[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:]
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    [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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    [GRAPHIC] [TIFF OMITTED] T2379.024
    
    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









































































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