[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
    THE AMERICAN ENERGY INITIATIVE, PART 9: H.R. 909, A ROADMAP FOR 
                        AMERICA'S ENERGY FUTURE

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

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON ENERGY AND POWER

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                              JUNE 3, 2011

                               __________

                           Serial No. 112-57



      Printed for the use of the Committee on Energy and Commerce

                        energycommerce.house.gov



                  U.S. GOVERNMENT PRINTING OFFICE
72-153                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing Office, 
http://bookstore.gpo.gov. For more information, contact the GPO Customer Contact Center, U.S. Government Printing Office. Phone 202ï¿½09512ï¿½091800, or 866ï¿½09512ï¿½091800 (toll-free). E-mail, [email protected].  
?

                    COMMITTEE ON ENERGY AND COMMERCE

                          FRED UPTON, Michigan
                                 Chairman

JOE BARTON, Texas                    HENRY A. WAXMAN, California
  Chairman Emeritus                    Ranking Member
CLIFF STEARNS, Florida               JOHN D. DINGELL, Michigan
ED WHITFIELD, Kentucky                 Chairman Emeritus
JOHN SHIMKUS, Illinois               EDWARD J. MARKEY, Massachusetts
JOSEPH R. PITTS, Pennsylvania        EDOLPHUS TOWNS, New York
MARY BONO MACK, California           FRANK PALLONE, Jr., New Jersey
GREG WALDEN, Oregon                  BOBBY L. RUSH, Illinois
LEE TERRY, Nebraska                  ANNA G. ESHOO, California
MIKE ROGERS, Michigan                ELIOT L. ENGEL, New York
SUE WILKINS MYRICK, North Carolina   GENE GREEN, Texas
  Vice Chair                         DIANA DeGETTE, Colorado
JOHN SULLIVAN, Oklahoma              LOIS CAPPS, California
TIM MURPHY, Pennsylvania             MICHAEL F. DOYLE, Pennsylvania
MICHAEL C. BURGESS, Texas            JANICE D. SCHAKOWSKY, Illinois
MARSHA BLACKBURN, Tennessee          CHARLES A. GONZALEZ, Texas
BRIAN P. BILBRAY, California         JAY INSLEE, Washington
CHARLES F. BASS, New Hampshire       TAMMY BALDWIN, Wisconsin
PHIL GINGREY, Georgia                MIKE ROSS, Arkansas
STEVE SCALISE, Louisiana             ANTHONY D. WEINER, New York
ROBERT E. LATTA, Ohio                JIM MATHESON, Utah
CATHY McMORRIS RODGERS, Washington   G.K. BUTTERFIELD, North Carolina
GREGG HARPER, Mississippi            JOHN BARROW, Georgia
LEONARD LANCE, New Jersey            DORIS O. MATSUI, California
BILL CASSIDY, Louisiana              DONNA M. CHRISTENSEN, Virgin 
BRETT GUTHRIE, Kentucky              Islands
PETE OLSON, Texas
DAVID B. McKINLEY, West Virginia
CORY GARDNER, Colorado
MIKE POMPEO, Kansas
ADAM KINZINGER, Illinois
H. MORGAN GRIFFITH, Virginia

                                 7_____

                    Subcommittee on Energy and Power

                         ED WHITFIELD, Kentucky
                                 Chairman
JOHN SULLIVAN, Oklahoma              BOBBY L. RUSH, Illinois
  Vice Chairman                        Ranking Member
JOHN SHIMKUS, Illinois               JAY INSLEE, Washington
GREG WALDEN, Oregon                  JIM MATHESON, Utah
LEE TERRY, Nebraska                  JOHN D. DINGELL, Michigan
MICHAEL C. BURGESS, Texas            EDWARD J. MARKEY, Massachusetts
BRIAN P. BILBRAY, California         ELIOT L. ENGEL, New York
STEVE SCALISE, Louisiana             GENE GREEN, Texas
CATHY McMORRIS RODGERS, Washington   LOIS CAPPS, California
PETE OLSON, Texas                    MICHAEL F. DOYLE, Pennsylvania
DAVID B. McKINLEY, West Virginia     CHARLES A. GONZALEZ, Texas
CORY GARDNER, Colorado               HENRY A. WAXMAN, California (ex 
MIKE POMPEO, Kansas                      officio)
H. MORGAN GRIFFITH, Virginia
JOE BARTON, Texas
FRED UPTON, Michigan (ex officio)

                                  (ii)


                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Ed Whitfield, a Representative in Congress from the 
  Commonwealth of Kentucky, opening statement....................     1
    Prepared statement...........................................     3
Hon. Henry A. Waxman, a Representative in Congress from the State 
  of California, opening statement...............................     5
Hon. Fred Upton, a Representative in Congress from the State of 
  Michigan, prepared statement...................................   139
Hon. Joe Barton, a Representative in Congress from the State of 
  Texas, prepared statement......................................   140
Hon. Michael C. Burgess, a Representative in Congress from the 
  State of Texas, prepared statement.............................   141

                               Witnesses

Hon. Devin Nunes, a Representative in Congress from the State of 
  California.....................................................     6
    Prepared statement...........................................     9
David Sandalow, Assistant Secretary for Policy and International 
  Affairs, Department of Energy..................................    17
    Prepared statement...........................................    20
Thomas Hicks, Deputy Assistant Secretary of the Navy (Energy)....    33
    Prepared statement...........................................    35
    Answers to submitted questions...............................   228
Neil Auerbach, Managing Partner, Hudson Clean Energy.............    54
    Prepared statement...........................................    57
Jack Spencer, Research Fellow, Nuclear Energy, The Heritage 
  Foundation.....................................................    71
    Prepared statement...........................................    73
James T. Bartis, Senior Policy Researcher, Rand Corporation......   109
    Prepared statement...........................................   112

                           Submitted Material

H.R. 909, A Bill to expand domestic fossil fuel production, 
  develop more nuclear power, and expand renewable electricity, 
  and for other purposes.........................................   144


    THE AMERICAN ENERGY INITIATIVE, PART 9: H.R. 909, A ROADMAP FOR 
                        AMERICA'S ENERGY FUTURE

                              ----------                              


                          FRIDAY, JUNE 3, 2011

                  House of Representatives,
                  Subcommittee on Energy and Power,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 9:05 a.m., in 
room 2322 of the Rayburn House Office Building, Hon. Ed 
Whitfield (chairman of the subcommittee) presiding.
    Present: Representatives Whitfield, Walden, Terry, Bilbray, 
Scalise, McMorris Rodgers, Olson, McKinley, Gardner, Pompeo, 
Inslee, Green, Gonzalez, and Waxman (ex officio).
    Staff present: Charlotte Baker, Press Secretary; Patrick 
Currier, Counsel, Energy and Power; Garrett Golding, 
Professional Staff Member, Energy and Power; Cory Hicks, Policy 
Coordinator, Energy and Power; Ben Lieberman, Counsel, Energy 
and Power; Dave McCarthy, Chief Counsel, Environment/Economy; 
Carly McWilliams, Legislative Clerk; Mary Neumayr, Counsel, 
Oversight/Energy; Tiffany Benjamin, Democratic Investigative 
Counsel; Jackie Cohen, Democratic Counsel; Greg Dotson, 
Democratic Energy and Environment Staff Director; and Caitlin 
Haberman, Democratic Policy Analyst; Alexandra Teitz, 
Democratic Senior Counsel, Environment and Energy.

  OPENING STATEMENT OF HON. ED WHITFIELD, A REPRESENTATIVE IN 
           CONGRESS FROM THE COMMONWEALTH OF KENTUCKY

    Mr. Whitfield. Call the hearing to order this morning, and 
today is the ninth day in our American Energy Initiative 
hearing, and today we are going to be discussing a more 
comprehensive plan to explore ways to produce the necessary 
energy for the American people.
    As you know, when we talk about energy, we talk about 
electricity as one part of it and transportation and fuel for 
transportation as the other part of it. We also know that we 
have a vast amount of natural resources within the borders of 
the United States of America, and many of us believe that we 
have not been able to fully explore and produce from those 
natural resources. And there are many impediments out there to 
it. We also understand that natural resources here in America 
alone will not meet all of our demands for the future.
    We also recognize that not only must we use fossil fuels, 
but we have to use renewables, and we need to explore 
opportunities and more green ways to produce energy for the 
American people, but we also need to be realistic that by 2035, 
the amount of electricity, for example, needed in America is 
going to increase by about 50 percent, and we have to be 
realistic on recognizing the cost of green energy, how much can 
it realistically provide, and what will the cost of electricity 
be for the American people because we find ourselves in a 
global marketplace in which we are competing with other 
countries around the world, and our electricity prices and 
transportation prices have to be competitive if we are going to 
be sure that businesses expand in the U.S., locate in the U.S., 
and we create jobs in the U.S.
    So I look forward to today's hearing. We have three panels 
today. On the first panel we have Devin Nunes, a member of 
Congress from California, who has done extensive work on the 
energy needs of America and has actually developed legislation 
to address some of those problems and issues. So I look 
forward--we look forward to his testimony, and at this time I 
would like to recognize the gentleman from California for his 
opening statement. Mr. Waxman.
    [The prepared statement of Mr. Whitfield follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.001
    
    [GRAPHIC] [TIFF OMITTED] T2153.002
    
OPENING STATEMENT OF HON. HENRY A. WAXMAN, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Waxman. Thank you very much, and Mr. Chairman, today we 
are holding a hearing on a bill that is titled, ``Roadmap for 
America's Energy Future.'' Our Nation faces major energy 
challenges and we need to have a serious conversation about the 
American energy future. But I am sad to say the legislation we 
are examining today proposes no innovative solutions to our 
Nation's energy needs. It doubles down on oil, and it doubles 
down on old, ineffective policies.
    We have seen this roadmap before. This is a recycled 
version of a plan developed by the secretive Bush-Cheney Energy 
Task Force and pushed through Congress by Republicans while 
they were in office. The Bush administration and Congressional 
Republicans spent 8 years following this roadmap. They pushed 
oil and gas drilling, onshore and offshore. They expedited 
permits and weakened environmental protections. They opposed 
efforts to increase fuel economy. They called for nuclear fuel 
reprocessing. They tried to greenwash proposals for drilling in 
the Arctic National Wildlife Refuge by implying congressional 
appropriators could use royalty revenues to support renewable 
energy. They pushed the dirtiest alternative and unconventional 
fuels, coal-to-liquids, oil shale, and tar sands.
    And where did they get this--and where did this roadmap 
lead us? Energy prices soared, and carbon pollution increased. 
And we have become even more dependent on foreign oil. In the 
last year of the Bush administration the Energy Information 
Administration projected that our dependence on oil and oil 
imports would continue to rise year after year.
    Today, we are sending nearly $1 billion per day overseas 
for foreign oil. We use 25 percent of the world's oil, but we 
only have 2 percent of the world's oil reserves. We've worked 
to increase our domestic crude oil production by nearly 300,000 
barrels per day. And yet gas prices remain high.
    Increasing oil production is not going to solve our energy 
needs. Even if we doubled our oil production, oil prices would 
still be set by world markets and leave us vulnerable to price 
shocks.
    H.R. 909's roadmap doesn't lead to the future. It leads to 
the past. The technology to turn coal into liquid fuel has been 
around since World War II. Its problem is as it has always 
been: huge amounts of carbon pollution that will drive 
uncontrolled climate change.
    American entrepreneurs and inventors are using technology 
to unlock real energy solutions: energy sources that are clean, 
safe, and affordable, and grow our economy. In testimony 
provided to the committee for today's hearing, we will hear 
that the wind and solar industries will create over 200,000 new 
jobs. But H.R. 909 would abandon our clean energy future to 
China. For many reasons it is unlikely to help renewable 
energy, because of flaws in its reverse auction mechanism.
    The bill does nothing on efficiency, which is the cheapest 
and most reliable new source of supply. It promotes the form of 
nuclear energy that risks putting nuclear bomb grade material 
into the hands of terrorists. It does nothing to develop carbon 
capture and storage, the technology that coal needs to remain a 
competitor in a carbon-constrained world.
    In 2001, Vice President Cheney said, ``Conservation may be 
a side of personal virtue, but it is not a sufficient basis for 
a sound, comprehensive energy policy.'' Ten years later the 
Republican budget defunds the federal investment in energy 
conservation and innovation. The rest of the world has been 
racing ahead over the last decade. It is too bad the 
Republicans' energy policies have not.
    We have seen this roadmap before, and we know where it 
leads us.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Thank you. At this time I would like to 
recognize Congressman Devin Nunes for his opening statement 
regarding his legislation, and Congressman, we are delighted 
you have come before the subcommittee, and we look forward to 
your testimony, and thank you for being here.

  STATEMENT OF HON. DEVIN NUNES, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Nunes. I do appreciate that, Mr. Chairman and Ranking 
Member, for allowing me to testify here today. It is an honor 
to be before the Energy and Commerce Committee. In fact, I have 
never been before the Energy and Commerce Committee before, so 
it really is an honor and a privilege for me to be here today.
    Our Nation has been blessed with great abundance of natural 
resources. Consider these astounding facts. ANWR potentially 
contains 10 billion barrels of oil, the Outer Continental Shelf 
is estimated to hold 85 billion barrels of oil and 420 trillion 
cubic feet of natural gas, and over two trillion barrels of oil 
are held in oil shale deposits, more than are contained in all 
of the countries in the Middle East combined. Additionally, our 
Nation has nearly 250 billion tons of recoverable coal 
reserves, which is the estimated equivalent of 800 billion 
barrels of oil and constitutes more than three times Saudi 
Arabia's proven oil reserves.
    Unbelievably, our government has chosen not to utilize 
these resources fully, despite the repeated promises to achieve 
energy independence by both Democrats and Republican 
administrations and Congresses alike. But continued inaction is 
unacceptable with stubbornly high unemployment, lackluster 
economic growth, widespread unrest in the Middle East, and the 
prospect of escalating gas prices punishing American families. 
Nothing done by our government in the past 4 decades has 
actually helped to achieve the goal of energy independence, or 
for that matter, kept energy prices affordable for American 
families and businesses. The reverse is true. We are more 
dependent on foreign oil today than ever before and far more 
economically vulnerable than at any point in our Nation's 
history.
    If we summon the political will to enact this legislation 
before the committee, H.R. 909, would reverse this course, 
immediately lower energy prices, and finally deliver on the 
unfulfilled promises of recent decades.
    The energy roadmap is not a radical alternative to current 
energy policy. That is, while we can all agree that we need a 
comprehensive approach, this approach must be market-based and 
gradual if we are to achieve true energy independence. I 
predict that any other approach will ultimately be rejected by 
the American people.
    The energy roadmap would lift restrictions on development 
and extraction of resources in ANWR and OCS. This could create 
up to two million jobs and maybe just the construction of these 
jobs would create another 100,000 construction jobs.
    The roadmap recognizes that dependence on any one fuel 
source is dangerous and short-sighted. It also recognizes that 
the American people have made it clear that they do see the 
merit in federal resources to develop and transition to 
alternative energy sources and to reduce carbon emissions when 
economically and technologically feasible.
    The status quo does not provide adequate support to the 
development of alternative energy. It is not necessarily a 
question of resources as much as it is a question of the 
appropriate structure to deliver support for the development of 
renewable energy. For example, while many renewable energy 
companies support the current production tax credit, they are 
frustrated with its lack of predictability and that it can get 
caught up in the legislative process and lapse.
    Accordingly, H.R. 909 would provide the financial resources 
and structure necessary to transition our economy to renewable 
and advanced energy alternatives. It would do this by 
depositing the new federal lease and royalty revenues, 
estimated to be over $500 billion in the next 30 years, into a 
trust fund. These dollars would then be made available to 
renewable energy producers through a reverse auction. This 
market-based mechanism would ensure that the cheapest and most 
efficient technology thrives while simultaneously opening the 
alternative energy market to greater innovation and 
competition.
    Importantly, the roadmap would not end the credit. Rather, 
it would give an alternative to energy entrepreneurs to choose 
to receive the credit or to forego it to receive support 
through the reverse auction. Moreover, the support provided 
under the energy roadmap for the development of renewable 
energy would not be subject to the federal budget or the 
legislative process. Put simply, it provides the best mechanism 
to develop, produce, and transition to alternative energy.
    Another component of the roadmap would establish or would 
mandate that 200 reactors be--permits be granted by 2040. This 
bill would provide new, streamlined regulations and a system to 
manage the waste that will drive private sector investments in 
these facilities, which today are stalled as a result of red 
tape, lawsuits, and parochial concerns. Nuclear power in my 
estimation is essential to achieving an abundant and affordable 
supply of electricity to fuel our Nation's economy.
    H.R. 909 would enhance our national security by removing 
barriers to expand our Nation's secure coal supplies to fill 
the tanks of the American military vehicles and jets. In fact, 
the bill's near-team goal is to produce at least 300,000 
barrels of CTL, coal to liquid. Such supply would equal the 
amount of fuel consumed daily by the U.S. military for domestic 
operations.
    The American people are looking to us for leadership. They 
know intuitively that we are running out of time, and they are 
worried about the future of our country and for their--and our 
country's future for their children. They have given us the 
opportunity to offer solutions to this and other big problems. 
My fellow colleagues, it is time for us to act, and I really do 
appreciate, Mr. Chairman, Ranking Member, for having the 
opportunity to testify here today.
    [The prepared statement of Mr. Nunes follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.003
    
    [GRAPHIC] [TIFF OMITTED] T2153.004
    
    [GRAPHIC] [TIFF OMITTED] T2153.005
    
    [GRAPHIC] [TIFF OMITTED] T2153.006
    
    Mr. Whitfield. Well, thank you, Mr. Nunes, for that 
testimony, and I will recognize myself for a period of 
questions and then will recognize Mr. Waxman for the same 
purpose.
    In your testimony you talked a little bit about a reverse 
auction for a fund to encourage more development of renewable 
fuels. Would you elaborate a little bit on the way this reverse 
auction would work?
    Mr. Nunes. Absolutely, Mr. Chairman. I believe that despite 
the ranking member's testimony at the beginning, I think this 
is something that is new, is innovative, and it would change 
the way that alternative energy is deployed. Basically to put 
it simply you take the royalty revenues, which some people 
estimate to be $500 billion over 30 years, it could be higher, 
it could be lower, but a significant amount of money. And what 
you do is essentially that money is there, and it acts as a 
reverse auction. So the lowest bidder wins.
    So if I could maybe give you an example. Say that someone, 
one person has windmills that they want to put up in 
California, and someone has a windmill farm that they want to 
put up in Nevada. And if one company says that they need $100 
to get their project off the ground, in California let us say 
it is $100, but in Nevada that company for the same size 
project only needs $90, they would submit those bids, and it is 
per megawatt, and the Nevada company would win.
    So you would--basically it gets to the cheapest way to 
deploy renewable energy, and this has been I think met with--in 
the Silicone Valley and the entrepreneurial community in 
California, this has been well received throughout the 
companies that want to see changes to the way these 
technologies are deployed.
    Mr. Whitfield. Now, is there an example of where this type 
of reverse auction has been implemented in other places and has 
been proven that it works very well?
    Mr. Nunes. Yes. Matter of fact, good question, Mr. 
Chairman. I was quite embarrassed to learn that when I 
developed this legislation I thought that I had developed 
something new. In fact, this is being used in Brazil, and to my 
knowledge, although I have not talked--I do coach the Brazilian 
Caucus, which is even more of an embarrassment that I didn't 
know that this was there, but from my understanding it is 
working very well.
    Mr. Whitfield. And they use it for the same purpose, for 
the development of renewables?
    Mr. Nunes. Yes, and I think it would be, it would probably 
for this committee, it would be worth your time maybe to look 
into that if you have another hearing.
    Mr. Whitfield. We have heard a lot recently, particularly 
from our friends on the other side of the aisle, about removing 
production tax credits and other things from the oil industry, 
and without getting into a discussion about that proposal per 
se, I would like to just broaden it, and do you think it would 
be reasonable or would it be helpful if we are going to have a 
debate about removing tax credits from the oil industry, 
should--in your view, should we have a debate about just 
removing incentives from all energy production?
    Mr. Nunes. In fact, Mr. Chairman, we have been--Chairman 
Camp of the Ways and Means Committee, we have been conducting a 
series of hearings of tax reform, and we have had many 
different companies from both foreign nationals and small 
businesses basically all say the same thing, that they would 
like to see the tax rate reduced and would basically forego all 
of these types of little production tax credits and different 
tax credits that are out there.
    And so I think President Obama-, you were at the meeting 
the other day, he indicated that this is something that he 
would like to do also, so I think simplifying of the tax code, 
getting rid of all these credits would be something worthwhile, 
and that is what the Ways and Means Committee is working on.
    Mr. Whitfield. You are working on that right now?
    Mr. Nunes. Yes.
    Mr. Whitfield. Now, in your proposal you talk about 
licensing 200 new nuclear plants in a relatively short time. I 
forgot if you said 2040, or whenever it was, but recognizing 
that we have this significant issue of how do we dispose of 
this waste because the administration has basically stopped 
Yucca Mountain after the expenditure of $15 billion and after 
judgments against the Federal Government of $15 billion and 
after taxpayers and energy users have paid the fee for this, 
how do you propose that we would get rid of this waste?
    Mr. Nunes. Well, one of the--what I tried to achieve in 
drafting this legislation was that tried to create a scenario 
where the Congress forces an administration to act one way or 
the other on Yucca Mountain and reprocessing and a whole host 
of issues, because as you know, it seems like every President, 
no matter if it is Republican or Democrat is--they are all for 
nuclear power yet nothing ever happens, and I think that our 
country, I think the most significant innovation in the last 
100 years from my perspective is the development of nuclear 
power.
    And I think we have been set back in this country over the 
last 4 decades because we really have not invested in new 
nuclear technology, and we are in real danger of falling behind 
China, who, you know, some folks estimate that they are on 
their way to build over 200 nuclear reactors. We don't really 
know, but I think they are building several dozen right now 
that are being built or in the process of it.
    So to not--so what this bill does is it basically forces 
the administration to say, yes or no, and it develops a 
timeframe so that we would either know that Yucca Mountain will 
be used or it will not be used, but we need to get to the 
bottom of that and get it, well, either stop it or start it.
    Mr. Whitfield. Well, thank you, Mr. Nunes.
    At this time I will recognize Mr. Waxman for his 5-minute 
question period.
    Mr. Waxman. Thank you very much for your testimony, and I 
think I might have been a little too harsh in my opening 
statement. I do want to consider your idea because I have long 
believed that we need to have market mechanisms to try to drive 
the results that we want. I don't think we can decide the 
winners and losers. We ought to say what we want to achieve and 
help the entrepreneurs in this country, unleash them and let 
them go forward and profit when they accomplish the goals we 
want. That is what we try to do, not to everybody's 
satisfaction in the cap-and-trade bill because we said if you 
can figure out new technology and ways to reduce the carbon 
emissions, it will be to your economic benefit. You will be 
able to have a clear profit for it.
    You seem to be doing that in a very different way, but 
nevertheless, you are trying to accomplish something that I 
find attractive, and I want to understand this more from you 
and from other witnesses later on.
    Mr. Nunes. Absolutely.
    Mr. Waxman. As I understand it, in order to be eligible for 
the reverse auction a renewable energy project must have a 
power purchase agreement in place, and the price in that 
contract is essentially the bid in this reverse auction. It 
would seem that because the prices will already be set in the 
contract, generators will not be able to change their bids as 
the auction proceeds, and the price-driving mechanism of a 
traditional reverse auction will not be available.
    I assume the intent of the provision to drive down the 
price of renewable energy. Isn't that what you are trying to 
do?
    Mr. Nunes. That is correct.
    Mr. Waxman. And do you anticipate generators breaking or 
renegotiating power purchase agreements in order to lower their 
bids?
    Mr. Nunes. Well, one of the things, Mr. Chairman, that--and 
I do appreciate your comments as it relates to the reverse 
auction, this is--it was a very difficult provision to draft, 
and we have spent several years doing it. You may remember that 
there in EPAC, whatever year that was, '05, there was something 
similar for renewable fuels that was put in.
    However, and the President actually has I think $150 
million in his budget for that proposal, but the way that the 
law was drafted and then how the regulations were written 
basically there has never been any money put into it, and there 
doesn't seem to be any interest from the renewable fuel 
community to utilize it.
    So what we attempted to do here was to keep it as clear and 
basic as possible so that you would have a clean way to run 
this auction. So, I mean, this is actually probably an 
expertise of yours on this committee, but we actually modeled 
it after the--originally when--before I knew that other people 
had tried this, we modeled it after the spectrum sales, the way 
that you auction off spectrum sales. So that was kind of our 
goal and then asking, when the regs would come out to basically 
have kind of three different levels so that you could have one 
level for technological development and research, you would 
have kind of a mid-sized level so that maybe small businesses 
and folks could utilize the program, and then you would have 
another pot at the highest level for the big energy companies 
to go out and build, you know, big wind farms or big solar 
farms.
    That is the attempt of the legislation. I would, you know, 
I think one of the options here is in this bill some of the oil 
provisions have moved through the House already, and I think 
there is an opportunity for this committee to maybe take this 
reverse auction and move it by itself, spend some time, you 
know, to make sure that it would work, you know, in a 
bipartisan way and maybe, you know, get this bill marked up and 
get it out to the floor, just the reverse auction provision. I 
would be very supportive of something like that.
    Mr. Waxman. Do you have a concern that if the choice 
between a reverse auction and a production tax credit, that the 
production tax credit is more certain, and the groups, the 
businesses involved will decide to forgo the reverse auction 
and stick with the tax credit?
    Mr. Nunes. I think that there is a--the uncertainty now in 
the production tax credit business is leading to a more 
complicated deployment of renewable energy, renewable power. I 
think there is some people that can use these credits, some 
people can't, and I think--and because I think what is 2012, 
they lapse anyway, and if you just look down the road, I mean, 
when you have Republicans and Democrats agreeing that we need 
to get out of this tax credit business to some degree, I just 
don't think it is--I think this program, having a trust fund in 
place where you take royalty revenue from oil and gas, is a way 
that would give some real certainty.
    Mr. Waxman. My time has expired, but let me thank you for 
your hard work on this legislation. You are a highly respected 
member of our California delegation and in the House, and I 
want to look at this more carefully because I do think we need 
a bipartisan approach, and I like the idea of something that 
will drive the markets rather than dictate the markets.
    Mr. Nunes. Well, Mr. Chair or Mr. Ranking Member, I would 
be willing to come and sit down with you and walk you through 
this or your staff.
    Mr. Waxman. I don't walk through things when I am sitting 
down, but I would be glad to----
    Mr. Whitfield. Well, in keeping with the procedures of our 
committee, Congressman Nunes, the chairman and ranking member 
are the only ones that would be asking you questions today, but 
our staff has looked at your legislation, and you have some 
really innovative approaches like the reverse auction, and we 
are going to continue to look at that and at some point work 
with other committees and try to move something to address some 
of the problems that you are trying to address in your 
legislation.
    So thank you for your time and for your involvement in this 
important issue.
    Mr. Nunes. I really appreciate it.
    Mr. Whitfield. Appreciate that.
    Mr. Nunes. Thanks for the opportunity, Mr. Chairman.
    Mr. Whitfield. At this time I would like to call up the 
second panel of witnesses. On the second panel we have Mr. 
David Sandalow, who is the Assistant Secretary for Policy and 
International Affairs at the U.S. Department of Energy, and we 
also have Mr. Thomas Hicks, who is the Deputy Assistant 
Secretary of the Navy, and we would like to welcome both of you 
to this hearing. We appreciate your taking time to be with us 
and offering us your expertise and knowledge, and with that, 
Mr. Sandalow, I would like to recognize you for 5 minutes for 
your opening statement.

 STATEMENTS OF DAVID SANDALOW, ASSISTANT SECRETARY FOR POLICY 
  AND INTERNATIONAL AFFAIRS, DEPARTMENT OF ENERGY; AND THOMAS 
     HICKS, DEPUTY ASSISTANT SECRETARY OF THE NAVY (ENERGY)

                  STATEMENT OF DAVID SANDALOW

    Mr. Sandalow. Thank you to members of the subcommittee. 
Thank you for the opportunity to be here today to discuss H.R. 
909, the Roadmap for America's Energy Future.
    The administration agrees with many of the goals of this 
bill. For example, the administration believes that 
facilitating the efficient responsible development of our oil 
and gas resources is a necessary component of energy security. 
We are working to expand cleaner sources of energy, including 
renewables like wind, solar, and geothermal, nuclear power, as 
well as clean coal and natural gas on public lands.
    However, the administration has serious concerns with many 
provisions in this legislation. For example, a number of the 
changes in Title I would make amendments to Interior's Offshore 
Energy Program, undercutting safety and environmental reforms 
adopted in the wake of the Deepwater Horizon oil spill, and it 
would open the coastal plain of the Arctic National Wildlife 
Refuge to oil and gas drilling. Department of the Interior and 
other involved agencies may have additional views on this 
legislation.
    H.R. 909 touches on programs implemented by a number of 
administration's agencies, and I will not comment in detail 
about programs outside of the Department of Energy's purview. 
In the remainder of my time I would like to discuss the 
administration's energy agenda and address several specific 
provisions from H.R. 909.
    In the State of the Union address President Obama laid out 
a plan for the United States to win the future by out-
innovating, out-educating, and out-building the rest of the 
world while at the same time addressing the deficit. Many 
countries are moving aggressively to develop and deploy the 
clean energy technologies that the world will demand in the 
coming years and decades. As the President said, this is our 
generation's Sputnik moment.
    We must rev up the great American innovation machine to win 
the clean energy race and secure our future prosperity. To that 
end, President Obama has called for increased investments in 
clean energy research, development, and deployment.
    In addition, he has proposed generating 80 percent of 
America's electricity from clean energy sources by 2035. A 
clean energy standard will provide a clear, long-term signal to 
industry to bring capital off the sidelines and into the clean 
energy sector. It will grow the domestic market for clean 
sources of energy, creating jobs, driving innovation, and 
enhancing national security.
    And by drawing on a wide range of energy sources, including 
renewables, nuclear, clean coal, and natural gas, it will give 
utilities the flexibility they need to meet our clean energy 
goals while protecting consumers in every region of the 
country.
    The Department of Energy's goal is to strengthen the 
Nation's economy, enhance our security, and protect the 
environment by investing in key priority, including supporting 
groundbreaking basic research, leading in the development and 
deployment of clean and efficient energy technologies to reduce 
our dependence on oil, and strengthening national security by 
reducing nuclear dangers, maintaining a safe and secure and 
effective nuclear deterrent and cleaning up our cold war 
legacy.
    As the President said in his State of the Union address, 
investing in clean energy will strengthen our security, protect 
our planet, and create thousands of new jobs here at home. We 
are doing this through programs to make, for example, homes and 
buildings more energy efficient with a new Better Buildings 
Initiative. We are also developing new sources of wind, solar, 
and geothermal supporting the modernization of the electric 
grid and carbon capture and sequestration technologies. We are 
supporting reducing our dependence on oil by developing the 
next generation of biofuels and promoting electric vehicle 
research and deployment supporting the President's goal of 
putting one million electric vehicles on the road by 2015.
    Mr. Chairman, I drove to work today in a plug-in hybrid 
vehicle. At night I plug that car into an outlet in my garage. 
I often get 80 miles per gallon as I drive through the streets 
of Washington, DC, and I am pleased to say that today I drove 
to this hearing from the Department of Energy garage in one of 
the new plug-in electric vehicles in the Department of Energy's 
fleet. So I think building on the investment that we are making 
in this country in electric vehicles we can bring down our 
dependence on oil. That is going to require further investment 
in lithium ion batteries, and Mr. Chairman, someday I hope that 
one of my grandchildren will look at one of my children who are 
now teenagers and say, what, you mean you couldn't plug in cars 
back when you were young.
    At the Department of Energy we are also focused on moving 
clean energy technologies from the lab to the marketplace. Over 
the past 2 years our loan programs have supported more than $30 
billion in loans, loan guarantees, and conditional commitments. 
I want to emphasize, too, that nuclear energy has an important 
role to play in our energy portfolio. To jumpstart the domestic 
nuclear industry the President's budget requests up to $36 
billion in loan guarantee authority. It also invests in the R&D 
for advanced nuclear technologies, including small modular 
reactors. H.R. 909 takes a different approach to expanding 
nuclear power production.
    H.R. 909 creates a reverse auction mechanism to fund 
renewable energy projects just discussed in the last panel. We 
share Representative Nunes's view that reverse auctions are a 
useful took for promoting renewable energy. From our experience 
with reverse auctions it is important to protect the taxpayers 
by requiring adequate assurance from bidders that they will 
perform. We look forward to working with the committee on a 
provision that accomplishes our shared goal of promoting 
American renewable energy and protecting taxpayers.
    To spur innovation, the administration has prioritized 
investments in basic and applied research. These are discussed 
in more detail in my statement, which I have submitted for the 
record.
    Mr. Chairman, in conclusion I want to thank the committee 
for inviting me to testify on issues associated with H.R. 909 
that relate to the DOE's mission. I appreciate the opportunity 
to discuss the President's roadmap for a clean and secure 
energy future.
    [The prepared statement of Mr. Sandalow follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.007
    
    [GRAPHIC] [TIFF OMITTED] T2153.008
    
    [GRAPHIC] [TIFF OMITTED] T2153.009
    
    [GRAPHIC] [TIFF OMITTED] T2153.010
    
    [GRAPHIC] [TIFF OMITTED] T2153.011
    
    [GRAPHIC] [TIFF OMITTED] T2153.012
    
    [GRAPHIC] [TIFF OMITTED] T2153.013
    
    [GRAPHIC] [TIFF OMITTED] T2153.014
    
    [GRAPHIC] [TIFF OMITTED] T2153.015
    
    [GRAPHIC] [TIFF OMITTED] T2153.016
    
    [GRAPHIC] [TIFF OMITTED] T2153.017
    
    [GRAPHIC] [TIFF OMITTED] T2153.018
    
    [GRAPHIC] [TIFF OMITTED] T2153.019
    
    Mr. Whitfield. Thank you, Mr. Sandalow.
    At this time, Mr. Hicks, you are recognized for a 5-minute 
opening statement.

                   STATEMENT OF THOMAS HICKS

    Mr. Hicks. Thank you, Chairman Whitfield and distinguished 
members, members of the subcommittee, thank you for the 
opportunity to appear before you today at this hearing on H.R. 
909. While neither the administration nor the Department of 
Defense has a formal position on this legislation, I am here to 
share with you the perspective of the Department of the Navy.
    As the Deputy Assistant Secretary of Navy on Energy, I have 
been actively involved in assessing the policy, economic, 
technological, and environmental costs and benefits associated 
with the use of fossil fuels and alternative fuels. I and many 
members of my staff and colleagues have personally met with 
dozens of industry representatives of U.S.-based organizations 
from a wide range of interests including alternative fuel 
companies, large oil companies, venture capital, private 
equity, and industry associations. We have also met with 
government experts from DOE, the Department of Defense, 
Department--U.S. Department of Agriculture, NASA, EPA, and 
others. So the perspective provided here today is drawn on 
these discussions and on contemporary studies and analysis on 
the topic of alternative fuels.
    Changing the way the United States uses, produces, and 
acquires energy is one of the central policy challenges that 
confront the Nation. It is something that Secretary Mabus cares 
deeply about, and it is something that the Navy and Marine 
Corps, under his leadership, has been aggressively working 
towards for the last 2 years.
    As a military and as a country, we rely far too much on 
fossil fuels, far too much on foreign sources of oil. This 
dependency degrades our national security and negatively 
impacts our economy. Our dependency on fossil fuels makes us 
more susceptible to price shocks, supply shocks, natural and 
man-made disasters, and, as we have recently seen, political 
unrest in countries halfway around the world.
    The challenges we face today are not just about what types 
of fuels we use or where and how those fuels are produced. 
Clearly we must be more efficient in the fuels that we use. The 
best barrel of oil is the barrel of oil we do not use. The 
challenge we face in the Navy today is the 280 ships we have 
today, the 3,700 aircraft are largely the ones we are going to 
have tomorrow and into the future, so focusing on new sources 
of fuel, drop-in replacement fuel is critical.
    For ships being more efficient means we can increase the 
days between refueling, improving both its security and combat 
capability. Better fuel economy for our aircraft means we can 
extend the range of our strike missions, enabling us to base 
them farther away from combat areas. Being more efficient and 
more independent and more diverse in our sources of fuel 
improves our combat capability both strategically and 
tactically.
    The Department of the Navy's interest in this topic of 
alternative fuels is fundamentally about improving our national 
security and our long-term energy security. The more we replace 
for in sources of oil with more diverse, domestically-produced 
alternative fuels the better we are as a military and the 
better we are as a Nation. How one successfully accomplishes 
that objective is where the debate lies, and it is a topic that 
the Department of the Navy has a perspective.
    It has recently suggested before this committee that the 
best near-term approach to meet the Department of Defense fuel 
needs is essentially a coal-derived or a mixture of coal-
derived and biomass Fischer-Tropsch fuels. Fischer-Tropsch is a 
thermo-chemical conversion process invented and developed in 
pre-World War II Germany to convert resources such as coal, 
natural gas, and biomass to fuel oil. In this country given the 
enormous quantities of biomass required and its relative 
limited availability at the scales required to run a Fischer-
Tropsch or an FT plant, biomass as a long-term feedstock that 
is typically not considered. More often than not, coal is 
viewed as the primary, if not exclusive, feedstock, and as a 
result, in addition to requiring large, new sources of coal, it 
requires enormous quantities of water, $5 to $10 billion in 
capital per plant to provide a fuel result that is more than 
twice as carbon intensive as petroleum.
    From the Navy's perspective, there simply are too many 
questions to suggest that this is the best near-term solution. 
In our ongoing dialogue with industry, venture capital, and the 
equity communities, one thing is clear. America's advanced 
biofuel industry knows no geopolitical boundaries, and unlike 
the proposed near-term solution, the feedstocks and refineries 
needed to produce advanced biofuels to power the fleet or our 
aircraft can literally be produced in every State, all 50 
States.
    The U.S.-based companies comprising this industry that are 
currently producing or will soon be producing fuels across the 
spectrum from the tens of thousands of gallons to the tens of 
millions of gallons. These are companies new and old, some are 
small businesses, and some are now publicly traded. These 
companies represent the type of innovation and spirit needed to 
meet the energy demands of the future. In conclusion, a robust 
advanced drop-in biofuels market is an essential element of our 
national energy security. Energy security for the Nation 
requires unrestricted, uninterrupted access to affordable 
energy sources to power our economy and our military. 
Traditional fossil-fuel based petroleum derived from crude oil 
has an increasingly challenging market and supply constraints. 
Chief among these is limited, unevenly distributed, and 
concentrated global sources of supply. Advanced biofuels that 
use domestic, renewable feedstock provide a secure alternative 
that reduces the risks associated with petroleum dependence.
    Just in closing, I would like to personally thank the 
committee for addressing the important topic of alternative 
fuels and for providing the Department of the Navy the 
opportunity to offer its perspective. Thank you.
    [The prepared statement of Mr. Hicks follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.020
    
    [GRAPHIC] [TIFF OMITTED] T2153.021
    
    [GRAPHIC] [TIFF OMITTED] T2153.022
    
    [GRAPHIC] [TIFF OMITTED] T2153.023
    
    [GRAPHIC] [TIFF OMITTED] T2153.024
    
    Mr. Whitfield. Thanks, Mr. Hicks. We appreciate your 
testimony as well.
    I will recognize myself for 5 minutes of questions.
    Mr. Sandalow, you are Assistant Secretary for Policy and 
International Affairs at DOE, and you know as well as any of us 
that we are utilizing about 20 million barrels of oil a day 
here in the U.S. for all of our needs, most of it 
transportation. And since 19--my first memory was 1976, on this 
subject when Jimmy Carter was President, and the big push was 
made, we have got to be less dependent on foreign oil.
    Now, this administration in my personal view is overselling 
the electric cars and some of these renewable energy 
mechanisms, not that we don't need them but I don't 
realistically think that they are going to be able to meet all 
of our increased energy demands any time soon.
    But you have probably studied this even more than I have 
since you are head of policy. What is your realistic appraisal 
on our ability to significantly reduce the amount of oil that 
we are buying from the Middle East and other countries, and 
what kind of timeframe from your analysis do you think is 
realistic?
    Mr. Sandalow. I think the ability of this country to meet 
any great challenge is extraordinary, Mr. Chairman, and I 
believe that if we set our minds to it that we can reduce our 
dependence on oil, reduce our dependence on imported oil, and 
we can do it by following a number of different pathways. I do 
believe that electric vehicles have tremendous potential, and 
by the way, not just to reduce our dependence on oil but also 
to create jobs in this country.
    Mr. Whitfield. Let me just make one comment on electric 
cars. The other day I saw a 1917 issue of the New York Times, 
and the front page was, electric cars are the cars of the 
future. That was 1917, and so I just point that out, that I 
would like for you to go on with your explanation and talk 
about some timelines as well.
    Mr. Sandalow. Yes. Thank you, Mr. Chairman. Fortunately, 
today we have new battery technologies like lithium ion 
batteries that weren't in existence in 1917, that are 
transformational that I think are really going to make a 
difference in this sector.
    But I fundamentally agree with the point you made about it 
is not just electric vehicles. I mean, we also need to pursue a 
number of other technical pathways. Biofuels have already been 
discussed, and biofuels have tremendous potential to reduce our 
dependence on imported oil and by also creating jobs here in 
the United States. And we need to do that with new advanced 
biofuels, we need to build the infrastructure to make that 
work, and we need to pursue natural gas as a transportation 
fuel. We have tremendous resources of natural gas here in this 
country expanding dramatically.
    We need to improve efficiency. That will matter 
tremendously in terms of it, and then finally we need to expand 
production of domestic oil as well, and we need to do it in an 
environmentally responsible way. That can make a big 
difference.
    So if we pursue all of these pathways, Mr. Chairman, I am 
absolutely confident that we can get off of imported oil in a 
significant way.
    Mr. Whitfield. Thank you. Many of us had a lot of 
frustrations up here about some of the money, the way it was 
spent on the Stimulus Package and others, and specifically I 
want to ask you about this one. The first company that DOE 
chose to give a federal loan guarantee was Solyndra, which is a 
solar manufacturer. It received $535 million in 2009. Since 
then the information we have is that the company has imploded. 
Its initial public offering failed, auditors have raised 
questions about whether the company will survive, and it has 
closed one of its facilities and laid off 180 workers.
    Could you tell me what your information is on this company?
    Mr. Sandalow. Yes. I don't have specific information on 
that project to relate here today, Mr. Chairman. I would be 
happy to follow up for the record on that, but I would say more 
broadly this loan guarantee program has created tens of 
thousands of jobs and helped put America in a competitive 
footing in some of these renewable energy technologies.
    Mr. Whitfield. Well, I mean, some of them may have created 
tens of thousands, but that one--they have already laid off 
180, and I might also say that First Wind Holdings had sort of 
the same experience. So, I mean, I think all of us are 
encouraging people to develop alternative fuels, but to be 
spending this kind of money on failed projects is just 
irresponsible in my view.
    And then I want to ask this question also. We hear a lot 
about wind power, and everyone I talk to does not think wind 
power is a realistic, major producer of energy anytime soon, 
and I want to know have you all conducted any studies with any 
groups on the amount of land that is necessary to produce any 
meaningful amount of electricity from wind? I mean, I am 
genuinely concerned about the amount of land that it takes to 
produce any meaningful amount of energy from wind.
    Mr. Sandalow. Mr. Chairman, I would say the wind power is 
already producing significant amounts of energy and growing in 
this country. It has been one of the major sources of new 
energy in this country for the past couple of years.
    In--there was a study done actually in the prior 
administration which pointed to the potential for wind power in 
this country at the range of 20 percent and more in the decades 
ahead.
    Mr. Whitfield. To be without incentives. Right now there is 
a $24 per kilowatt hour incentive for wind power.
    Mr. Sandalow. But the cost is coming down like it is with 
all these new technologies, and you know, I would say on the 
topic of land, that certainly land is required for some of 
these big turbines, but there is increasing interest right now 
in offshore wind all the way around, you know, around the 
world. So I think this is another area where with American 
innovation, American ingenuity, and research we can create the 
technology of the future that will allow us to have cheap, 
clean, secure energy.
    Mr. Whitfield. Thank you. My time has expired.
    Mr. Gonzalez, you are recognized for 5 minutes.
    Mr. Gonzalez. Thank you very much, Mr. Chairman.
    Let me go straight to Mr. Hicks, because you said a couple 
of things that were rather interesting. Regarding DOD and the 
role that it can play obviously as we go in search for 
alternatives, on page--I am trying to see what page this is 
actually. I think it is page 3 of your testimony, ``the 
camelina grown in Florida and Montana, the algae grown in New 
Mexico, Hawaii, or in Pennsylvania, for example, can be turned 
into fuels blended in existing infrastructure in the Gulf or on 
the East or West Coast to power the Fleet.''
    So you are saying that that may be a realistic alternative 
in your opinion?
    Mr. Hicks. It certainly is a realistic and growing 
alternative for us, literally and figuratively. I mean, it is 
one that we are seeing--today we are aware of a facility in 
the--in Texas, for example, that is capable of alternative 
fuels, bio-based alternative fuels, 90 million gallons per 
year, and claiming at competitive prices with petroleum.
    So we are seeing that. You know, what we are looking at is 
fuels that don't need new infrastructure, and that is both for 
the commercial sector but also for us. We need ready, dropped-
in fuels, fuels that don't require changes to our platforms and 
our engines, that don't require changes to our infrastructure 
to store and use the fuel, and that is exactly what we are 
getting by looking at these advanced biofuels.
    And to be clear, we are looking at these in 50/50 blends, 
so these are blended with petroleum, and that is a common point 
for the commercial industry as well, going to a 50/50 blend.
    Mr. Gonzalez. In the production of these alternatives, but 
they still require some incentives, some encouragement in the 
way of tax credits and such that we have attempted to do in the 
past. Is that something that still would be in the mix?
    Mr. Hicks. Certainly that would help. That said, there are 
companies and there are about a handful of those that are 
publicly traded now and are moving forward with their plans 
without necessarily those subsidies in hand. But certainly that 
type of support would accelerate the maturation of that market 
and enable that--those technologies in this country to be 
something that can be exported outside of this country, and I 
think to the betterment of those commercial industries.
    Mr. Gonzalez. Let me ask you about the Department of 
Defense specific as far as contracting for alternatives. Are 
you allowed to enter contracts that are long-term, because 
obviously that would have some benefits, there would be some 
predictability in the producers of biofuels alternatives and so 
on.
    What is the situation when it comes to DOD contracting long 
term?
    Mr. Hicks. Sure. So for contracting long term for fuels and 
to be very clear, the Navy and all the services purchase our 
fuels through Defense Logistics Agencies, Energy, which is part 
of the Department of Defense. Their limit is a 5-year agreement 
to purchase fuels.
    Mr. Gonzalez. And I don't know the answer, that is why I 
would ask you. Is 5 years something that works to the benefit 
of both the Department of Defense as well as the producers of 
the alternatives that were seeking greater use?
    Mr. Hicks. Well, certainly as we have talked to the 
producers, 5 years for an emerging industry is not something 
that they feel is sufficient, and I know through legislative 
proposals the Defense Logistics Agency Energy has put forward 
requesting as much as 20 years, and what we have heard 
consistently from industry is 10, 15 years are needed, but I 
think where the Department of Defense is today is requested 
through DLA Energy upwards of 20 years.
    Mr. Gonzalez. And full disclosure, Mr. Griffith and I have 
a bill to that effect. That is the reason I am asking. It is 
kind of self-serving but----
    Mr. Hicks. We thank you for your support, and I think it 
would be a help as well as the ability to address some of the 
scoring issues that go with those purchases as well.
    Mr. Gonzalez. I only have 40 seconds left, and Mr. 
Sandalow, I have a question for you, and that is I know the 
chairman had some doubts about electric vehicles, but I do see 
that is an increasing role, but have you all been able to or is 
there another agency or department that would be more 
appropriate to factor in the increased demands on the 
production of electricity if, in fact, we increased the number 
of electric vehicles? Some could be hybrid, and some would be 
like the Leaf, which is fully electric. Nevertheless, you still 
got to plug them in.
    Mr. Sandalow. Thank you for the question, Congressman. That 
is something the Department of Energy has looked at very 
closely, and the good news there is that we have a lot of 
excess capacity in our power generating sector at night, and 
when cars plug in at night, they are going to be able to 
refuel.
    Another piece of good news is that these electric vehicles 
are very efficient. They are much more efficient in terms of 
their use of energy than in a standard internal combustion 
engine. So the technical productions that have been done say 
that even with tens of millions of these cars on the road we 
would not be putting major stresses on our electric generating.
    Mr. Gonzalez. Thank you very much. My time is up.
    Thank you, Mr. Chairman.
    Mr. Whitfield. Yes, sir, and Mr. Terry, you are recognized 
for 5 minutes.
    Mr. Terry. Thank you. Mr. Hicks, I appreciate your 
testimony here today and presence. In your opening you made 
statements and suggestions about making the Navy vehicles more 
energy efficient, and of course, you also then mentioned that 
the major users of fuel are ships and planes.
    How do you make them more fuel efficient? How do you get 
better air miles per gallon for your planes and ocean miles for 
your ships? And following up you can just make them more 
efficient, why haven't you?
    Mr. Hicks. Well, we are making them more efficient, and the 
way you do that, and I will speak both for our surface vessels 
as well as our aircraft, in many ways you can look at the 
codings on those, and so for our service vessels, for example, 
we are putting on whole codings, propeller codings to make the 
ships effectively silkier in the water, better able to float 
through the water.
    We are also putting on stern flaps onto many of our ships, 
and where we can, where it is economically justified in the 
lifespan of those platforms, as they go through their dry 
docking procedures, we are putting those measures on place--on 
board.
    With our aircraft it is largely, again, looking more at 
some of the codings we have on our aircraft, and again, we are 
doing that, but there is another opportunity that we are 
working on, we have had some success with our surface vessels, 
and that is an incentivized energy conservation program. We 
call it INCON, and it is a way for the skipper of the ship as 
they go forward and plot out their course if they can do that 
in a more efficient way, some of the savings that comes from 
that could be used for other supplies on the ship, and the rest 
of that savings coming back to the Navy for other purchases 
such as fuel order training.
    So there is a culture aspect to this as well that we are 
looking at, and we are also looking at the so-called hotel 
loads on these--on the ships, so not only as they are under 
way, what do we really need to power and when and then 
certainly as they plug into the shore and literally plug in and 
get much of their power from the shore, how can we reduce the 
energy on there to limit it to what is really required to 
maintain the combat readiness of that craft.
    So we are doing these, and we are exploring many other 
opportunities as well, but, you know, the ships and the 
aircraft we have today are the ones we are going to have for 
the future. So being more efficient is critical to that but 
also finding alternative sources of fuel is----
    Mr. Terry. Let us go into that quickly, and you had 
mentioned coal to liquid, and in fact, a few years ago that was 
a major push by the Department of Defense for national security 
and defense security in having a domestic source that is 
reliable and secure.
    Where are--where is the Defense Department overall, Navy, 
on production of aviation fuel or diesel fuel from coal? Has 
that been shut down?
    Mr. Hicks. Well, the Navy--I can't speak for all the 
Defense Department, but the Navy never really had a coal to 
liquid certification program. The Air Force has had that 
program. They are also testing hydro-renewable fuels, jet 
fuels, as we are. Our path has been more with the hydro-
renewable jet fuels. We will have tested and certified every 
service vessel and every aircraft frame by 2012, to use 50/50 
blends of alternative fuel, hydro----
    Mr. Terry. Is the Navy's position that they would like to 
have a coal-to-liquids program? You had mentioned that in your 
statement.
    Mr. Hicks. I don't believe I mentioned it, sir, and if I 
did, I misspoke, but I think we are very comfortable with the 
program that we are on, and we feel that that is the best near-
term solution for the Department of Navy is one that is focused 
on alternative biofuels. The challenges with coal to liquids, 
as has been mentioned before, it is a technology that has been 
around since pre World War II Germany. The challenges there are 
the capital expenditures required, $5 to $10 billion, the 
amount of water and the sources of water that you need for 
that, the amount of waste that is generated from those plants, 
and then certainly there is the carbon picture there that--
which is typically those plants without carbon capture and 
storage----
    Mr. Terry. And my last----
    Mr. Hicks [continuing]. Hasn't been done in this country.
    Mr. Terry [continuing]. Question, I hate to interrupt but--
--
    Mr. Hicks. Sure.
    Mr. Terry [continuing]. I have been told that the Navy has 
used aviation fuel blend with the aviation fuel from algae. Can 
you tell me how that has worked?
    Mr. Hicks. It has worked flawlessly. I have actually had 
the privilege to sit down with the pilot of the F-18 that used 
the 50/50 blends of biofuels. Part of what we, you know, one of 
the things that we require is that the ready drop-in fuels, the 
blends that we have is transparent to the end users and does 
not sacrifice any part of our mission, and that is what we are 
finding today.
    So F-18 hornet a year ago in April flew at mach 1.2 and has 
since gone through its entire envelope with not a--any sort of 
issue at all with the fuel, and we are finding out that same 
case in the rivering command boat that we have got, a Seahawk 
helicopter, and the other platforms that we see. Algae is one 
of the biofuels or feedstocks that we have used to date. It is 
not the only one. We have also used camelina, and there are 
many other types that would be, that could be grown in, again, 
all 50 States in the country, and we are seeing that.
    Mr. Terry. Thank you.
    Mr. Whitfield. Thank you. Mr. Waxman, you are recognized 
for 5 minutes.
    Mr. Waxman. Thank you very much, Mr. Chairman. Mr. Sandalow 
and Mr. Hicks, I would like to thank you for appearing before 
us.
    Mr. Hicks, our Armed Services set an interesting nexus in 
our energy policy. They are both the biggest single user of 
energy and also reliant on the civilian energy infrastructure. 
Because of these two factors they can be a significant catalyst 
for helping the Nation transition to a clean energy future by 
advancing new technology and leading the way for the 
development of new commercial transportation fuels.
    In 2007, we enacted the Energy Independence and Security 
Act. Section 526 of that act contained a provision to ensure 
that long-term government contracts are not used to prop up 
dirty, unsustainable fuels.
    Mr. Hicks, from the Navy's perspective what signal has 
Section 526 sent to industry and the Armed Services, and can 
you explain what the result has been?
    Mr. Hicks. I can explain that from the Department of Navy's 
perspective, again, not speaking for Department of Defense or 
the administration, but what we have seen is in working with, 
again, industry from the refiners and the companies themselves 
to the equity communities that support them is that they are 
responding to that, and they are holding themselves to that 
higher standard, not only on greenhouse gas emissions as 526 
requires, so we see that as an effective policy tool, but also 
on things such as food, security, water use, land use, indirect 
and direct, and they are holding themselves to that higher bar 
because, well, I will leave it to them to describe why, but 
that is what we are seeing as a trend.
    Mr. Waxman. Well, you mentioned the algae-driven jet fuel 
the Navy purchased from Solazyme. I had the opportunity to 
visit their operations in Northern California. It is the 
world's first 100 percent algae-based jet fuel, and you have 
mentioned that there are other things along those same lines, 
but this just seems to be the right result from the market 
signal that has been sent by Section 526. Is that right?
    Mr. Hicks. Yes, it does, and I think as you mentioned 
Solazyme is a great example as a company that literally started 
in a garage as I understand it and has as of a week ago just 
went public and was over subscribed by 10 or 12 fold. So--and 
hundreds of jobs coming along with that, but bottom line 
providing fuel for us in the areas where we have used it for 
the testing and certification, you know, blended with 
traditional fuels and, again, transparent to the users.
    It has been an effective tool. The market is responding to 
this and is ramping up to support it, and I would also say that 
private equity in our conversation, multiple, multiple 
conversations with them is lining up as well, and they are 
starting to see these companies with some very solid business 
plans and business models and supporting them as well.
    Mr. Waxman. The bill that is before us for discussion would 
repeal Section 526. From the Navy's perspective, from your 
perspective, would repealing Section 526 send the right 
direction of the industry and the Armed Services?
    Mr. Hicks. I think, again, we are comfortable with 526. It 
is an effective policy tool. It is having an affect on the 
market that I think is one that is the right direction in the 
sense that it is providing not only clean fuels but fuels that 
ultimately will be competitive, and I think that is what we are 
looking for.
    Mr. Waxman. It in effect means the Armed Services and the 
Congress are consistent in the message that we must pursue new, 
more sustainable fuels. I think that is an important policy 
that we want to continue.
    Mr. Sandalow, the bill before us purports to be a roadmap 
to our energy future, but it omits key policies that many 
recognize are critically important. For example, it does not 
even mention energy efficiency. It also fails to mention 
technologies that show so much promise and are just now 
beginning to be commercialized like electric vehicles.
    Instead it seems to be a proposal to return to the energy 
policies of the Bush administration with a focus on drilling in 
the Arctic Refuge and the Outer Continental Shelf.
    Can, Mr. Sandalow, can you discuss whether this legislation 
identifies the right areas for us to focus on as a roadmap to 
our energy future?
    Mr. Sandalow. Well, thank you, Mr. Ranking Member. Let me 
emphasize in response to the point you made about energy 
efficiency. I talked to a power plant executive recently who 
told me that the cheapest power plant for him is the one that 
he doesn't have to build, and he underscored the tremendous 
potential in this country to improve our economic performance 
by saving energy, by stopping the wasting of energy. So any 
comprehensive energy plan for our country needs to include 
energy efficiency, what some people call the first fuel.
    It also needs to emphasize innovating, and you know, we are 
an extraordinary Nation with--throughout our history we have 
innovated and succeeded by doing so. The energy race in the 
next century is going to be absolutely central, and I think 
government and business working together can help position the 
United States in this global competitive marketplace.
    Mr. Waxman. If this committee were to craft an energy 
policy to meet our Nation's needs now and in the future, would 
the Department be willing to work with us and support those 
efforts?
    Mr. Sandalow. Yes, Mr. Ranking Member, very closely.
    Mr. Waxman. Thank you. Thank you, Mr. Chairman.
    Mr. Whitfield. Mr. McKinley, you are recognized for 5 
minutes.
    Mr. McKinley. Thank you, Mr. Chairman.
    Since I have come to Congress now, what, 140 days now, I 
have come to really understand more the frustration of the 
process here, and I have really come to the characterization 
coming from West Virginia that is a coal State, I really can 
sense a strong disdain in this administration for using coal, 
and it manifests itself time and time again, even at the White 
House here today, how he, the President mischaracterized fly 
ash as being poisonous and running in our streams and killing 
our marine life. Just patently false.
    I see in Wellsville that there was a coal liquefaction 
facility plan for there to create diesel fuel, excuse me, 
airplane fuel for our military. That has been held up by 
permitting. There was a facility constructed in Marshall 
County, West Virginia, in the '60s with a coal liquefaction 
facility there.
    I would ask you, I guess, Mr. Sandalow, that might be--no 
one has records of that that we can find. Is that something 
that you could get back that that plant was operating for 
numbers of years to prove the viability of that technology and 
conclusions?
    As I recall from the '60s that there was something that as 
long as petroleum was over $40 a barrel, that is age ago, that 
is before inflation obviously, that it was commercially viable 
that we could take coal and liquefy it.
    Could you possibly try to find that, some of those older 
findings so we could refresh that? It is just an ongoing 
characterization I have of this administration that they have--
they are avoiding--you all seem to be avoiding accountability. 
I am an engineer. I want to solve a problem, not take on more 
problems. Once I identify and we have got issues out here, and 
we never seem to finish them.
    We have talked--we know about liquefaction, we know about 
some of these things, but now let us take on another project so 
that we never conclude that project. Clean coal technology. 
Everyone was thumping their chests over the years. We were 
going to have clean coal technology, we are going to put more 
money into research, and then when the President submits his 
budget, he slashes the money in the National Energy Technology 
Lab. It is just so blatantly evident that you all don't want to 
use coal.
    So now my question would be if we can, I guess we just have 
to wait you out. Two years we will find out. Can we not use the 
spent fuel rods? Then you all have, I mean, participated--the 
Yucca Mountain Project is on hold. Correct? Can we put fuel 
rods in Yucca Mountain today? The answer is no?
    Mr. Sandalow. Congressman, if I could, first I want to be 
sure to respond to the question you asked about the specific 
plant you mentioned, and I would be happy to--I am not familiar 
with that particular plant, but I would be happy to look into 
that for you.
    Mr. McKinley. Thank you.
    Mr. Sandalow. Follow up on that. Second, I want to state 
clearly that coal is a vital energy source for this Nation, 
that it is one that is essential for our future, and it is one 
that this administration is committed to as an important source 
of energy for our country. And that is one reason that we have 
invested so much in our coal future, in funding for clean coal 
research, and funding for deployment of carbon capture 
technologies, and a variety of other programs that would make 
the difference for this country, and you know, I have had the 
privilege of visiting the National Energy Technology Lab in 
your State, Congressman. It is--I think it is a real jewel of 
the Department of Energy lab system, doing important work in 
this area.
    So I hope it is something we can work on.
    Mr. McKinley. The Department, the EPA has become a rogue 
agency for--they are pulling permits for mines, they are 
shutting them down, they were operating for 4 years, Melville 
Mine down in Logan County. They pulled the permit for Dan Mine 
in northern West Virginia over a water permit.
    These are operating mines. I want to get back now to the--I 
think it is clear where the administration is. They don't want 
to be held accountable, they want to continue doing research 
rather than finish the job on what they are, and one of those 
elements is coal.
    But I want to go back to nuclear. Is there any way that we 
can take those spent fuel rods instead of storing them, are 
they--is there any way that we could use them for the military 
in fueling our ships that once they have been completed, their 
lifecycle is finished for creating energy?
    Mr. Hicks. We can take that one back for the record, sir. I 
am not able to speak to that today.
    Mr. McKinley. Do you have any----
    Mr. Sandalow. I know this, I mean, this committee has had 
extensive conversations about Yucca just this week, 
Congressman, I know, and my colleague, Pete Lyons, was up here 
testifying on exactly this topic, and I know he is answering 
extensive questions for the record from your committee on 
exactly this topic.
    Mr. McKinley. But right now for the--we cannot store any 
fuel rods at Yucca Mountain. Is that correct?
    Mr. Sandalow. Right. I mean, Yucca Mountain, of course, 
Congressman, is, you know, right now not in a position, and it 
is----
    Mr. McKinley. Fifteen billion dollars spent----
    Mr. Sandalow [continuing]. The blue ribbon----
    Mr. McKinley [continuing]. And we can't put anything in it 
yet.
    Sorry. I have run over my time.
    Mr. Whitfield. The gentleman from Texas, Mr. Green, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I have a number of 
questions.
    My first one is for Mr. Hicks. Section 526 of the Energy 
Independence and Security Act of 2007 sought to limit the DOD's 
ability to enter into contracts for fuels derived from coal-to-
liquid fuels or ``non-conventional'' oil sources, such as 
Canadian oil sands. Advocates of Section 526 claim it was 
supposed to impact the purchase of fuels that were made 
available to the general fuel supply, but environmental groups 
are suing DOD for purchasing fuels derived from oil sands.
    Is it practically possible for the DOD to determine which 
fuels are derived from Canadian oil sands or which are not in 
the general--Nation's general fuel distribution system?
    Mr. Hicks. Congressman, I appreciate that question. I think 
the best way for me to answer that is really take that one for 
the record. That is really a better question I think for 
Defense Logistics Agency Energy, who is the one who that is 
purchasing the fuel on behalf of the services to answer. Yes. I 
would prefer that, to take that for the record, sir.
    Mr. Green. Well, I have refineries that produce--bring in 
crude oil from a lot of different places, and the result is 
aviation fuel, and you can't tell if the aviation fuel meets 
the criteria whether it comes from the Gulf of Mexico, Saudi 
Arabia, or even Canadian oil sands. So----
    Mr. Hicks. Yes, Congressman. I know that is a challenge and 
how they can find that accounting, and we can do, can kind of 
track where the dropped fuel and barrel of oil came from, but 
it is one that is probably better suited for DLA Energy to 
respond.
    Mr. Green. Thank you.
    Mr. Sandalow, Wednesday the last question from my 
colleague, the Environment Subcommittee had a hearing on Yucca 
Mountain. In that hearing we discussed the need to develop at 
least one interim storage facility to ease the burden of the 
storage dilemma.
    The President has said that he supports investments in 
alternative forms of energy, and Secretary Chu testified before 
this committee that we are unable to meet the President's goal 
if we do not continue to invest in nuclear energy. This, of 
course, means that we will have to have an increase in nuclear 
waste, and we need to safely store it. So we will need to 
resolve the situation sooner or later.
    In June of 2009 the DOE withdrew its proposed Global 
Nuclear Energy Partnership Technology Demonstration Program. 
This program would explore different ways to recycle spent fuel 
much as the French system. If the administration does not 
support long-term storage at Yucca Mountain or recycling fuel 
rods but remains insistent on we must rely on energy sources 
such as nuclear, then just what do we intend to do with this 
nuclear waste? Is there an alternative? Because I know the 
French have been, you know, recycling those rods for at least 
20 years.
    Mr. Sandalow. Yes. Thank you for the question, Congressman. 
It is very important and along the same lines as Congressman 
McKinley.
    This is a topic that is being addressed by Blue Ribbon 
Commission appointed by the Secretary of Energy, composed of 
some of our Nation's leading experts on this topic, and their 
report is expected this summer. So I would defer any further 
question, you know, and answer on that, I mean, answer on that 
to Blue Ribbon Commission.
    Mr. Green. Mr. Chairman, we might need to have the Blue 
Ribbon Commission come up some time because I wasn't in 
Congress in the '80s when the decision on Yucca Mountain was 
made, but obviously, hopefully, they had a Blue Ribbon 
Commission in the 1980s to make that decision.
    Let me ask a question also. H.R. 909 has set up a reverse 
auction to incentivize renewable energy development. I have 
some concerns on how the details are laid out in the 
legislation. Mr. Sandalow, you testified about the Department's 
experience with reverse auction for cellulosic biofuels which 
has yet to achieve its objectives. The cellulosic biofuels 
industry, which was expected to take off, has stalled, and last 
summer's call for bids in the reverse auction went unanswered.
    Clearly reverse auctions must be carefully crafted in order 
to achieve the dual goals of saving money and incentivizing 
production. Several aspects of reverse auction in this 
legislation may be problematic. Reverse auctions have potential 
as incentive for renewable energy development, but it is clear 
from DOE's experience that the details matter, and if our 
committee develops legislation on the matter, we will be 
mindful to do so very carefully.
    For example, in order to be eligible to participate in 
reverse auction, facilities have to have power purchase 
agreements in place. My question, Mr. Sandalow, is what stage 
of development will a renewable energy project developer enter 
into a power purchase agreement?
    Mr. Sandalow. Well, I think the way that that relates to 
the reverse auction is something that will need to be worked 
out in the course of discussions about this legislation, 
Congressman. I agree completely with the point you are making 
that reverse auctions have tremendous potential. They are an 
important market-based mechanism, but the details do matter in 
terms of how we work that out.
    Mr. Green. Is there any portion of the renewable energy 
sector in your estimation that has progressed to that stage?
    Mr. Sandalow. I am sorry, Congressman. When you say that 
stage?
    Mr. Green. To the stage of even talking about a power 
purchase agreement.
    Mr. Sandalow. Yes, absolutely, Congressman, there are.
    Mr. Green. And as soon as they reach that stage, will they 
have done so without the benefit of federal loan guarantees 
included in--including DOE loan guarantees and loan guarantees 
administered by USDA for biofuels?
    Mr. Sandalow. That is a good question which I will take for 
the record, Congressman.
    Mr. Green. OK. I don't expect you to answer about USDA, but 
if you could--if they have done it without the Department of 
Energy loan guarantees.
    Mr. Chairman, I know I am out of time. I will submit the 
rest of the questions.
    Mr. Whitfield. OK. Mr. Olson, you are recognized for 5 
minutes.
    Mr. Olson. Thank you, Mr. Chairman. I seem to be the guy 
who always comes up when votes are being called, so I will try 
to be brief. But thank the witnesses for coming today, thank 
you for your expertise.
    My first question is for you, Mr. Sandalow. As you know 
now, the U.S. is the largest producer of natural gas in the 
world, and there is great potential there to improve our energy 
security, our national security. Hydraulic fracturing 
advancements in horizontal drilling techniques have been the 
key to developing these resources. President Obama in the State 
of the Union and energy speeches this year has said natural gas 
is a big part of our energy future.
    EPA is studying the fracturing process over concerns about 
contamination of drinking water, but Administrator Jackson 
admitted on the Hill over on the Senate side last week that 
there are no known cases of contamination as results of 
hydraulic fracturing.
    Last year in a reference to hydraulic fracturing Secretary 
Chu was quoted as saying, this is a quote, ``We are going to 
have some regulation going on then.'' Let me read that again. 
``We are going to have some regulation going on then.'' So 
basically DOE is looking to have DOA doing some regulation, and 
has your agency been actively pursuing any regulations over the 
practice of hydraulic fracturing?
    Mr. Sandalow. Congressman, thank you for your question. A 
couple of points in response to it. First, I would emphasize 
that all the--that the technical progress that we have made in 
shale gas in the past couple of years is extraordinary and 
impressive and that much of it started with funding from the 
U.S. Department of Energy. It is a great example of the 
important role of the Federal Government in spurring 
technological innovation.
    At this--in your question about the environmental impacts, 
the Secretary of Energy has asked his advisory board to take a 
look at this issue, and in fact, just this week that advisory 
board has been meeting, looking at technologies that will allow 
us to develop our shale gas resources using hydraulic 
fracturing and doing so in a way that minimizes environmental 
impact. And that has been the main focus of our activity at the 
Department of Energy on this topic.
    Mr. Olson. OK, but there is no known contamination of 
drinking water from a DOE perspective. Correct?
    Mr. Sandalow. I don't have specific information on that, 
Congressman. That would mainly fall into the purview of the 
Department of the Environmental Protection Agency.
    Mr. Olson. I couldn't agree with you more. The government 
has a great record of investing resources but once we get 
beyond that, that is about it, and it is my concern that we 
don't have the competing things, EPA, these things to keep 
these resources going, because, again, our natural gas reserves 
are--right now, clean source of energy, so our generation is 
probably in transportation, the next, you know, replace 
gasoline with something we need to do right here in our 
country, American jobs and decrease our dependence on foreign 
sources of oil.
    Mr. Hicks, I appreciate your comments today about the 
Department of Defense, the Department of the Navy's dependence 
on fossil fuel. If I understand your comments to Mr. Terry, DOD 
and the progress you are making isn't because you are changing 
fuels per se. It is because you are doing all sorts of things 
outside, streamlining the aircrafts, moving in the propellers, 
those type of things, the screens on the surface vessel subs. 
And obviously wind and solar aren't going to be used in those--
our carriers, our subs, or our airplanes. I mean, some fossils 
are going to be a big part of our future and very specific 
fossil fuels; mosinavia and JP, JP-5, JP-8. JP-8 was on--
because it was specifically designed to have a lower flash 
point so the fires we had in history like the USS Forrestal 
during the Vietnam War.
    And that is a very special fuel, and most of that, a lot of 
that is, built is not the right word, but is processed in the 
district Congressman Green represents at the shale facility in 
Deer Park, Texas, and you know, it is, again, if it was made 
more difficult to obtain these fossil fuels, would that have a 
weakened affect on the military of today?
    Mr. Hicks. Certainly that would have an effect, and I think 
it speaks to our overall energy strategy, which is both one of 
efficiency and one of finding domestic alternative sources so 
we can be more independent in our field choices, and, again, 
the waypoint that we are going toward is a 50/50 blend of the 
JP-5 that you mentioned in hydro-renewable jet fuel, and 
likewise, F-76 Marine diesel and a combination of HRD hydro-
renewable diesel fuel for our service vessels.
    Mr. Olson. Thank you for those comments, and I am about 
running out of time, but I know you share these sentiments, 
but, you know, our job, our main job of our military is to kill 
our enemies, and our job here in Congress and your job is to 
give them all the equipment, the proper equipment, the proper 
fuel they need to do that and not to be some sort of test bed 
for some future generated source of energy. Other people can do 
that. We need you to have your fuel and fossil fuels for as 
long as you need it to have the best equipment out there that 
is second to none.
    I yield back the balance of my time. Thank you.
    Mr. Whitfield. Mr. Inslee, you are recognized for 5 
minutes.
    Mr. Inslee. I thank you, thanks, Mr. Sandalow, for being 
here. Glad you are on duty, and I want to ask you both about 
biofuels potential. I am going to be a little parochial talking 
about this for a moment because we really have an aggressive 
effort to develop a biofuels industrial base in the Pacific 
Northwest. There is a very active consortium with Boeing and a 
host of civilian aviation firms, and we appreciate Secretary 
Mabus's leadership on this. He was hugely excited on our Earth 
Day last year in the rose garden when he announced that we had 
had our Green Hornet first time break the sound barrier using 
biofuels. That was pretty exciting.
    Mr. Sandalow. Yes.
    Mr. Inslee. So I guess the question is what can we do to 
facilitate a bioreactor actually going in out in the Northwest, 
how can we help that effort, and what is the status of those 
considerations?
    Mr. Sandalow. I am going to start by thanking you, 
Congressman, for your long-time leadership on these issues. I 
have learned a lot from reading what Mr. Inslee has written 
and----
    Mr. Inslee. Good. There was somebody out there. I wasn't 
sure.
    Mr. Sandalow. This is an extremely important area of our 
country, one with tremendous potential. I am going to have to 
take back the specific question about the opportunities in the 
State of Washington and come back to you on that, but there is 
no question that overall this country can create jobs and 
reduce our dependence on oil with investment in new biofuels 
technologies. We just heard what I think is an amazing American 
story about taking a fighter jet to mach 1.2, you said, I 
believe, and using American-made, you know, biofuels from a 
technology nobody would I think believe was possible 10 or 20 
years ago.
    That is exactly the type of thing that we can do, and the 
future, I think, many--I have heard experts say that the next 
stage in this industry is scaling up commercial-sized bio-
refineries that will get significant volumes of biofuels that 
have been tested at bench scale up and into the marketplace, 
and I think it is very important that we look at ways to do 
that in the years ahead.
    It is important that we continue the research in the new 
types of feedstocks that are really going to make a difference 
in the years and decades ahead.
    Mr. Hicks. And if I could add, and I would be remiss if I 
didn't mention that the Green Hornet actually has now gone to 
1.7, mach 1.7. Commander Weaver, Pie, as he is known, I think 
would want it to be known that he has taken it to its full 
limit with no challenges at all to the fuel whatsoever.
    Certainly as we know a couple of companies in the State of 
Washington, they are doing great work, AltAir Fuels is one, and 
I believe Imperium is another, and we are watching those 
companies as they mature.
    In terms of your question I think just, you know, continued 
support toward alternative fuels is something that we can do as 
a country to help us and enable us to be more energy 
independent. As David mentioned, you know, R&D plays a critical 
role in this both in the near term and the long term. I think 
for our efforts being able to test and certify the platforms we 
have and be able to accomplish those missions at 100 percent of 
their abilities with no challenges at all with those fuels is 
something that we would also just, you know, request continued 
support for.
    Mr. Inslee. Well, just to be a little parochial, there is 
an amazing consortium out in our neck of the woods, and we have 
multiple companies, Targeted Growth is doing genetically-
modified base, a company with some leadership in Washington 
State, Sapphire Energy, is doing algae-based. There are now 
commercial scale or pre-commercial scale ponds in New Mexico, 
and I know you will be looking for--from growing to 
distribution to testing to commercialization. I think we are 
developing that kind of environment out in the Northwest, and 
if there is any way we can help accommodate your efforts, that 
would be great.
    I want to ask you about coal to liquids. I am a person who 
has supported the effort to develop cleaner coal to reduce CO2, 
and we supported here in the bill we passed in the House last 
year, the year before last, a billion-plus dollars a year to 
help develop a way to use coal in a way that does not 
significantly disrupt the climate.
    But the coal to liquids that I am familiar with that are 
addressed in this bill it appears to me would actually go 
backwards from a CO2 pollution context and lifecycle of the 
product. If that is correct, then why would we want to go 
backwards to a product that actually is going in the opposite 
direction than we all know we need to go?
    Mr. Hicks. I would just say those are some of the questions 
that we have from the Navy's perspective, which are--I think 
there are some large questions around that technology and may 
explain why some of those in that industry are pulling back or 
dialing back some of their efforts there.
    But the questions of the enormous capital expenditures 
needed, $5 to $10 billion, enormous water needed, as well as, 
you know, just some of the waste product that would come out of 
that are all areas that need to be addressed, in addition to, 
and this is what is great with Department of Energy is dealing 
with and doing the research and development on carbon capture 
and storage technology, which can be used, you know, with the 
coal plants that we do have, the plants that have been 
providing affordable power for, you know, a century now and 
will into the next and using that technology focused on those 
plants I think is something that could be an advantage.
    But for coal-to-liquid facilities and to suggest that that 
is the near-term solution with all these other question marks I 
think is something that needs further inquiry.
    Mr. Inslee. Thank you.
    Mr. Whitfield. Thank you. We have one vote on the House 
Floor, and so we are just going to take a little time off here. 
I think Ms. McMorris Rodgers will be coming back, and when she 
comes back, I think she will have questions for the two of you, 
but whether she does or does not come back, we will be back 
within about 10 minutes.
    So we will be in recess until then.
    [Recess.]
    Mr. Terry. [Presiding] Hopefully I will have some of my 
colleagues continue to join me, but we are finished with the 
second panel. So Mr. Sandalow and Mr. Hicks, really appreciate 
your testimony. It was interesting, and I thought you gave good 
detail on your answers, which is much appreciated by this 
committee.
    So at this time you are dismissed.
    At this time we will call up the next panel. While we are 
setting up name plates and getting the chairs organized, our 
third panel is Neil Auerbach from the Hudson Clean Energy, 
James Bartis, Senior Policy Researcher, RAND Corporation, and 
Jack Spencer, Research Fellow, Nuclear Energy, from The 
Heritage Foundation.
    Mr. Auerbach, we are going to start with you. Give us just 
a few more seconds to get settled in, get your water, turn your 
mike on, and Mr. Auerbach, if you would begin.

  STATEMENTS OF NEIL AUERBACH, MANAGING PARTNER, HUDSON CLEAN 
  ENERGY; JACK SPENCER, RESEARCH FELLOW, NUCLEAR ENERGY, THE 
    HERITAGE FOUNDATION; AND JAMES T. BARTIS, SENIOR POLICY 
                  RESEARCHER, RAND CORPORATION

                   STATEMENT OF NEIL AUERBACH

    Mr. Auerbach. Thank you very much, members of the 
committee, for the opportunity to testify for you today. It is 
an honor and privilege.
    My name is Neil Auerbach, and I am the Founder and Managing 
Partner of Hudson Clean Energy Partners. Hudson Clean Energy 
Partners is a global private equity firm that focuses 
exclusively on investing in the clean energy sector. With over 
$1 billion in assets under management, Hudson is a leading 
global investor in sectors that include wind, solar and 
hydroelectric energy, and biofuels, biomass, smart grid, 
electric vehicles, energy efficiency, and storage. Given our 
position on the front lines of these fast-growing industries, 
we have seen firsthand the impact of government policies on 
private sector capital flows, both at home and abroad.
    New capital flowing into our sector is coming in at such a 
quick pace that we are already drawing nearly equal to capital 
flowing into new fossil-fuel-fired power plants around the 
world, and in fact, in 2010, the amount of capital in renewable 
energy power generation was about 85 percent of global capital 
flowing into fossil-fuel powered generation. So this is 
becoming and is now a very big business.
    The increasing scale of our industry is causing dramatic 
changes and strategic thinking of industry players and 
policymakers around the world. Other forces at work in the 
energy industry are also causing a reassessment of strategic 
thinking, most notably the rapid advances made in extracting 
shale gas cheaply.
    While these and other forces at work are putting pressure 
on lowering the cost of power, upward pressure on the price of 
oil is occurring, leading to higher prices at the gasoline pump 
for motorists here in the U.S. and around the world.
    As the Chinese economy continues to grow, demand for 
petroleum will continue to increase. Today China is by far the 
world's largest market for automobiles, yet on a per capita 
basis the market penetration for automobiles is roughly about 
1/20 of what it is in the United States. Imagine what will 
occur when they draw equal to the United States.
    While my written testimony addresses the reverse auction 
mechanism in Title III of H.R. 909, I just want to articulate 
first, although my specialty and frankly a majority of my 
network and my career is now devoted to clean energy, I am 
broadly in support of an all-of-the-above strategy and that 
strategy informing this legislation, and so I support the basic 
concept of using dedicated oil and gas royalties as a funding 
source to create a trust fund out of which payments will be 
made to renewable energy generators.
    It is important to understand why I believe so passionately 
in the future of clean energy and why I believe it is actually 
in the present. There are three basic reasons why clean energy 
is increasingly attractive to consumers and to policymakers 
around the world. It is good for energy security, including 
American energy security, it is good for economic growth, and 
it is also good for the environment, and I believe that by 
looking at all three factors one concludes that more clean 
energy, in particular, renewable energy, is better than less 
for America's energy future.
    I want to focus before getting into renewable--to reverse 
auctions directly on the chart which is to my right, and if you 
want, I can--if the camera can focus on it. Just as an 
illustration to make it as clear as I can with a chart, that 
looks fairly complex I will try to simplify it, at just how 
dramatic the changes are that I refer to in the--in what is 
happening today in clean energy.
    Over the past 80 years there have been obviously 
significant price movements in the electricity sector in the 
United States of coal-fired, gas-fired, nuclear-fired, wind-
powered, and solar-powered electricity. And what this chart 
shows is how prices have come down as each of these power 
sources has scaled over the past roughly 100 years. The fastest 
declining cost for power is coming from solar, and that is the 
orange dotted line all the way on the right. Next fastest is 
wind, and then we have got natural gas and coal and then 
nuclear, which to date has actually been increasing in cost.
    Now, again, I am not against any of the power sources but 
ultimately I believe that the reverse auction mechanism that I 
will address in more detail now speaks to the need to allow 
market forces to drive down the cost of all sources of energy 
in our economy, and the most--and so what we have seen here is 
enormous progress.
    Last week the research director for GE gave his 
pronouncement that he thought that solar electricity would be 
cheaper than coal, electricity in 3 to 5 years. My personal 
assessment from investing hundreds of millions, if not 
billions, of dollars in the solar industry over the past 10 
years is that it may be 5 years away, maybe a little bit more, 
but it is coming very fast.
    Just to give you a further example, the solar industry has 
grown from 2005 to 2011, 15 times. The changes that are 
occurring in that industry alone are enormous, and they are 
going to bring cheaper power to Americans everywhere if we 
scale up the industry wisely in the United States.
    The reverse auction mechanism, first of all, very simply, 
there is a lot of confusion about what a reverse auction is, 
and I think Congressman Nunes addressed it clearly. A regular 
auction is clearly where one seller is trying to induce 
multiple buyers to bid, to raise the price. In a reverse 
auction the buyer is trying to do the opposite, and so there is 
a lot of window dressing or detail associated with how one 
constructs a reverse auction, but reverse auctions work, and 
they have been demonstrated to work, and I will get into the 
Brazil example in a few minutes.
    The bill effectively proposes replacing the current tax 
credit system over time that has existed for about 18 years for 
supporting renewable energy with a reverse auction. I want to 
point out here that the reverse auction mechanism in essence 
works. There are some issues that need to be addressed, and I 
will just mention two of them, and then we can get into the 
rest of it in questions.
    I believe that we need to remove the reverse auction from 
annual appropriations. Billions, hundreds of billions of 
dollars of capital can be mobilized in support of renewable 
energy in the United States, but capital will not flow if the 
reverse auction mechanism is subject to annual appropriation, 
and I think that the PPA issue that has been raised by several 
members that is noted in my testimony also needs to be 
addressed. In my written testimony we focus on a recommendation 
to actually expand the use of the reverse auction to include 
all three revenue streams.
    [The prepared statement of Mr. Auerbach follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.025
    
    [GRAPHIC] [TIFF OMITTED] T2153.026
    
    [GRAPHIC] [TIFF OMITTED] T2153.027
    
    [GRAPHIC] [TIFF OMITTED] T2153.028
    
    [GRAPHIC] [TIFF OMITTED] T2153.029
    
    [GRAPHIC] [TIFF OMITTED] T2153.030
    
    [GRAPHIC] [TIFF OMITTED] T2153.031
    
    [GRAPHIC] [TIFF OMITTED] T2153.032
    
    [GRAPHIC] [TIFF OMITTED] T2153.033
    
    [GRAPHIC] [TIFF OMITTED] T2153.034
    
    [GRAPHIC] [TIFF OMITTED] T2153.035
    
    [GRAPHIC] [TIFF OMITTED] T2153.036
    
    [GRAPHIC] [TIFF OMITTED] T2153.037
    
    [GRAPHIC] [TIFF OMITTED] T2153.038
    
    Mr. Terry. Thank you. I appreciate that, Mr. Auerbach.
    Mr. Spencer of The Heritage Foundation.

                   STATEMENT OF JACK SPENCER

    Mr. Spencer. Mr. Chairman, members of the subcommittee, my 
name is Jack Spencer. I am the Research Fellow for Nuclear 
Energy Policy at The Heritage Foundation. The views I express 
in this testimony are my own and should not be construed as 
representing any official position of The Heritage Foundation.
    Thank you for inviting me to testify before you today 
regarding the Roadmap for America's Energy Future. I would like 
to focus on the nuclear power provisions of that bill.
    Nuclear is among America's least expensive electricity 
sources. It emits nothing into the atmosphere, has a great 
safety record in the United States, including no injuries. 
Despite these facts, no plants have been ordered for over 3 
decades. In many instances there will be none, there will be no 
additional construction without taxpayer backing.
    So this has been the basic approach of most policymakers. 
In fact, looking at many of the proposals currently under 
consideration, one might conclude that Washington thinks that 
it can subsidize nuclear energy into commercial viability.
    I would suggest, however, that a lack of taxpayer support 
is not the problem. The problem is an incoherent nuclear waste 
management policy and an antiquated regulatory system. The 
energy roadmap begins to address both of these areas.
    Ultimately, America's failed approach to nuclear waste 
management presents a substantial risk to the future of nuclear 
power. Constructing a nuclear materials repository is essential 
to fixing this problem. Current law states that the repository 
shall be built at Yucca Mountain. The energy roadmap breaks the 
impasse over Yucca Mountain by establishing a 90-day timeline 
for the Nuclear Regulatory Commission to determine based on 
technical and scientific data whether or not to issue a permit 
for repository construction. If Yucca is not suitable, the 
proposal sets forth a process to find an alternative site.
    But the roadmap goes a step further. It directs the 
Department of Energy to report back to Congress on the 
feasibility of both establishing an organization outside of the 
Department to manage Yucca and of removing the fee that 
ratepayers pay to the Federal Government for waste management 
services. Removing the fee would allow for a market-based 
system to emerge. It is this provision of the--that sets the 
roadmap apart from recent, from its recent predecessors.
    Instead of attempting to fix the flawed system, this 
legislation allows for a fundamental reform of how nuclear 
waste is managed. In a market-based system instead of paying a 
preset fee to the Federal Government to manage used fuel or in 
this case not managed used fuel, nuclear power operators would 
pay a fee for service. This could include simply paying a fee 
for geologic storage or a more complex suite of processing 
services.
    The key is to establish a pricing mechanism for placing 
nuclear waste storage in a geologic repository. Nuclear power 
operators could then decide, given the price of used fuel in 
Yucca, how to manage their waste. As the price to access Yucca 
goes up, so will the incentive for nuclear operators to do 
something else with their used fuel.
    This should give rise to an industry that competes to 
provide used management, used-fuel management services. One 
could imagine a marketplace where everything from interim 
storage to full fuel reprocessing was available. The basic 
regulation would be that all the waste must be disposed of by 
the time the plant is decommissioned, and of course, that 
everything is done within the guidelines set by the NRC to 
protect public health and safety.
    This idea is gaining ground. For example, Tim Echols, a 
Georgia State Public Services Commissioner, recently published 
an op-ed in the Atlanta Business Chronicle supporting the 
approach. More recently, experts from the Center for Strategic 
and International Studies, the Federation of American 
Scientists, the University of Illinois Champaign-Urbana, and 
The Heritage Foundation, I would be the representative there, 
authored a report entitled, ``U.S. Spent Nuclear Fuel: A 
Market-Based Solution.'' Even nations like Finland and Sweden 
are finding great success in waste management programs where 
waste producers are responsible for waste management.
    The energy roadmap also would reform how new reactors are 
permitted by creating a second permitting track that would 
allow for a permit to be issued in approximately 2 years. The 
expedited process would entail more efficient processes for 
both environmental and technical review.
    The bill also begins to build regulatory support for new 
reactor technologies. Without this regulation, new technologies 
are effectively banned from the marketplace. Customers do not 
want reactors that the NRC will not regulate, and the NRC does 
not want to put its resources toward a reactor technology that 
has no customers. The result is that new technologies are at a 
severe disadvantage.
    To begin changing this, the roadmap directs the NRC to 
develop a set of guidelines for technology-neutral nuclear 
plants. Allowing our reactor designers to meet a general set of 
plant guidelines would represent a significant step forward in 
building a more diverse and competitive nuclear industry.
    And the final point that I would like to bring to the 
committee, the subcommittee's attention is that the proposal 
would give the NRC a 90-day deadline to report to Congress what 
personnel and resources are required to establish a 
predictable, regulatory program for small modular reactors. 
Like other elements of the bill, this provision moves away from 
the subsidy-first mentality that consolidates market power in 
Washington to a market-based division that allows the actual 
commercial value of a technology to determine its ultimate 
success.
    That concludes my testimony. I look forward to your 
questions.
    [The prepared statement of Mr. Spencer follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.039
    
    [GRAPHIC] [TIFF OMITTED] T2153.040
    
    [GRAPHIC] [TIFF OMITTED] T2153.041
    
    [GRAPHIC] [TIFF OMITTED] T2153.042
    
    [GRAPHIC] [TIFF OMITTED] T2153.043
    
    [GRAPHIC] [TIFF OMITTED] T2153.044
    
    [GRAPHIC] [TIFF OMITTED] T2153.045
    
    [GRAPHIC] [TIFF OMITTED] T2153.046
    
    [GRAPHIC] [TIFF OMITTED] T2153.047
    
    [GRAPHIC] [TIFF OMITTED] T2153.048
    
    [GRAPHIC] [TIFF OMITTED] T2153.049
    
    [GRAPHIC] [TIFF OMITTED] T2153.050
    
    [GRAPHIC] [TIFF OMITTED] T2153.051
    
    [GRAPHIC] [TIFF OMITTED] T2153.052
    
    [GRAPHIC] [TIFF OMITTED] T2153.053
    
    [GRAPHIC] [TIFF OMITTED] T2153.054
    
    [GRAPHIC] [TIFF OMITTED] T2153.055
    
    [GRAPHIC] [TIFF OMITTED] T2153.056
    
    [GRAPHIC] [TIFF OMITTED] T2153.057
    
    [GRAPHIC] [TIFF OMITTED] T2153.058
    
    [GRAPHIC] [TIFF OMITTED] T2153.059
    
    [GRAPHIC] [TIFF OMITTED] T2153.060
    
    [GRAPHIC] [TIFF OMITTED] T2153.061
    
    [GRAPHIC] [TIFF OMITTED] T2153.062
    
    [GRAPHIC] [TIFF OMITTED] T2153.063
    
    [GRAPHIC] [TIFF OMITTED] T2153.064
    
    [GRAPHIC] [TIFF OMITTED] T2153.065
    
    [GRAPHIC] [TIFF OMITTED] T2153.066
    
    [GRAPHIC] [TIFF OMITTED] T2153.067
    
    [GRAPHIC] [TIFF OMITTED] T2153.068
    
    [GRAPHIC] [TIFF OMITTED] T2153.069
    
    [GRAPHIC] [TIFF OMITTED] T2153.070
    
    [GRAPHIC] [TIFF OMITTED] T2153.071
    
    [GRAPHIC] [TIFF OMITTED] T2153.072
    
    [GRAPHIC] [TIFF OMITTED] T2153.073
    
    [GRAPHIC] [TIFF OMITTED] T2153.074
    
    Mr. Whitfield. Mr. Bartis, you are recognized for 5 minutes 
for your opening statement.

                  STATEMENT OF JAMES T. BARTIS

    Mr. Bartis. Mr. Chairman and distinguished members, thank 
you for inviting me to further elaborate on the testimony that 
I gave to this subcommittee on May 5 of this year. I will be 
focusing my remarks today on the policy implications of 
sections of H.R. 909 that deal with oil shale and coal 
liquefaction, as is RAND's policy. My testimony neither 
endorses nor opposes specific legislation.
    The United States has enormous oil shale, has an enormous 
oil shale resource base, enough to support the production of 
millions of barrels per day for centuries. But getting a useful 
fuel from this resource is technically complex, requiring 
temperatures that are much higher than those used in processing 
Canadian oil sands.
    Moreover, nearly all of the high-value oil shale resources 
geographically concentrated on federally managed lands lie in a 
very small area, roughly 30 by 35 miles in Colorado's Piceance 
Basin and within a small portion of the Uinta Basin within 
Utah. That oil shale belongs to all of us. The public value is 
potentially tens of trillions of dollars.
    But reaping that public benefit, not to mention the energy 
security benefits of domestic alternative fuels production, 
requires the development of a commercial oil shale industry 
capable of producing a few million barrels per day. That level 
of production should be the long-term strategic goal for oil 
shale. At this stage I don't know if that goal can be achieved. 
We are talking about a tremendous amount of industrial 
activity, especially when we consider supporting infrastructure 
within a very small reason. Extensive measures will be required 
to prevent serious adverse ecological and social economic 
impacts and to protect the quality of the Colorado River.
    My analysis of the oil shale provisions of H.R. 909 is that 
they do not move our Nation towards that long-term strategic 
goal of large and sustainable commercial production. My 
specific concerns are detailed in my written testimony.
    There are a few areas where Congress may need to provide 
direction so that the Nation can realize the full opportunity 
that oil shale offers. The critical step is obtaining early 
production experience. Until we understand the performance of 
the process options, it is not productive to engage in 
establishing a detailed, regulatory structure for a large, 
multi-million barrel-per-day commercial industry.
    I suggest the following for consideration by the committee. 
First, require that the Departments of Energy and the Interior 
and the Environmental Protection Agency cooperatively develop 
and publish a federal plan for promoting the construction and 
operation of a limited number of pioneer commercial plants. 
That plan should be designed to attract America's top high-
technology firms.
    Second, require that the Department of the Interior 
develop, publish, and implement a 15-year schedule for multiple 
offerings of small R&D leases.
    And third, require the preparation of plans for conducting 
critical environmental and ecological research and an 
assessment of the carbon management options in the vicinity of 
the federally managed oil shale lands.
    Turning to coal, here we have another enormous resource 
that we could be utilizing to meet our liquid fuel needs. 
Technical approaches are available to produce liquid fuels from 
coal or a combination of coal and biomass with life cycle 
greenhouse gas emissions that are comparable or significantly 
below those associated with conventional petroleum.
    Moreover, over the long-term, liquid fuels derived from a 
combination of coal and biomass could provide a new market for 
coal that could counter the adverse local and regional economic 
impacts of reduced demand for coal in power generation due to 
measures to reduce greenhouse gas emissions.
    I am concerned with the slow progress towards gaining 
commercial experience in coal-derived liquids production in the 
United States. However, I do not believe that government 
ownership of alternative fuels production facilities is a 
credible solution. If the Congress is interested in using the 
purchasing power of the Defense Department to promote early 
commercial experience, I suggest providing the Department with 
the authority to make long-term agreements to guarantee a 
minimum sale price to the benefit of the alternative fuel 
producer in the event that oil prices are low. In return for 
this benefit the Department would negotiate a maximum purchase 
price that would be lower than world oil prices in the event 
that world oil prices pass a specified threshold.
    I would also like to make a few comments regarding 526 of 
the Energy Independence and Security Act of 2007. The primary 
policy issue raised by repeal of this section is whether it is 
in the national interest to allow government agencies to 
promote the production of alternative fuels to have life-cycled 
greenhouse gas emissions that are significantly higher than 
their petroleum counterparts. For example, repeal of this 
section would open the door to a government procurement of 
coal-derived liquids produced without any management of 
greenhouse gas emissions.
    As enacted, Section 526 places severe constraints on the 
government's ability to purchase fuels. This is because 
commercially-available fuels might contain certain amounts of 
alternative fuels that fall under the prohibitions of that 
section, as was mentioned by the Congressman from Texas. 
Congress attempted to correct this problem in 2010, when it 
enacted Public Law 111314, but the language of Section 3010 of 
that law is very unclear. Congress should consider clarifying 
the meaning of that section.
    If the intent of Congress is to promote the early 
production of alternative fuels with greenhouse gas emissions 
that are comparable or very close and well within the 
uncertainty of our petroleum imports, then Section 526 can be 
appropriately amended. For example, an amendment could allow 
government purchases of alternative fuels derived from coal if 
90 percent of greenhouse gases produced during the production 
process were captured and sequestered. Such a provision would 
greatly simplify the ability of a coal-to-liquids plant to 
qualify for government purchase contracts.
    My written testimony contains a section-by-section review 
of the oil shale and coal-to-liquid provisions which I hope you 
will find useful.
    Thank you very much, sir.
    [The prepared statement of Mr. Bartis follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.075
    
    [GRAPHIC] [TIFF OMITTED] T2153.076
    
    [GRAPHIC] [TIFF OMITTED] T2153.077
    
    [GRAPHIC] [TIFF OMITTED] T2153.078
    
    [GRAPHIC] [TIFF OMITTED] T2153.079
    
    [GRAPHIC] [TIFF OMITTED] T2153.080
    
    [GRAPHIC] [TIFF OMITTED] T2153.081
    
    [GRAPHIC] [TIFF OMITTED] T2153.082
    
    [GRAPHIC] [TIFF OMITTED] T2153.083
    
    [GRAPHIC] [TIFF OMITTED] T2153.084
    
    [GRAPHIC] [TIFF OMITTED] T2153.085
    
    [GRAPHIC] [TIFF OMITTED] T2153.086
    
    [GRAPHIC] [TIFF OMITTED] T2153.087
    
    [GRAPHIC] [TIFF OMITTED] T2153.088
    
    [GRAPHIC] [TIFF OMITTED] T2153.089
    
    Mr. Whitfield. Well, thank you all for your opening 
statements, and at this time I am going to call on Mr. Terry 
for 5 minutes of questions.
    Mr. Terry. I appreciate that, Mr. Chairman.
    Mr. Auerbach, fulfilling my promise, but it is one of the 
more intriguing aspects of the bill is reverse auctions and 
clean energy. So in the context of Brazil, you said you were 
going to tell us about Brazil, but put it in the context of 
what also you think would positively and negatively work in the 
United States to encourage more clean energy.
    Mr. Auerbach. Sure. Certainty provides greater investment 
in clean energy infrastructure, and the current system we have 
of tax credits that expire every couple of years has introduced 
uncertainty and has stymied deployment. The reverse auction 
mechanism in Brazil, which came actually I think it was last 
year, the year before that was called ``the PROINFA feed-in 
tariff,'' at an average price for wind of about $136 a 
kilowatt. I am sorry. A megawatt hour.
    In the reverse auction process auctioning off 2.1 gigawatts 
of wind energy in a number of different contracts, the average 
price bid was $74.40 in U.S. dollar terms. That came in below 
hydropower, which averages in Brazil about $80 a megawatt hour. 
That is remarkable. Some have criticized the auction for 
allowing too many speculative bids, but if you look at the list 
of winners, you see some of the largest utility companies, 
companies that have very substantial balance sheets and are 
capable of transacting. So I do believe that the auction there 
has worked.
    And so the biggest difference between the Brazilian auction 
and what is in this current program is that you sell the power 
to the reverse auction agency rather than just one attribute, 
and so in our proposal one way of solving the chicken and egg 
problem associated with meeting a power purchase agreement to 
establish credibility before participating in the reverse 
auction to get the benefit payment that substitutes for tax 
credits is to be able to sell all the revenue streams through 
the reverse auction agency that would be administering the 
purchase and sale of electricity.
    So a renewable energy generator would have a price certain 
for all of its attributes. The three income streams are to sell 
the power itself, the sale of renewable energy credits, which 
are a substantial portion of the revenue stream of a renewable 
energy generator, and the benefit payment that comes from the 
trust fund. And that would take some work to get that 
innovation into the law and obviously we would need bipartisan 
agreement, but I think it would actually streamline and 
dramatically increase the clean energy generation in the United 
States.
    Mr. Terry. Does Brazil have a credit as well?
    Mr. Auerbach. I don't think so, but I would tell you I 
would like to do more homework. I have researched, but we don't 
have facilities in Brazil today. So I may be missing a beat, 
but I have studied it, and I don't believe so. I think it is 
just one price.
    Mr. Terry. So but in your testimony you mentioned multiple 
revenue streams, one of which is the tax credit.
    Mr. Auerbach. Right.
    Mr. Terry. The philosophy I think that we are working under 
is reverse auctions instead of credits.
    Mr. Auerbach. Correct, and so what I mean, let me just make 
this as simple as I can because there is a lot of complexity 
here. If--I actually have companies that have several hundred 
billion dollars invested in clean energy generation in the 
United States in development. What we want to do is to know how 
much money we are going to make for the sale of the electrons, 
and the way you get paid is through the power purchase 
agreement, through the tax credits today, and through renewable 
energy credits.
    And so that, the total of that revenue divided by the 
capital costs and minus your funding costs is how much money we 
made, and so if the clean energy generator knows how much money 
they are going to make and they can have that price certain, 
then you are going to have more clean energy generation because 
the market is determining it.
    The reverse auction mechanism is substituting a tax credit 
for a benefit payment, which I believe is more efficient on its 
own. So if the reverse auction only covered substitute tax 
credit payments, we need to solve the chicken and egg problem. 
There are other ways of solving it. Our recommendation is to 
just--is to have a more organized sale of renewable power 
through the reverse auction agency, which I believe can be used 
for a broader purpose, including the diversion of royalty 
payments into the trust fund and any allocations to renewable 
energy generators.
    Mr. Whitfield. Mr. McKinley, I will recognize you for 5 
minutes for questions.
    Mr. McKinley. Thank you, Mr. Chairman.
    I am just curious to get a sense of where we are in this 
with the--if the bill was presented, would you support it?
    Mr. Auerbach. I would support it with modifications. If we 
got the modifications that we asked for, I would support it. As 
written it needs further work in order to have its intended 
effect.
    Mr. McKinley. Thank you. Mr. Spencer?
    Mr. Spencer. I am not in a position to support or not 
support legislation. I can say that I think that a lot of the 
ideas and policies put forth certainly from a nuclear 
standpoint really give us a new way to address some really 
fundamental flaws in how we do nuclear energy and gives us a 
future there.
    Mr. McKinley. Mr. Bartis.
    Mr. Bartis. I would rather not comment on that. I haven't 
studied this.
    Mr. McKinley. I am just--I was curious because I think at 
least he is showing some imagination here and something that 
reflects a little bit on the use of coal, and as I said to the 
earlier panel, my--I have come pretty clearly to understand 
there is quite an aversion in Washington and especially under 
this administration to use coal.
    Mr. Bartis. Well, there has been a long history of Congress 
and the administration specifying how to do things as opposed 
to what the goals are, and as we pointed out with coal 
liquefaction, if we can do it with a small amount of biomass 
and coal, gets you fantastic environmental benefits, and it 
gets you very reasonable costs. And yet the way we have 
structured some of our legislation, that option is not allowed 
because as soon as it is coal involved, it doesn't meet the 
renewable.
    And so I think there is, you know, the goal of the Congress 
should always be focused on, you know, what are you trying to 
achieve. Are you trying to achieve energy security, are you 
trying to achieve lower greenhouse gas emissions? Use those as 
your goals, not specifying technologies.
    Mr. McKinley. Do any of you know from the coal industry 
whether the coal industry is subsidized? I hear that all the 
time here. Panels, members of the other side of the aisle talk 
about the subsidy on the coal industry. Do any of you have any 
record at all of the subsidies on coal?
    None? Again, I am just curious because it seems like we 
just keep chasing things down the stream. I won't use that 
clique, but, again, we just don't seem to solve anything. We 
are about--we get close to solving something. There was the--
what was it, the Fischer-Tropsch process, it was--why aren't we 
just back in the '30s, why aren't we just perfecting it instead 
of taking on something new?
    And maybe it is--maybe I am being naive about the whole 
process. I am thinking as an engineer that we would complete 
something instead of starting something new. It just seems like 
this administration and the whole process that we don't have 
the energy policy, we don't have any plan to have an energy 
policy, everyone talks about it, but there is none. And we 
are--we don't want to be held accountable. We seem to be so 
much more filled here in Washington with symbolism that we want 
to move symbolically to starting a new fuel process and new 
energy when we have things that we could work.
    I can imagine if this would have been back in the 
automobile industry if we had quit making the first automobile 
and went with something else, but they kept perfecting it until 
it became the automobile, the vehicle that we use. Same thing 
with airplanes when they started in the process. Why don't we 
finish it? Why don't we just--what--is it the economics? Mr. 
Bartis?
    Mr. Bartis. No. Our discussions with organizations that are 
interested in promoting and building plants is that there is a 
residual concern regarding where the world oil prices are 
heading, and we all, because they are high today, we think they 
are going to stay high, and if you have got a large investment 
to bet on that, you are going to be a little bit more cautious.
    So there is downward potential that could last. It may not 
be very long, but it could be downward potential, and that 
would cause something like a coal-to-liquids plant to be a 
disaster. And that is why we are talking about--in our analysis 
we looked at incentives that the government could provide that 
would be applicable to the first few plants. We don't like 
subsidizing production. We do think that there is a government 
role in promoting early commercial experience, and coal-to-
liquids is one of those, coal and biomass to liquids. That it 
is environmentally clean is one of those applications.
    Mr. McKinley. Thank you. Mr. Spencer, do you have something 
you want to chime in?
    Mr. Spencer. Yes, Congressman. I am here to talk primarily 
about nuclear energy, but you have given me an opportunity that 
I find hard to pass up. Given that when I am not working on 
nuclear energy I work on energy subsidies broadly, and I think 
the bigger issue here is what is the role of government, and 
you talked about these projects that have started and stopped. 
I would simply suggest that with all due respect to all of the 
great men and women who have--who work in this building and the 
one on the other side and all of the great men and women and 
scientists who work down at the Forsaw Building at the 
Department of Energy, that ultimately it is the marketplace 
that is the best arbiter of which of these technologies go 
forward and which ones don't.
    And if coal to liquids is the way to go, then people will 
invest in that and will do that. If energy prices are going to 
stay high, then that creates a panoply of opportunity for 
biofuels, ethanol, whatever the case may be, but we continue to 
use Washington and centralized control in Washington to distort 
the marketplace, so we never get any of these projects 
finished, rather than allowing and trusting the marketplace. 
And ultimately it is the marketplace that has given us all of 
the goods and services that we enjoy today.
    Mr. McKinley. Thank you very much. I think I have gone over 
my time.
    Mr. Whitfield. The gentleman from Kansas, Mr. Pompeo, is 
recognized for 5 minutes.
    Mr. Pompeo. Thank you, Mr. Chairman.
    Mr. Auerbach, you talked about the increase in capital 
flows into renewable----
    Mr. Auerbach. Yes.
    Mr. Pompeo [continuing]. Energy. What drove that increase? 
You said--I forgot the time period. The last couple of years?
    Mr. Auerbach. Yes. In the solar industry--the last 6 years, 
I am talking about--it was policies, government policies around 
the world. Most of that actually was happening in Europe with 
feed-in tariffs, the most notable of them is in Germany, which 
despite its relatively poor solar insulation conditions is the 
world's largest market for solar energy. And it also resulted 
from improvements in technology, and several companies, many 
companies have participated in that progress in the United 
States, in Europe, and in China.
    So the cost of installed solar has dropped roughly about 75 
percent over the last 5 years. When prices drop and they are 
going to continue to drop, it stimulates demand, and these 
feed-in tariffs which started out very, very high have been 
coming down extremely quickly. I am not a personal proponent of 
feed-in tariffs as the way to go because it is another example 
where the government is setting the price rather than the 
market, which is why I like Congressman Nunes's reverse auction 
approach.
    But the combination of market stimulus, the price signal, 
and technology progress has resulted in a transformation of the 
solar industry unlike anything I have seen in the energy 
industry over the course of my involvement, and this would be 
for well over a decade.
    Mr. Pompeo. I appreciate that, and I, too, I think the 
reverse auction is a step forward from the way we have done 
business. I can't imagine putting hundreds of millions of 
dollars at risk depending on us to renew a tax credit every 
couple of years.
    Mr. Auerbach. It makes me nervous.
    Mr. Pompeo. Yes. I can only imagine the increase in the 
cost of capital that results from that.
    Mr. Auerbach. The cost of capital has gone up much higher 
in the United States than anywhere else in the world because of 
it.
    Mr. Pompeo. So with all of these improvements that you 
described why not just say, hey, just go away? Why not just 
tell us, go away, leave us alone, don't need a reverse auction, 
we don't need a thing. Remove the regulatory barriers that are 
in the way of all of these things whether that is wind or solar 
or natural gas and coal, and we will raise the money, and we 
will get it done, and we will make money doing it. And make 
really happy consumers because they will have affordable energy 
here in America.
    Mr. Auerbach. OK. That is a great question, and there are 
many who have suggested that. Let me--in answering that 
question, and I am sure my other panelists here will have views 
on it, I will also touch on Mr. McKinley's point. If you look 
at the history of federal expenditures in this country, there 
has been an analysis actually done for the Nuclear Energy 
Institute a couple of years ago. The vast majority of federal 
expenditures have gone actually to fossil fuels, something like 
73 percent, including to the coal industry.
    Now, I didn't do the study myself, so I can refer you to 
it, and so you can look at the source material I quoted in my 
testimony. And so the renewable power industry is catching up 
and is catching up as the chart shows at a pace that gives us 
enormous confidence in the future. If you simply stop the music 
and then force everyone to find their seats, it may be that the 
wrong folks will not find a seat, you know, in the room that 
otherwise would be the winners in a few years from now.
    So what we need is smarter policies that allow market 
mechanisms to work more efficiently. Stopping the music right 
now and pulling all subsidies or all expenditures of all sorts 
I think would increase the cost in the short term rather than 
reduce the costs.
    So I think we need to do this in a more gradual way.
    Mr. Pompeo. I don't understand that. I don't understand how 
if the government got out of the way it would increase costs. 
You would still--because it would still find the low-cost 
alternative, and utilities would power their plants with the 
low-cost alternative, and more people would go figure out how 
to make those curves come down even faster.
    Mr. Auerbach. Well, what the reverse auction does is it 
actually allows the market, if the market doesn't need it, the 
market will not be asking for it, and it will disappear on its 
own, so it allows actually for a gradual move to full market 
freedom to set prices.
    So I think the reverse auction mechanism is the safer way 
to get the same goal that I share.
    Mr. Pompeo. Yes. Very good. I yield back the balance of my 
time, Mr. Chairman.
    Mr. Whitfield. Thank you. At this time I would recognize 
the gentleman from Louisiana, Mr. Scalise, for 5 minutes.
    Mr. Scalise. Thank you, Mr. Chairman.
    I would start with Mr. Auerbach. On the reverse auction, I 
know one thing that you talk about a lot of us get frustrated 
with is when you see some trying to pick winners and losers 
where government is trying to pick who is going to win and who 
is going to lose.
    In a reverse auction can you maybe walk through some things 
in that type of process that would prevent the Federal 
Government from picking winners and losers?
    Mr. Auerbach. OK. Yes. What the bill currently provides is 
a division of regions and actually a division of technologies. 
There, what we are trying to do on the region side is to allow 
various resources in the country to be developed on their own. 
See, if you actually have one national auction, a reverse 
auction, you might have South Dakota taking all of the wind 
resource, but because of the lack of transmission, you may 
never be able to evacuate that power to California or New York 
or Chicago where you need it.
    And so a regional approach allows the realities of the 
marketplace to work well, so I think it is a well-designed 
piece of the legislation. What we also do is allow for--what 
the legislation does it allow for technology limits, 60 
percent, I think, to one technology, 90 percent for two, and 
what that is doing there is saying that although wind today is 
the cheapest form of renewable power generation, ultimately 
because of these cost curves you want to induce more 
competition and to see oil prices continue to come down.
    So the allocation of the auction among technologies I think 
helps to push the price down of all renewable power.
    Mr. Scalise. Thanks. One of the things we have been hearing 
when you talk about impediments to expanding renewable energy, 
it seems like some of the same things we are hearing about 
impediments to developing some of our own natural resources in 
America in traditional energy are seeming to apply to renewable 
energy, and that is overreach by the Environmental Protection 
Agency.
    Can you describe, especially as it relates to the long 
process it takes for site selection, things like that, can you 
describe what types of overreach you have seen?
    Mr. Auerbach. Yes. Anecdotally, although I--we have a lot 
of development sites in California, it is well known, for 
example, that it takes 2 to 3 years to actually develop a wind 
farm in Texas, and it takes 5 to 8 years to develop a wind farm 
in California. I don't think it is the EPA that stands in the 
way. It is a lot of State environmental red tape that delays 
the pace of development in California in particular. But 
California has actually--recently has been showing more 
progress.
    And so environmental red tape is actually a problem for the 
renewable power industry, and so more accelerated permitting 
would allow, both on federal lands and also on private lands, 
would allow for faster deployment of renewables and cheaper 
deployment of renewables.
    Mr. Scalise. Thanks. Mr. Bartis, talking about more 
opportunities for permitting for natural resources, I know one 
of the frustrations that we have in the Gulf Coast area is the 
inability to get clear guidelines from the Department of 
Interior, BOEM, to move forward but also with the inability to 
get more areas opened up. When you talk to other States, it 
seems like there are a number of other States interested in 
getting into the game and helping produce American energy, and 
you know, it surely would be my goal to see us eliminate our 
dependence on Middle Eastern oil.
    Clearly, we have the capacity to do that with so many 
reserves that are completely shut off by federal policy, but if 
you can talk maybe about some incentives that could be provided 
that you know of that would encourage States to participate 
where maybe they are not right now.
    Mr. Bartis. That is a tough question. There is a lot--from 
what we know there is a lot of offshore oil that other States 
have, and the challenge is to move forward successfully. We 
know we have a tremendous amount of oil shale as addressed 
today, literally three times the reserves of Saudi Arabia, that 
look very attractive. We need to make some progress there. The 
only way to get progress is to get some more experience, and 
that means we have got to allow people, to give industry enough 
incentive, a big enough reward so that if they go in there and 
figure out how to do this, and thereby monetize this huge 
resource that we have as a Nation and to our benefit, you know, 
they will move.
    Mr. Scalise. What is your take on increased revenue sharing 
to States who want to participate?
    Mr. Bartis. The revenue sharing, I mean, I can't comment on 
the revenue, I mean, the revenue sharing. I don't want to 
comment on that. I think there is already revenue sharing as 
you are aware, and I don't--we have not looked at whether----
    Mr. Scalise. Well, we don't--I know in Louisiana we don't 
have any revenue sharing right now. It is not until 2017, 
that----
    Mr. Bartis. Right.
    Mr. Scalise. But it seems like there are a number of other 
States that have----
    Mr. Bartis. It depends. Yes. Yes.
    Mr. Scalise. If revenue sharing was involved where they can 
provide a stream of revenue to their State, there would be a 
big stream of revenue to the Federal Government as well, it 
seems like kind of a win-win to encourage more----
    Mr. Bartis. Yes. I--we haven't looked at that, and I 
shouldn't be commenting on things that we have----
    Mr. Scalise. I don't know if anybody else wants to comment 
on that.
    All right. I yield back. Thanks.
    Mr. Whitfield. The gentleman from California, Mr. Bilbray, 
is recognized for 5 minutes.
    Mr. Bilbray. Thank you. Mr. Chairman, I apologize. I was 
downstairs at my other committee looking at government 
regulations that are obstructing economic growth, so I think we 
are sort of in a lot of ways looking at the same problems from 
different angles.
    First of all, being a history major, I want to go back and 
remind all of us that the oil industry was the environmental 
option to the oil, I mean, from the previous oil was the 
whaling industry that provided the energy to light our lights. 
And the fact that the gasoline was just a waste product from 
the manufacturing of the--and so the whole concept of driving a 
car that was driven by gasoline was really just because we had 
all this, you know, dangerous stuff around as a bi-product, a 
waste product, and develop that.
    So I think it kind of tells us how innovative Americans can 
be and the human mind can be confronted with an opportunity and 
a problem, and now it is this huge, precious resource rather 
than trash from, you know, leftovers, and how do we move 
forward with it.
    The other assumption I want to point out is would everybody 
here agree with the concept that we need a Manhattan Project 
for our energy independence? We keep hearing that. You know, my 
biggest frustration about it is somebody has been in a 
regulatory agency one way or the other since 1976. Manhattan 
Project wouldn't be legal today. Would not be legal to do it 
today and every time I just ask anybody, anybody brings that 
up, we need to confront that.
    My question is when we look at these obstructions that the 
government, one way or the other, is standing in the way of, 
while we are talking about why aren't we doing innovative 
things, the fact is we require people to stay in a box, and we 
complain about them staying in a box.
    You mentioned California. In fact, you may want to talk 
about this. We talk about how wind generation is so efficient, 
but do we talk about the fact that it needs transmission lines 
that are usually three times farther than traditional power and 
the obstructionism and let me give you the sun link. You know 
that one. It is twice to three times as long as it would have 
been if the Federal Government would have allowed the 
transmission lines to go over federal jurisdiction. No Indian 
reservation, no national park, but the freeways go through. Do 
you want to comment on the fact that it is oK to put a freeway 
through federal property but not a transmission line to get to 
solar power?
    Mr. Auerbach. Sure. I can't pass up that opportunity, 
Congressman.
    I am concerned obviously. I am in the clean energy 
business. I am concerned with the environment, but ultimately 
everything is cost benefit, and the amount of time and energy 
and money that renewable energy development teams have to 
expend on figuring out how to get transmission to load centers 
from the wind resource basically it prevents a lot of renewable 
energy from being built that could be both environmentally 
beneficial and also cost effective.
    Mr. Bilbray. Give me an example. California implemented AB 
32, talked about saving the planet, thought it was so important 
to be able to save the planet, but all those regulations and 
all those mandates but did not exempt it from CGWA, the 
California Environmental. Didn't think it was important enough 
to exempt it from CGWA because, oh, they couldn't retreat on 
that.
    At the same time my colleague from California will remind 
you they did exempt the football stadium in the City of 
Industry from CGWA but not the implementation of AB 32.
    Can we agree that we should get away from the term, 
renewable, and go to clean technology or sustainable 
technology? I mean, words matter, and one of the things that 
frustrates me is to hear almost as if renewable is a catchy 
catchword but really doesn't reflect the reality.
    Can we talk about the changing of those terminologies?
    Mr. Auerbach. Could I just----
    Mr. Bilbray. Go ahead.
    Mr. Auerbach [continuing]. Address that quickly? Well, 
first of all, the name of my firm is Hudson Clean Energy 
Partners. I had the choice to name it renewable, and so I 
wanted a broader platform, and so I agree with the term clean.
    I would like, however, to just note that renewable energy, 
the resources themselves are also natural resources that are 
part of our national treasure. So the sun that is shining in 
Southern California and the wind that is blowing across the 
Plain States are natural resources for this country that are 
worth trillions of dollars.
    Mr. Bilbray. OK, but here is the point. To get into that, 
when somebody talks about electric fleets, when we talk about 
developing efficient wind generation, we are talking about 
permanent magnet DC motors and generators. OK? At that time we 
talk about that, but we don't talk about the fact that if we 
are going to go to electric system, if we are going to have 
wind power, we are going to have efficient electricity, we have 
got to have rare earth, 70 pounds for every Prius, and you know 
what your wind generates, but we are not talking about that the 
Federal Government will not allow private industry to go onto 
public lands and mine the rare earth that is essential to do 
all the things that everybody else--and we sit through these 
committees and hear colleagues talk about all these great 
plans, but they are not willing to allow the process to be 
legal to reach those goals. Things like rare earth, which is 98 
percent coming from China.
    Mr. Auerbach. It is only 98 percent or 95 percent of the 
production, not of the resource itself. The United States has 
plenty of resources. I agree with what the Congressman is 
saying. If we are going to develop more clean energy and use 
technologies that are now commercially available and coming 
down rapidly in cost like electric cars, we need to have a 
resource strategy, and it has to be domesticated more than it 
is today.
    Mr. Bilbray. Mr. Chairman, I appreciate that, and just to 
point out that the Prius are actually, the Toyota is actually 
designing now an AC motor, which is a lot less efficient than 
the permanent magnet DC motor, just because of the threat of 
not being able to get the rare earth material, and we get into 
it.
    And I apologize. I didn't get a chance to get in nuclear 
power. I think that we need to be looking at nuclear power and 
moving it like we did on interstate freeways where the Federal 
Government has engaged, and DOD should be looking at sighting 
facilities so that we can get the private sector doing what we 
do with freeways, not sighting, not permitting, but building 
them after we go through the hoops, the regulatory hoops, and 
if we are not brave enough to go through those regulatory 
hoops, we should forget about the concept of being able to tap 
into this clean and cost-effective energy.
    Yield back, Mr. Chairman.
    Mr. Whitfield. Mr. Bilbray, I think we are going to adopt a 
policy of giving you 10 minutes for your questions.
    Mr. Bilbray. I apologize.
    Mr. Whitfield. Mr. Auerbach, I noticed in your testimony 
you made the comment that a focused effort should be made on 
making the U.S. a more welcome home for clean energy 
manufacturing, and I was just wondering what specifically would 
you be referring to?
    Mr. Auerbach. Well, yes, thank you. If we would provide 
longevity to the system incentivizing deployment, manufacturing 
will come to roost in the United States. The problem with the 
current system and my personal problem is having to approve 
manufacturing facilities and generation facilities is that we 
have to look at the clock, and when the clock runs out every 
couple of years on the system for providing centers at the 
federal level, which are still today a necessary component but 
are--and through reverse auctions will become a decreasing part 
of the calculus, it makes it hard to stimulate capital 
deployment that needs a multi-year payback.
    And so if we can have a reverse auction mechanism, that 
longevity--and was taken out of an annual appropriations--then 
capital committers around the world would look to how to 
streamline the value chain to put in place in the United States 
those parts of the value trade that are going to actually help 
lower the cost of clean energy in the United States.
    Mr. Whitfield. So you are primarily talking about 
incentives and more certainty on those types of programs?
    Mr. Auerbach. The best thing that we can do to get more 
capital flowing because the private sector, we are now in our 
portfolio companies building two manufacturing facilities in 
the United States, and there are many other manufacturers that 
would actually reopen plants for value trade components that 
have actually been shuttered today----
    Mr. Whitfield. Uh-huh.
    Mr. Auerbach [continuing]. And build new ones if they knew 
that this industry had a home for a multi-year period that was 
more market based.
    Mr. Whitfield. And what would be the impact if--Mr. Nunes 
talked about the Ways and Means was looking at eliminating all 
tax credits and incentives, and Mr. Pompeo made some reference 
to that. If that actually happened, how would that affect your 
company?
    Mr. Auerbach. As I indicated to Mr. Pompeo in--because he 
asked me that in a question, my preference as a policy matter 
is to see this being done carefully. Billions and billions of 
dollars of capital are already at work, and hundreds of 
billions of dollars are also looking to be deployed, and so I 
think Congress needs to move very, very carefully, and so by 
making any radical move, by, for example, terminating tax 
credits that have a statutory life and terminating them early, 
I think that it would have a deleterious affect on capital. It 
would cause the stock prices of public companies to fall, it 
would strand capital investment, it would cause loss of jobs in 
the United States.
    If we do so in a thoughtful, gradual way, as I think is the 
crux of the reverse auction mechanism in H.R. 909, I think that 
we will have the opposite affect of actually encouraging more 
capital to come into the United States to find it a more secure 
home.
    Mr. Whitfield. Do you invest in--does your venture capital 
firm invest in nuclear energy?
    Mr. Auerbach. We don't. We are not prohibited from doing 
so, but for reasons that are--have been made pretty clear to 
capital committers it is not a very easy place to commit 
capital at least for 10-year time periods.
    Mr. Whitfield. Mr. Spencer, you in your testimony talked 
about Mr. Nunes's legislation providing a second permitting 
mechanism for nuclear energy. Would you explain just briefly 
what that is, how that would work----
    Mr. Spencer. Sure.
    Mr. Whitfield [continuing]. And why it is better?
    Mr. Spencer. Yes. The current process allegedly takes 4 
years. It has never happened yet, and each time we get close it 
seems to not happen again, but what the roadmap does it sets up 
a 2-year timeframe that if the applicant meets certain 
conditions--they are building on or adjacent to an existing 
site, if you are, if you have a reactor that is fully 
certified, and there are a number of others--then you get to 
enter into this separate track that gives a more efficient or 
consolidated review of the environmental and technical aspects 
of the application.
    It is a tight time scale, but it is one that I think, a lot 
of experts think is doable if we establish that path, and that 
would give certainty, would allow us to get through more 
applications, and quite frankly, I think provide competition 
within the regulatory environment to demonstrate that you need 
to start getting these things done. Otherwise we are going to 
do it a different way.
    Mr. Whitfield. Now, are you optimistic about these smaller-
type nuclear plants that sometimes people refer to as modular 
or whatever?
    Mr. Spencer. I think--I am optimistic that the technology 
can be applied commercially in the future extraordinarily, 
economically, and efficiently in all that. I am less optimistic 
that the policies that have been proposed will get us there. 
What we see is the administration and proponents of small 
modular reactors, what they want is a Department of Energy 
program where the DOE essentially chooses the one or two 
technologies that go forward to be licensed.
    I think that is the wrong approach, frankly. You have a lot 
of entrepreneurs out there spinning off technology, spinning 
off commercial enterprises. What if they are not one of the two 
that are chosen? I would suggest that it is--the market is the 
better arbiter of that.
    Instead of going through the Department of Energy I would 
suggest we get the Nuclear Regulatory Commission really geared 
up to be able to support this sort of activity so that if 
people want to go down that road, then, you know, we have the 
Regulatory support to do that.
    Mr. Whitfield. Yes, and Mr. Bartis, you mentioned Fischer-
Tropsch. Other than South Africa, where is the Fischer-Tropsch 
technology being used today?
    Mr. Bartis. It is--the Fischer-Tropsch technology is used 
in--most recently it has been built up in Qatar in the Persian 
Gulf. They are going to have about 170,000 barrels per day of 
production online this year. The technology is very up to date, 
but that is an application to natural gas. In our country the 
only place that might make sense is in Alaska because that gas 
in Alaska, no one is going to pipe back to this, to the 
Continental--or the lower 48 anymore because of all the shale 
gas. So we have got stranded gas up there.
    Applying it to coal is not a big deal, and we have got one 
for building, scheduled to build a plant and pretty far along 
in Wyoming. They are not going to be using Fischer-Tropsch. 
They are going to be using a variant of Fischer-Tropsch 
called--that the Mobil Oil Company invented, and--but it is 
very much the same.
    But that is the only--and they are going to be producing 
gasoline. They are not going to be producing fuels that would 
be of interest to the military.
    Mr. Whitfield. Thank you. Mr. Gardner, you are recognized 
for 5 minutes.
    Mr. Gardner. Thank you, Mr. Chairman. I just got back from 
the hearing downstairs, so I will defer at this point.
    Mr. Whitfield. Well, I guess that concludes today's 
hearing. I want to thank the three of you for coming in and 
giving us your views and opinions which we certainly will take 
into consideration as we move forward, and we look forward to 
working with you in the future. Thank you very much.
    The record will remain open for 10 days for any additional 
material or testimony that anyone would like to offer, and with 
that this concludes today's hearing.
    [Whereupon, at 11:39 a.m., the subcommittee was adjourned.]
    [Material submitted for inclusion in the record follows:]

    [GRAPHIC] [TIFF OMITTED] T2153.090
    
    [GRAPHIC] [TIFF OMITTED] T2153.091
    
    [GRAPHIC] [TIFF OMITTED] T2153.092
    
    [GRAPHIC] [TIFF OMITTED] T2153.093
    
    [GRAPHIC] [TIFF OMITTED] T2153.094
    
    [GRAPHIC] [TIFF OMITTED] T2153.095
    
    [GRAPHIC] [TIFF OMITTED] T2153.096
    
    [GRAPHIC] [TIFF OMITTED] T2153.097
    
    [GRAPHIC] [TIFF OMITTED] T2153.098
    
    [GRAPHIC] [TIFF OMITTED] T2153.099
    
    [GRAPHIC] [TIFF OMITTED] T2153.100
    
    [GRAPHIC] [TIFF OMITTED] T2153.101
    
    [GRAPHIC] [TIFF OMITTED] T2153.102
    
    [GRAPHIC] [TIFF OMITTED] T2153.103
    
    [GRAPHIC] [TIFF OMITTED] T2153.104
    
    [GRAPHIC] [TIFF OMITTED] T2153.105
    
    [GRAPHIC] [TIFF OMITTED] T2153.106
    
    [GRAPHIC] [TIFF OMITTED] T2153.107
    
    [GRAPHIC] [TIFF OMITTED] T2153.108
    
    [GRAPHIC] [TIFF OMITTED] T2153.109
    
    [GRAPHIC] [TIFF OMITTED] T2153.110
    
    [GRAPHIC] [TIFF OMITTED] T2153.111
    
    [GRAPHIC] [TIFF OMITTED] T2153.112
    
    [GRAPHIC] [TIFF OMITTED] T2153.113
    
    [GRAPHIC] [TIFF OMITTED] T2153.114
    
    [GRAPHIC] [TIFF OMITTED] T2153.115
    
    [GRAPHIC] [TIFF OMITTED] T2153.116
    
    [GRAPHIC] [TIFF OMITTED] T2153.117
    
    [GRAPHIC] [TIFF OMITTED] T2153.118
    
    [GRAPHIC] [TIFF OMITTED] T2153.119
    
    [GRAPHIC] [TIFF OMITTED] T2153.120
    
    [GRAPHIC] [TIFF OMITTED] T2153.121
    
    [GRAPHIC] [TIFF OMITTED] T2153.122
    
    [GRAPHIC] [TIFF OMITTED] T2153.123
    
    [GRAPHIC] [TIFF OMITTED] T2153.124
    
    [GRAPHIC] [TIFF OMITTED] T2153.125
    
    [GRAPHIC] [TIFF OMITTED] T2153.126
    
    [GRAPHIC] [TIFF OMITTED] T2153.127
    
    [GRAPHIC] [TIFF OMITTED] T2153.128
    
    [GRAPHIC] [TIFF OMITTED] T2153.129
    
    [GRAPHIC] [TIFF OMITTED] T2153.130
    
    [GRAPHIC] [TIFF OMITTED] T2153.131
    
    [GRAPHIC] [TIFF OMITTED] T2153.132
    
    [GRAPHIC] [TIFF OMITTED] T2153.133
    
    [GRAPHIC] [TIFF OMITTED] T2153.134
    
    [GRAPHIC] [TIFF OMITTED] T2153.135
    
    [GRAPHIC] [TIFF OMITTED] T2153.136
    
    [GRAPHIC] [TIFF OMITTED] T2153.137
    
    [GRAPHIC] [TIFF OMITTED] T2153.138
    
    [GRAPHIC] [TIFF OMITTED] T2153.139
    
    [GRAPHIC] [TIFF OMITTED] T2153.140
    
    [GRAPHIC] [TIFF OMITTED] T2153.141
    
    [GRAPHIC] [TIFF OMITTED] T2153.142
    
    [GRAPHIC] [TIFF OMITTED] T2153.143
    
    [GRAPHIC] [TIFF OMITTED] T2153.144
    
    [GRAPHIC] [TIFF OMITTED] T2153.145
    
    [GRAPHIC] [TIFF OMITTED] T2153.146
    
    [GRAPHIC] [TIFF OMITTED] T2153.147
    
    [GRAPHIC] [TIFF OMITTED] T2153.148
    
    [GRAPHIC] [TIFF OMITTED] T2153.149
    
    [GRAPHIC] [TIFF OMITTED] T2153.150
    
    [GRAPHIC] [TIFF OMITTED] T2153.151
    
    [GRAPHIC] [TIFF OMITTED] T2153.152
    
    [GRAPHIC] [TIFF OMITTED] T2153.153
    
    [GRAPHIC] [TIFF OMITTED] T2153.154
    
    [GRAPHIC] [TIFF OMITTED] T2153.155
    
    [GRAPHIC] [TIFF OMITTED] T2153.156
    
    [GRAPHIC] [TIFF OMITTED] T2153.157
    
    [GRAPHIC] [TIFF OMITTED] T2153.158
    
    [GRAPHIC] [TIFF OMITTED] T2153.159
    
    [GRAPHIC] [TIFF OMITTED] T2153.160
    
    [GRAPHIC] [TIFF OMITTED] T2153.161
    
    [GRAPHIC] [TIFF OMITTED] T2153.162
    
    [GRAPHIC] [TIFF OMITTED] T2153.163
    
    [GRAPHIC] [TIFF OMITTED] T2153.164
    
    [GRAPHIC] [TIFF OMITTED] T2153.165
    
    [GRAPHIC] [TIFF OMITTED] T2153.166
    
    [GRAPHIC] [TIFF OMITTED] T2153.167
    
    [GRAPHIC] [TIFF OMITTED] T2153.168
    
    [GRAPHIC] [TIFF OMITTED] T2153.169
    
    [GRAPHIC] [TIFF OMITTED] T2153.170
    
    [GRAPHIC] [TIFF OMITTED] T2153.171
    
    [GRAPHIC] [TIFF OMITTED] T2153.172
    
    [GRAPHIC] [TIFF OMITTED] T2153.173
    
    [GRAPHIC] [TIFF OMITTED] T2153.174
    
    [GRAPHIC] [TIFF OMITTED] T2153.175
    
    [GRAPHIC] [TIFF OMITTED] T2153.176
    
    [GRAPHIC] [TIFF OMITTED] T2153.177
    
    [GRAPHIC] [TIFF OMITTED] T2153.178
    
    [GRAPHIC] [TIFF OMITTED] T2153.179
    
    [GRAPHIC] [TIFF OMITTED] T2153.180
    
    [GRAPHIC] [TIFF OMITTED] T2153.181
    
    [GRAPHIC] [TIFF OMITTED] T2153.182
    
    [GRAPHIC] [TIFF OMITTED] T2153.183
    
    [GRAPHIC] [TIFF OMITTED] T2153.184
    
    [GRAPHIC] [TIFF OMITTED] T2153.185
    
    [GRAPHIC] [TIFF OMITTED] T2153.186
    

                                 
