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

                                A REVIEW OF THE

                           ADVANCED RESEARCH PROJECTS

                                 AGENCY--ENERGY

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

                                    HEARING

                                   BEFORE THE

                       SUBCOMMITTEE ON INVESTIGATIONS AND

                                   OVERSIGHT

                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                            HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                           TUESDAY, JANUARY 24, 2012

                                   __________

                               Serial No. 112-57

                                   __________

     Printed for the use of the Committee on Science, Space, and Technology

           Available via the World Wide Web: http://science.house.gov

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                  COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                        HON. RALPH M. HALL, Texas, Chair
    F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
        Wisconsin                        JERRY F. COSTELLO, Illinois
    LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
    DANA ROHRABACHER, California         ZOE LOFGREN, California
    ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
    FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
    JUDY BIGGERT, Illinois               GABRIELLE GIFFORDS, Arizona
    W. TODD AKIN, Missouri               DONNA F. EDWARDS, Maryland
    RANDY NEUGEBAUER, Texas              MARCIA L. FUDGE, Ohio
    MICHAEL T. McCAUL, Texas             BEN R. LUJAN, New Mexicoo
    PAUL C. BROUN, Georgia               PAUL D. TONKO, New York
    SANDY ADAMS, Florida                 JERRY McNERNEY, California
    BENJAMIN QUAYLE, Arizona             JOHN P. SARBANES, Maryland
    CHARLES J. ``CHUCK'' FLEISCHMANN,    TERRI A. SEWELL, Alabama
        Tennessee                        FREDERICA S. WILSON, Florida
    E. SCOTT RIGELL, Virginia            HANSEN CLARKE, Michigan
    STEVEN M. PALAZZO, Mississippi       VACANCY
    MO BROOKS, Alabama
    ANDY HARRIS, Maryland
    RANDY HULTGREN, Illinois
    CHIP CRAVAACK, Minnesota
    LARRY BUCSHON, Indiana
    DAN BENISHEK, Michigan
    VACANCY
                                     ------

                  Subcommittee on Investigations and Oversight

                       HON. PAUL C. BROUN, Georgia, Chair
    F. JAMES SENSENBRENNER, JR.,         DONNA F. EDWARDS, Maryland
        Wisconsin                        ZOE LOFGREN, California
    SANDY ADAMS, Florida                 BRAD MILLER, North Carolina
    RANDY HULTGREN, Illinois             JERRY McNERNEY, California
    LARRY BUCSHON, Indiana
    DAN BENISHEK, Michigan
    VACANCY
    RALPH M. HALL, Texas                 EDDIE BERNICE JOHNSON, Texas

                                C O N T E N T S

                           Wednesday, April 13, 2011

                                                                       Page
    Witness List.....................................................     2

    Hearing Charter..................................................     3

                               Opening Statements

    Statement by Representative Paul C. Broun, Chairman, Subcommittee
      on Investigations and Oversight, Committee on Science, Space,
      and Technology, U.S. House of Representatives..................    12
        Written Statement............................................    15

    Statement by Representative Paul D. Tonko, Ranking Minority
      Member, Subcommittee on Investigations and Oversight, Committee
      on Science, Space, and Technology, U.S. House of
      Representatives................................................    17
        Written Statement............................................    19

                                   Witnesses:

    Dr. Arun Majumdar, Director, Advanced Research Projects Agency--
      Energy, U.S. Department of Energy
        Oral Statement...............................................    21
        Written Statement............................................    24

    Hon. Gregory Friedman, Inspector General, U.S. Department of
      Energy
        Oral Statement...............................................    29
        Written Statement............................................    31

    Frank Rusco, Director, Energy and Science Issues, U.S. Government
      Accountability Office
        Oral Statement...............................................    37
        Written Statement............................................    39

    Discussion                                                           49

                  Appendix: Answers to Post-Hearing Questions

    Dr. Arun Majumdar, Director, Advanced Research Projects Agency--
      Energy, U.S. Department of Energy;.............................    70

    Hon. Gregory Friedman, Inspector General, U.S. Department of
      Energy.........................................................    83

                 Appendix 2: Additional Material for the Record

    Majority Staff Report as Submitted by Chairman Paul C. Broun.....    86

    Minority Staff Report as Submitted by Ranking Member Paul Tonko..    98

    Polar-Orbiting Environmental Satellites: Report from GAO, June
      2012...........................................................   159

           A REVIEW OF THE ADVANCED RESEARCH PROJECTS AGENCY--ENERGY

                                  ----------

                           TUESDAY, JANUARY 24, 2012

                      House of Representatives,
          Subcommittee on Investigations and Oversight,
                   Committee on Science, Space, and Technology,
                                                        Washington, DC.

        The Subcommittee met, pursuant to call, at 2:04 p.m., in
    Room 2318 of the Rayburn House Office Building, Hon. Paul Broun
    [Chairman of the Subcommittee] presiding.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Broun. The Subcommittee on Investigations &
    Oversight will come to order. I will try not to break this desk
    like my predecessor Chairman did.
        Good afternoon, everyone, to today's hearing titled, ``A
    Review of the Advanced Research Projects Agency--Energy,''
    ARPA-E. You will find in front of you packets containing our
    witness panel's written testimony, biographies and their truth
    in testimony disclosures. I want to welcome everyone here, and
    I particularly want to welcome our witnesses here today.
        Now I will recognize myself for five minutes for an opening
    statement.
        The Advanced Research Projects Agency--Energy, or ARPA-E,
    was created in 2007 by the America COMPETES Act but not funded
    until 2009 with the passage of the American Recovery and
    Reinvestment Act. ARPA-E was directed to foster high-risk,
    high-reward energy technologies too risky for the private
    investment. In general, the statute calls for these
    technologies to be focused on reducing energy imports and
    emissions while improving energy efficiency.
        The Agency is directed to accomplish these goals by doing
    the following: identifying and promoting revolutionary advances
    in fundamental sciences; secondly, translating scientific
    discoveries and cutting edge inventions into technological
    innovations; and thirdly, accelerating transformational
    advances in areas that industry by itself is not likely to
    undertake because of the technical and financial uncertainty.
        These principles and goals are generally well-supported on
    both sides of the aisle here in Congress, and for good reason.
    If the Federal Government is going to fund energy research, it
    should not duplicate or crowd out private-sector investment. It
    should focus on revolutionary breakthroughs that will transform
    our energy infrastructure.
        Despite this support, this Committee did raise a number of
    concerns when ARPA-E was proposed. Specifically, the Committee
    was concerned with how the creation of a new agency would
    affect the world-class research supported by DOE's Office of
    Science. Historically, DOE's Office of Science has been the
    home of basic energy research, and their efforts have focused
    on high-risk, high-reward basic research for decades. The
    Committee was concerned that ARPA-E would compete with the
    Office of Science for scarce resources, thereby undermining
    basic research.
        Similarly, the Committee was also concerned that ARPA-E
    could unnecessarily duplicate DOE's significant related work in
    other programs and areas scattered throughout the department.
        Finally, the Committee was concerned ARPA-E would focus on
    late-stage technology development and commercialization efforts
    that are better left for the private sector to undertake,
    thereby accepting both the risk and the potentially great
    reward. Such interventions could eventually crowd out private
    investment and get the government into the business of picking
    winners and losers among competing companies and technologies
    rather than letting the marketplace make these decisions.
        Today's hearing allows the Committee to evaluate whether
    those concerns have been addressed. With respect to the impact
    ARPA-E is having on the Office of Science, we saw a 53 percent
    increase in ARPA-E's budget in the 2012 fiscal year, while the
    Office of Science received only a 0.6 percent increase. In the
    prior fiscal year, ARPA-E's budget increased by 260 percent,
    while the Office of Science budget decreased six percent.
    Apparently our concern was well-founded.
        We also have some initial data regarding duplication with
    private- and public-sector funding, and based on work
    undertaken by GAO and Committee staff, the record appears
    mixed. Of the 44 small- and medium-sized companies that
    received an ARPA-E award, GAO found that 18 had previously
    received private-sector investment for a similar technology.
    Committee staff were able to identify five additional companies
    that received private sector funding prior to their ARPA-E
    award.
        Similarly, a review of GAO work papers and publicly
    available information indicates numerous instances of overlap
    and duplication between ARPA-E and both public- and private-
    sector funding. For example, GAO found that 12 of the 18
    companies it identified as having received private sector-
    funding prior to their ARPA-E award planned to use ARPA-E
    funding to either advance or accelerate prior funded work. One
    eventual ARPA-E awardee stated in its application that their
    ``original projections planned on prototype demonstration and
    subsequent first-market adopter sales in late 2012 or early
    2013. The ARPA-E award coupled with another $1 million in
    venture financing as part of our cost share allows us to
    accelerate our development schedule to 2011 instead.'' Just
    brought it a year or possibly two sooner.
        These and numerous other examples that are detailed in a
    majority staff report that I have attached to my opening
    statement raise a fundamental question regarding the role and
    future of ARPA-E. Should it direct taxpayer money to simply
    speed up or accelerate companies and what they are already
    doing, or should it fund research in truly high-risk white
    spaces, so-called white spaces, that no one else is willing to
    undertake? I hope today's hearing provides an opportunity to
    identify common ground on this question.
        Another thing that taxpayer money should not be used for is
    meetings with bankers to raise capital and a fee to appear on a
    local television shows. The DOE IG noted in its report that
    these two tasks were cited as an allowable cost by ARPA-E under
    its Technology Transfer and Outreach policy. ARPA-E originally
    argued that such spending should be allowed despite the DOE
    IG's concerns, Just yesterday, however, ARPA-E provided an
    updated technology transfer policy that is now silent on the
    appropriateness of this type of spending. Personally, I think
    it is inappropriate. The Subcommittee is reviewing this policy,
    and I look forward to getting clarification from ARPA-E on this
    question. These concerns are not meant to imply that all of the
    work being conducted by ARPA-E is duplicative or unworthy of
    federal funding. Many of the projects it supports are clearly
    in line with its statutory direction, and if taxpayers are
    going to be involved in funding energy technologies at all, it
    should be in a manner similar to ARPA-E's focus on high-risk,
    high-reward research that is not being pursued by the private
    sector.
        Despite ARPA-E's stated commitment to ``carefully structure
    its projects to avoid any overlap with public and private
    sources of funding,'' we have seen numerous instances that
    deviate from that pledge. Going forward, we will continue to
    monitor whether the agency is actually following the statutory
    direction and look forward to ARPA-E's cooperation.
        [The prepared statement of Mr. Broun follows:]
        [GRAPHIC] [TIFF OMITTED] T2379.010

        [GRAPHIC] [TIFF OMITTED] T2379.011

        Chairman Broun. Now I recognize the Ranking Member from New
    York, my good friend, Mr. Tonko, for five minutes or whatever
    time beyond that that he needs. Mr. Tonko.
        Mr. Tonko. Thank you, Mr. Chairman. Thank you for holding
    this hearing today, and thank you to our witnesses for
    participating.
        The Advanced Research Projects Agency--Energy, or ARPA-E,
    was designed to be nimble, creative and aggressive in funding
    promising ideas that could transform the way we obtain and use
    energy. Nothing in the law said that ARPA-E could only fund
    companies that did not have private-sector funding or that it
    could not fund companies that had funding from other agencies.
    Our expectation was that ARPA-E could apply the successful
    DARPA model to the energy sector and enable promising ideas to
    move expediently toward proof of concept or demonstration.
        ARPA-E was to take on a scope of work that the private
    sector could not take on by itself and to accelerate the
    timeline of innovation in a way other agencies or venture
    capital could not do alone. Nothing in the GAO report that
    tackled this question suggests ARPA-E is doing anything but
    what the Congress and the president envisioned when ARPA-E was
    established in 2007. Time to market with an invention matters.
    Everyone knows who Alexander Graham Bell was and that he was
    awarded the first patent for a telephone. Very few people know
    who Elijah Gray was. He was second to file at the Patent Office
    for a very similar device. ARPA-E is supposed to make sure that
    the Alexander Graham Bells in our new and more competitive
    globalized world are American inventors and American companies.
        The response to this new organization has been enormous.
    DOE has received over 4,000 concept papers in the three years
    of its existence. Companies and academic institutions that I
    interact with are very excited about this new model for funding
    our energy research. ARPA-E is funding innovative companies in
    my district, like SuperPower in partnership with the University
    of Houston and others to research materials and
    superconductivity applications with the potential to provide
    essential improvements in our energy infrastructure.
        Given the importance of energy to every sector of our
    economy and our comeback and to all of our citizens, I believe
    we not only can afford this program, we cannot afford to lose
    it.
        Other national governments are investing, investing in the
    energy technologies of the future, clean energy technologies,
    especially renewable energy technologies. The Chinese
    government invested $34.6 billion in clean energy in 2009 while
    our United States Government invested $18.6, or rather, the
    United States invested $18.6 billion. Perhaps others are
    willing to accept second place in the race to develop new
    energy technologies. I simply am not.
        Finally, Mr. Chair, I have to comment on the Staff Report
    that the majority will enter into the record today. You and
    Chairman Hall have a well-documented opposition to ARPA-E. You
    asked GAO to examine how ARPA-E might be skirting the law
    requiring that DOE ensure they are not duplicating funding of
    the private sector. We will hear from the GAO about their
    findings today, but their bottom line was that DOE has been
    working to ensure that they fund projects on a scale and time
    line that the private sector alone would not fund.
        Mr. Chair, it appears that when GAO's report did not give
    the majority the findings you had hoped for, the majority staff
    wrote the report it wished to receive. The majority staff went
    through GAO's work papers and cherry-picked some examples to
    portray the law as something that it is not. These are
    hallmarks of a partisan hit piece, not a thoughtful, thorough
    report. Just as one example, the staff report points to several
    examples of companies that received private-sector funding or
    funding from other federal programs. However, the report does
    not validate whether the funding is duplicative with ARPA-E
    funding or not. The report settles for assertion and hand
    waving where only facts should matter. I will not oppose a
    motion to put the majority's report into the record, despite my
    misgivings about the process so long as it is understood that
    members on this side may decide to insert into the record our
    own evaluation of that work product and this program. I am
    pleased to note that we will receive testimony on two reports
    today, one from GAO, and one from the DOE Inspector General. I
    am going to put far more faith in their work products and
    findings, which are largely positive and productive than the
    partisan claims of the majority's report.
        I thank the witnesses for appearing before us this
    afternoon, and I do look forward to your testimony. Thank you.
    I yield back.
        [The prepared statement of Mr. Tonko follows:]
        [GRAPHIC] [TIFF OMITTED] T2379.012

        [GRAPHIC] [TIFF OMITTED] T2379.013

        Chairman Broun. Thank you, Mr. Tonko. I want to read into
    the record the following. Review of GAO's work papers was
    necessary to provide context and quantification to key findings
    and best inform the Committee's oversight work going forward.
    ARPA-E is a fledgling agency that is still adjusting as it
    grows, and it just received a 50 percent budget increase over
    the prior year.
        I think the minority will agree with me, it is important
    that we identify and correct potential problems now while the
    agency is still getting its feet under it.
        To this end, the more extensive review adds great value to
    the community's efforts to be good stewards of the taxpayers'
    dollars.
        I appreciate your opening statement. If there are Members
    who wish to submit additional opening statements, your
    statements will be added to the record at this point. I ask
    unanimous consent that Mr. Bartlett and Mr. Rohrabacher be able
    to participate. Hearing no objections, so ordered.
        [The information may be found in Appendix 2.]
        Chairman Broun. At this time, I would like to introduce our
    panel of witnesses. Doctor--help me.
        Mr. Majumdar. Majumdar.
        Chairman Broun. Majumdar. Close. I am trying, sir. I
    apologize. My family can't spell, can't pronounce, I am not
    sure which, with my spelling, B-r-o-u-n. But anyway, Dr.
    Majumdar is Director of Advanced Research Projects Agency--
    Energy for the U.S. Department of Energy. The Honorable Gregory
    Friedman, Inspector General of the U.S. Department of Energy,
    and Mr. Frank Rusco, the Director of the Energy and Science
    team at the U.S. Government Accountability Office.
        As our witnesses should know, spoken testimony is limited
    to five minutes each. I am not going to be real hard on that,
    as I mentioned to you all before, if you need a few extra
    moments, I will give you a little leeway. But if you could keep
    it to five minutes if possible, but I don't want to short-
    change you, either.
        After those five minutes, of course, the Members of the
    Committee will have five minutes each to ask questions. Your
    written testimony will be included in the record of the
    hearing.
        It is the practice of the Subcommittee on Investigations
    and Oversight to receive testimony under oath. Do any of you
    have objections to taking an oath? Let the record reflect that
    all witnesses were willing to take an oath by shaking their
    heads side to side in a negative manner.
        If all of you would please stand and raise your right hand.
    Do you solemnly swear or affirm to tell the whole truth and
    nothing but the truth, so help you God? Let the record reflect
    that all witnesses participating have taken the oath and said,
    ``I do.''
        Now, I recognize our first witness, Dr. Majumdar.

               STATEMENT OF DR. ARUN MAJUMDAR, DIRECTOR,

               ADVANCED RESEARCH PROJECTS AGENCY--ENERGY,

                       U.S. DEPARTMENT OF ENERGY

        Dr. Majumdar. Mr. Chairman, Ranking Member Tonko, Chairman
    Hall and the esteemed Members of this Subcommittee, I want to
    thank you for inviting me to testify on behalf of the Advanced
    Research Projects Agency for Energy, or ARPA-E, about recent
    R&D activities, a recent report by the U.S. Government
    Accountability Office, GAO, and a report released in August
    2011 by the U.S. Department of Energy's Office of Inspector
    General, IG.
        I am here to report to you on ARPA-E's activities and
    challenges. ARPA-E, which this Committee was integral in
    creating, is modeled after DARPA, which helped catalyze
    innovations such as the Internet, GPS, stealth technology, and
    many others. These innovations not only strengthened our
    national security but also economic prosperity by creating
    entirely new industries. ARPA-E's goal is to catalyze similar
    quantum leaps in energy technologies, ones that are too risky
    for the private sector, and those that have the potential to
    create entirely new industries.
        Today, we import roughly 50 percent of the oil we use from
    other nations, many who don't share our values, and we pay
    approximately $1 billion a day. This is a national security
    problem as well as an economic prosperity one. If we keep
    importing oil and pay like business as usual, we will put our
    children's and grandchildren's future at risk. A secure future
    is like a stool with three legs--national security, economic
    security, and environmental security--and at the foundation of
    all three securities are innovations in energy technologies.
        ARPA-E funds high-risk research projects focused on early-
    stage breakthrough energy technologies by a competitive
    process. Some examples, batteries that will make electric cars
    have a longer range and be cheaper than gasoline-based cars so
    that they can be sold without subsidies; entirely new ways of
    making biofuels using microbes that do not use sunlight but
    rather use electricity from nuclear, wind and other sources.
        With durations of two to three years, these inherently
    high-risk projects have the potential to be transformative and
    create a large economic growth 15 to 20 years from now. ARPA-E
    does not fund incremental improvements in existing technology
    but rather funds research that could create new technologies
    that do not exist today. But if it did, it would make today's
    technologies obsolete.
        As you may know, ARPA-E issued its fourth round of Funding
    Opportunity Announcements on April 20, 2011, and subsequently
    announced 60 cutting-edge research projects aimed at
    dramatically improving how the U.S. produces and uses energy.
    With over $150 million from our fiscal year 2011 budget, the
    new ARPA-E projects focus on research for innovative energy
    technologies, while increasing U.S. competitiveness in rare
    earth alternatives and breakthroughs in biofuels, thermal
    storage, grid controls, and power electronics. These projects
    are located across 25 states, with 50 percent of the projects
    led by universities, 23 percent by small businesses, 12 percent
    by large businesses, and 13 percent by national labs, and two
    percent by non-profits.
        We are currently looking at new technologies and
    innovations in various areas. For example, we are holding a
    technical workshop in the area of natural gas and its
    undeveloped, innovative and potentially transformational uses
    in the transportation sector. We are also gearing up for our
    third annual ARPA-E Energy Innovation Summit on February 27th
    to 29th, which will feature many of the country's energy
    thought leaders such as Bill Gates, Fred Smith, Lee Scott,
    Ursula Burns and Susan Hockfield. I invite you to join us at
    the summit and witness for yourself our Nation's energy
    innovation ecosystem.
        To be globally competitive, speed is of the essence. ARPA-E
    has developed a streamlined process so it can execute with a
    fierce sense of urgency and unprecedented speed and efficiency.
    Being vigilant stewards of taxpayer dollars is a critical
    component of ARPA-E's DNA. All projects will be selected purely
    based on merit, based on a panel of experts. Once selected,
    ARPA-E Program Directors are personally invested in every
    project they manage to help them overcome technical barriers.
    But if a technology does not work and a project cannot reach
    its go/no-go milestones, ARPA-E discontinues the projects
    before the end of the day rather than waste taxpayer dollars.
        I would like to express my thanks to the DOE Inspector
    General and the GAO for their total reviews and final
    recommendation, all of which have been accepted and implemented
    by ARPA-E. ARPA-E is committed to continuously improving its
    operations so as to better fulfill its statutory mission of
    enhancing our Nation's economic and energy security and
    maintaining the U.S.'s technological lead in the development
    and deployment of advanced energy technologies.
        I would also like to thank the IG and the GAO for
    safeguarding the sensitive proprietary information of ARPA-E
    applicants and awardees. Maintaining the confidentiality of
    this information was promised in the competitive selection
    process. It is critical to attracting the best ideas and talent
    in future funding competitions and maintains the
    competitiveness of a performance in domestic and foreign
    markets.
        Thank you again for your time, and I look forward to
    answering your questions.
        [Statement of Dr. Majumdar follows:]
        [GRAPHIC] [TIFF OMITTED] T2379.014

        [GRAPHIC] [TIFF OMITTED] T2379.015

        [GRAPHIC] [TIFF OMITTED] T2379.016

        [GRAPHIC] [TIFF OMITTED] T2379.017

        [GRAPHIC] [TIFF OMITTED] T2379.018

        Chairman Broun. Thank you, Doctor. Our next witness is Mr.
    Friedman. Mr. Friedman, you are recognized for five minutes.

                  STATEMENT OF HON. GREGORY FRIEDMAN,

              INSPECTOR GENERAL, U.S. DEPARTMENT OF ENERGY

        Mr. Friedman. Thank you, Mr. Chairman. Mr. Chairman and
    Members of the Subcommittee, I appreciate the opportunity to
    testify at your request on the work of the Office of Inspector
    General concerning the Department of Energy's Advanced Research
    Projects Agency, commonly referred to as ARPA-E. Specifically,
    as requested by the Subcommittee, my testimony today will focus
    on our August 2011 audit report.
        ARPA-E, as has been noted previously, was created to
    enhance domestic economic and energy security by funding high-
    risk, high-payoff energy technology research and development.
    As of January 17, 2012, according to department data, it had
    approved 153 projects valued at about $448 million. Of this
    amount, approximately $220 million has been expended.
        The purpose of our audit was to evaluate ARPA-E's program
    implementation and its stewardship of taxpayer-provided
    resources. Our review revealed that ARPA-E generally had
    effective systems in place to make research awards and to
    deploy Recovery Act resources. Of particular note, we found
    that ARPA-E, despite being a relatively new program, had
    developed and implemented research proposal selection criteria
    designed to make certain that awards were consistent with its
    mission objectives.
        We did, however, identify several opportunities to enhance
    safeguards over program execution activities and funding. At
    the time of our review, ARPA-E had not fully implemented
    policies and procedures to ensure that first, technology
    transfer and outreach activity expenditure goals were met and
    that such costs were effectively tracked and verified; second,
    that awardee activities were effectively monitored and that
    recipient requests for reimbursement were properly reviewed;
    and finally, ARPA-E had not established formal procedures for
    determining whether to continue or terminate projects that were
    not meeting program objectives.
        Based on the interim results of our audit, ARPA-E surveyed
    award recipients about their technology transfer and outreach
    activities and expenditures. Recipients reported that they have
    spent an estimated $15.3 million on such activities which
    allowed program officials to conclude that ARPA-E had exceeded
    the 2.5 percent spending requirement established in law.
        To address this matter on an ongoing basis, ARPA-E
    established a requirement that recipient expenditures reflect
    at least the minimum required amount and that such expenditures
    be tracked and reported.
        We also identified potentially unallowable costs that had
    been incurred by a small business recipient. At this small
    business, which was awarded approximately $5.8 million in ARPA-
    E funding, $1.2 million of which had been incurred at the time
    of our audit, we identified almost $40,000 in questionable
    direct costs. Responding to our finding, the responsible
    contracting officer, as had been mentioned earlier, concluded
    that virtually all of the direct costs were allowable because,
    in his judgment, they fell under the broad category of
    technology transfer activities.
        Further, this same recipient did not have support for its
    indirect cost rate. As such, we questioned the total indirect
    costs of $239,000 claimed by the recipient as of June 30, 2010.
    In response to our finding, program officials requested a
    review of the recipient's indirect cost rate.
        APRA-E's response to our report was favorable. ARPA-E took
    specific steps to address several of the issues we raised
    during the course of the audit. For example, policies governing
    monitoring and oversight, invoice review, and those related to
    terminating non-performing awards had been finalized. Further,
    ARPA-E officials told us that it had taken action to better
    define allowable technology transfer costs, and it implemented
    a process to measure progress in meeting spending goals in this
    area.
        We will continue to monitor ARPA-E's activities as part of
    our normal risk assessment process. I would like to point out
    that the Office of Inspector General recently issued a Lessons
    Learned Report based on our body of work covering the
    department's efforts under the Recovery Act, a major source of
    ARPA-E support. Our report, based on over 70 audits and
    inspections, along with a number of investigations, identifies
    several best practices, which if fully implemented, in our
    judgment, should help ARPA-E and the Department enhance overall
    program execution.
        Mr. Chairman, this concludes my statement. I would be
    pleased to answer any questions that you or the Members of the
    Subcommittee may have.
        [Statement of Mr. Friedman follows:]
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        Chairman Broun. Thank you, Mr. Friedman. I next recognize
    our next witness, Mr. Rusco. You are recognized for five
    minutes, sir.

                STATEMENT OF MR. FRANK RUSCO, DIRECTOR,

                       ENERGY AND SCIENCE ISSUES,

                 U.S. GOVERNMENT ACCOUNTABILITY OFFICE

        Mr. Rusco. Thank you. Mr. Chairman, Ranking Member Tonko
    and Members of the Subcommittee. I am happy to speak today
    about GAO's work on ARPA-E. At the request of this Committee,
    GAO undertook an evaluation of ARPA-E to examine, one, the
    Agency's use of criteria and other considerations for making
    awards, including applicants' identification of past private-
    sector funding; two, the extent to which ARPA-E projects could
    have been funded by the private sector; and three, the extent
    to which ARPA-E coordinates with other DOE offices to avoid
    duplication of efforts. At this hearing, the resulting GAO
    report is being released, and I will speak briefly about our
    key findings. In reviewing applications and selecting awardees,
    ARPA-E uses four key criteria. These include an assessment of
    the potential impact of the proposed technology; the project's
    overall scientific merit; the applicant's qualifications,
    experience and capabilities; and the quality of the applicant's
    management plan.
        In addition, ARPA-E program directors take other things
    into consideration, including the transformative nature of
    projects and the likelihood that the project could be funded by
    the private sector.
        ARPA-E program directors also assist successful applicants
    in shaping projects and management plans to focus on
    transformational energy technologies and to increase the
    chances of success. With regard to the extent to which ARPA-E
    type projects could have been funded privately, it is
    impossible to know with certainty whether or not any individual
    project could be solely funded by private sources. However,
    based upon a wide range of evidence, we concluded that it is
    unlikely that most ARPA-E projects could have been solely
    financed by the private sector.
        We did find that 18 of 121, or 15 percent of applicants
    given awards in ARPA-E's first three rounds of funding, had
    previously received some venture capital funding. It is
    important to note that some of the applicants also would have
    had other forms of funding that were not visible to us in the
    course of our audit. So any successful company engaged in this
    will have some source of private funding likely or other
    university funding. But we found 18 that had venture capital
    funding, and that was available for us to review.
        Of these projects funded by ARPA-E that had received
    previous venture capital funding, the projects differed from
    what had been previously funded by the venture capital. In most
    cases, the differences were technological. Either the ARPA-E
    projects were fundamentally different than projects that had
    received prior funding or were related but more challenging or
    transformational in nature. And for five of the projects, they
    were quite similar to what had been previously funded, but the
    ARPA-E funding allowed them to speed up their research
    significantly over what was possible with private funding
    alone.
        Our overall conclusion was based on the result of
    interviews with ARPA-E program directors, six venture
    capitalists and ARPA-E applicants and awardees including the 18
    that had previously received private funding. All of these
    sources provided evidence consistent with the conclusion that
    the specific projects funded by ARPA-E would not have been
    funded solely by the private sector.
        Finally, we found that ARPA-E program directors and other
    staff take steps to coordinate with other DOE program offices
    before making funding announcements to try to identify funding
    gaps. ARPA-E program directors also use officials from other
    DOE offices and from the Department of Defense to assist in
    reviewing ARPA-E applications. These efforts to communicate
    with and coordinate with other members of federal research and
    development programs may reduce the potential for overlap in
    funding.
        While we found it unlikely that most ARPA-E projects could
    have been solely funded by the private sector, we also found
    that ARPA-E could improve its approach to collecting and
    evaluating information about applicants' past private funding.
    Specifically, while ARPA-E directors were generally aware of
    prior funding and applicants were required to provide such
    information, we found that most applicants did not initially
    adequately identify prior funding or explain why their projects
    could not be solely funded by the private sector. As a result,
    in order for program directors to evaluate private-sector
    funding, the directors had to ask for supplemental information
    from those applicants.
        To improve the efficiency of the application review process
    and the quality of information about private funding, we
    recommended that ARPA-E provide guidance to applicants,
    including a sample response. We also recommended that ARPA-E
    require applicants that had previously received private-sector
    funding to provide letters from investors or other
    documentation with their applications that explained why
    investors are not willing to fund applicants' projects.
        Finally, we recommended that ARPA-E use venture capital
    funding databases to help identify applicants that had received
    private-sector funding and to verify information provided by
    applicants. ARPA-E concurred with our findings and
    recommendations.
        Thank you. This concludes my prepared statement. I will be
    happy to answer any questions you may have.
        [The prepared statement of Mr. Rusco follows:]
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        Chairman Broun. Thank you, Mr. Rusco, and I want to thank
    the whole panel for your all's testimony.
        Reminding Members that the Committee rules limit Member
    questioning to five minutes per round of questions, the Chair
    at this point will open the round of questions. The Chair
    recognizes himself for five minutes of questions.
        Dr. Majumdar, I want to see if you can help us by
    clarifying for the Subcommittee what appears to be a point of
    confusion regarding ARPA-E's philosophy with respect to
    industry awardees. You have emphasized many times that ARPA-E
    limits its support to how risk technology, so-called white
    spaces, that are not being supported by industry or elsewhere
    in the government. GAO found that this was true with respect to
    most awards, most as they described it. However, GAO's review
    as well as other public information indicates many instances
    where ARPA-E's philosophy appears to instead support
    acceleration of activities already being undertaken by the
    private sector.
        Let me give you two quick examples. One venture capital-
    backed company, Phononic, testified before this Committee that
    it was using ARPA-E funds to accelerate what it was already
    doing. The Phononic CEO stated that his company's ``original
    projections planned on prototype demonstration and subsequent
    first market adoptive sales in late 2012 or early 2014, the
    ARPA-E award coupled with another $1 million in venture
    financing as part of our cost share allows us to accelerate our
    development schedule to 2011 instead.'' GAO paperwork states
    that another company ``said that once the technical development
    of its first traunch of private financing were met, the second
    traunch was automatically funded and would have occurred
    irregardless of whether the company received ARPA-E funding or
    not.''
        Those don't sound like high-risk projects in which the
    private sector is unwilling to invest. Please help reconcile
    award examples like this with ARPA-E's stated philosophy to
    limit funding to technology areas too risky for private
    investment.
        Dr. Majumdar. Congressman, thank you for your question. Let
    me just explain the philosophy of what do I mean by ARPA-E
    funds projects that are too risky for the private sector. And I
    have stated this before in many of my hearings, that ARPA-E
    will fund ideas that have never been funded before by the
    private sector, not to say that if there are companies that
    have been funding by the Venture Capital industry or by other
    private sector, that we will not fund. They may have funded for
    low-risk ideas for things that will generate revenue in three
    or four years, which is what the GAO report----
        Chairman Broun. Let me interrupt you just for the sake of
    time. I have about two minutes left.
        GAO has this example where they said all they did is
    accelerate their funding. Now, that is one example, granted.
    But it is one example that is out there. And they said that
    ARPA-E funding just accelerated the production of work that
    they would have done anyway. Is this an anomaly or is this
    something that is ongoing or is this something that is
    pervasive within ARPA-E or what?
        Dr. Majumdar. We have never funded any idea that had been
    funded by the private sector. Since you raised the issue of,
    you know, specifically of Phononic Devices, that happens to be
    my area of research myself. So I can get into gory details on
    that. But essentially, they are trying to come up with a
    material which conducts electricity very well but blocks heat.
    Now, as you know, you take material like copper, it will
    conduct electricity and heat, and if you take a material like
    in a diamond, it won't conduct electricity, but will conduct
    heat. To find a material which conducts electricity but blocks
    heat is a non-trivial problem, and there is--you know, they
    are, in a sense, trying to get into a scientific breakthrough
    that they will translate into a device. But if they could do
    that, here is--let me just give you a number.
        Chairman Broun. Again, I have 1/4 of a minute, 3/4 of a
    minute left. I misspoke. That was not GAO. That was the
    company's CEO that made those statements, and he said the
    Charles grant just accelerated what they were going to do
    anyway with private funding all from private sourcing, not
    something new, something that would be just that they were
    going to do anyway. You all's grant just helped them to do it
    in 2011 instead of 2012 or 2013 as they stated.
        The point is, and my time has run out, and I will just let
    this go and you and I can talk later, ARPA-E is supposed to
    fund projects that the private sector will not and cannot fund.
    This CEO said that all you did was just accelerate their
    development, and I think we need to be very cognizant that
    taxpayer dollars are very scarce. We are in a financial crisis
    as a Nation, and we need to make sure that projects that are
    funded through ARPA-E will not get private funding, cannot get
    private funding because they are too risky. That is one of the
    charges of ARPA-E. So we will talk about that later. My time is
    up. Now I yield to Mr. Tonko for five minutes.
        Mr. Tonko. Mr. Rusco, you are releasing your report today?
        Mr. Rusco. Yes, that is correct.
        Mr. Tonko. And a report that you spent perhaps the better
    part of a year in developing. And that I believe was done at
    the request of Chairman Hall and Chairman Broun?
        Mr. Rusco. Yes.
        Mr. Tonko. Can you briefly describe the review steps at GAO
    for the report to be developed, the interviews, the documents
    that you collect, and can you do that within the frame of a
    minute, please?
        Mr. Rusco. Yes. Just briefly, to look at the private-sector
    funding, we looked at a venture capital funding database to try
    to identify prior capital that had gone to the companies that
    had the ARPA-E projects. And then we followed up with both the
    program directors and with the companies that had gotten the
    funding to try to determine what the nature of the funding was
    and how it differed from the projects. And then we also talked
    to venture capitalists, some of whom were the funders of the
    ARPA-E projects we looked at.
        Mr. Tonko. Well, thank you. And curiously, the staff to the
    majority did their own report, largely based on your working
    papers. When did they see your working papers?
        Mr. Rusco. We have had a long back-and-forth with our
    client's staff throughout this, and I think it has been
    productive. At the very beginning of the job, they gave us
    information they would be working on. And then at the end of
    the report when we released the report to them but it had not
    been publically issued, then as per our protocols, they were
    able to come over and look at our work----
        Mr. Tonko. At what point?
        Mr. Rusco. That took place last week.
        Mr. Tonko. So last week? So they took about a week to
    develop their own report? That staff product reaches radically
    different conclusions, does it not, from those in your report?
        Mr. Rusco. I think that the facts in the Committee report
    are in our work papers, the ones that----
        Mr. Tonko. Right, but the conclusions----
        Mr. Rusco. And I haven't had a chance to look at it very
    carefully so I can't really speak too much to it. But I think
    that the difference is that our conclusion is based on a body
    of evidence that goes beyond those work papers and that----
        Mr. Tonko. But are the conclusions----
        Mr. Rusco [continuing]. May be why we interpret things
    differently.
        Mr. Tonko. Would you analyze or characterize those
    conclusions as being drastically, radically different than
    yours?
        Mr. Rusco. I wouldn't characterize it as radically
    different. I think it is a matter of degree. It is sort of like
    what should the program be doing? We certainly found cases
    where----
        Mr. Tonko. Well, does it live within, is it a conclusion
    that they live within the context of the statute? Are we
    misinterpreting statute here to draw a conclusion?
        Mr. Rusco. Well, certainly we would have reported on that
    had we found that. That was not one of our objectives to
    interpret the statute, but we always have our general counsel
    working on reports. We did not find anything that to us looked
    like the agency was in violation of statute or we would have
    reported that.
        Mr. Tonko. Okay. And did the Republican staff ask you to
    check on their facts and conclusions?
        Mr. Rusco. Yes.
        Mr. Tonko. And when did that come about?
        Mr. Rusco. They sent us a memo on Thursday, last week, and
    we looked through the facts through our work papers and
    commented on those.
        Mr. Tonko. Well, the report, using your work papers again,
    finds cases where they allege or imply that a company was
    getting funding for work from the private sector, even as they
    took ARPA-E money. They point to ample cases from your work
    papers to suggest that ARPA-E is simply duplicating work
    already funded or soon to be funded by private capital or other
    agencies. I assume you know what is in your work papers. Did
    you find the kind of overlapping funding in duplication?
        Mr. Rusco. I think our interpretation is different. We did
    find cases in which companies had received prior private
    funding, but the projects differed to a large extent or a
    significant extent from what was funded in the past, and in
    several instances, five instances, we found that the company
    said that the ARPA-E funding had enabled them to significantly
    speed up their research and it was a----
        Mr. Tonko. So as we heard already from Dr. Majumdar, there
    are cases of innovation, of technology transfer and of
    expediting, moving along, developing the market, transforming
    the market. So these 18 cases were getting funded for something
    other than previously being funded?
        Mr. Rusco. Most of them were technologically distinct from
    what had been previously funded.
        Mr. Tonko. Okay. Thank you very much.
        Chairman Broun. Thank you, Mr. Tonko. I want to ask you to
    put your hatchet down because the report was actually meant to
    supplement and not to refute the working papers, and in fact,
    staff have done some extra research on top of that and found
    other instances where--we just call into question--we just want
    the same thing that the minority staff and minority members
    want, this ARPA-E to be successful and utilize taxpayers'
    dollars in the proper way.
        Mr. Tonko. Well, Mr. Chair, if you will----
        Chairman Broun. Certainly.
        Mr. Tonko. I think the statute is quite clear about
    transformational and about speeding up, expediting a process
    that can transform the market. And I think that it is very
    clear, the spirit and the letter of the law is very clear that
    this is to move along in a way that--time is innovation here.
    Time will determine who comes to the market first. If you can
    transform the market, I am assuming that is what we all wanted
    ARPA-E to do, and the statute is very clear. And to
    misrepresent it or misinterpret it, is just not helping, I
    think, the effort.
        Chairman Broun. Mr. Tonko, there has never been an
    allegation that there has been a statutory breach.
        Now I recognize the Full Committee Chair, Mr. Hall, for
    five minutes.
        Chairman Hall. Thank you, Mr. Chairman. I have a feeling
    that maybe ARPA-E is saying that they couldn't spend the money
    wisely because they had to spend it so quickly. I am not sure I
    am on solid ground there, but during debate on the America
    COMPETES Act which created ARPA-E, a lot of us were very
    concerned that the new agency might ultimately reshuffle the
    budget prioritization for existing DOE offices and de-emphasize
    the basic science research conducted within the Office of
    Science.
        So given the current budget constraints, where does ARPA-E
    fit into DOE's priority list? Whoever wants to answer that
    could.
        Dr. Majumdar. I will be happy to answer, as Secretary Chu
    has said many times in the past that ARPA-E is one of his top
    priorities. In terms of DOE priorities, Secretary Chu has said
    ARPA-E is one of his top priorities.
        Chairman Hall. Which offices will be reduced funding to
    provide additional ARPA-E funds if they are special and they
    set them up on such a high plane?
        Dr. Majumdar. Well, I think that, you know--frankly, the
    budget is decided by Congress. And so----
        Chairman Hall. Well, that doesn't help us a hell of a lot.
    Go ahead.
        Dr. Majumdar. So I mean, it is really the budget that is
    decided by Congress that we execute on. And so with regards to
    where the funds go, I think Congress will decide, and we will
    just execute according to the law.
        Chairman Hall. Well, EPA seems to have a way around what
    Congress says to do. That is not the subject here, though.
        Mr. Friedman, the IG report states that in response to the
    questionable spending by ARPA-E recipients that you identified,
    an ARPA-E official said that the agency, and I am quoting here,
    ``focused its attention on meeting the Recovery Act requirement
    of expeditiously awarding funds to projects by September 30,
    2010, and as a consequence didn't have sufficient time and
    resources to devote to establishing its operational controls in
    the area of policies and procedures.'' That is the reason I
    said initially that basically ARPA-E is saying that they
    couldn't spend the money wisely because they had to spend it so
    quickly. Is that a fair statement?
        Mr. Friedman. Well, Mr. Hall, I think you are going beyond
    where I would go. What we clearly have said in the report and
    what we found was that there were certain mid-point and end-
    point policies and procedures that had not been formalized.
    Some of them were in draft, some of them were not. And we were
    told by people in the program office that their priority going
    in that because of the rush, because of the pressure they faced
    with some of the front-end decisions as to how to selection
    criteria and the rest, so that they were putting the other
    policies and procedures--sort of they were the second priority.
        Chairman Hall. Well, the lack of institutional financial
    controls seems to indicate the potential that misuse of funds
    could be much more widespread than that identified in the three
    awards that the IG reviewed. Do you agree to that?
        Mr. Friedman. Well, not to be too clever, Mr. Hall, I don't
    know what I don't know. We felt that the three that we selected
    gave us a fair representation. We looked at the control
    structure fairly thoroughly. Is it possible in the 100-plus
    awards that were made that we didn't look at there were
    problems? Absolutely.
        Chairman Hall. Well, I guess it is not too much to ask, if
    your office will review this spending in more detail as part of
    your ongoing stimulus oversight. And if we have some questions
    later to follow up on this, that we are going to ask the
    Chairman to ask you to answer them within a reasonable amount
    of time.
        Mr. Friedman. I will do my best.
        Chairman Hall. I have some other questions I would like to
    ask about, Solyndra and many others. But I may get back to
    that. I may try to handle that by direct letter where you will
    have plenty of time to sit down and give us your answer to that
    or that you don't have an answer to it.
        I thank you, and I yield back my time.
        Chairman Broun. Thank you, Mr. Chairman. And I now
    recognize Mr. Miller for five minutes.
        Mr. Miller. Thank you, Mr. Chairman. In the four years that
    I chaired this Subcommittee, in addition to knocking a hole in
    the Chairman's podium with the gavel, we also did look at the
    performance of a lot of agencies within this Committee's
    jurisdiction. And in a perfect world, agency leadership, the
    Inspector General would have welcomed the work of the GAO. It
    was an important oversight tool for Congress. The IG statute
    contemplates that. It intends for it to be a management tool
    for the executive branch as well as an oversight tool for
    Congress. And GAO and the IGs can make constructive criticism,
    can actually be helpful in their suggestions.
        But it was rarely seen as that by the executives, by the
    top leadership of the agencies. They always saw it as
    unwelcomed criticism, not as helpful criticism. And frequently
    any cooperation was very grudging at best.
        Mr. Friedman, Mr. Rusco, what cooperation was there from
    ARPA-E in your work? Were they cooperative or did they hinder
    in any way your work?
        Mr. Friedman. Mr. Miller, was that directed to me?
        Mr. Miller. To both of you, yes.
        Mr. Friedman. I must say that in his testimony, when Dr.
    Majumdar, praised the work of the IG and GAO, I got very
    nervous. But having said that, we had a very good relationship.
    It was a productive relationship. As we point out in our
    report, management took responsive action during the course of
    our audit when we brought issues to their attention. So I would
    say it was a productive relationship.
        Mr. Rusco. I would echo that.
        Mr. Miller. Same thing. And in looking at your report, the
    reports never come back and say they are doing everything
    perfectly. There are always suggestions for how things might be
    done differently. But my sense from your report, Mr. Friedman
    and Mr. Rusco, is that you regard--well, how did you regard
    ARPA-E's management overall? I know the GAO has kind of a watch
    list of the most troubled agencies. ARPA-E is not on that. How
    do you regard the management of ARPA-E overall, having spent
    some time looking at the program?
        Mr. Friedman. Well, we would point out some shortcomings,
    and obviously ARPA-E has come back and told us they have made a
    lot of changes, improvements, corrections, instituted policies
    that we found lacking at the time. We have not confirmed what
    they have said. But fundamentally, as I said, Mr. Miller, the
    relationship was good, and I think it was a productive
    situation. I must say that I think so far we view it as a
    fairly positive situation in the Department of Energy family.
        Mr. Rusco. The ARPA-E management has been very responsive
    to our requests for information. They have also been very
    responsive to our findings and recommendations. But again, we
    always evaluate what has happened after the passage of time. So
    I am hoping they will follow up on these.
        Mr. Miller. Okay. Mr. Majumdar, sorry. Dr. Majumdar, there
    has been some criticism on this Committee on ARPA-E as crowding
    out research that the private sector would have done otherwise.
    But leaders in industry seem to disagree with that, including
    Bill Gates of Microsoft, Jeff Immelt of GE, Norm Augustine who
    was the former head, the former CEO of Lockheed-Martin and of
    course the chair of the Augustine Commission that issued the
    Rise Above the Gathering Storm report on competitiveness. And
    they concluded that ARPA-E was in fact funding high-tech, high-
    risk, long-term investments in clean energy. That would not
    have happened otherwise. And this is a quote from a letter they
    wrote. ``By nearly all accounts it appears that ARPA-E is being
    managed as a highly efficient, risk-taking, results-oriented
    organization.''
        Dr. Majumdar, could you compare for us ARPA-E to other
    government programs that are considering energy issues, and
    what value does ARPA-E bring to our commitment to invest in
    clean energy innovation research?
        Dr. Majumdar. Well, thank you, Mr. Congressman. I think if
    you go to the Gathering Storm report that Dr. Augustine and his
    committee wrote, they felt there was a gap in our energy
    landscape in the R&D, in the research section of the landscape,
    where we were doing basic science where, you know, looking for
    how energy interactions matter, the origins of
    superconductivity and basically scientific discoveries.
        And then we were doing quite applied work, and there was a
    gap out there of translating basic science understanding into
    something useful that did not exist before and that was--and
    they created or they proposed that an agency like ARPA-E be
    created so that to translate the science into technologies that
    did not exist before, the first prototype of something that did
    not exist before, and thereby provide U.S. technological lead
    and economic and national security, which is what you have
    enacted under the law, and we are following exactly what was
    proposed in the law including the accelerating of
    transformation technology which is in the law. That is exactly
    what we are doing.
        Chairman Broun. The gentleman's time is expired. I now
    recognize Mr. Bartlett for five minutes.
        Mr. Bartlett. Thank you, sir, but is there still a
    Subcommittee Member that hasn't had a chance, time, on the
    Democrats' side?
        Chairman Broun. Mr. McNerney.
        Mr. Bartlett. I would yield to him. I should come at the
    end of all your----
        Chairman Broun. Okay. Mr. McNerney, I apologize.
        Mr. McNerney. Well, Mr. McNerney thanks the esteemed Member
    for his time.
        I have in front of me what I believe are the Republican
    objections to the ARPA-E program, first of all, that it funds
    projects that receive private funding; secondly that it picks
    winners and losers; and third, that it crowds out private
    investment. So the first objection, that it funds projects that
    receive private funding, I think has already been discredited.
    But just to drive the point home a little bit, I am going to
    read a section of the statute that I believe is a fitting
    section and that is Section C.2.2.C, ``Accelerating
    transformational technological advances in areas that industry
    by itself is not likely to undertake because of technical and
    financial uncertainty.'' So that, in my mind, doesn't say that
    private funding is to be excluded from ARPA, and I think that
    drives that point home.
        The objection that ARPA-E crowds out private investment I
    think was dealt with pretty effectively by my colleague. And
    the third objection is it picks winners and losers. So Dr.
    Majumdar, I would like you to address that.
        Dr. Majumdar. Well, thank you, Congressman, for the
    question. Here is what we do in ARPA-E. The process involves
    identifying a white space as was mentioned before. Let me give
    you an example. We are looking for those batteries for electric
    vehicles that will make the electric cars have a longer range
    and be cheaper than gasoline cars so that these electric
    vehicles, so these plug-in hybrid electric vehicles will be
    cheaper so that you can sell without subsidies. Now, that
    battery does not exist anywhere in the world, and today's
    lithium ion battery is not going satisfy that metric. So we
    said we will go to that white space where no one exists and no
    one in the world has this battery, and if we develop that
    battery, the U.S. will get the technological lead then. And
    that battery has to be double the energy density of today's
    lithium ion battery and 1/3 the cost.
        And so that was a technology agnostic metric that if anyone
    could meet. And what that created is really the competition. We
    are not picking winners. We are creating the competition
    between 15 different types of approaches that we have funded in
    that portfolio. They are all competing to get to that metric
    because if they do, and some of them might, we will have the
    technological lead. And if you manufacture those batteries in
    the United States, we will have really the economic growth as
    well. And that is what we are trying to do.
        Mr. McNerney. So that is typical of a portfolio is that you
    fund different organizations to come up with technologies
    competing with each other and then let the winner decide by the
    technology?
        Dr. Majumdar. We create the competition. We don't pick
    winners.
        Mr. McNerney. Okay. Just to answer what the Chairman of the
    Full Committee asked, is there any connection whatsoever
    between ARPA-E and Solyndra?
        Dr. Majumdar. Absolutely not.
        Mr. McNerney. Can you confirm that, Mr. Friedman?
        Mr. Friedman. Well, I have no indication there is any
    connection whatsoever. There may be something that I am not
    aware of. But let me address the Solyndra matter now if I can.
    As has been publically stated both by the Department of Justice
    and by my office, there is a criminal investigation ongoing
    with regard to Solyndra. So it is impossible for me to answer.
    It could possibly disrupt an ongoing investigation. I know that
    would not be in the interest of anybody, and therefore, I
    really can't talk beyond that.
        Mr. McNerney. Thank you. Mr. Friedman, also, I would like
    to ask you what are the similarities and difference between
    ARPA-E and another program called the SBIR program? Are they
    both trying to accomplish the same thing? What is the
    difference in philosophy? Is that something you could answer?
        Mr. Friedman. You know, I really couldn't give you the best
    answer. Certainly we have done work in the SBIR program, a fair
    amount of work. We have done work now in ARPA-E. The Department
    of Energy is a $13 billion a year science department on many
    different levels using many different programs. So you know, I
    can't define specifically the differences between them right
    here and now.
        Mr. McNerney. Dr. Majumdar, do you have any idea what the
    differences are between the two programs?
        Dr. Majumdar. Well, I can give you a long answer but I have
    only 22 seconds. I was, at one point, a former recipient of an
    SBIR grant for a small company that started in the Bay Area,
    and basically, lots of differences. SBIR do not have active
    program management. We hire some of the smartest people in the
    technical community to come to ARPA-E and actively manage and
    help make the decision if something is not working to terminate
    it to not waste taxpayer dollars.
        That does not happen in SBIR. In SBIR, there is Phase One,
    and there is a gap of six months before you get to Phase Two.
    In the start-up company there is no cash flow. It will go out
    of business. And so that doesn't happen in ARPA-E. There are
    go/no-go milestones, annual milestones, and quarterly reports
    that people have to submit.
        So there are many, many differences. I could go on and on,
    but I will just limit my answer to that.
        Chairman Broun. The gentleman's time has expired. Sorry. I
    would like to add, back to--part of the statute it says areas
    that industry by itself is not likely to undertake. So you
    can't overlook the not, either, Mr. McNerney and Mr. Tonko, and
    that is the whole thing. We are not here to be a hatchet job on
    ARPA-E or anybody else.
        Mr. McNerney. Mr. Chairman, it is not likely to undertake
    by itself.
        Chairman Broun. It says is not likely to undertake, period.
    It doesn't say by itself.
        I now recognize Mr. Bartlett for five minutes.
        Mr. Bartlett. Thank you very much. I believe the--I am told
    the staff has loaded a couple of slides for me that will I hope
    kind of put--okay. There they are. We can see them now--kind of
    put the need for ARPA-E in context.
        [Slide]
        Mr. Bartlett. The upper figure here is from '08 from the
    International Energy Association which is a creature of OECD. I
    think you would see it on the side screen so you don't have to
    turn around. And what they are showing there is oil from our
    wells that we are now pumping. The dark blue at the bottom, you
    see that we have now reached a peak there.
        By the way, we were told that that was going to happen 56
    years ago by M. King Hubbard, and 32 years ago in 1980, looking
    back at 1970 when he predicted the U.S. would peak, we knew
    with absolute certainty that he was right about the U.S., and
    therefore he would probably be right about the world.
        I want to note a couple things in that slide. Note that the
    total liquid fuels is about 84 million barrels a day for five
    years now. Note that they projected by 2030 that the world
    would be producing 106 barrels of oil per day. Now, just two
    years later in the slide at the bottom, reality is setting in.
    They go up to 35 now, not to just 30. And note there the
    precipitous decline in production in the wells from which we
    are now pumping oil. And the two curves on top, by the way, are
    the same thing. They are different colors, and they are flipped
    around. One is natural gas liquids, and the other is
    unconventional oil. They are the same things. They are just one
    on top of the other in different colors.
        The dark red wedge on top, which is enhanced oil recovery,
    in the lower slide is incorporated where it should be in the
    oil we are now pumping because that just squeezes a little more
    out with live steam or CO2 or something like that
    down there.
        Notice the two huge wedges that they put in there to keep
    the world from having a reduced production of liquid fuels.
    They put huge wedges in there of oil that they hope will be
    produced from fields that we have found, but too tough to
    develop, like under 7,000 feet of water and 30,000 feet of rock
    in the Gulf of Mexico.
        And then there is a pretty big wedge there that is of
    fields yet to be discovered. Now, I will tell you with some
    confidence, that those two wedges will not occur to that
    degree. They did not occur in our country. We are the most
    creative, innovative society in the world. We drill more oil
    wells than all the rest of the world put together. And today we
    produce half the oil that we did in 1970. Now, if you think
    that the world is more creative and innovative than the United
    States, then maybe you think those two wedges are going to
    happen. They are not going to happen. Your government paid for
    four studies that said that we were going to be here, two of
    them issued in '05, two of them issued in '07. Your government
    didn't like what those studies said, so they just ignored them.
    The first was the big Hirsch report. In '05, the second was the
    Corps of Engineers, in '07 two reports. The Government
    Accountability Office, sir, your office did a report, and the
    National Petroleum Council. All four reports said essentially
    the same thing, the peaking of oil is either present or
    imminent with potentially devastating consequences. The world
    has never faced a problem like this to quote the Hirsch report,
    the SAIC report. And the social and economic consequences will
    be unprecedented is what they said.
        You know, the tragedy is that ARPA-E was not here 20 years
    ago because that is when we needed it. It is now too late
    because I think that there essentially no chance that the world
    is going to avoid some enormous geopolitical consequences as a
    result of the peaking of oil. It is not that we are running out
    of oil. Don't let anybody tell you that. We are not running out
    of oil. There is a lot of oil left out there. Half of all the
    oil that we will ever pump, probably more than half that we
    will ever pump, is still left out there. What we have run out
    of is our ability to produce the oil as fast as we would like
    to use it.
        The next slide shows that.
        [Slide].
        Mr. Bartlett. There is the next slide. A bit of wishful
    thinking in this. The bar at the left shows increased
    production. There is not going to be any increased production.
    This is wishful thinking. But the bar on the right is not
    wishful thinking. That is going to be demand. Demand is going
    up. It is kind of the perfect storm, Mr. Chairman. At just the
    time we are trying to come out of a recession and just the time
    that they are developing oil with China and India leading, that
    is when oil is $100 a barrel, that is just the time that we
    need more oil and it is not going to be there.
        So there is a dire need for ARPA-E. If you could use more
    money, sir, I would gladly vote to provide it for you. You
    know, I tell audiences that the innocence and ignorance on
    matters of energy in the general population is astounding, and
    we have truly a representative government. Thank you.
        Chairman Broun. I assume you yield back?
        Mr. Bartlett. Mr. Rohrabacher.
        Chairman Broun. Mr. Rohrabacher, you are recognized for
    five minutes.
        Mr. Rohrabacher. Thank you very much, Mr. Chairman, and I
    am not as pessimistic as my colleague, but I am certainly in
    agreement with him that we need----
        Dr. Bartlett. It is realistic, sir.
        Mr. Rohrabacher [continuing]. And that we--realistic. Or
    maybe I am too optimistic, let us put it that way. But I do
    believe that no matter how you come down on it, we need to be
    focusing on developing energy resources and using our brains
    and our creativity in finding new ways of creating energy,
    rather than just more traditional ways. And that is what ARPA-E
    is supposed to be about.
        Let me ask about--you know, people mention Solyndra, and
    everybody, you know, sort of is shaking around and trying to
    duck. But let me just ask--and again, I am sorry. I always
    mispronounce your name as well.
        Dr. Majumdar. Maybe because it has fallen down.
        Mr. Rohrabacher. Okay, Majumdar. Has the White House,
    anyone in the White House, ever contacted you regarding a grant
    that someone had applied for an ARPA-E grant?
        Dr. Majumdar. No, never.
        Mr. Rohrabacher. This White House has never contacted you
    for any of these awards that you are giving? So you don't have
    any pressure from them at all?
        Dr. Majumdar. No.
        Mr. Rohrabacher. Okay. That is good to hear. Obviously--
    well, I can't say obviously was the case with Solyndra. We will
    find out. There is a case, for example, where Beacon Power
    received a $2.8 grant from you, and they also received a $24
    million grant from the Office of Electricity from DOE and a $43
    million loan guarantee from the DOE, all within a seven-month
    period. Now, how is it that your organization that is supposed
    to be aimed at helping people who can't get funding is now
    helping an organization duplicating the support from two
    different other entities or two other approaches they are doing
    for money? How is that?
        Dr. Majumdar. Sure. I will be happy to clarify that,
    Congressman. What they did in the ARPA-E project is they went
    through a competitive process. They actually went through that
    process and won this grant, which is not a loan, it is a grant,
    and this is on energy storage as opposed to power storage. So
    the one that they got from the Office of Electricity is for
    power storage which is for frequency regulation. It is short-
    time power storage with fly wheels.
        Mr. Rohrabacher. Now, I know----
        Dr. Majumdar. Our program was designed to look for storing
    gigawatts of power for an hour. When a wind gust comes in from
    the west or from anywhere else, you got to store about a
    gigawatt of electricity for an hour. That is energy. That is
    not power. And ARPA-E's program was designed to look at the
    energy storage which is quite different from the power storage.
    And I can go into----
        Mr. Rohrabacher. I will have to admit to you that not being
    an expert when a Ph.D. tells me that there is a difference
    between energy and power, and those of us who are less
    educated----
        Dr. Majumdar. Let me explain.
        Mr. Rohrabacher. It seems rather similar to be--no, it is
    government money. And by the way, this company happened to go
    bankrupt after receiving this $70 million of money from the
    Government.
        Dr. Majumdar. The difference between power and energy is
    like if you have a car, the power comes from your engine, and
    the energy storage comes from your gas tank, the size of a gas
    tank. They are different, and so that is what--so what we were
    funding them for is the energy storage part.
        Mr. Rohrabacher. Well, there are a couple other in this GAO
    report. There are several other companies that have suggested
    their names were redacted. But it does look like--it says,
    ``Potentially duplicative funding for essentially the same
    work. Are these--maybe I should ask our GAO guy. Are we talking
    about here--and here is another one--name redacted, submitted
    similar grant proposals to ARPA-E and other agencies, and both
    proposals were successfully awarded.
        Are these just because they are similar, people don't know
    the difference between energy and power or what have we got
    here?
        Mr. Rusco. I am sorry. I am not sure exactly what you are
    referring to. Is that in the committee report or is that in
    our----
        Mr. Rohrabacher. This is from a GAO work paper notes that
    one company named redacted. And here is a quote, ``Submitted
    similar grant proposals to ARPA-E and other agencies, and both
    proposals were successfully awarded.'' And so you found them to
    be apparently similar grant proposals.
        And then another company by your report, name redacted,
    explicitly stated that its application, that the proposal was
    ``potentially duplicative funding for essentially the same work
    statement.'' Do you know--I can't tell you the company because
    you eliminated the name there. Oh, excuse me. We redacted the
    name. I thought this was coming from----
        Voice. It is a summary of their work.
        Mr. Rohrabacher. It is a summary of their work, but I have
    been recommended -- I guess or recommended when they gave me
    this paper not to read the names of the companies. Perhaps we
    should let them know what the name of the company is.
        Chairman Broun. The gentleman's time is expired. If one of
    you want to make a quick answer, I will be glad to accept that
    or you can present the question, if that is all right with you,
    Mr. Rohrabacher. If you have a quick answer, please say it.
        Mr. Rusco. Maybe the best way to proceed would be for us to
    talk to your staff about those things off line since some of
    the information in our--much of the information in our work
    papers is business sensitive.
        Mr. Rohrabacher. Well, there are two companies then that
    you did name and were eliminated from my copy here but----
        Chairman Broun. The gentleman's time is expired.
        Mr. Rohrabacher. Sorry about that. We are going to go to a
    second round of questions. The minority has acquiesced to my
    suggestions that we go to three minutes per member, and I ask
    unanimous consent that that be approved, so ordered.
        The Chair will recognize himself for three minutes. The IG
    report notes that in February of 2011, ARPA-E updated its
    technology transfer and outreach policy that included guidance
    to awareness on appropriate tech transfer expenditures. But
    this policy ``allows recipients to incur costs that are
    typically unallowable under the FAR.'' That is Federal
    Acquisition Regulations.
        At 3:00 p.m. yesterday, ARPA-E provided an updated TTO
    policy to the Committee. There were several notable differences
    between the February 2011 policy and the one provided
    yesterday. Dr. Majumdar, I would like to ask you a few
    questions about these differences, please, sir. The formal
    policy explicitly says that the expenditures on the following
    activities are acceptable uses of awardees' funds: number one,
    meetings with investors to raise capital; number two, business
    plan, development and market research; three, expenditures
    relating to seeking additional funding from the private sector
    and government agencies; four, marketing and other expenditures
    relating to promoting an ARPA-E funded technology; and five,
    commercialization expenditures. The new policy we just received
    lists examples of both appropriate and inappropriate spending
    but is silent on all of these activities.
        So I would like to ask you to clarify, does ARPA-E allow
    awardees to spend taxpayer funding on each of these items?
        Dr. Majumdar. Well, Congressman, just to give you some
    general terms, we have basically created this policy in
    consultation with the Federal Acquisition Regulation. Our
    contracting officer has decided, has determined, that these are
    allowable costs under the FAR rules, and if there is something
    that is unallowable and if the IG--we worked with the IG in the
    past, some things are unallowable, we go and recover the cost.
    And so we work together to do that.
        And so we are basically following the regulations, Federal
    Acquisition Regulation, with our contracting office making the
    determination.
        Chairman Broun. Sir Inspector General, would you agree with
    that?
        Mr. Friedman. Well, I have not seen the new policy
    formulation that you apparently received. We haven't had a
    chance to study it, so I really wouldn't be in a position, Mr.
    Chairman, to comment on the new policy.
        What we found--I should point out that when it comes to
    cost-incurred audits that we do, we develop questionable costs
    and make recommendations to the contracting officer. The
    ultimate decision is that of the contracting officer. We
    provide advisory reports which we have done, and the
    contracting officer ultimately decides. That doesn't mean we
    agree with the contracting officer in every instance, but I
    would have to see the new policy in this regard.
        Chairman Broun. Very good. My time is just about expired. I
    will yield it back and yield to Mr. Tonko for three minutes.
        Mr. Tonko. Thank you, Mr. Chair. To me, you know, listening
    to the testimony here today, I come to the conclusion that the
    IG and the GAO, the two places we turn to for honest
    evaluations of how programs are doing, both came back from the
    reviews of ARPA-E with largely positive reports. They have
    recommended modifications. It seems as though they have been
    complied with by ARPA-E folks. It would seem to me that simple
    fairness would dictate that the Committee acknowledge and
    congratulate Dr. Majumdar on his accomplishments. I am
    disappointed that partisanship has sunk to the level where we
    cannot even come together for such a simple thing as
    acknowledging when we find a program that seems to be on the
    right track, encouraging jobs and allowing acceleration and
    transformation to take hold. I look at the guidelines within
    the statute which indicates accelerating transformational
    technological advances in areas that industry by itself is not
    likely to undertake.
        So with that, Dr. Majumdar, I would ask with small
    companies and start-ups often looking for any support they can
    get to carry forth with their ideas, I know they look to
    venture capital and other agencies anywhere they can. How does
    ARPA-E differ in what it does as compared to other agencies or
    the private capital market?
        Dr. Majumdar. Well, as I explained in the past, what we are
    looking for are white spaces, and let me just describe what
    that white space is because it has been referred to several
    places, are those areas where (a), within, first of all within
    the Department of Energy, no one else is funding. Secondly, are
    areas where there are potential for transformative solutions
    that meet the ARPA-E goals as written in the statute, the U.S.
    technological lead, reducing our imports, et cetera. Where
    there is an opportunity for science, new scientific discoveries
    can be translated into quantum leaps in technologies that will
    provide the U.S. with a technological lead and potential
    technological growth down the line. That is the area. And to
    identify that, we recruit some of the best people from the
    technical community to bring them in and then work with the
    technical community and within the DOE and other federal
    agencies, including the Department of Defense, to identify
    those white spaces. And that is how we create these areas, and
    the battery one that I gave earlier was an example of that. I
    gave the example of creating oil based on microbes that have
    never been used to make oil before. And these live on
    electrodes, and they grab electricity and make oil which has
    never been done ever by anyone in the world before. And that is
    a completely new pathway of creating oil. And if in the future
    it becomes successful and scales down in cost and volume, it
    will create the foundation of an entirely new industry that
    does not even exist today. That is the kind of research that we
    are funding right now.
        Mr. Tonko. That might be something that the country needs
    right now. We need that reinforcement if we are going to
    compete effectively in an innovation economy race around the
    world. Thank you.
        Chairman Broun. Mr. Tonko, I agree with you. In fact, in my
    opening statement I congratulated or said that ARPA-E is
    supporting a lot of projects that are clearly aligned. This is
    a Committee of Investigation and Oversight. We are not trying
    to beat up on them. We just have a responsibility to our
    constituents and taxpayers in this country to make sure that we
    continue with this very much-needed research. In fact, Dr.
    Majumdar and I had some private discussions about some of the
    things they are doing, and I am very excited about some of the
    projects that he has undertaken.
        I now recognize Mr. Hall for three minutes.
        Chairman Hall. Mr. Chairman, I maybe made a few people
    nervous when I mentioned Solyndra. I didn't really mean any
    harm to anybody. I just know that it is a good example that we
    can learn from, and we are going to follow up. And I think it
    is reason for the nervous situation.
        In the wake of Solyndra, I would hope DOE is taking great
    care to insure such influential political actors are not
    receiving favored treatment from the Administration, but it is
    very difficult to follow the money in some of these cases and
    not be concerned. Dr. Majumdar, wouldn't one of the best ways
    to avoid such potential cronyism and favored treatment be to
    avoid funding companies with such extensive private-sector
    backing in the first place?
        Dr. Majumdar. Well, Chairman Hall, I can only speak for
    ARPA-E, and I think I would say that everything that we do in
    ARPA-E is based purely on merit. It is based on external panel
    reviews that we have, of two stages of reviews, and as I said,
    it is purely based on merit and that is how every single
    project has been decided and executed on.
        Chairman Hall. Well, let me ask you this. How often were
    officials from the White House were in touch with you? They
    weren't in touch with you or your team or people under you
    regarding specific ARPA-E awards. Would you answer that for me?
        Dr. Majumdar. They have never been in touch with me in
    terms of actual ARPA-E awards before the selection.
        Chairman Hall. You have said that before. Anyone with your
    team under you?
        Dr. Majumdar. No one has been in touch--no one from the
    White House has been touch with anyone in ARPA-E with regards
    to selection.
        Chairman Hall. Okay. Did anyone connected to the White
    House or entities concerned with the presidential elections
    contact you or your staff regarding any ARPA-E applicants prior
    to the award to them?
        Dr. Majumdar. No.
        Chairman Hall. All right. I thank you.
        Chairman Broun. Thank you, Mr. Chairman. Now I recognize
    Mr. Miller for three minutes.
        Mr. Miller. Thank you, Mr. Chairman. There have been a lot
    of questions about some research getting funding from more than
    one source within the Federal Government. It is almost an
    implication that that research is getting more than is needed
    and they are pocketing the rest, like Mel Brooks' movie, ``The
    Producers.'' My impression is that all that money is actually
    being spent on the research in those cases, but how do you
    account for some research getting funding from more than one
    source and what steps are you taking to make sure there is not,
    in fact, duplicative funding of the same kind of research by
    different parts of the Federal Government?
        Dr. Majumdar. Well, Mr. Congressman, let me just give you
    my own background. I have been a scientist and an engineer for
    the last 22 years in the research community. I have received
    funding from many of the federal agencies out here. In fact, my
    group was, I would say, fairly successful where I had funding
    from the NIH, funding from NSF, from the Office of Naval
    Research, et cetera. So my group had funding from multiple
    sources. But we had to make clear, absolutely crystal clear,
    that they were for different projects. And so that is exactly
    what we are following right now, that if ARPA-E is providing
    funding for anything and if that particular group has received
    funding from somewhere else, our job is to make sure that the
    ARPA-E funding is distinct and it is unique for that particular
    project only. And that is what we have followed, and you know,
    the records would show that.
        Mr. Miller. Do you have any procedures to make sure that
    there is not overlapping funding for the same kind of research,
    that it is in fact distinct funding?
        Dr. Majumdar. Yes, we do, and I think I would like to
    acknowledge the help of the IG in helping us with that. I am
    sorry, the GAO in helping us with that and the IG. And they
    have made recommendations in making sure that we follow some of
    the procedures. And those have now been enacted and there are
    policies in ARPA-E to make sure that we do this in the right
    way, and we appreciate the help that we have received from
    them.
        Mr. Miller. Either of you in the little time I have left
    have any comment on this? You don't have to have a comment on
    this, you just can have a comment on this.
        Mr. Friedman. Well, Mr. Miller, the uneasiness that--
    Chairman Hall appears to be bipartisan. We are working on
    several cases that involve precisely the subjects that you are
    talking about, but they are at a very early stage, and it would
    be inappropriate for me to discuss them.
        Mr. Miller. But not involving ARPA-E?
        Mr. Friedman. In one or more cases, ARPA-E's funds are
    involved, but it does not reflect negatively upon the
    management of ARPA-E or the Department of Energy.
        Mr. Miller. Okay.
        Mr. Friedman. In other words, people in the science
    community are not immune from seeking funding from multiple
    organizations for essentially the same work. That happens,
    research misconduct cases that we do work, we do have in our
    inventory.
        Mr. Miller. Okay. My time has expired.
        Chairman Broun. Thank you, Mr. Miller. Dr. Bartlett, we
    enjoyed your five-minute sermon. I recognize you for another
    three-minute sermon if you have it geared----
        Mr. Bartlett. Okay. Thank you very much.
        Chairman Broun [continuing]. Up or questions, sir.
        Mr. Bartlett. I would just like to note that in a former
    life, I worked for the IBM Corporation, Federal Systems
    Division, and at one time I was performing 14 different grants
    and contracts. So one entity can solicit money from a number of
    different sources because there are different projects that you
    work on.
        I would like to ask the members of the family if they know
    that there is a better prognosticator of energy futures than
    the IEA? Are you sufficiently familiar with the International
    Energy Association?
        Dr. Majumdar. Yes, sir.
        Mr. Bartlett. Do you know if there is a better energy
    prognosticator in the world than this group?
        Dr. Majumdar. I think they are considered one of the top,
    you know, agencies to look at energy futures, et cetera.
        Dr. Bartlett. Of the slides that I showed were called the
    World Energy Outlook. The first one was in '08 where they
    thought that by 2030 we would be producing 106 million barrels
    of oil a day. Just two years later, just last year in 2010,
    they now believe that by 2035, five years late, we would be
    producing only 96 million barrels of oil a day. And if you look
    at the crude oil projections, even with those two huge wedges
    which I do not think have a prayer of being realized, they are
    flat. The only increase in growth that they have is from
    natural gas liquids, and those won't be in your gas tank
    probably because they are propane and butane and things like
    that, and then unconventional oil that is growing. That is like
    the tar sands of Alberta, Canada, and we will get a bit more
    from that.
        We really need to--energy is somewhat fungible but not
    totally. The energy future for electricity is very good. I
    don't have any problem with their energy future there, more
    nuclear and wind and solar and microhydro and true geothermal,
    tapping into the molten core of the earth, we can get about all
    the electricity that we need.
        Our real crisis for the future is going to be liquid fuels,
    and there is--every 12 days we use a billion barrels of oil.
    That is about sixth-grade arithmetic. That is not tough, is it?
    84 million barrels a day, 12 days, that is about a billion,
    right? So you see a new find of 10 billion barrels and that is
    a huge discovery of oil. That will last 120 days. Big deal. We
    face a huge challenge here, and you know, I am exhilarated by
    challenges, and this is a huge challenge. It is going to call
    the best from us to meet this challenge. It is not trivial. And
    why do you think your government ignored four different studies
    that essentially the same thing, four organizations I
    mentioned? They didn't want to hear it so they didn't pay any
    attention to it. You know, it is sad. Thank you, Mr. Chairman.
        Chairman Broun. The Chairman's time has expired. You don't
    have anybody on your side. Mr. Rohrabacher, you are recognized
    for three minutes.
        Mr. Rohrabacher. Thank you very much. Just to go back to
    the line of questioning they had before, especially about
    Beacon Power, which, as I mentioned at the end of the last
    time, it went bankrupt after receiving these $70 million from
    three different sources, from ARPA-E as well as from the DOE.
    Our records seem to show that all of this was done to develop a
    flywheel energy storage technology. Again, I am not educated
    enough to know the difference between the terms that we were
    talking about, energy and power, but doesn't the fact that it
    was all going for flywheel technology seem to indicate that
    there was duplication? And by the way, just so my colleagues on
    the other side of the aisle, when we say we are against
    duplication, it doesn't mean that we are suggesting that
    someone has pocketed the money. That is absurd. We are
    suggesting that maybe the money could have been used better
    somewhere else that wasn't duplicating the money being spent on
    the research. But you may answer the question.
        Dr. Majumdar. Congressman, I am also very concerned--that I
    share a concern about duplication as well, which is why we
    coordinate very, very closely with the rest of the DOE and
    other federal agencies and also look at where the private
    sector is funding. In this particular case, they went through a
    competition, they won the award competitively. Right now they
    are meeting the go/no go milestones that we have put together.
    They are also meeting----
        Mr. Rohrabacher. They are now meeting it?
        Dr. Majumdar. Yeah, and they are also meeting the
    obligations of the cost share.
        Mr. Rohrabacher. But even after they filed for bankruptcy
    they are meeting these things?
        Dr. Majumdar. Well, it is going through some restructuring,
    and we are in consultation with the Department of Justice, you
    know, when we work with them.
        Mr. Rohrabacher. And what factor, how does that play into
    if someone is asked for a grant, do you check to see if they
    are not going to go bankrupt before you provide the grant?
        Dr. Majumdar. Well, at that time, you know, when we
    actually gave the grant, we did check at that time. At that
    time they had not filed for bankruptcy, and you know, then they
    subsequently did because----
        Mr. Rohrabacher. Well, wouldn't the money be coming back?
    If a company gets money from ARPA-E and then goes bankrupt, do
    we get any of the money back as part of the settlement for a
    company that is going out of business?
        Dr. Majumdar. Well, they have not been liquidated, they are
    being restructured right now.
        Mr. Rohrabacher. Okay.
        Dr. Majumdar. So it is not that they are completely gone.
    They have been restructured, and that is part of the Department
    of Justice thing. We are not involved in that except to the
    point that we consult with them in making sure that we are not
    violating any laws.
        Mr. Rohrabacher. Okay.
        Dr. Majumdar. But at the same time, they are meeting the
    milestones and their cost-share obligations.
        Mr. Rohrabacher. Okay. Well, let me just note for the
    record that we do have two companies that we do have their
    names here, but we didn't want to put them forth in this
    hearing for fear of saying something bad about the company. But
    we do have two names that were included in the GAO report that
    said there was duplication. It appeared to be duplication, and
    if we could get the answer back in writing of why that was not
    duplicative and the GAO report was inaccurate.
        Chairman Broun. The gentleman's time is expired. I remind
    Members that we can all submit questions in writing, and I
    appreciate the witnesses to answer in a timely manner. I think
    you have two weeks to do so, and we appreciate it. We are going
    to----
        Mr. Rohrabacher. Mr. Chairman.
        Chairman Broun. Mr. Rohrabacher.
        Mr. Rohrabacher. Whereas our friends on the other side of
    the aisle have suggested that we have not congratulated them
    for the good things that they have done, could I please note
    for the record that because we ask questions like this does not
    mean that we do not deeply appreciate the job that you are
    doing and that of course all of you have done for your country
    and for the benefit of all of mankind, and so we congratulate
    you for that, and thank you, and please don't think the tone
    that we have here does not mean that we don't appreciate the
    good things.
        Dr. Majumdar. Thank you very much to all of you.
        Chairman Broun. I want to associate myself with those
    remarks, and I am sure all our Democrat friends would also
    associate. I hope that you all will associate yourself with
    those remarks.
        I thank you all for your valuable testimony and Members for
    your questions. The Members of the Subcommittee may have
    additional questions as I have already mentioned, and we do ask
    you to respond to those in writing. The record will remain open
    for two weeks for additional comments from Members. The
    witnesses are excused, and the hearing is now adjourned.
        [Whereupon, at 3:40 p.m., the Subcommittee was adjourned.]

                       Answers to Post-Hearing Questions

                       Answers to Post-Hearing Questions
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                                   Appendix 2

                                  ----------

                       Additional Material for the Record

          Majority Staff Report as Submitted by Chairman Paul C. Broun
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        Minority Staff Report as Submitted by Ranking Member Paul Tonko
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      Polar-Orbiting Environmental Satellites: Report from GAO, June 2012