limit
costs to Treasury;
A requirement that mills reinvest 50% of the refundable
credit in energy efficiency and environmental improvement projects.
Providing this limited tax credit will assist a critical industry
that provides high wages and good benefits. Pulp and papermaking
employees earned an estimated $36 billion in wages in 2008, or an
average of about $70,000 a year in wage and benefit packages for jobs
in mostly rural areas where similar employment is not readily available
and the jobs are not easily replaceable. The industry is a major
economic driver in the country, accounting for 6 percent of the U.S.
manufacturing GDP, or approximately $200 billion in annual sales.
While on par with the auto industry in terms of the sheer number of
jobs and related benefits, the economic benefits of the pulp and paper
industry are not concentrated in a single region but widely distributed
geographically. The industry is a top-10 manufacturing employer in 48
states, and paper mills are among the largest school and municipal
taxpayers and charitable contributors in the small communities where
they operate.
With nearly 1 million direct employees and up to 6 million
additional indirect jobs, the forest products industry is a key
American manufacturing sector, but it is facing increasing competition
for its most essential raw material with power producers who can afford
to pay more for biomass as a result of government tax credits and other
subsidies.
The Paper Industry Coalition to Save Energy and Main Street Jobs
represents approximately 25,000 people in rural areas in more than 20
states from Maine to Florida to Washington state. With the industry's
job multiplier effect, that's an additional 88,000 to 132,000 jobs that
rely on the health of these paper companies in communities where
sustainable and stable employment is elusive. This is why the United
Steelworkers are standing with us to secure passage of this essential
support for rural manufacturing jobs in the new Green Economy.
We appreciate the opportunity to present these comments to the
Committee, and look forward to working in partnership with the
government to reduce foreign energy dependence through the use of
green, renewable fuels, while solidifying an American manufacturing
icon that supports rural communities and small towns across the
country.
Members and staff with an interest in learning more about this
topic are encouraged to contact Mark L. Behan of Behan Communications
Incorporated at [email protected] or at (518) 792-3856, or any of
the following members of our coalition:
Appleton Papers Old Town Fuel & Fiber
(Appleton, WI) (Old Town, ME)
Tom Ferree 920-991-8127 Dick Arnold 207-827-7711
[email protected] [email protected]
Boise Inc. Port Townsend Paper Corp.
(Boise, ID) Eveleen Muehlethaler 360-379-
2112
Virginia Aulin 208-384-7837 [email protected]
[email protected]
Buckeye Technologies Sappi Fine Paper North
America
(Memphis, TN) (Boston, MA)
Dennis Livingston 901-320-8906 Amy Olson 617-423-5409
[email protected] [email protected]
Domtar Stratex Energy
(Fort Mill, SC) (Portland, ME)
Tom Howard 803-802-8041 Gordon Grimes 207-228-7233
[email protected] [email protected]
Finch Paper LLC Thilmany Papers
(Glens Falls, NY) (Kaukauna, WI)
Adam Blumenthal 212-488-1341 Russ Wanke 920-766-8520
[email protected] [email protected]
Glatfelter Verso Paper Corp.
(York, PA) (Memphis, TN)
Mike Springer 717-225-2780 Mike Jackson 877-837-7606
[email protected] [email protected]
Lincoln Paper and Tissue LLC
(Lincoln, ME)
Keith Van Scotter 207-794-0601
[email protected]