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DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS FOR
FISCAL YEAR 2004
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THURSDAY, MAY 22, 2003
U.S. Senate,
Subcommittee of the Committee on Appropriations,
Washington, DC.
The subcommittee met at 9:30 a.m., in room SD-124, Dirksen
Senate Office Building, Hon. Conrad Burns (chairman) presiding.
Present: Senators Burns, Domenici, Dorgan, and Byrd.
DEPARTMENT OF ENERGY
Office of the Secretary
STATEMENT OF HON. SPENCER ABRAHAM, SECRETARY
OPENING STATEMENT OF SENATOR CONRAD BURNS
Senator Burns. We're going to call the committee to order
this morning, Mr. Secretary, thank you for coming. I've got a
brief statement on my opening and then the ranking member,
Senator Dorgan, will be along soon and we will take his
statement and if he has questions, we will allow him to do
that. He's running on a tight tether today, and I understand
you are too. And I think we are going to have a stack of votes
this morning, and with the President being in HC-5, once you
get into the bowels of that building, it takes a while to free
yourself.
First of all, we're glad to see you here to discuss the
budget this morning for the Department of Energy. I know we
struggled a bit to get this hearing on your schedule and I know
you made some changes to accommodate us, we appreciate that.
The Department's request for activities under the
subcommittee's jurisdiction represents an effective cut of
around $120 million. That is a considerable reduction for
energy activity. Of course the reason it falls under this
committee is because of the vast amount of our energy found on
public lands under our jurisdiction. We can quibble over
transfers and deferrals, but I think it's fair that we discuss
some of these reductions as that is the reason we hold these
hearings.
Within the total you have requested, there are some very
healthy increases in some selected programs. The budget
increases weatherization by $65 million, in keeping with the
President's intention to double the program. The budget
includes $40 million for the National Climate Change Technology
Initiative for climate change-related research, $23 million of
which is under this subcommittee's jurisdiction. And the budget
increases fuel cell research within the Office of Energy
Efficiency by $22 million, and includes the increases to
support the President's Freedom Car Initiative.
We are anxious to hear more about these proposals, Mr.
Secretary, and I expect you will find at least conceptual
support for many of them from this subcommittee. The problem is
that the budget also includes fairly severe cuts in other
important programs. The oil and gas programs within the Office
of Fossil Energy have been cut in half. The fuels program
within the Office of Fossil Energy has been completely
eliminated, and the Industries of the Future program has been
reduced about two-thirds.
We recognize, Mr. Secretary, that you are compelled to
operate under some fairly restrictive budget constraints and we
are certainly not opposed to reducing some programs in favor of
others as national priorities change, and as successes and
failures in your research programs become known.
But I think what you will find concerns us most is the
severity of some of these reductions, and the fact that some of
them may result in us failing to capitalize on important
research that has been supported by this committee for many,
many years, and the research done in those areas has been
fairly sizable. It is important, Mr. Secretary, to maintain a
robust and balanced R&D program in the Department, one that
enhances our Nation's energy security and enables our economy
to grow without sacrificing environmental quality, and I think
the focus today will be whether your budget request is adequate
to sustain such a program.
Your testimony will help us as we begin to draft this
appropriations bill under some very tight constraints and
again, we appreciate you being here this morning. I think it
will also help our deliberations on the energy bill, which I
hope the Senate will return to after the Memorial Day recess.
I now turn to our ranking member, my good friend from North
Dakota, Senator Dorgan. Good morning.
OPENING STATEMENT OF SENATOR BYRON L. DORGAN
Senator Dorgan. Senator Burns, thank you very much, and
thank you for holding this hearing.
Senator Burns. You didn't bring any more weed this morning?
Senator Dorgan. Since we're dealing with the Energy
Department, I should have brought a gallon of gas perhaps, but
the chairman is referring to a noxious weed that I brought to
the last hearing, but I am not going to do that in the future.
I didn't know it was very effective.
Let me thank the Secretary for being here. The Secretary
and I had a chance to visit yesterday, and I know that you are
under certain restraints, that there really isn't any way that
you could tell us or the audience, or for that matter the press
what you really think of the Office of Management and Budget.
So, I will not ask you about that, but let me raise a couple
issues, some of the same issues that Senator Burns raised.
You know I'm concerned about the decrease for energy
conservation research, I talked to you about that yesterday. I
think cutting energy conservation research is moving in exactly
the wrong direction. I appreciate that the funding for the
larger energy efficiency and renewable office funded in the
energy and water bill is up slightly less than 1 percent, but
renewable energy research, while important in its own right, is
not a substitute for efforts focused on conserving the amount
of energy we use. We use a prodigious amount of energy in this
country as I've stated, and it is exactly the same calculation,
and we consume 25 percent of the world's energy, which points
to our need to focus on research and development efforts in
reducing the amount of energy consumption, so I'm concerned
about that.
My colleague Senator Burns said that the budget severely
undercuts fossil energy R&D, which accounts for 85 percent of
the energy resources in this country. Over half of our
electricity comes from coal, and oil and natural gas account
for almost 100 percent of our transportation energy needs.
Because of this, environmentally sound approaches to the
management of fossil energy certainly is essential to our
national energy security.
Now, we need money for new initiatives, but money for new
initiatives should not come from other initiatives that are
also very important. We talk about a hydrogen economy and fuel
cells, and I am very appreciative of the present research in
that area and this is a direction we ought to head, I don't
think you can overstate the importance of that. It is very
important. I have said that we need an Apollo-type program, a
program that is bold and aggressive, and I suggested around
$6.5 billion over a period of years. But having said all that,
I'm very impressed that the administration put itself on record
saying let's move in this regard. So the question isn't the
direction so much as it is velocity, and I hope that we can
wrap this up into an Apollo-type program. But we should not be
believing that even as we move in that direction we are going
to somehow diminish the use of coal, oil and natural gas long
into the future, and the ability to do that in a thoughtful way
requires that we have adequate research.
As Senator Burns knows, we have a Commerce Committee
hearing ongoing at the moment and I have another appropriations
subcommittee as well, so I will not be able to stay for
questions, Mr. Secretary, but you and I covered most of our
concerns yesterday in the meeting in my office. And again, I
was pleased to serve with you in the Congress, here in the
Senate, and I am really pleased you are where you are.
Secretary Abraham. Me as well, thank you, Senator.
Senator Burns. Thank you, Senator Dorgan. Mr. Secretary, we
look forward to your statement.
SUMMARY STATEMENT OF HON. SPENCER ABRAHAM
Secretary Abraham. Thank you, Mr. Chairman, and you and the
ranking member, we obviously served together for a number of
years and have come to these projects we work on together from
a background of previous successful collaboration, and I look
forward to continuing that again this year.
Mr. Chairman, what I propose is that I submit most of the
testimony I have here for the record rather than in an oral
presentation, give a very brief overview so that we can move
ahead with the hearing.
Our fiscal year budget for the Department of Energy, both
the component within this subcommittee as well as the component
within the Subcommittee on Energy and Water is a request for
$23.4 billion, and we believe it will allow the Department to
help address a number of issues that relate to America's safety
and security. This amount is $1.3 billion above the fiscal year
2003 budget request, which is a 5.9 percent increase overall.
We do recognize, Mr. Chairman, the critical contribution of
energy on national defense, that the environment and science
and technology make to a prosperous as well as a peaceful
future, and I think this budget continues that work. With
regard to our energy work, the energy sector, this budget
submission is collectively between both subcommittees $2.5
billion. We think it will allow us to continue our wide-ranging
efforts that will lead to the eventual transformation of our
energy economy.
I think the most exciting work and promising areas of long-
term research and technology expansion either fall wholly or in
large part within the province of this subcommittee, so I think
not just this year but in the years ahead, we are going to see
a great deal of activity going on in programs that this
subcommittee has appropriations responsibility for.
Our fossil energy promotes this administration's belief
that coal must be a critical part of our long-term energy
future. We recognize coal is abundant, it is comparatively
inexpensive and is going to be used here and around the world.
Our administration appreciates environmental concerns regarding
coal and will devote technology to answer those concerns and to
guarantee the future widespread use of coal. That's the
rationale between the President's Clean Coal Power Initiative,
which seeks $2 billion over 10 years to companies that work on
and test technologies that improve power plant generation and
emission of coal.
In addition, we recognize carbon management requires
special attention and that's why our budget this year features
a 60 percent increase for research into carbon sequestration,
which in my view and I think in our judgment will be a key to
finding methods and technologies to reduce, avoid or capture
greenhouse gas emissions. More importantly, it is that interest
as much as any which was behind our recently announced coal-
powered generation project of the future, we call it Future-
Gen, which will lead us to operate the world's first coal-
fired, emission-free power plant. Future-Gen will take on the
challenge of cutting electricity emissions and sequestration of
greenhouse gasses and promote the increased use of hydrogen in
meeting future energy needs. It is one of, I think, the most
bold steps we can take towards a pollution-free energy future.
In addition to the game-changing research in the clean coal
area, we are likewise engaged in another initiative that in my
judgment will lead us to a transformation in the energy world
with the development of hydrogen fuel cells, as Senator Dorgan
referred to earlier, as a power source. Hydrogen is the most
abundant element in the universe, with nearly a limitless
supply, and the use of hydrogen eliminates many of the
consequences currently associated with fossil fuels. Our
administration is very optimistic about the use of hydrogen as
the transportation fuel of the future. As the President noted
in his State of the Union address, we are similarly exploring
the use of hydrogen to generate electricity to heat our homes
and power our businesses, proposing to spend about $1.7 billion
dollars on hydrogen fuel cell research and development, and the
development of the transportation applications of hydrogen.
PREPARED STATEMENT
I can think of no other program with the potential payoff
for our Nation's security, our economic security, our foreign
policy and especially for the environment as the work we're
going to be doing on hydrogen. I think some day people may look
back on that initiative as one of the greatest achievements of
this time, and perhaps connect it up to the activities of this
subcommittee. We look forward to working with the committee on
these exciting new ventures as well as our ongoing work related
to weatherizaton assistance programs, natural gas, and a host
of other topics that time doesn't permit me to go into
discussion at this moment of these various other initiatives,
as well as the ones I mention in my written testimony. I look
forward in the Q and A session to having the chance to respond
to any questions that you might have.
[The statement follows:]
Prepared Statement of Hon. Spencer Abraham
INTRODUCTION
Mr. Chairman, and Members of the Subcommittee, it is a pleasure to
be here today to discuss the President's fiscal year 2004 Budget
request for the Department of Energy (DOE).
The total fiscal year 2004 Budget request for the Department of
Energy is $23.4 billion (excluding $123 million advanced appropriated/
deferred from fiscal year 2003). This amount is $1.2 billion above the
fiscal year 2003 appropriated level. This Administration recognizes the
critical contribution our work on defense, energy security, the
environment and world-leading science and technology makes to a
peaceful and prosperous future. Of the total $23.4 billion request,
$1.7 billion is requested for programs funded in the Interior and
Related Agencies Appropriation under the jurisdiction of this
Subcommittee. The $1.7 billion Interior Appropriations request is $76.7
million less than appropriated in fiscal year 2003.
The total fiscal year 2004 Budget continues the Administration's
commitment to ensure national defense and safeguard the Nation's energy
security through advances in science and technology, as well as fulfill
our obligation as the environmental stewards to our communities. While
DOE's national policy objectives have not changed, this budget reflects
a new approach toward conducting business at the Department of Energy.
Reengineering efforts that we began in fiscal year 2002 have taken
shape: programmatic activities are better focused to achieve primary
mission objectives, budget priorities are set with improved measurable
performance criteria, and corporate management initiatives reflect
aggressive implementation of the President's Management Agenda.
The President's fiscal year 2004 Budget for the Department of
Energy reflects, and addresses, the critical challenges we face today
and will continue to face in the coming decades. I have charted a
course for the Department of Energy that emphasizes DOE's critical
contributions to the Nation's national security and provides forward-
reaching solutions to America's energy problems. My priorities are to
meet our responsibilities to maintain the nuclear stockpile; expand and
make more comprehensive our non-proliferation activities; accelerate
the environmental cleanup program; develop 21st century cutting edge
advanced fuel cell and alternative energy technologies; maintain coal
as a major, low-cost, domestically produced, energy resource through
the Coal Research initiative; build and maintain a stable and effective
national defense program to respond to the guidance in the Nuclear
Posture Review with special emphasis on revitalizing laboratory and
production plant infrastructure; continue our leadership to ensure
nuclear power remains a key energy resource; and maintain a world class
scientific research capability. The fiscal year 2004 Budget is focused
to deliver on these priorities.
As part of the Department's Strategic Planning process these
priorities translate into six overlapping Departmental goals that form
our core mission of National Security. All of the Department's planning
and budgeting for fiscal year 2004 drives toward these six goals:
--Maintain a safe, secure and reliable nuclear deterrent
--Control nuclear proliferation
--Reduce dependence on energy imports
--Achieve a cleaner, healthier environment
--Improve our energy infrastructure to ensure the reliable delivery
of energy, and
--Maintain a world-class scientific research capability
Formulation of this year's budget reflects significant management
changes occurring within the Department of Energy. Guided by the
President's Management Agenda and my management reforms started in
fiscal year 2003, this budget implements integrated, long-term program
planning and performance accountability. The Department is implementing
a five-year programmatic and planning framework to provide an
unprecedented opportunity to consider future impacts in determining
this year's funding priorities. This budget was formulated to deliver
measurable results to reach the Department's strategic goals. This
achievement is a significant step toward reaching my key goal to focus
DOE activities to adhere to the primary mission of national security.
By streamlining program activities and management structures, the
Department of Energy will more effectively and efficiently manage and
produce the results expected by American taxpayers.
PRESIDENT'S MANAGEMENT AGENDA AND NATIONAL ENERGY POLICY COORDINATION
Rising to the challenge of the President's Management Agenda, the
Department is beginning to improve how it manages, budgets, and plans
for all programs, projects, and activities. By improving management,
performance, and accountability, the Department is striving for a level
of performance that keeps DOE programs safe, on track, and on budget. A
system of scorecards is being used to evaluate the effectiveness of
various programs and allocate resources to achieve this end.
Performance measures are improving to ensure that they are specific,
quantifiable, concise, comprehensive, and relevant to the American
taxpayer. Also, in accordance with the President's commitment to an
expanded and effective electronic government, DOE is centrally managing
information technology investments to reduce waste, increase
productivity, and provide increased corporate services at lower cost.
Research and Development Investment Criteria.--The President's
Management Agenda calls for consistent and sufficient evaluation of
future research and development (R&D) investments and past performance.
In response, the Department developed internal guidance for programs to
score their R&D activities against the Administration's applied R&D
investment criteria. This approach focuses R&D dollars on long-term,
potentially high-payoff activities that require Federal involvement to
be both successful and achieve public benefit. The Department will
continue to work to develop consistent scoring and benefit estimation
methods, to permit comparison of applied R&D programs across the
Department.
The applied R&D scorecard process is an important way the
Department is integrating performance into the budget. The scorecard
process is in its second year of development. The goal is to develop
highly analytical justifications for applied research portfolios in
future budgets. This will require the development and application of a
uniform cost and benefit evaluation methodology across programs to
allow meaningful program comparisons.
The Department's Science programs also participate in the
government-wide effort to evaluate basic research efforts against the
criteria of quality, relevance, and performance. As part of this first
year effort for basic research programs, the Office of Science has
incorporated the principles of the investment criteria into the
formulation of its Congressional budget narrative.
Program Assessment Rating Tool.--In addition to the use of R&D
investment criteria, the Department implemented a new tool to evaluate
the management effectiveness of selected programs. The Program
Assessment Rating Tool (PART) was developed by the Office of Management
and Budget (OMB) to provide a standardized way to assess the
effectiveness of the Federal Government's portfolio of programs. While
OMB's objective for fiscal year 2004 was to evaluate 20 percent of each
government agency, the Department of Energy reviewed nearly 60 percent
of its activities through the PART process. The Departmental elements
that participated were Environmental Management, Science, Fossil
Energy, Nuclear Energy, Energy Efficiency and Renewable Energy, the
Power Marketing Administrations, and the National Nuclear Security
Administration.
The structured framework of the PART provides a means through which
programs can assess their activities differently than through
traditional reviews. While some of the programs received less than
favorable scores, the information exchange between the Department and
OMB proved quite valuable. The current focus is to establish outcome-
and output-oriented goals, the successful completion of which will lead
to benefits to the public, such as increased national security and
energy security, and improved environmental conditions. The Department
will incorporate feedback from OMB into the fiscal year 2005 Budget and
planning process, and will take the necessary steps to continue to
improve performance. The results of the review are reflected in the
Department's fiscal year 2004 Budget. The refocusing of the Fossil
Energy Oil and Gas program was supported by the results of the PART
review.
National Energy Policy Office.--The Department of Energy has
established a National Energy Policy Office to provide strategic
direction within DOE and overall coordination within the Federal
Government with respect to implementing national energy plan
recommendations and activities to assure dependable, affordable, and
environmentally responsible production, delivery, and use of energy.
This Office's mission is to achieve measurable performance results and
consistency in implementing our national energy goals through effective
policy development, planning and management strategies that are
integrated into DOE's budgeting process and that foster interagency and
intergovernmental coordination, generate public-private collaboration,
and enhance international cooperation. Through such coordination and
integrated policy planning and budgeting, the Office will assure
performance results that advance and safeguard our national energy
security objectives by assuring access to reliable and affordable
energy supplies through a balanced and diversified portfolio of energy
sources and modernization of energy infrastructure; securing continuous
improvement in energy efficiency and conservation through technology
research development and deployment to manage effectively and extend
our energy resources, reduce demand and lower costs; assuring
environmental progress and sustainable growth; and assuring that a
robust market guides pricing, technology deployment, energy efficiency,
fuel selection and energy systems.
INTERIOR AND RELATED AGENCIES APPROPRIATION BUDGET REQUEST
I would now like to address some of the specifics of our fiscal
year 2004 Interior and Related Agencies Appropriations request.
In total for fiscal year 2004, we are requesting $1.7 billion. This
amount is $76.7 million less than appropriated in fiscal year 2003. By
appropriation, we are requesting $519.3 million for Fossil Energy
Research and Development; $16.5 million for Naval Petroleum and Oil
Shale Reserves; $36.0 million for the 6th payment in the Elk Hills
School Lands Fund; $875.8 million for Energy Conservation; $1.0 million
for Economic Regulation; $175.1 million for Strategic Petroleum
Reserve; $5.0 million for the Northeast Home Heating Reserve; and $80.1
million for the Energy Information Administration. In addition, fiscal
year 2003 appropriations action advance appropriated $36.0 million for
the 5th payment in the Elk Hills School Lands Fund and deferred $87.0
million of Clean Coal Technology balances into fiscal year 2004. This
brings the fiscal year 2004 total to $1.8 billion.
I would now like to address some specifics of the Fossil Energy,
Energy Conservation, and Energy Information Administration budget
requests.
FOSSIL ENERGY BUDGET REQUEST
Mr. Chairman, when he took over as Assistant Secretary for Fossil
Energy last year, I asked Assistant Secretary Mike Smith to realign the
Fossil Energy program to focus virtually and exclusively on supporting
three of the President's top energy and environmental initiatives:
Clear Skies, Climate Change, and Energy Security.
To be included in the fiscal year 2004 Budget, Fossil Energy
programs must either support the development of lower cost, more
effective pollution control technologies or help diversify the Nation's
future sources of clean-burning natural gas to meet the President's
Clear Skies goals; expand the Nation's technological options for
reducing greenhouse gases either by increasing power plant efficiencies
or by capturing and isolating these gases from the atmosphere; or
measurably add to the Nation's energy security by providing a short-
term emergency response (e.g., Strategic Petroleum Reserve) or a
longer-term alternative to imported oil (e.g., hydrogen and methane
hydrates).
President's Coal Research Initiative.--The fiscal year 2004 Budget
continues to meet the President's commitment to spend $2 billion on
clean coal research over 10 years by providing $320.5 million for the
President's Coal Research Initiative. Since our budget testimony last
year, the Department has made significant progress on a new generation
of environmentally-clean coal technologies.
Our ``first round'' solicitation in the Clean Coal Power
Initiative--the centerpiece of the President's clean coal commitment--
attracted three dozen proposals for projects totaling more than $5
billion. On January 15, 2003, we announced the first winners of this
competition--eight projects with a total value of more than $1.3
billion, more than one billion dollars of which would be provided by
the private sector. Industry has again stepped up to the table,
offering both good ideas and significant private sector cost-sharing.
In fiscal year 2004, we are requesting $130.0 million as the next
``installment'' of the Clean Coal Power Initiative. At the present
time, our plans are to issue competitive solicitations every 2 years--
the next one in the fall of 2004. As in the initial solicitation, we
propose to combine 2 years of appropriations (and any available funds
from prior solicitations) because of the size and scope of the
projects.
The President's Clean Coal Power Initiative is especially
significant because it directly supports the President's Clear Skies
initiative. The first projects, for example, included an array of new
cleaner and cheaper concepts for reducing sulfur dioxide, nitrogen
oxides, and mercury--the three air pollutants targeted by the Clear
Skies initiative. To ensure that even more effective pollution control
concepts continue to emerge as candidates for future clean coal
competitions, we are also requesting $22.0 million for research into
even cleaner and more affordable innovations for existing plants.
Several of the recently-selected Clean Coal projects also help
expand the menu of options for meeting the President's climate change
goal of an 18 percent reduction in greenhouse gas intensity (carbon
equivalent per GDP) by 2012, primarily by boosting the efficiencies of
power plants (meaning that less fuel is needed to generate electricity
with a corresponding reduction in greenhouse gases). To position even
more advanced, high efficiency power generating concepts for future
development and testing, we are requesting $64.0 million to continue
research into integrated gasification-combined cycle and a companion
effort in high-performance, multi-fuel-capable turbines. A key aspect
of these advanced power concepts--which will make up key modules of our
``Vision 21'' emission-free power plant of the future--is that they
emit carbon dioxide in a way that makes the greenhouse gas easier to
capture.
Carbon management will become an increasingly important element of
our coal research program. Carbon sequestration--the capture and
permanent storage of carbon dioxide--has emerged as one of our highest
priorities in the Fossil Energy research program--a priority reflected
in the proposed budget increase to $62.0 million in fiscal year 2004
from a fiscal year 2003 appropriated level of $39.9 million.
Carbon sequestration, if it can be proven practical, safe, and
affordable, can dramatically enhance our long-term response to climate
change concerns. It could offer the United States and other nations one
approach for reducing greenhouse gases that would not necessitate
changes in the way we produce, deliver, or use energy.
Beginning in fiscal year 2004, one of the cornerstones of our
carbon sequestration program will be a national network of regional
partnerships. This Secretarial initiative, which I announced in
November, will bring together the Federal Government, state agencies,
universities, and private industry to begin determining which options
for capturing and storing greenhouse gases are most practicable for
specific areas of the country. We hope to start at least five of these
partnerships in fiscal year 2004.
Our sequestration budget also includes support for the President's
National Climate Change Technology Initiative Competitive Solicitation
program. Funding from the Fossil Energy program will be combined with
funding from the Office of Nuclear Energy, Science and Technology and
the Office of Energy Efficiency and Renewable Energy to competitively
fund technology R&D with the greatest potential to reduce, avoid, or
sequester gas emissions.
Another aspect of the President's Coal Research Initiative is the
production of clean fuels from coal. Hydrogen has emerged as a major
priority within the Administration and the Department of Energy as a
clean fuel for tomorrow's advanced power technologies (such as fuel
cells) and for future transportation systems. Within the Fossil Energy
program, we have allocated $5.0 million for research into new methods
for making hydrogen from coal.
To provide fundamental scientific knowledge that benefits all of
our coal technology efforts, our fiscal year 2004 Budget also includes
$37.5 million for advanced research in such areas as materials, coal
utilization science, analytical efforts, and support for coal research
at universities (including historically black and other minority
institutions).
Other Power Systems Research and Development.--We are also
proposing $47.0 million for continued development of fuel cells with an
emphasis on lower-cost technologies that can contribute to both Clear
Skies emission reductions, particularly in distributed generation
applications, and Climate Change goals by providing an ultra-high
efficiency electricity-generating component for tomorrow's power
plants. Distributed power systems, such as fuel cells, also can
contribute to the overall reliability of electricity supplies in the
United States and help strengthen the security of our energy
infrastructure.
Natural Gas Research.--The President's Clear Skies Initiative also
provides the rationale for much of the Department's $26.6 million
budget request for natural gas research. Clear Skies legislation is
likely to further increase demand for this clean-burning fuel; even in
the absence of new environmental requirements, natural gas use in the
United States is likely to increase by 50 percent by 2020.
Our natural gas research program, therefore, is directed primarily
at providing new tools and technologies that producers can use to
diversify future supplies of gas. Emphasis will be increased on
research that can improve access to onshore public lands, especially in
the Rocky Mountain region where much of our undiscovered gas resource
is located. A particularly important aspect of this research will be to
develop innovative ways to recover this resource while continuing to
protect the environmental quality of these areas.
We also plan to establish a new industry-led, university consortia-
based program to develop breakthrough technologies that can help assure
a continued supply of affordable natural gas beyond 2015. The focus of
this program will be on projects that could revolutionize the way
natural gas is supplied in the United States--a focus that is well
beyond the type of research industry is now doing.
Natural gas storage will also assume increasing significance in the
United States as more and more power plants require consistent, year-
round supplies of natural gas. Toward this end, we will initiate a
nationwide, industry-led consortium that will examine ways to improve
the reliability and efficiency of our Nation's gas storage system and
explore opportunities for LNG facility sitting.
The most significant change in our Natural Gas Research program is
the new work we are proposing in hydrogen. In keeping with our energy
security goal of finding alternatives to traditional transportation
fuels, we are proposing to spend $6.6 million to study innovative
methods to produce hydrogen from natural gas. We will ask industry,
academia, and our national laboratories to submit new ideas on hydrogen
production and related research. Since the byproduct of gas-to-hydrogen
processes will likely be carbon dioxide, this effort will also include
research on ways to capture this greenhouse gas. This work will be
closely coordinated with other efforts in the Office of Fossil Energy
to capture and sequester carbon dioxide.
Over the long-term, the production of natural gas from hydrates
could have major energy security implications. Hydrates--gas-bearing,
ice-like formations in Alaska and offshore--contain more energy than
all other fossil energy resources. Hydrate production, if it can be
proved technically and economically feasible, has the potential to
shift the world energy balance away from insecure sources of supply.
Understanding hydrates can also improve our knowledge of the science of
greenhouse gases and possibly offer future mechanisms for sequestering
carbon dioxide. For these reasons, we are continuing a research program
to study gas hydrates with a proposed funding level of $3.5 million.
Oil Technology Development.--The President's National Energy Plan
calls attention to the continued need to strengthen our Nation's energy
security by promoting enhanced oil (and gas) recovery and improving oil
(and gas) exploration technology through continued partnerships with
public and private entities.
At the same time, however, we recognize that if the Federal oil
technology R&D program is to produce beneficial results, it must be
more tightly focused than in prior years. Consequently, our fiscal year
2004 Budget request of $15.0 million reflects a reorientation of the
program toward those areas where there is clearly a national benefit
rather than solely a corporate benefit.
One example is the use of carbon dioxide (CO<INF>2</INF>) injection
to enhance the recovery of oil from existing fields. CO<INF>2</INF>
injection is a proven enhanced oil recovery practice that prolongs the
life of some mature fields, but the private sector has not applied this
technique to its fullest potential due to insufficient supplies of
economical CO<INF>2</INF>. A key Federal role to be carried out in our
proposed fiscal year 2004 program will be to facilitate the greater use
of this oil recovery process by integrating it with CO<INF>2</INF>
captured and delivered from fossil fuel power plants.
We will also refocus much of our Oil Technology program on a new
Domestic Resource Conservation effort that will target partnerships
with industry and universities to sustain access to marginal wells and
reservoirs. These aging fields account for 40 percent of our domestic
production, yet contain billions of barrels of oil that might still be
recovered with ever-improving technology. A high priority effort in
fiscal year 2004 will be to develop ``micro-hole'' technology. Rather
than developing just another new drilling tool, the Federal program
will integrate ``smart'' drilling systems, advanced imaging, and
enhanced recovery technologies into a complete exploration and
production system. Micro-hole systems may offer one of our best
opportunities for keeping marginal fields active because the smaller-
diameter wells can significantly reduce exploration costs and make new
drilling between existing wells (``infill'' drilling) more affordable.
Using breakthrough technology like this to keep marginal fields in
production preserves the opportunity to eventually apply even more
advanced innovations that could recover even larger quantities of
domestic crude that traditional oil recovery methods currently leave
behind.
Other Fossil Energy R&D.--Our budget also includes $124.3 million
for other activities in our Fossil Energy program, including $92.8
million for headquarters and field office salaries, $3.0 million for
plant and capital improvements, $9.7 million for environmental
restoration, $6.0 million for Federal matching funds for cooperative
research and development projects at the University of North Dakota and
the Western Research Institute, $2.8 million for electricity and
natural gas import/export responsibilities, and $10.0 million for
advanced metallurgical research at our Albany Research Center. The
increase in funding at the Albany Center (up from $6.0 million in
fiscal year 2003) reflects the Center's growing role in developing
better materials for fuel cells and in studying new mineral carbonation
concepts for carbon sequestration.
PETROLEUM RESERVES
The Strategic Petroleum Reserve and Northeast Home Heating Oil
Reserve are key elements of our Nation's energy security. Both serve as
response tools for the President to use to protect U.S. citizens from
disruptions in commercial energy supplies.
Strategic Petroleum Reserve.--The President has directed us to fill
the Strategic Petroleum Reserve to its full 700 million barrel
capacity. The mechanism for doing this--a cooperative effort with the
Minerals Management Service to exchange royalty oil from Federal leases
in the Gulf of Mexico--is working well. We have been able to accelerate
fill from an average of 60,000 barrels per day at the start of the
President's initiative to a planned rate of 130,000 barrels per day for
deliveries beginning this month.
Because of the President's ``royalty in kind'' initiative, we have
achieved the Reserve's highest inventory level ever, now at 600 million
barrels. Our goal remains to have a full inventory of 700 million
barrels by the end of calendar year 2005.
Our fiscal year 2004 Budget for the SPR is $175.1 million, all of
which is now in our facilities development and operations account. We
do not require additional funds in the oil acquisition account because
charges for transporting ``royalty in kind'' oil to the SPR are now the
responsibility of the oil supplier. Also, because we have the authority
to ``borrow'' funds from other Departmental accounts to support an
emergency SPR drawdown, we no longer require the same amount of standby
funding in this account. This has allowed us to use $5.0 million in
funds previously appropriated for this purpose to support a portion of
our fiscal year 2004 Fossil Energy R&D budget request.
Northeast Home Heating Oil Reserve.--We are requesting $5.0 million
for the Northeast Home Heating Oil Reserve, a decrease of $1.0 million
from the fiscal year 2003 appropriated level. The decrease reflects
cost savings realized from recompeting our commercial storage
contracts. The 2-million-barrel reserve remains ready to respond to a
Presidential order should there be a severe fuel oil supply disruption
in the Northeast. A key element of this readiness is a new online
computerized ``auction'' system that we implemented during the last
year to expedite the bidding process. Installing and testing the
electronic system (including tests with prospective commercial bidders)
has been a major element of the Office of Fossil Energy's role in
implementing the ``e-government'' initiatives in the President's
management agenda.
Naval Petroleum and Oil Shale Reserves.--The fiscal year 2004
Budget request of $16.5 million is a decrease of $1.2 million from the
fiscal year 2003 appropriated level. The Rocky Mountain Oilfield
Testing Center (RMOTC), established at the Naval Petroleum Reserve No.
3 in Wyoming, will be closed, resulting in a $3 million per year cost
savings. RMOTC is more appropriately a private sector activity. We also
intend to transfer the Naval Petroleum Reserve No. 2 in California to
the Department of the Interior by the end of fiscal year 2003, although
the transition and certain environmental compliance activities will
continue into fiscal year 2004. We further expect to be able to reduce
our funding requirements for equity redetermination studies for the
Government's portion of the Elk Hills Naval Petroleum Reserve No. 1,
which was divested in 1998. Of the four producing zones for which final
equity shares had to be finalized, three have been completed; the
fourth (the Shallow Oil Zone) is expected to be finished in fiscal year
2005.
ENERGY CONSERVATION BUDGET REQUEST
For our Interior appropriation funded programs in fiscal year 2004,
we are requesting $875.8 million, $16.0 million less than appropriated
in fiscal year 2003. The decrease reflects a shift in priorities among
activities supported by the different appropriations, consistent with
the Administration's R&D investment criteria and PART results, as I
will describe through my testimony.
Mr. Chairman, our fiscal year 2004 Budget reflects the new
organization within EERE. Two years ago, EERE was divided into 31
programs, in 17 offices, stovepiped into 5 market sectors. There were
multiple overlapping layers of management and duplicative and
inconsistent business systems that generated significant inefficiencies
and made it difficult to ensure accountability.
In response to the President's Management Agenda, we launched a
dramatic restructuring of the EERE program in April 2002. This
restructuring eliminated the 5 market sectors and 17 offices,
streamlined 31 programs into 11, eliminated up to four management
levels, and centralized administration functions into a single support
organization with a focus on developing consistent, uniform, and
efficient business practices. This is the most dramatic restructuring
of EERE in at least 12 years and arguably in its history.
The restructuring combined all the hydrogen and fuel cell
activities, formerly scattered across 2 market sectors and 3 programs,
into a single program for greater efficiency and synergy. It also
combined all the bioenergy-related activities, formerly scattered
across 3 market sectors and 3 programs, into a single program focused
on advanced biorefineries.
The fiscal year 2004 Budget is fully aligned with EERE's new
management structure and strategic goals and together they will provide
greater synergy and increased efficiency and productivity in the R&D
and deployment activities lead by EERE.
EERE's R&D and technology deployment efforts supported by the
fiscal year 2004 Budget will provide Americans with greater freedom of
choice of technology, while providing increased energy security, and
reducing financial costs and impacts on the environment.
Mr. Chairman, the Energy Conservation budget request has been
developed with these challenges and opportunities in mind.
FreedomCAR and Vehicle Technologies.--The FreedomCAR and Vehicle
Technologies (FCVT) Program is developing more energy efficient and
environmentally friendly highway transportation technologies to help
reduce United States petroleum consumption. The long-term aim of the
program is to develop ``leap frog'' technologies such as hydrogen-
fueled vehicles to provide Americans with freedom of mobility along
with energy security, lower costs, and lower environmental impacts.
Program activities include research, development, demonstration,
testing, technology validation, technology transfer, and education that
could achieve significant improvements in vehicle fuel efficiency and
displacement of oil by other fuels which ultimately can be domestically
produced in a clean and cost-competitive manner.
In fiscal year 2004, the Department is requesting $157.6 million, a
decrease of $19.7 million below the fiscal year 2003 appropriated level
for the FreedomCAR and Vehicle Technologies program. The FreedomCAR
portion of the budget is $91.1 million, an increase of $5.5 million
above the fiscal year 2003 appropriated level. All funding for
transportation fuel cell and hydrogen infrastructure activities is
included in the Hydrogen, Fuel Cells, and Infrastructure Technologies
program to accelerate RD&D activities to support both the FreedomCAR
partnership and President's new Hydrogen Fuel Initiative.
Fuel Cell Technologies.--In fiscal year 2004, we are requesting
$77.5 million, an increase of $22.4 million above the fiscal year 2003
appropriated level for Fuel Cell Technologies from Interior
Appropriations. The fiscal year 2004 Budget supports fuel cell cost
reduction and initiation of a fuel cell vehicle test and evaluation
program.
Americans currently depend on foreign sources for 55 percent of our
oil-a dependence that is projected to rise to 68 percent by 2025. Since
two thirds of the oil we consume is used for transportation, we must
focus on alternative means of fueling transportation from domestic
resources if we ever expect to reverse this trend.
Hydrogen fuel cell vehicles require no petroleum-based fuels and
emit no pollutants or carbon dioxide. Their development and commercial
success would remove personal transportation as an environmental issue
and substantially reduce our dependence on foreign oil
The hydrogen needed to fuel these vehicles is domestically
available in abundant quantities as a component of natural gas, coal,
biomass, and even water through electrolysis using renewable or nuclear
power. The challenge is to economically produce, deliver, store, and
distribute hydrogen for use as a consumer fuel, and to engage the
broader oil, energy, and power companies in this effort. To meet this
challenge, the President's fiscal year 2004 Budget proposes a new
Hydrogen Fuel Initiative, a $1.2 billion effort over five years, which
will accelerate research and development activities to solve technical
challenges in hydrogen production, delivery, storage, and distribution.
When the vision of the President's Fuel Initiative is achieved,
hydrogen will power the fuel cells that provide energy for our cars,
trucks, homes, schools, and businesses.
To support FreedomCAR and the Hydrogen Fuel Initiative, we need to
make significant research and development investments to develop
vehicles powered by hydrogen fuel cells and the infrastructure to
support them. The government will be to help fund and coordinate the
high-risk R&D work of numerous private sector partners and our National
network of science laboratories. Government coordination of this
undertaking will help resolve one of the difficulties associated with
development of a commercially viable hydrogen fuel cell vehicle: the
``chicken and egg'' question. Which comes first, the fuel cell vehicle
or the hydrogen production and delivery-refueling infrastructure to
support it? The President's Hydrogen Fuel Initiative, in conjunction
with the FreedomCAR partnership, answers the question by proposing to
develop both in parallel; that is, to augment the already significant
investments in vehicle technologies with new investments in hydrogen
and fuel cell technologies. By so doing, Federal investments can help
advance commercialization of hydrogen fuel cell vehicles and
infrastructure by 15 years, from 2030 to 2015.
These efforts will enable the development of hydrogen fuel cell
vehicles for the showroom floor by 2020. Success of these programs will
begin to eliminate the need for imported oil, while simultaneously
reducing emissions and greenhouse gases from America's transportation
fleet without affecting the freedom of personal mobility we demand.
Weatherization and Intergovernmental Activities.--In fiscal year
2004, we are requesting $357.0 million for Weatherization &
Intergovernmental Activities, $42.5 million more than appropriated in
fiscal year 2003.
The Weatherization and Intergovernmental Program activities support
the President's National Energy Policy recommendations for rapid
deployment of clean energy technologies and energy efficient products.
The program's funding request also supports the President's commitment
to increase funding by $1.4 billion over 10 years for the
Weatherization Assistance Program, which improves the energy efficiency
of dwellings occupied by low-income Americans.
Our Weatherization Assistance Program request ($288.2 million,
$64.7 million above the fiscal year 2003 appropriated level), supports
weatherization of approximately 126,000 low-income homes. Based on
historical data, the program anticipates that low-income families will
save $1.80 in energy costs for every dollar invested over the life of
the efficiency improvements. The Weatherization Assistance Program was
assessed using the Administration's PART and was rated Moderately
Effective.
Our fiscal year 2004 request for other subprogram activities within
the Weatherization and Intergovernmental Program are as follows: State
Energy Program Grants ($38.8 million, $5.9 million less than
appropriated in fiscal year 2003), State Energy Activities ($2.4
million, $3.0 million less than appropriated in fiscal year 2003), and
Gateway Deployment ($27.6 million, $13.3 million less than appropriated
in fiscal year 2003). Within Gateway Development, there are several
program shifts. For example, to avoid duplication of efforts, funding
for International Market Development activities is now requested within
the International Renewable Energy Program in the Energy and Water
appropriation. The National Industrial Competitiveness through Energy,
Environment, and Economics (NICE3) activity is terminated because the
activities are within industry's capability and do not match up well
against the Administration's R&D investment criteria. Other activities
are being refocused to ensure program performance can be meaningfully
evaluated.
Building Technologies.--EERE's buildings technology R&D programs
address technologies, techniques and tools to make residential and
commercial buildings, both in existing structures and new construction,
more energy efficient, productive and affordable. Strategies include
system R&D to reduce overall residential and commercial building energy
use, R&D focused on energy end uses such as water heating, food
refrigeration, and clothes washing, and the development of building
energy efficiency codes and national equipment energy efficiency
standards. The Buildings program was assessed using the PART and was
rated Adequate. Recommendations included refocusing R&D funding on
long-term, high-risk, potentially high-payoff activities; evaluating
potential duplication of Building program activities funded via the
Energy and Water appropriation; and developing better performance
measures. The request begins to address these recommendations.
Our fiscal year 2004 Budget for the Interior-funded portion of the
Building Technologies program is $52.6 million, $6.8 million less than
appropriated in fiscal year 2003. The funding supports a portfolio of
activities that includes solid-state lighting, energy efficiency
improvement of other building components and equipment, and their
effective integration using whole-building-system-design techniques, as
well as the development of codes and standards.
Emerging Technologies R&D.--In fiscal year 2004, we are requesting
$21.8 million to conduct building components and equipment R&D. This
amount is $9.4 million below the fiscal year 2003 appropriated level.
The request reflects a redirection of near-term, low risk R&D in space
conditioning and appliances to longer-term, higher-risk activities with
a greater potential public benefits. For example, we are proposing a $5
million investment to expand our Solid State Lighting research
activities. Solid State Lighting represents a promising, new approach
to efficient lighting systems. Our Solid State Lighting research will
create the technical foundation to revolutionize the energy efficiency,
appearance, visual comfort, and quality of lighting products by
achieving efficiencies upwards of 70 percent (source efficiency).
Residential Buildings and Zero Energy Buildings R&D.--The fiscal
year 2004 Budget is $15.2 million, an increase of $2.9 million from the
fiscal year 2003 appropriated level. The Department will pursue systems
research on five promising technology areas, enhance activities to
apply practices and approaches developed through Building America to
existing residential buildings.
Equipment Standards and Analysis Program.--We are requesting $9.0
million, compared with $9.6 million in our fiscal year 2003
appropriated level. The Department will continue the development of
equipment test procedures and standards. We will be completing analyses
that will add new products to the lighting and appliance standards
program.
Industrial Technologies.--The Industrial Technologies program
partners with energy-intensive industries to develop and apply advanced
technologies and practices that reduce industry's energy consumption
and improve environmental performance. In fiscal year 2004, we are
requesting $24.0 million, compared with the $62.1 million appropriated
in fiscal year 2003, for the Industries of the Future (IOF) (Specific)
programmatic area. The request reflects a determination that the
program supports some activities for which the private sector has
sufficient incentive to pursue without Federal support. The Department
has re-focused its R&D efforts to higher priority technologies within
the EERE portfolio, including hydrogen and advanced fuel cell
technologies. The activities that continue in the IOF (Specific)
programmatic area will focus on bringing existing projects to
successful commercialization and pursuing longer-term, higher-risk
activities with significant potential public benefits that industry
would not undertake alone. We are also requesting $34.4 million, $2.1
less than appropriated in fiscal year 2003, for the IOF (Crosscutting)
programmatic area, which includes Industrial Materials of the Future
($13.6 million); High Efficiency Combustion Systems ($2.0 million);
Sensors and Control Technology ($3.8 million); and Industrial Technical
Assistance ($14.8 million).
Biomass.--For the first time we have brought a diverse industry
together and produced a vision and R&D roadmap that has increased the
level of industry investment. This roadmap has allowed us to begin the
process of rebuilding the program and focusing on the most promising
long-term opportunities for these technologies. We have improved our
collaboration with other Federal agencies, especially the Department of
Agriculture (USDA). In addition, the Farm Bill provided direction and
mandatory funding to USDA to work with DOE in advancing biomass
technologies. Our fiscal year 2004 request for Interior-funded portion
of the biomass program is $8.8 million, compared with $24.6 million
appropriated in fiscal year 2003. The request supports continuing R&D
on the thermochemical and bioconversion process, and evaluating
opportunities for the production of fuels and chemicals from
intermediates (``platforms'') such as sugars from biomass and starch
crops, synthesis gas from biomass gasification, and biomass oils. The
request terminates black liquor gasification activities, which do not
align well with the R&D investment criteria, as sufficient incentive
exists for industry to pursue these activities alone.
EERE bioenergy activities were integrated into one office to help
focus resources on a limited and more coherent set of goals and
objectives, increasing collaboration with industry, reducing overhead
expenses, and exploiting synergies among similar activities in support
of a future biorefinery industry. This focus on a clear set of goals,
substantial leveraging of research funding with industry, and the
transfer to industry of a number of demonstration activities that
industry should continue to pursue without federal support is reflected
in our request.
Power.--Our Distributed Energy Resources Program leads a national
effort to develop a flexible, smart, and secure energy system by
integrating clean and efficient distributed energy technologies
complementing the existing grid infrastructure. The program is
supporting regional and state strategies to ensure electricity and
reliability. By producing electricity where it is used, distributed
energy technologies can increase grid asset utilization and reduce the
need for upgrading some transmission and distribution lines. Also,
because distributed generators are located near the point of use, they
allow for the capture of the waste heat produced by fuel combustion
through combined heat and power (CHP) systems. In fiscal year 2004, we
are requesting $51.8 million, compared with $61.1 million appropriated
in fiscal year 2003. The program is following an RD&D model, similar to
Advanced Turbine Systems subprogram, completed in fiscal year 1999, in
pursuing activities in microturbines, reciprocating engines, thermally
activated devices and other areas. The program expects to meet the
performance milestones for efficiency, environmental emissions and cost
effectiveness for microturbines and reciprocating engines through cost-
shared RD&D and down selecting among several different approaches.
Federal Sector.--The Federal Government is the Nation's single
largest energy consumer. It uses almost one quadrillion British thermal
units (Btu) of energy annually, or about 1 percent of the Nation's
energy use. In fiscal year 2000, the Federal Government spent about $4
billion in energy to heat, cool, light, and conduct operations in
500,000 buildings. Simply by using existing energy efficiency and
renewable energy technologies and techniques, the Federal Government
can begin to lead the Nation toward becoming a cleaner, more efficient
energy consumer. In fiscal year 2004, we are requesting $20.0 million
for the Federal Energy Management Program to continue meeting the goals
of reducing Federal energy consumption.
Program Management.--The Energy Conservation Program Management
budget component provides executive and technical direction,
information, analysis, and oversight required for efficient and
productive implementation of those programs funded by Energy
Conservation appropriations in EERE. In addition, Program Management
supports all Headquarters staff, six Regional Offices, the Golden Field
Office in Colorado and several DOE employees at three Operations
Offices to plan and implement EERE activities as well as facilitate
delivery of applied R&D and grant programs to federal, regional, State,
and local customers. In fiscal year 2004, we are requesting $76.7
million for these activities, which is fairly level with the fiscal
year 2003 appropriated level.
ENERGY INFORMATION ADMINISTRATION BUDGET REQUEST
For the Energy Information Administration (EIA), we are requesting
$80.1 million, the same level as appropriated in fiscal year 2003. The
requested funding will be used for ongoing data and analysis activities
and critical data quality enhancements, so EIA can continue to
disseminate accurate and reliable energy information and analyses to
inform energy policy-makers. EIA's base program includes the
maintenance of a comprehensive energy database, the dissemination of
energy data and analyses to a wide variety of customers in the public
and private sectors through the National Energy Information Center, and
the maintenance of modeling systems for both near- and mid-term energy
market analysis and forecasting.
In fiscal year 2004, EIA's priority is to maintain high-quality
core energy data programs and forecasting systems needed to provide
timely data, analysis, and forecasts. EIA will complete the update and
overhaul of its consumption surveys. EIA will continue to overhaul the
electricity surveys and data systems to accommodate changes in the
deregulated energy industry and improve data quality and accuracy in
the petroleum, natural gas, and electricity areas.
EIA continues to aggressively expand the availability of electronic
information and upgrade energy data dissemination, particularly on the
EIA Web site. The increased use of electronic technology for energy
data dissemination has led to an explosive growth in the number of its
data customers and the breadth of their interests, as well as an
increase in the depth of the information distributed. During fiscal
year 1997, EIA established a goal to increase the number of users of
its Web site by 20 percent annually. In each of the succeeding years
EIA has managed to either meet or exceed this commitment, with a 39
percent increase in fiscal year 2002 while delivering more than 2,400
gigabytes of information.
EIA also has increased dramatically the distribution of its
information by becoming the dependable source of objective energy
information for the news media. By using this distribution channel EIA
has ensured its energy data to be widely seen and used by the general
public at minimal additional cost to the Federal Government.
In May 2002, on short notice, and with no new budget resources,
EIA, at my direction, began operation of a new weekly survey of natural
gas in underground storage after the American Gas Association stopped
operation of its weekly survey. This survey is the Nation's only weekly
gas supply data and is crucial to decisions of supply planners in
industry and utilities as well as to analysts assessing the current
natural gas supply and demand situation, especially prior to the winter
heating season.
EIA culminated a three-year effort to revise its electric power
data collection forms with a new set of surveys. The new surveys will
collect information necessary to understand and evaluate many of the
changes that have occurred in the electric power industry due to
restructuring and retail competition by collecting additional
information from the growing percentage of nonutility generators. EIA
added to its E-Government initiatives by incorporating Internet data
collection with this set of surveys.
In the area of improving data quality, EIA has reprocessed twelve
years of electricity data from nonutility generators and has revised
its Annual Energy Review to present this data according to industry
conventions, moving nonutility power producers' consumption from the
industrial sector to the electric power sector. The revised data uses
natural gas consumption supplied by nonutility electric generators in
place of natural gas pipeline deliveries, providing a better
representation of natural gas consumption. These revisions will be
extended to other EIA publications this year.
With increasing frequency, EIA has been requested by the
Administration and Congress to produce comprehensive service reports
that analyze current energy issues of major importance. The number and
sophistication of these analytical requests have grown, often requiring
EIA to postpone work on vital quality assurance activities, and
requiring negotiation with the requestor on delivery dates and the
scope of the study and final report. As in past years, EIA fulfilled
several requests for special studies and investigations for the
Administration and Congress. During fiscal year 2002, EIA expended
nearly $2 million in resources to complete the 93 special reports and
analyses during the fiscal year. In particular, EIA was asked by
several Members of Congress to evaluate the impact of several
provisions of the proposed House and Senate Energy Bills on energy
demand, supply, prices, and on the economy. These analyses were often
referred to Congressional floor debates and many were cited in revision
to the proposed Senate bill. If this level of demand continues, EIA is
expected to exceed $2 million in fiscal year 2004 to fulfill these
requests for analyses and reports on topical energy issues.
Mr. Chairman, and Members of the Subcommittee, this concludes my
prepared statement. I would be happy to answer any questions you may
have at this time.
Senator Burns. Thank you, Mr. Secretary. We have been
joined by the ranking member, and former chairman of the full
committee, Senator Byrd this morning. Senator Byrd, if you have
a statement, we would entertain that at this time.
OPENING STATEMENT OF SENATOR ROBERT C. BYRD
Senator Byrd. Mr. Chairman, thank you very much, and thank
you, Mr. Secretary. Thank you, Mr. Chairman, for holding this
hearing today so that the members of this subcommittee have an
opportunity to review and discuss the administration's fiscal
year 2004 budget request for the Office of Fossil Energy, the
Office of Energy Efficiency, the Energy Information Agency, and
the Strategic Petroleum Reserve. I appreciate your willingness
to ensure the Secretary's appearance this morning. He's kind of
hard to get hold of, but you brought him in. You are from the
west, and when you go after them, you get them, right?
Senator Burns. I wish I could say that about my fishing.
Senator Byrd. Much of the $1.7 billion appropriated to the
Energy Department through the Interior bill is directed towards
research and development activities. These programs,
particularly the fossil energy programs, are the linchpin to
ensuring our Nation's energy security. Mr. Chairman, 52 percent
of the electricity generated in this country comes from a coal-
fired power plant, and close to 100 percent of our
transportation comes from oil and natural gas. Obviously, the
importance of fossil fuels to our national and economic
security cannot be overstated.
Yet despite those facts and contrary to all the rhetoric
that we hear coming from this administration, what is being
proposed for the Office of Fossil Energy is simply disastrous.
This budget cuts coal research 10 percent below the fiscal year
2003 enacted level. It cuts natural gas research and
development by 43 percent. It cuts oil research and development
by 64 percent. And it would put 150 of the brightest fossil
energy scientists out of work at the very moment we should be
redoubling our efforts to find resources in an environmentally
sound manner.
Mr. Chairman, I look forward to working with you throughout
the appropriations process to see what can be done to rectify
these shortsighted and negative proposals. I know that
resources will be particularly tight for fiscal year 2004, but
this budget request cannot be adopted in its present form
without doing serious damage to our Nation's energy security
efforts. I would urge you and all the members of the
subcommittee to resist going down that path.
Thank you, Mr. Chairman.
Senator Burns. Thank you, Senator.
We discussed this when the Secretary was in my office, and
we're going to find a way to get the job done the way it should
be done. I'm always amazed at the mindset of some folks. The
majority of our oil and gas is found on public lands. Yet, we
vote every day to take those lands and those areas where that
resource is found completely off the board when it comes time
to inventory what we have in the event that we need them. So
this thinking on oil and gas runs counter to some ideas here on
the Hill of what we should be using.
We spend a lot of money every year on the Strategic
Petroleum Reserve, and send millions of barrels of oil down
there, we simply buy it and put it in the ground. That's a cost
to the taxpayer. The taxpayer is paying nothing for the natural
reserves that we find on some of our outer continental shelf
and our public lands. It is already there because Mother Nature
stores it, but we are denied the right to inventory it and
recover it, if it has to be recovered.
About 2 weeks ago we had the opportunity to drive the fuel
cell automobiles that General Motors had out here. I will tell
you that looking at the numbers, and looking at the work that's
being done, we are closer to a hydrogen society than we think
we are. The work that's being done in hydrogen fuel cells is
starting to see some results. So I'm very encouraged about
that. Also the Secretary and I think there is a great
possibility with Future-Gen.
We have tons and tons of coal, and we should not back off
in working on the technology to make it more feasible, to make
it more acceptable to the environment, and to look at this
great product we have because it is a source of the cheapest
power that we produce today other than hydro. Hydro is the only
one that can come close to that. So, Mr. Secretary, we talked a
little bit about Future-Gen and its proposals, we look forward
to working with you on that, and of course we also have some
very distinct ideas on where it should be located, but
nonetheless I think it is a bold step as far as our concerns.
In the area of conservation, I believe you are aware of the
solid-state lighting initiative which this subcommittee
supported with an appropriation of around $3 million last year.
You have requested $5 million for this program and there is
significant promises that lay ahead in solid-state lighting and
we've been a witness to a lot of that research and development.
I understand the Department has investigated and calculated
these potential benefits while developing a road map for the
solid-state lighting program. Would you want to share with the
committee your conclusions or have you drawn any conclusions,
or where are you in that particular program?
Secretary Abraham. Well, I think, Mr. Chairman that the
conclusions we have to this point is we believe it is possible
to produce higher quality lighting using advanced solid-state
technology that could produce a 70 percent improvement over the
best fluorescent lighting today. We are seeking about a 21
percent increase in the lighting R&D budget from what we had
submitted in 2003, in part to accommodate an increase in next-
generation solid-state lighting.
So you know, I think the percentage of total electricity
used in this country that's attributed to lighting is about 22
percent of all of our electricity demand level, so if we can
make gains in efficiency or breakthroughs in this area, it has
a much broader application than a lot of the other things in
which we do research. So I think we are exploring creating a
more formal public/private kind of partnership and try to focus
more on this issue. And I know that in the energy bill, this
has come up as an area in which the Congress will want to take
a lead in setting out a formalized process for this and it is
an area where real potential exists.
Senator Burns. For the information of the committee, we are
talking about the use of fiber optics for the purpose of
lighting. Senator, this can even be done through your drapes.
They can change the tone of light and the amount of light. The
folks who work what they call the midnight shift now, but in
your day we worked graveyard, if you remember.
Senator Byrd. The hoot owl.
Senator Burns. The hoot owls. They can now make lighting in
a plant to simulate a morning light, noon light, and an
afternoon light, even though it's dark outside. It's a
marvelous breakthrough. There is a consortium of manufacturers
who have come together to support this lighting initiative.
It's just like the Secretary says, when you talk about the
possibility of a 70 percent savings in lighting costs alone in
this country, you're talking about a big chunk of conservation.
I really hope that the Department of Energy will take a closer
look.
According to the budget justification, a rather small off-
highway vehicle R&D program is being terminated because other
research opportunities have higher impact on energy savings. In
looking at the Department's own R&D road map off-highway,
however, I find that off-highway uses account for 20 percent of
the fuel used in the transportation sector. That is a huge
amount and I don't think there are a lot of people that
understand how much off-highway fuel is used in this country.
Can you reconcile these figures with the energy use and the
emissions with your decision to terminate a $3.5 million
program?
OFF-HIGHWAY VEHICLE R&D PROGRAM TERMINATION
Secretary Abraham. As I understand, the principal focus of
the work that has been done has been related to railroad
applications, and I think in that area the amount of actual
demand or the use of oil is pretty small compared to the daily
total consumption of the country, which is about a quarter-
million barrels a day out of 12 million barrels a day of
imports alone. So in terms of the priority somebody has to set
when somebody sets a budget, we looked at that percentage
versus the percentage that goes to the rest of the
transportation sector and made the judgment that even if we
were highly successful in the improvement of R&D in this area
that it wouldn't have in terms of application that big of an
effect, and I think that's the basis of that conclusion that
you read.
GASOLINE PRICES
Senator Burns. I think even though we're going into the
vacation season gasoline prices are on everybody's mind. We saw
the spike in February, and it's settled down to around $27 or
$28 a barrel now. They tell me the domestic supplies are lower,
our domestic production keeps going down. OPEC made an
announcement the other day that they were going to watch their
supplies. Can you give us an update on these fluctuating oil
prices? And have you drawn any conclusions about what we should
be doing about them?
Secretary Abraham. Let me talk about the sense of the
market for a minute and then what we should be doing. On the
market itself, there is no question that we went through a
period here over the last 4 or 5 months that was sort of the
perfect storm in terms of problems. Just an incredible
combination of events happened in a very short period of time.
One of them was the strike in Venezuela, which took about 3
million barrels of production out for a very long time, and
much of the Venezuelan oil comes to the United States, that's
one of our major supply sources. We also had a cold winter
which made the demand go up during the winter heating season.
We had in Nigeria a period of civil unrest that threatened some
of the employees that worked in the oil sector there and they
pulled people out of the fields and caused production in
Nigeria to drop for a period. And we had the period leading up
to the war in Iraq, we had the war, and since its beginning of
course and even today, the production from Iraq was essentially
halted. So this was a pretty amazing period of events.
In one sense we saw some spikes in the market and you
referred to them, we saw the market go from the mid-20s to even
a little bit higher, to spike up into the high-30s for a brief
period of time right before the war, I think the top limit it
hit was $39.99 a barrel. And it has now come down and is
stabilizing in the mid-to high-20 range. We would like probably
less of that, to see, you know, obviously less of that
volatility.
On the other hand, if you compare this period to three
similar periods in which a lot of international crises were
taking place, from the last 30 years, the spike was
substantially lower. In 1973 during the oil embargo that took
place, prices spiked four-fold. In the 1979-80 period during
the revolution in Iran, prices more than doubled. From the
Persian Gulf War in 1990, 1991, prices doubled. But here they
went up for a shorter period of time and by a much smaller
amount.
As a consequence, we have seen gasoline prices, the
projection for gasoline prices for the summer based on our
energy administration reduced substantially. At one point we
were pointing to a summer-long average of almost $1.70 a
gallon, and now it's $1.46 a gallon. We would like to see
gasoline prices lower than that, but that's comparable or lower
than two of the last three seasons, so in that sense we are a
little more optimistic today than we would have been just 1 or
2 months ago.
What we would like to do in the long term is much more
important, and I think the subcommittee cares how we address
this. One, the chairman has talked about with me and talked
publicly at some length about the need to diversify our
international source of supply.
Senator Byrd makes a good point. We will try to get our
national labs focused on this challenge.
So to complete the thought I was on before, Senator, the
issue you have raised on a number of occasions about the
diversification of where we have energy partnerships is
important and Russia is one area I know you're interested in,
and is one focus of our attention as well. Last year we hosted
a summit between Russian energy companies and American energy
companies, tried to bring them together to create an
opportunity for people to become familiar with new project
opportunities in Russia and the Caspian region generally. There
is a lot of infrastructure that needs to be built in order for
those resources to become available to the world market, but we
see that as an opportunity. We see in Africa as well as our own
hemisphere areas where greater production is possible. That's
one part of the solution.
A second part of the solution is the need to proceed
producing more here at home, and the debate the Senate last had
on the war and other production issues is critical to that.
Finally, we try to look ahead, how can we reduce our
dependence on foreign oil, and that's really the reason that
the hydrogen proposal that we're talking about this morning, we
see it as a way to address both the dependence on imports on
the one hand and the environmental issues that relate to
internal combustion engines on the other. And we are very
confident that the research we're proposing and would be
carried out with Congress's support to develop not just a fuel
cell operating vehicle but the infrastructure to support it has
the potential by 2020 to produce the capability to literally be
operated on hydrogen fuel cells. The source of the hydrogen
could be domestic in nature and it would change the game
completely in terms of the dependence issue on the one hand and
the issue of the environmental concerns on the other.
The one thing I always point out to people is that these
issues keep coming up. Every time there is a spike in energy
prices, we all look for answers and then when the prices go
back down it seems that the people sort of forget about it for
a while and yet, the cycle continues. And whether it's a series
of issues like the ones we have had this year or others, it's
going to keep going in that sort of pattern until we get past
this debate if we are successful, which I think we can be on,
the hydrogen fuel cell initiative.
Senator Burns. Senator, do you have a statement? I was
going to go to Senator Byrd for his questions.
OPENING STATEMENT OF SENATOR PETE V. DOMENICI
Senator Domenici. I have a brief statement. First, I want
to thank you, Mr. Chairman, and welcome the Secretary. It's
good to have you here and great to be with you again. I am
interested in the President's budget for fossil energy R&D and
energy conservation programs of the Department, and related
programs. It has been 2 years since President Bush submitted
his comprehensive energy plan, and we renewed our commitment to
passing a comprehensive energy act. I look forward to Senate
action on Senate bill 14, which is pending on the calendar, and
I thank you for the help you gave us in preparing that bill.
I also thank Senator Byrd and his staff and others for the
significant help they gave us for preparing the coal provisions
of that bill, which we think are mighty powerful for America's
future. I believe the programs under the jurisdiction of the
Interior Subcommittee are critical to our Nation's future. The
administration's proposal to develop a hydrogen-powered car
through the FreedomCAR and FreedomFuel initiatives with about
$1.5 billion spread over the next 5 years hold significant
promise for the future and again, Senator Byrd, we will find
provisions for that in Senate bill 14 as a part of a Senate and
congressional policy, with some changes.
The Clean Coal Power Initiative and the Coal Research and
Technology Initiative in which DOE proposes to invest $2
billion over 10 years focuses on our most abundant energy
resource. Coal is necessarily part of our energy future, and we
want it to be clean coal. Investments in more efficient energy
technologies for industry, the building sectors, and
transportation have big payoffs for the country.
Conservation is an important component of our energy
security. The administration plans to double the funding for
weatherization assistance over 10 years will greatly advanced
this goal.
There are many good initiatives in the President's budget,
and most necessarily come at the expense of our ongoing
programs. You know of my concern, Mr. Secretary, over the
repeat of the administration proposals to significantly reduce
our investments in oil and gas technologies. These are not big
programs but over a number of years they have contributed
significantly to new technology by which we are discovering oil
and gas underground. The budget proposes funding oil at 65
percent below the currently enacted level and gas by 44 percent
below the enacted level. Those are the funding levels.
Congress has traditionally restored funding to these
programs and I suspect, even though the budget is tight, that
we will try again to set our priorities in these appropriations
bills. It will be tough for us to provide funding for all the
initiatives, but we are up to the task, and with the ranking
member understanding these issues as he does, I believe somehow
or another we are going to come through with a good
Presidential budget being made better by this subcommittee.
So I join my colleagues in welcoming you, Mr. Secretary,
and look forward to an exchange of views. Before I am finished
today, I will cite a technology that's going on in a little
community in New Mexico and that I'm going to invite you to
come and see. When it comes to the issue of clean coal, it is
truly a marvel. We can't quite get it exposed, but it's
something that the world should know about. I yield.
Senator Burns. Senator Byrd.
Senator Byrd. Thank you, Mr. Chairman, and thank you,
Senator Domenici, for the good work you're doing, and you have
made my statement already but I'm going to make it again,
because I know the Secretary wants to hear it.
FOSSIL ENERGY RESEARCH BUDGET CUTS
Mr. Secretary, 2 years ago, the administration ignored its
own campaign rhetoric and proposed an 18 percent cut in funding
for fossil energy research. At that time, I remember that
speech that the President made in West Virginia, and that's why
you're sitting right here today. He made that speech in West
Virginia, he was going to add $2 billion to fossil energy
research, so here you are. But for that, and his outreach to
the steelworkers in West Virginia, he wouldn't be President and
you wouldn't be Secretary.
So at that time, you explained away the inconsistencies
between the rhetoric and the reality by telling us that you
were new to the job and that you did not have complete control
of the budget. You told us just wait a year and we would see
concrete evidence that the administration was truly committed
to the kind of research needed to secure our national energy
security.
Last year, the President's budget proposed a 16 percent cut
in the fossil energy account. You told us then, with all due
respect, that despite its actions, the administration was
indeed devoted to fossil energy research but that the Assistant
Secretary was new to his job and did not have complete control
of the budget. You also said that he was undertaking a top-to-
bottom review of all fossil energy programs and that that
policy review would drive future budget requests.
Now today, here comes the Secretary before us to present a
budget request which again cuts fossil energy research by 16
percent overall, including 13 percent from the Clean Coal
program, 44 percent from natural gas research, and 58 percent
from oil research. I think these requests constitute prima
facie evidence that this administration lacks a coherent and
comprehensive national energy plan. I can't believe that these
cuts are based on sound policy decisions. Nor do I believe that
anyone can seriously argue that in a $2.2 trillion Federal
budget, $600 million invested in research that will allow us to
utilize our most abundant energy resources in a sound manner is
too much. Thus, I question you, Mr. Secretary.
Can you point to anything in your top-to-bottom policy
review that would suggest, even suggest a need for the level of
cuts that this administration has proposed?
Secretary Abraham. Well, let me try to preface my remarks
if I could take a little additional time on this response by
saying this administration absolutely is committed to and is
working hard on programs that relate to maintaining the
strength of coal and/or fossil fuels as part of our energy mix,
and there should be no misunderstanding of that.
Second, I want to also sort of talk briefly about the
commitments we are making and the programs we are trying to
launch.
Third, I want to put in context, although just for your
consideration, the chronology of how some of these budgets have
been put together.
Let me talk about the program, Senator. We obviously are
demonstrating a greater level of commitment to putting the
fossil fuel, and particularly the coal sector, to bring it into
the 21st century and maintain it as a strong part of our energy
mix. I base it on the rhetoric of people who accuse us of being
far too committed to coal in the future. In fact, when we
announced our hydrogen fuel vehicle program, people assailed it
because they said you were going to burn dirty coal to create
hydrogen.
Our position is that for coal to succeed and survive and be
successful, we have to address some of these environmental
concerns, and we concluded that the carbon sequestration is a
key component of that long-term vision for the use of coal.
That's why that program is increased by 60 percent. That's a
result of the review which we conducted.
I am also convinced that we have to go beyond the
laboratory and demonstrate to the world the capabilities that
we have and the ability that we will have to actually operate a
totally clean power plant, coal-based electricity generation
facilities that sequesters 100 percent of the carbon. That's
why we launched a $1 billion program in the new Future-Gen
proposal which over the next decade and perhaps 10 or 12 years
will be, I think the most ambitious new program in the area of
fossil fuel that is being undertaken anywhere in the world. In
fact, since we announced it, we have had many numerous nations
contact us to ask if they can participate.
Now, you have to----
Senator Byrd. Mr. Secretary, my time is limited. You are
still cutting the budget. Now, is there anything in the policy
documents or in the administration's national energy policy
that would convince Congress to massively scale back our
national commitment to fossil energy research?
Secretary Abraham. Let me apologize. I was taking extra
time and I hope it won't come off Senator Byrd's time.
Senator Burns. Nothing comes off his time.
Senator Byrd. You see what respect age brings you. I am the
ancient gnome of the Capitol.
PROGRAM ASSESSMENT RATING TOOL [PART]
Secretary Abraham. Let me try to focus on that specific
issue. First, in determination of some specific conclusions,
one of the things which was included in the process of putting
this budget together was the result of a series of analyses
called PART scores, that analyzed various Department of Energy
programs. It was a review conducted by the Office of Management
and Budget, and regrettably from our point of view, the scores
with respect to our natural gas and oil technology programs
deemed those programs as currently constituted ineffective.
After that process, with the programs in those areas deemed to
be literally ineffective in their performance, not every part
of them, but substantial parts of them, I did not feel I could
come to this committee or the public and say we are asking for
large amounts of money to support programs that have been rated
as ineffective. We are in the process of reconfiguring those
test programs.
Second, I would say to the committee if the chronology
could be thought about, we submitted this budget before this
committee and this Congress passed its budget, and now the
comparison to what was the enacted level of 2003 is being used
to say that we proposed big cuts. And granted, there were marks
in the House and Senate at the time, but we didn't have a final
budget. We are proposing in R&D for fossil energy a $40 million
increase over what we proposed last year.
I would also note that we had available to us last time
when we submitted our budget for our 2003 request, we had
available advanced appropriations which we could include in
that request. We still submitted a budget with an R&D----
FOSSIL ENERGY OMB BUDGET
Senator Byrd. Mr. Secretary, would you provide the
committee with the fossil energy budget submission that your
Department presented to OMB, so the committee can compare it
with what the administration has requested?
Secretary Abraham. I don't know if such documents are
normally provided in this kind of setting and I would have to
check on whether that kind of document is provided.
Senator Byrd. What I'm trying to get at is, I'm trying to
get at what you really told the Office of Management and
Budget--I suppose Mr. Mitch Daniels is still at the helm--what
you really told OMB you needed and what, how we can compare
that with what the administration requested. Perhaps then we
will be in a position to make an adjustment that will help you
meet your needs. And that's what the people I think want to
see, they want to see careful handling of their money, but they
also want to see research go forward so their children can be
encouraged by the needs are that are going to confront them.
Can you provide that?
Secretary Abraham. Senator, I can't recall which documents
we have made available or would make available. That which has
been made available in the past, I will make available. I can't
recall which of these sorts of submissions have ever been
submitted to Congress.
Senator Byrd. I can assure you that's not the first time
that question has been asked and I can also assure you that the
Appropriations Committee has been provided with the answers to
such questions as they have been propounded to various
department heads in the past. I have been around here 50 years
and this is something the committee needs to know. See what you
can do and see if you can provide that for the record.
[The information follows:]
Non-Release of Department's OMB Budget Request
According to the Office of Management and Budget [OMB], the advice
and counsel leading up to the recommendations that form the basis of
the President's budget are part of the internal deliberative process of
the executive branch. Similar to the pre-mark up activities of any
congressional committee, the initial views and positions within the
executive branch vary widely relative to the outcome in the President's
budget. In order to assure the President the full benefit of advice
from the agencies and departments, the administration treats these
working papers, such as the Department's OMB budgets, as pre-
decisional, internal documents. Therefore, the Department's OMB budget
is not releasable outside of the executive branch.
Senator Byrd. Is my time up?
Senator Burns. It is, and I would call on Senator Domenici.
CLEAN COAL
Senator Domenici. Mr. Secretary, I want to compliment the
administration on the continuing commitment to the Clean Coal
Power initiative and to the Clean Coal Power and Coal Research
initiative in the 2004 budget. I believe we should capitalize
on our greatest strength in coal and nuclear, in both areas and
address the risk areas. I think you are handling these in the
right way now and I compliment you for it.
I would like to assure you that coal initiatives will
address issues associated with mining as well as the subsequent
combustion process. For example, I want to cite this for you
and for you, Senator Byrd. There is a small company in New
Mexico in the city of Raton which has worked with a Russian
institute through your Department's Initiatives for
Proliferation Prevention to develop instruments that allow
remarkable refinements in coal and how it is mined.
This instrument, which actually mounts itself on a drill
head, enables the drill to automatically, believe it or not,
leave the last few inches of the top and bottom of the coal
seam in place. The majority, it happens, of all the heavy metal
contaminants are in those few inches of coal. Can I repeat? The
majority of the metal contaminants, which are the worse, are in
those few inches. This machine goes through the mine and leaves
that there, never touches it, and it's geared to it, it's
instrumented to it, it's all technology. What comes out is coal
that is far less contaminated. Thus, the burden of what you
have to do with it to clean it is dramatically reduced.
I continue to believe that we should focus on research and
development in clean coal. I like the big picture, let's
produce a machine. I think the same way about nuclear, let's
produce the new nuclear machine. But at the same time, there is
research of this type and many like it, and I would like to
call it to your attention because I believe it has some
fantastic potential for America. I would hate to see it used
exclusively in Russia for the next 8 or 10 years before we take
a look. So I leave that with you and I will call it to your
attention again, Mr. Secretary.
Secretary Abraham. Thank you.
FUEL CELLS
Senator Domenici. On oil and gas research, I'm disappointed
in the request. I told you about it, but I believe we will work
together on this committee to see what we can do about it.
On fuel cells, the administration's proposed initiatives
for fuel cells and hydrogen R&D have been very well received in
the scientific community and in the Congress. The so-called
FreedomCar and other things that go with it are excellent
ideas. There is a serious question about whether that program
is going to get us where we want to be fast enough, but in an
economy where we don't have all the money in the world to
spend, I believe for an initiative just announced to have $1.4
billion is an excellent start.
A recent report of the National Research Council raised the
issue, essentially saying that in its assessment, that a number
of the fuel cell demonstration projects seemed to be getting
ahead of our progress on essential fuel cell R&D. Mr.
Secretary, do you share my concern that we need more
fundamental R&D to make progress on fuel cell technology?
Secretary Abraham. Yes, we do. The challenges we have on
the hydrogen fuel cell and FreedomCar initiatives are multiple.
We have a challenge in bringing down the cost of the fuel cell
itself. The price has come down a lot in recent years, but it
still has a long way to go.
Second, we have an issue relating to storage. We have to be
able to store sufficient power on the vehicle to enable the
range that they think you should be able to drive, that's 300
miles, and there is research involved there. We have the
production of the hydrogen, and one of the things that we are
doing in this next 5-year period is to try to invest in a
variety of production technologies, coal being a possible
source, nuclear energy being a possible source, natural gas
being a source, and renewable sources as well.
Senator Domenici. Just for the record, I rode around in
one. How much was the cost of that one?
Secretary Abraham. The rental cost is in the $10,000 range.
Senator Domenici. Aren't they worth more than a few million
dollars each?
Secretary Abraham. Yes.
Senator Domenici. I would expect that if they are going to
each cost $10 million, we will have to vote on whether we want
to make any progress or not. Let me leave that.
What is your assessment of research on liquid hydrogen,
compressed gas, and carrier fuels that would transport hydrogen
in vehicles?
HYDROGEN VEHICLES
Secretary Abraham. At the end of the day, our belief is
that some of these technologies, can work for near-term
demonstrations of hydrogen vehicles. One of the major problems
is that they, for example, the liquid tanks come nowhere close
to meeting the volume targets, the issue I mentioned a moment
ago. One of the ideas a few years ago was electric vehicles,
and then people realized the distance you could drive was
constrained. We recognize that for a hydrogen motor vehicle
fleet to work, people have to see it as a comparable product to
the product it's used to, it has to drive as far, sufficient
power and size, but you have to be able to refuel and get home
when you drive some place, and the storage issues are
substantial for liquid tanks and compressed tanks.
Fuels like gasoline or methanol can be used, you have to
have an on-board processing unit, and the processors have been
reduced dramatically in size. They are expensive and
complicated projects, so again, we question whether either of
these routes will get you to a vehicle comparably priced even
after much development, which is why we tried to develop the
fuel cell.
FUEL CELL RESEARCH AT LOS ALAMOS NATIONAL LABORATORY
Senator Domenici. I want to close my testimony here by
making a suggestion to you. I note that the researchers at Los
Alamos National Laboratory continue to make progress in fuel
cell research, and I think you would concur in that statement.
I think they are poised to be one of the centers of excellence
in this area. I believe the Nation needs to create a center to
integrate a number of the specialties to more easily develop
commercially-ready fuel cell initiatives, and I think the
Department ought to be thinking about a center, a focal point.
I ask you to consider that and obviously in your consideration
of it, if you might consider Los Alamos as a center of
excellence to pursue more vigorously the various research
moving efficiently towards a prototype and more ready-to-go-
fuel cell.
Secretary Abraham. The answer would be of course as we move
through those considerations, both the question of one or more
centers will be examined, and we already have I think very high
regard for the work that has gone on and continues at Los
Alamos in this area. What we're trying at this stage to do is
to determine the road map in kind of the logistics. I think we
have an excellent road map in terms of the research pathway
forward. A key part of that is we really make sure that the
money that's needed, I think 80 percent is the amount that we
believe has to be focused on basic research with a smaller
percentage, 20 percent or so in terms of demonstrations, and
now that we have that pathway for it, I think how we execute
the pathway is what is important.
We definitely know what the research challenges are and we
hope to keep people realistic about the time frame. People
think that somehow in 4 or 5 years, we can mandate or force the
marketplace to move faster than it is prepared to move and I
think that will undermine the success of this transformation.
It took many, many years and a trillion dollars to build the
petroleum infrastructure we have today and it's going to take
time with respect to a hydrogen fuel infrastructure, and if you
try to short-cut that, it would be counterproductive.
Senator Domenici. But Mr. Secretary, the objective of
moving as rapidly as you can in the most efficient manner to
get to a consumer-ready fuel cell system is something you must
look at every day, because that may not happen by having
diffuse research that's going on with everybody excited about
their little business.
Secretary Abraham. You are absolutely correct and there is
no question that the time issue is critical in the following
respect. This has always been 30 years away.
Senator Domenici. It's not now.
Secretary Abraham. I will say this. It will be 30 years
away if we don't put it on a fast track, don't fund it and
don't move with the vehicles at the same time. Because as I
think many of you are already well aware, which is a challenge
itself, is we can't just build the car when there isn't a fuel
system, or a fuel system when there is no car. We really have
to move them both.
Senator Domenici. Thank you very much. Thank you, Mr.
Chairman.
HYBRID TECHNOLOGY
Senator Burns. I want to follow up on that. You have cut
Vision 21 on the hybrids and that tells me that the production
or the results of that R&D has been on the negative side. Can
you bring me up to date?
Secretary Abraham. In the budget we submitted, we're
seeking a higher amount than we did last year for hybrid
technology because we do see developments in that area as still
beneficial. However, we don't believe the hybrids are the final
answer, we see this as a transitional step between where we are
today with a basic, you know, internal combustion engine,
traditional system and the day in 20 years or so when hydrogen
vehicles are available. We would like to and believe there can
be an expansion of other kinds of more fuel efficient vehicles
and we see hybrids as a part of that transition, which is why
you will see that we are proposing a slight increase in hybrid
technology.
Senator Burns. I am concerned about all these cuts in
particular areas. I don't want you to weaken your hand when it
comes to interagency governmental policy. I think you have to
have a strong hand about interagency on these environmental
issues, because I would like to see more cooperation between
the Department of Energy and Department of the Interior.
Sometimes those talks break down when we talk about either
stationary or transportation fuels, so I would kick that up if
we could. We are going to have new people to deal with at EPA,
but this is very sensitive.
I have some questions on off-shelf reserves. We talked
about most of these issues privately, and I think we can deal
with them. We look forward to working very closely with you as
we develop this budget.
Do you have any further questions, Senator Byrd?
Senator Byrd. I do have some, Mr. Chairman. Shall I
proceed?
Senator Burns. You may.
CLEAN COAL TECHNOLOGY PROGRAM
Senator Byrd. 2\1/2\ years ago, I referred to this earlier,
candidate George Bush endorsed the Clean Coal Technology
program, he committed to spend $2 billion over 10 years to
support that program. That's $200 million a year, a very strong
endorsement of coal, and I'm sure that's one of the reasons he
was able to carry the State of West Virginia in the 2000
election.
But despite his promise, in fiscal year 2002 he only
proposed $150 million, in fiscal year 2003 he again proposed
$150 million, and this fiscal year 2004 budget proposes just
$130 million. By my calculation, I use the old math, I don't
think the new math will be far off the point, that's $170
million behind on the promise. Rather than seeking $600 million
for the Clean Coal program, as candidate Bush promised, the
administration sought only $430 million, 38 percent less than
what was pledged. That seems to be a credibility gap between
what was said and what has taken place. What can you say, Mr.
Secretary, to the people who heard Mr. Bush as a candidate
proclaim if he was elected that he would spend $2 billion on
the Clean Coal program, and does the administration have a plan
to live up to its commitment?
Secretary Abraham. I would state that we are $430 million
ahead of where we were, and the administration has demonstrated
those commitments, and in a variety of other regulatory debates
that have gone on, that we are deeply committed, as I said
earlier, to the coal sector and the role of coal in the energy
mission. But I would just add to what I said earlier, that in
addition to the Clean Coal Power initiative that you have
discussed, there are 7 more years to go and we are mindful of
the commitment that was made.
We have just announced the Future-Gen program, which I
believe will be a very substantial $1 billion program over the
next 10 to 12 years, so it's my anticipation that the Future-
Gen program will be running parallel to the Clean Coal Power
initiative and the combination of these over this time frame
will at least reach the level that the President committed and
could conceivably be a fair bit higher than that level when the
price tags are added up at the end.
Senator Byrd. Mr. Secretary, you seem to be counting all
coal research. Mr. Bush cited in specificity the Clean Coal
program, not coal in general, he said Clean Coal. And so, there
is a credibility gap. He wasn't talking about all coal, he was
talking about clean coal research when he used that figure.
FUTURE-GEN
Secretary Abraham. Senator, again, I focus on our Future-
Gen proposal as being the greatest enterprise that will be
undertaken to demonstrate how we can generate power with coal
in an environmentally clean fashion. It complements the Clean
Coal initiative that you referenced and so I believe, as I
said, over the 10 years, I mean, the combination of those
programs will more than meet the $2 billion commitment the
President made.
NATIONAL ENERGY TECHNOLOGY LABORATORY
Senator Byrd. The administration's request for the Office
of Fossil Energy contains $92.7 million for employee salaries
and expenses. Most of those people are assigned to the National
Energy Technology Laboratory headquartered in Morgantown, West
Virginia. On the face of it, it would appear to be a $5.5
million increase over the fiscal year 2003 enacted level. But
just as it did last year, the administration has again double
counted $14 million in employee salaries previously authorized
under the Clean Coal acts. The true request, therefore, is not
$92.7 million, but, rather, $78.7 million, an 11 percent cut
that translates into a loss of 150 jobs.
The country cannot afford to lose 150 of the brightest
fossil energy scientists we have. I can assure you that I will
do everything I can to see to it that this budgetary sleight-
of-hand is reversed. In the meantime, would you please tell the
committee the rationale for this decision, and is the
Department of Energy responsible or as I would rather think,
have you been dictated to by the Office of Management and
Budget?
Secretary Abraham. Senator, I take all the responsibility,
because that's my job, and my only comment would be that we
certainly will do our very best to address the issue of the
work force. I'm happy to note that in addition to the money we
had available to work with when we submitted the budget, the
advanced appropriations which were included in the final
enacted budget included an additional $80 million which we did
not have access to when we made our submission for Clean Coal
Technology. Obviously, the implementation of programs with that
money will require us really to have more program direction and
we'll work within that amount certainly to try to address the
question of our work force.
FOSSIL ENERGY PROGRAM TOP-TO-BOTTOM REVIEW
Senator Byrd. Last year when you testified before the
subcommittee, you told the subcommittee that you had directed
the new assistant secretary to conduct a top-to-bottom review
of all programs under his jurisdiction. And on November 21,
2002, you wrote to me that the committee would be fully briefed
on the contents of the review as soon as it had been approved
by the Office of Management and Budget. The approval has now
taken place and I know our subcommittee has, in fact, received
a copy of the review, but I don't believe our staff has been
fully briefed on its contents, nor have they had the
opportunity to ask questions about the review's many
recommendations. For example, it would be helpful to know more
about the management reforms that have been proposed on page 4
of the review for the Office of Fossil Energy and the National
Energy Technology Lab in Morgantown. Given the fact that any
such reorganization would have to be approved by the committee
before it could be implemented, it's important to have these
matters discussed with our staff as soon as possible.
Can you tell us when you anticipate having the fossil
energy staff brief the subcommittee staff?
Secretary Abraham. I believe, Senator, in fact your staff
brought this specifically to my attention, or at least that
there has been inadequate communication between our staffers,
this week on Tuesday. I conveyed that to my staff on Tuesday.
My understanding is there was conversation yesterday with an
offer actually to come up yesterday to provide an initial
opportunity to have discussions, but because of the hearing
that was happening today, that was not feasible. So it's my
understanding there will be a meeting next week. I don't know
that that will satisfy all of the issues, but it will be a
starting point of what I hope will be much more frequent
discussion and dialogue between the staffs. And I would make
clear to you as I did to your staff, that if there is an
inadequate level of this communication, please bring it to my
attention and I will be happy to address it.
Senator Byrd. Very well, thank you. If you do intend to
move forward with a reorganization, can you tell the committee
whether you expect to formally seek the committee's approval?
Secretary Abraham. I guess I'm happy to try to answer that,
but I'm not sure I can answer it at this time. Perhaps the
Assistant Secretary, who is here--within the next week would be
a time frame in which the request should be forthcoming.
COMPETITIVE SOURCING PROGRAM
Senator Byrd. Very well, thank you. Mr. Chairman, I have
just a couple other quick ones, if I may.
One of the government-wide initiatives that I am
particularly interested in is the administration's competitive
sourcing program. As I understand it, the Office of Management
and Budget essentially scores each department and agency on how
well it complies with the President's management agenda. The
various agencies are encouraged to submit management plans to
the OMB and to meet competitive sourcing targets outlined in
the President's budget. I have been informed by officials at
OMB that these plans, while submitted to OMB for approval, may
be released to the public at the discretion of the agency or
department head.
If this subcommittee is to recommend the appropriation of
nearly $1.8 billion to the Department of Energy for the
programs under the committee's jurisdiction, I think it's
reasonable to expect a full accounting of any management plan
or competitive sourcing plan submitted to OMB for approval.
Will you please tell the committee the status of your
Department's competitive sourcing plan, and will you agree to
make it available to the Congress when it is complete?
Secretary Abraham. Senator, I would be happy to make it
available if it is--unless there are constraints I am unaware
of. If it is being made available by other agencies, we
wouldn't have a different viewpoint on that, and I would be
glad to also provide, if the committee would like, some kind of
personal briefing on it by the folks who have been engaged in
the competitive sources work.
[The information follows:]
U.S. Department of Energy, Revised Competitive Sourcing Plan
[June 9, 2003]
BACKGROUND
The Department of Energy [DOE] listed 9,889 full-time equivalents
[FTE] on its 2001 FAIR Act Inventory as ``commercial,'' or about 67
percent of DOE's total civilian workforce of 14,717 FTE. These figures
include 3,409 commercial FTE at the Power Marketing Administrations
[PMA]. Since the PMAs are largely funded by ratepayers and are already
subject to the competitive forces of the marketplace, the Department
and the Office of Management and Budget [OMB] mutually agreed to
exclude the PMAs from the competitive sourcing initiative.
Consequently, the Department's overall goal is to study 3,230 positions
or 33 percent of its commercially coded FTE. In March 2002, DOE
commenced studies on 972 FTE. As a result of further review and
analysis, the total number of FTE included in the Department's first
round of studies has increased to approximately 1,100. DOE plans to
study an additional 2,100 FTE in fiscal year 2004 and beyond to reach
its OMB mandated objective. It is expected that the taxpayers will
benefit from the initiative, regardless of who wins the competitions,
as a result of reduced costs, greater effectiveness, and increased
responsiveness.
SUMMARY OF THE MANAGEMENT PLAN
The Department plans to meet its goals through the use of in-house
and contract support resources. The Department assembled a team of
management, human resources, financial, acquisition and functional area
analysts and defined the conversion, public-private competitions and
privatization initiatives necessary to meet DOE's fiscal year 2002 and
fiscal year 2003 performance targets. The Department awarded
Performance Based Service Contracts (PBSC) to support the development
of the management studies and competitions. The provisions of OMB
Circular A-76 govern DOE's studies and competitions. The Department
will continue its on-going studies and will conduct feasibility studies
to determine the specific activities and related FTE that should be
studied in future rounds. Business case anaylses will be the
methodology employed, as well as a determination as to the studies'
resource impacts and the ability of the Department to sustain its
mission.
Below is a further breakout of the fiscal year 2002/2003 plan by
Departmental function and FTE. The name of the individual responsible
for the Department of Energy's Office of Competitive Sourcing/A-76,
with telephone number, is also provided.
Competitive Sourcing Project Manager: Dennis E. O'Brien, Office of
Management, Budget and Evaluation/CFO
Phone Number: (202) 586-1690
The Department, on March 22, 2002, announced an initial list of 927
FTE to be competed in fiscal year 2002/2003. As anticipated, the number
increased to approximately 1,100. It is expected that the scope of the
studies and changes to the baseline will occur as the teams continue to
review the functions and FTE under study.
Announced cost comparison functions: Financial Services, 150 FTE,
Department-wide. Revised to 159 FTE; Information Technology, 420 FTE,
Department- wide. Revised to 642 FTE; Human Resources (training), 98
FTE, Department-wide. Revised to 130 FTE; Logistics, 190 FTE,
Department-wide. Revised to 220 FTE; Personnel Security Investigators,
27 FTE, Department-wide. Study Deferred; Paralegal Support, 21 FTE,
Department-wide. Exempted from further study; Graphics, 13 FTE; and
Civil Rights Reviews, 8 FTE.
These figures do not include contractor positions that are also
being studied by the A-76 Teams.
Overall the Department expects to compete at least 30 percent
percent of its adjusted 2001 FAIR Act inventory upon the conclusion of
its first round of studies.
We estimate that the one-time additional budgetary cost of
conducting these competitions will be about $6M (based on an estimated
cost of $7,700 per FTE for a multifunction/multilocation study
subjected to a full public-private cost comparison and other associated
study and acquisition costs).
The Department has completed the initial overview training program
for competition managers, program managers, selected employees, and
labor organizations that focused on the A-76 process. The Department's
training emphasized performance and delivering quality service in the
most cost-effective manner.
------------------------------------------------------------------------
Tasks Completion date
------------------------------------------------------------------------
Complete fiscal year 2001 FAIR Act Completed.
Inventory/Challenges/Appeals.
Develop Competitive Sourcing Plan.......... Completed.
Identify functions, locations and FTE.. Completed.
Coordinate program with employee labor Completed.
organizations.
Establish communication/training Completed.
program.
Publish guidance for functions with 10 Completed.
or fewer FTE.
Publish guidance for cost comparisons.. Completed
Create tracking and reporting database. June 2003.
Develop, plan and schedule fiscal year 2002/ Completed.
2003 studies.
Assemble team to review inventories/ Completed
functions on sourcing plans.
Review competitive sourcing plans and Completed
adjust as needed.
Identify potential functional or Completed
geographic groupings.
Determine schedule for function reviews Completed
Announce functions to be studied in Completed
fiscal year 2002/2003.
Develop performance-based work Completed
statements for common functions.
Issue Guidance for fiscal year 2002 FAIR Completed.
Act Inventory.
Submit fiscal year 2002 FAIR Act inventory Completed.
to OMB.
Establish Study Team Organizations......... Completed.
Select Study Team Support Contractors...... Completed.
Develop and submit for Secretarial approval Completed.
individual study action plans.
------------------------------------------------------------------------
FISCAL YEAR 2004/05 COMPETITIVE SOURCING/A-76 PLANNING
DOE is initiating a feasibility study to determine the FTE to be
competed in fiscal year 2004-2005. This study will encompass cost
benefit tradeoff analyses, identification of potential functions/
organizations and related FTE, identification of locations and
recommended number of studies, identification of insourcing
opportunities and characterization of mission/personnel and
geographical impacts. The result will be the development of the most
effective and efficient business case to support particular study
areas.
INSOURCING
DOE has and will continue to explore insourcing opportunities when
it is deemed appropriate to fulfill mission requirements and in cases
where significant efficiencies and economies can be achieved. The
Department received approval under the fiscal year 2001 Energy and
Water Development Appropriations Act to federalize its Emergency
Operations contractor workforce. To-date, this has resulted in a
conversion of 30 contractor positions with an additional 5 positions
expected to be federalized by the end of fiscal year 2003. Overall,
this national security related initiative will result in a net savings
of $1.7 million annually. These savings will be redirected to enhance
emergency operations training and to provide additional technical
assistance to the field. Also during fiscal year 2003 and 2004, DOE
will be soliciting organizations to identify insourcing opportunities
warranting an A-76 study. To date, potential insourcing opportunities
have been identified and are being investigated in the function of
aircraft maintenance.
Senator Burns. I think that would be helpful.
CLEAN ENERGY TECHNOLOGY EXPORTS
Senator Byrd. I have one last question. Congress has urged
the administration to support increased opportunities to open
and expand international energy markets and export U.S. clean
energy technologies to developing countries and other nations
abroad. These efforts are very important to help meet our own
energy security needs, addressing related economic job
creation, trade, environmental, and climate change objectives.
Additionally, such efforts could significantly aid in meeting
other nations' infrastructure and development needs while also
increasing the deployment of a range of U.S. clean energy
technologies, including clean coal technologies.
The Clean Energy Technology Exports, or CETE, will help
meet that challenge. It had its genesis within the Senate
Appropriations Committee and has had broad bipartisan support.
The administration has talked about such ideas on occasion, but
despite such rhetoric, the participating Federal agencies have
done little, if anything, to implement the strategic plan. It
seems to me that someone is sitting on their hands and missing
a critical opportunity.
Because the Department of Energy is a leading agency
involved in the implementation of the CETE initiative as called
for by the Congress and released by the administration in
October of 2002, what specific actions is your agency taking to
work with the other Federal agencies and to engage
nongovernmental organizations, private sector companies, and
other international partners with regard to this plan? And can
you tell the committee when the Appropriations Committee will
receive the required annual CETE progress report that was due
to this committee on March 1, 2003?
Secretary Abraham. Senator, here is what I know we have
done. We have created a new Office of International Energy
Market Development, and acting separately the Fossil Energy
Division has developed an international program for clean coal
which will augment the efforts of that. We have now been
designated to be a co-chair of the interagency working group to
try to promote clean energy exports, so that gives us a greater
role in being able to move this ahead, which we intend to do.
Obviously, a lot of work that we are engaged in is
applicable to sharing internationally. But if I could just go
beyond the confines of that program to reassure you that this
is a high priority that I have personally become engaged with.
We have a lot of meetings both in Washington, and occasionally
in multilateral and international settings with developing
countries who are just starting to look at how they can address
their growing demand for energy with environmental concerns,
and we have been looking at a lot of bilateral working groups
to try to provide that assistance on that basis as well.
It is probably the single most frequently requested support
that I receive when I am having a meeting with an energy
minister from a developing country because they are challenged,
they don't have the technology to do the sorts of things they
want in an environmentally clean or effective way. So I see it
as an area of substantial growth on the international side of
what we do, even in addition to the program which you talked
about.
I'm not sure what the status of the March 1 report is and
if somebody with me can answer that, and if they can't, we will
get you an answer for the record immediately.
[The information follows:]
Status of Clean Energy Technology Report
The Department expects to submit the clean Energy Technology Report
to Congress by the end of July 2003.
Senator Byrd. Very well. If I have further questions, Mr.
Chairman, I would like to submit them for the record.
SOLID STATE CONVERSION ALLIANCE
Senator Burns. You might update us along the same lines
with respect to the solid state conversion alliance. Can you
update the committee on the progress of the program and how you
propose allocating resources for fiscal year 2004, to ensure
you have adequate resources for the team to fulfill its
promises?
Secretary Abraham. I will be happy to. I will comment in
general here, I don't think there is at all disagreement as to
the potential for solid state energy production the program is
designed to achieve. I think we are in total agreement, as far
as I can tell, which is, this is a program with which we are in
agreement in terms of what the issue is, what is the pace at
which we get there and what is the timetable that has the
highest potential for success. So, I will be glad to get that
information for the committee.
[The information follows:]
Solid State Energy Conversion Alliance
Overall, the Solid State Energy Conversion Alliance Program [SECA]
is progressing extremely well. In fact, there is early interest from
auto manufacturers in SECA type fuel cells as evidenced by BMW's
arrangement with Delphi, one of the SECA industry team developers, to
put a compact fuel cell unit for auxiliary power in the trunks of BMW
vehicles by 2007.
The SECA program is dedicated to developing innovative, effective,
low-cost ways to commercialize solid oxide fuel cells [SOFCs]. The
program is designed to move fuel cells out of limited niche markets
into widespread market applications by making them available at a cost
of $400 per kilowatt or less through the mass customization of common
modules. SECA fuel cells will operate on today's conventional fuels
such as natural gas, diesel, as well as coal gas and hydrogen, the fuel
of tomorrow. The program will provide a bridge to the hydrogen economy
beginning with the introduction of SECA fuel cells for stationary (both
central generation and distributed energy) and auxiliary power
applications.
The SECA program is currently structured to include competing
industry teams supported by a crosscutting core technology program.
SECA has six industry teams working on designs that can be mass-
produced at costs that are ten-fold less than current costs. The SECA
core technology program is made up of researchers from industry
suppliers and manufacturers as well as from universities and national
laboratories all working towards addressing key science and technology
gaps to provide breakthrough solutions to critical issues facing SECA.
The SECA industry teams collectively are making very good progress.
Delphi, in partnership with Battelle, is developing a 5 kW (kilowatt),
planar, 700C-800C, anode-supported SOFC compact unit for the
distributed generation [DG] and auxiliary power unit [APU] markets.
Delphi is expert at system integration and high-volume manufacturing
and cost reduction. They are focused on making a very compact and
light-weight system suitable for auxiliary power in transportation
applications.
General Electric is initially developing a natural gas 5 kW,
planar, 700C-800C, anode-supported SOFC compact unit for residential
power markets. GE is evaluating several stack designs and is especially
interested in extending planar SOFCs to large hybrid systems. They also
have a radial design that can simplify packaging by minimizing the need
for seals. GE has made good progress in achieving high fuel utilization
with improved anode performance using standard materials by optimizing
microstructure.
Cummins and SOFCo (formerly McDermott) are developing a 10 kW
product initially for recreational vehicles [RVs] that would run on
propane using a catalytic partial oxidation [CPOX] reformer. The team
has produced a conceptual design for a multilayer SOFC stack assembled
from low-cost ``building blocks.'' The basic cell, a thin electrolyte
layer (50-75 micron) is fabricated by tape casting. Anode ink is
screen-printed onto the one side of the electrolyte tape, and cathode
ink onto the other. The printed cell is sandwiched between layers of
dense ceramic that will accommodate reactant gas flow and electrical
conduction. The assembly is then co-fired to form a single repeat unit.
Siemens Westinghouse Power Corp. [SWPC] is developing 5-10 kW
products to satisfy multiple markets. SWPC has developed a new tube
design for their 5 kW units that use flat, high power density [HPD]
tubes. This allows for a shorter tube length and twice the power output
compared to their current cylindrical tube. It also results in more
efficient manufacturing, assembly, and better volumetric power density.
The Department is requesting $33 million in fiscal year 2004 for
the SECA Program from several research budget elements. Primary funding
of $23.5 million will be provided from the Distributed Generation Fuel
Cells Innovative Concepts budget line. This funding will be primarily
for the six industry teams. In addition, $6.0 million for SECA from
Fuel Cells Advanced Research will be used for the SECA core technology
program, $1.5 million for SECA from Advanced Research--for research on
materials for coal-based SECA systems, and $2.0 million for SECA from
Advanced Metallurgical Research (Albany), for metallurgical research
applicable to general SECA systems. Additionally, in fiscal year 2004,
we will begin funding the two additional SECA industry teams just added
in fiscal year 2003--Fuel Cell Energy and Acumentrics. These industry
teams represent additional industry design alternatives that will
enhance the prospects of success of SECA fuel cells for a broader
market. The SECA program cost-share levels range from 20-50 percent.
For the industry teams the cost share begins at 20 percent and ends at
50 percent for later phases.
Senator Burns. Okay, I think that takes care of just about
all our questions. There will be a couple more coming up. And I
want to thank Senator Byrd for being here this morning, and for
you. We know the scheduling is tough. We will leave the record
open for a couple weeks and hopefully after the break, we will
begin finalizing these appropriations.
Secretary Abraham. Senator, thank you.
ADDITIONAL COMMITTEE QUESTIONS
Senator Burns. There will be some additional questions
which will be submitted for your response in the record.
[The following questions were not asked at the hearing, but
were submitted to the Department for response subsequent to the
hearing:]
Questions Submitted by Senator Conrad Burns
HYDROGEN TRANSPORTATION SYSTEM
Question. Your testimony refers to the difficult ``chicken and
egg'' problem that confronts us as we discuss moving to a hydrogen-
based transportation system. No consumer is likely to invest in
hydrogen or fuel cell products without adequate fueling infrastructure
in place, and nobody will invest in fueling infrastructure without
customers. How do you think we get past this problem?
Answer. Launching a hydrogen-fueled transportation system does face
the classic ``chicken and egg'' question as it relates to fuel cell
vehicles and hydrogen infrastructure. Establishing a new fuel
infrastructure such as hydrogen will be complicated, yet it will need
to be largely in place when widespread fuel cell vehicle introduction
starts. Strong market signals will be needed for this infrastructure
development to happen, making low cost hydrogen production and delivery
technologies essential. Transition strategies will have to be developed
that are far more effective than what has been used to foster markets
for today's alternative fuels. The exact nature of those strategies
will depend on infrastructure and vehicle technologies that are far
from being fully developed. Therefore, the Department is working with
all stakeholders to develop both the vehicle and the infrastructure
technologies in parallel. DOE's planning efforts have included the
FreedomCAR Partnership Plan, the National Hydrogen Energy Roadmap, and
R&D plans. These documents describe how DOE will integrate its ongoing
and future vehicle and hydrogen R&D activities into a focused effort.
This coordinated DOE effort will improve the effectiveness and
accountability of DOE's research, development and demonstration (RD&D)
activities and strengthen its contribution to achieving the technical
milestones on the road to a hydrogen economy.
Question. What have we learned to date from efforts to get other
alternative fueled vehicles into the marketplace?
Answer. Our experience with alternative fuels tells us that the
issue of reasonable fuel availability must be resolved before
widespread acceptance of dedicated alternative fueled vehicles is
possible. DOE learned that consumers find it simply more convenient to
operate fuel flexible vehicles with petroleum-based fuels rather than
alternative fuels because of the lack of alternative refueling
stations. In addition, natural gas, methanol and ethanol vehicles are
limited to niche markets or certain regions because fuel for these
vehicles isn't available nation-wide.
Because hydrogen is a universal energy carrier made from various
primary energy resources, we think it can be a standardized national
fuel. This assumes successful resolution of technical and cost
barriers, and development of codes and standards. To address these
issues, the Department is launching a transportation and infrastructure
partnership with industry and local government agencies to demonstrate
and evaluate fuel cell vehicles under real operating conditions to
obtain cost, performance and reliability information, and hydrogen
fueling stations to validate efficient, clean, and economical hydrogen
production, storage, and delivery technologies, including standard
vehicle refueling interfaces, safety practices, and codes and
standards.
Question. Some have suggested that natural gas might be a logical
bridge to a hydrogen based transportation system. Is there merit to
this suggestion, or are we likely to have to make the leap directly to
hydrogen from today's gasoline-based system?
Answer. Hydrogen does present a long-term solution to America's
energy security needs, and can do so with significant benefits for the
local and global environment. Hydrogen is an energy carrier, not an
energy resource like natural gas, and can be produced from a variety of
domestic feedstocks. This feedstock diversity is a benefit unique to
hydrogen and means we would not be dependent on any one energy
resource.
In the near-term, natural gas will be an important hydrogen
feedstock. It is a good choice for near-term hydrogen production
because the distribution infrastructure exists, and because the
economics are presently more favorable than that of other feedstocks.
Hydrogen production is not expected to increase demand for natural
gas by any more than 5 percent in 2025, due to the small number of
vehicles expected to be on the road. The vehicle infrastructure needed
for these demands will be small. It is envisioned that as the hydrogen
fuel cell vehicle fleet increases, our ability to produce hydrogen from
other sources will grow to match it. In the long-term, we hope to
generate hydrogen through renewable energy and other carbon-free
processes, such as nuclear energy.
ADVANCED VEHICLE TECHNOLOGY PROGRAMS--PARTNERSHIP FOR A NEW GENERATION
OF VEHICLES (PNGV) AND FREEDOMCAR
Question. Your budget states that the FreedomCAR program will build
on the successes of the Partnership for a New Generation of Vehicles
(PNGV) program and learn from its failures. What were the successes of
the PNGV program?
Answer. PNGV provided the framework for government and industry to
align previously independent research to address common societal goals.
The partnership opened up new channels of communication between
industry and government, which has provided both parties with access to
more and better technical data.
In its annual reviews of the PNGV, the National Research Council
noted ``the substantial accomplishments already gained in pursuing the
program so far'' (seventh report--2001) and observed that the
partnership has ``enhanced cooperation at all levels and has achieved
results more rapidly than would have been the case in the absence of
partnership'' (6th report--2000). Selected concrete examples of
technological achievements are listed below.
Enabling research
--Increased the life of lithium ion batteries from 2 years to 7 years
for hybrid-electric vehicle drives.
--Demonstrated that, under certain conditions, advanced diesel fuel
formulations can achieve particulate matter (PM) emission
reductions of up to 35 percent without compromising fuel
efficiency or raising oxides of nitrogen (NO<INF>X</INF>)
emissions.
Vehicle integration
--The aluminum body structure on the Ford's Prodigy concept vehicle
is 53 percent lighter than a conventional steel design, and the
process used on the Prodigy is applicable to high volume
production.
--In DaimlerChrysler's ESX3 concept vehicle, the unique thermoplastic
injection molded body system is estimated to reduce weight by
46 percent and cost by 15 percent versus conventional steel
structures.
--General Motors' Precept concept vehicle proved the technical
feasibility of achieving 80 miles per gallon, however, high
cost remained as a major barrier toward commercialization.
PNGV Research successes migrating into production
--Cadillac, Oldsmobile, and Chevrolet vehicles incorporate aluminum
door, deck, and hood panels by utilizing a PNGV developed
production processes.
--The 2001 Chevrolet Silverado uses a 50-pounds lighter composite
pickup truck box.
--The 2001 Jeep Wrangler utilizes a new, lighter, recyclable
thermoplastic hardtop.
FreedomCAR will build on the technology advancements gained from
successful PNGV R&D efforts. The new research portfolio, focused on
longer range, higher risk research, will be applicable to a broader
range of production vehicles.
Question. What were PNGV's failures, and what have we learned from
them?
Answer. FreedomCAR is taking advantage of the technological
progress made under the PNGV to build a stronger, better partnership
more closely aligned with the Nation's needs. The centerpiece of the
FreedomCAR Partnership is the effort to develop efficient, affordable
fuel cell technologies that can help to reduce our Nation's petroleum
consumption while eliminating vehicle emissions.
One key improvement of FreedomCAR compared with PNGV concerns
management structure. DOE, the agency that funded the majority of PNGV
activities, now solely represents the government in the partnership,
with consultation from other agencies as appropriate. The streamlined
organizational structure improves communication with the industry.
Another improvement is in the research time horizon and focus. The
PNGV had a 10-year horizon and was aimed at a single vehicle platform,
the mid-size sedan. In order to meet the accelerated 10-year horizon,
some promising technologies (i.e., ultracapacitors) were prematurely
downselected from the research portfolio. These technologies were
unable to meet the requirements of the PNGV within the 10-year horizon.
The single vehicle platform narrowed the research focus on a vehicle
segment that was the highest selling segment at the start of the
partnership but did not address the explosion in the sport utility
vehicles.
FreedomCAR is focused on performing R&D at the component and sub-
systems level and leaves the vehicle integration of these technologies
to the automakers, offering more flexibility. As in the PNGV,
FreedomCAR places significant effort on the core technologies
supporting hybrids, such as advanced materials and batteries, not only
because the work is essential for the hydrogen vehicle but also because
of the near-term benefits possible from petroleum-fueled power sources
in hybrid.
TRANSITION OF TECHNOLOGIES TO MARKET
Question. In several places your budget request terminates or
reduces funding for activities that are closer to the deployment end of
the R&D spectrum, choosing instead to focus resources on more basic,
high-risk research. Generally speaking I understand this philosophy,
but at some point we run the risk of investing in a lot of
technological advances that will sit on the shelf without some
additional support for deployment or demonstration. Do you think your
budget request is balanced in this regard?
Answer. Yes, I believe it is balanced. About ten years ago these
programs made a similar (but opposite) shift in their balance, moving
some resources from more basic work to near-term and deployment
efforts. That was never intended to be a permanent change in balance.
To some degree, we have been living off accumulated intellectual
capital, and we now need to move the balance back toward more
fundamental research in order to replenish those reserves and refill
the technology pipeline. This is not a wholesale change in our R&D
balance, however: we are continuing to propose substantial funding in a
variety of deployment activities.
Energy markets are changing and our energy policies have matured.
The unusually low energy prices of the 1990s made it particularly
difficult for new technologies to enter the marketplace successfully,
and our energy policies were focused on showing action on near-term
reductions in greenhouse gas emissions. While today's energy prices are
not high in historical terms, they are high enough to create
significant economic incentives for energy efficiency in applications
such as industrial processes.
The progress we made on advancing hybrid vehicle technology has
caused almost every major automobile manufacturer in the world to turn
their attention to such vehicles, and competitive pressures are now
growing to the point where most major auto manufacturers have announced
production plans for at least some forms of hybrid vehicles. But the
types of hybrids currently being announced and produced use
conventional engine technologies, and do not offer the really dramatic
gains in efficiency that we believe are possible with advanced
technologies such as fuel cells and unconventional lightweight
materials.
In many cases, including hybrid and electric vehicles, the
technologies we are currently deploying run the risk of remaining
niche-market products unless technology breakthroughs or leapfrog
approaches make their performance and economics so compelling that they
become mainstream.
Our energy and climate-change policies are now focused on the 2015-
2020 timeframe, and we have a renewed emphasis on energy security. In
order to make a major market impact in that timeframe, products will
need to be competitive in broad market segments, not just niche
markets, which is driving our search for leapfrog technologies in
activities such as the FreedomCAR Partnership, the Hydrogen Fuel
Initiative, solid-state lighting for buildings, and distributed energy
resources.
Question. Take black liquor gasification, for example. We've
invested significant funds to develop this technology in partnership
with the pulp and paper industry, and the Department had expressed its
intention to participate in at least three demonstrations of different
gasification technologies. Now the budget proposes to terminate the
program after only one partial demonstration. There is great potential
for reduction in energy use and emissions if advanced technologies are
deployed, but industry says the capital investment is simply too large
to justify investing in an unproven technology. Is the industry just
bluffing in your opinion?
Answer. The Department did not request funds for the industrial
gasification activities under the Interior Appropriation in fiscal year
2004 based upon the state of technology advances made and a review
using the Administration's R&D investment criteria, which helped guide
this decision. The Department has invested substantially in R&D on the
thermochemical conversion of biomass for producing power, fuels, and
products that is directly applicable to the pulp and paper industry. We
also are continuing with R&D on advanced technologies that will further
lower the risk to industry for the deployment of these technologies.
Additionally, we have committed available funds to complete our
obligation for the black liquor gasifier demonstration at Big Island,
VA.
As discussed in the previous question, we believe that there are
sufficient economic incentives for industry to adopt many new energy
efficiency technologies such as black liquor gasification. When it
comes to determining the appropriate Federal role in R&D, there is
frequently an inherent tension between the Federal Government (acting
as a prudent steward of taxpayer dollars while seeking to maximize
benefits from a broad research portfolio) and industry (which seeks to
minimize new technology development and acquisition costs in order to
reduce outlays and achieve a greater financial return for its
investors). Thus, while the Department does not wish to conclude that
industry is ``just bluffing'' in this instance, we would note that we
believe it would be shortsighted of industry should they decide not to
bring this gasification technology to commercialization.
Question. Do you think market forces will eventually compel
companies to install these new technologies on their own, or that
industry will be forced to do so because of regulatory pressure?
Answer. Those factors and more will provide businesses with the
incentive to use or market the technologies that we have been
developing. Virtually all of our efforts are planned in conjunction
with industry, and the ``road mapping'' process we have used means that
we know the technologies we have developed are useful, and the roadmaps
give the companies a good sense of how they can utilize the
technologies for their own benefit. In the case of some industries,
such as the automakers discussed above, it is competitive pressures
that will lead to adoption of new technologies. In energy-intensive
industries, such as pulp and paper and the ones we have worked with in
our Industrial Technologies program, the companies would be financially
shortsighted not to make use of the energy- and cost-saving
technologies we have developed. In yet other industries, the regulatory
pressures you allude to may become important--there is clearly more
interest now among heavy truck and bus manufacturers in adopting more
efficient, less-polluting engine technologies than there was prior to
the recent tightening of heavy diesel emissions standards.
OFF-HIGHWAY VEHICLE R&D
Question. According to the budget justification, the rather small
Off-highway Vehicle R&D program is being terminated ``because other
research opportunities have higher impact on energy savings.'' In
looking at the Department's own R&D roadmap off-highway research,
however, I find that off-highway uses account for 20 percent of fuel
use in the transportation sector. I also find that of all mobile
sources, large off-highway diesel engines contribute 20 percent of
NO<INF>X</INF> emissions and 36 percent of particulate matter. Can you
reconcile these figures on energy use and emissions with your decision
to terminate a $3.5 million program?
Answer. The definitions of ``Off-Highway'' and ``Non-Highway'' that
DOE uses are found in the Transportation Energy Data Book, which is
published annually by Oak Ridge National Laboratory for DOE. Off-
Highway includes vehicles that are used in construction and
agriculture. These vehicles accounted for 3.4 percent of transportation
energy use in 2000. Non-Highway includes aircraft, marine vessels, rail
and pipeline. These activities accounted for 21.1 percent of
transportation energy use in 2000. The Off-Highway Vehicle R&D effort
within the FreedomCAR and Vehicle Technologies Program was aimed at
saving oil in vehicles that account for less than four percent of the
oil used in transportation, therefore the potential oil savings would
be small relative to potential oil savings achievable by shifting these
funds to other aspects of our transportation sector R&D portfolio.
While off-highway vehicles currently contribute a
disproportionately large amount of NO<INF>x</INF> and PM, we anticipate
that EPA's existing and proposed future emissions standards, to be
phased in over the next decade, will result in a significant decline in
criteria pollutant emissions from these sources.
ENVIRONMENTAL IMPACTS OF FUELS
Question. Your budget also eliminates funding for analysis of the
environmental impacts of fuels, deeming this activity to be in the
purview of other agencies. While I would agree that DOE shouldn't be
duplicating the efforts of EPA or other Federal agencies, I think there
have been times that the Department has had differences with EPA about
the environmental impacts of various fuels or technologies. Are you at
all concerned that termination of this program will weaken your hand in
inter-agency policy or regulatory discussions?
Answer. DOE's and EPA's complementary efforts to research the
environmental impacts of alternative fuels have been ongoing for many
years at this point. DOE's work was intended to ensure that emerging
technologies do not have unforeseen negative environmental impacts, as
was the case with tetraethyl lead and MTBE (methyl tertiary butyl
ether). In addition, DOE activities investigated the environmental
effects of fuels derived from diverse feedstocks such as biorenewables,
oil sands (tar sands), and even hydrogen. EPA's efforts focus on the
determination of the impacts of current technologies and fuels on the
environment.
The DOE work provided a feedback loop to the management of our
research and development efforts, but we believe that the topics have
been quite thoroughly researched now. If such feedback is needed for
additional fuels in the future, we feel we can rely on external
organizations. EPA will continue to conduct the comprehensive
evaluations necessary to support regulations. Since their research,
rather than ours, has been what has driven regulations, we do not
expect any regulatory impact from the termination of our program.
PERFORMANCE MEASURES
Question. First of all, let me acknowledge the work that your staff
has done to be responsive to this committee's repeated calls for
better, more clearly written budget justifications. I'm not saying it's
a perfect document yet, but this year's product is an improvement in
many areas over past years. Some of the more interesting displays in
the justification are your Government Performance and Results Act
estimates that project the benefits of your R&D programs. I know this
is a complex undertaking, but the numbers do raise some interesting
questions. Among the Energy Conservation R&D programs, the Industrial
echnologies program, the Vehicle Technologies program and the Buildings
Technologies program are expected to produce by far the largest savings
in energy use, oil consumption, and carbon emissions. In spite of this,
the Industrial Technologies program is taking the largest cut of any
program, and the vehicle and buildings programs are being reduced as
well. How should we interpret this seemingly conflicting information?
Answer. Potential benefits are but one consideration in making
difficult allocation decisions. Other considerations include program
performance, relative priority, and alignment with the Administration's
R&D investment criteria, among others (see response to next question).
One aim of the R&D investment criteria is to ensure an appropriate
Federal role exists, and that there are market barriers causing
underinvestment by the private sector. In the case of many Industry
Program R&D activities, firms have the financial incentive to invest in
energy efficient technologies that can reduce their costs. Thus, the
seemingly conflicting information you describe can be explained by our
determination that, despite potentially large benefits, many industry
R&D activities benefit firms more than the taxpayer, so there is less
of a Federal role in these activities.
We would make two important notes. First, on the whole, the
reductions you identified were more than offset by increases in other
programmatic areas. For example, reductions for some activities in the
FreedomCAR and Vehicle Technologies program were more than offset by
increases in the Hydrogen (in the Energy Supply account) and Fuel Cells
subprograms. This represents a shift in funding from near-term
technology issues that industry is very capable of addressing, such as
combustion engines and petroleum-based fuels, to more advanced
technologies that offer greater energy and carbon-emissions benefits in
the long term, such as fuel cells for hybrid vehicles. Second, we
continue to improve our modeling assumptions and scenarios so that we
can better compare potential benefits of technology investments within
and between programs. This effort is a priority in helping to implement
the Administration's R&D investment criteria.
Question. Aside from the expected benefits in terms of energy
savings and emissions reductions, what other inputs are used as you
develop your budget request?
Answer. We seek a portfolio balance among a number of criteria:
--the energy savings and emissions reductions that you've already
mentioned, plus
--other benefits like:
--energy security,
--pollution reduction, and
--net economic benefits to society;
--program performance and alignment with the Administration's R&D
investment criteria, which include many policy considerations
such as:
--the need for, or appropriateness of, a government role in a given
technology (typically a clear public benefit with a market
failure or friction that precludes optimal private
investment);
--plans for merit-based, competitive program execution;
--industry's apparent commitment to adopting or marketing a
technology (often as evidenced by their willingness to
cost-share);
--clearly-defined performance measures and decision-points for the
R&D area;
--a technology's or industry's track record of progress based on
those performance measures; and
--maintaining a portfolio balance of near-, mid-, and long-term
technology RD&D in each of the major sectors of our
economy.
FOSSIL ENERGY--DOMESTIC OIL PRODUCTION/IMPORTS
Question. First, I would like to commend the Department's efforts
to keep an eye on energy markets through the work of the Energy
Information Administration. However, I am extremely concerned that the
Department seemingly ignores its own information in the formulation of
budget priorities. During the early stages of the recent war with Iraq,
crude prices shot to $38 a barrel and have recently stabilized at a
lower level. However, all indicators seem to illustrate crude prices
are rising again and stocks are low. Can you update us on the current
state of the highly fluctuating oil markets?
Answer. We expect oil markets to continue to be volatile but well
within the high and low limits established in the last two years.
Supplies are dependent on the rate at which Iraqi exports return to
market, the stability of West African production, recovery in
Venezuela, the reaction of other non-OPEC producers to current prices
and, of course, the level of exports from OPEC countries. Demand may
also deviate from expectations, as the world's economies grow at rates
different from projections. Given the current level of oil inventories,
news will tend to move prices up and down rather quickly, but we do not
expect them to approach either the highs set earlier in 2003 or the
lows reached in early 2002.
Question. This Subcommittee has an acute interest in energy
production, as most domestic production comes from land and waters
under our jurisdiction, and the Fossil Energy portfolio under DOE
requires our close attention due to the Administration's lack of
adequate commitment to domestic energy R&D. Can give us a sense of how
current crude imports compare to prior years as a percentage of
domestic consumption?
Answer. In March 2003, the most recent month for which complete
monthly data is currently available, the ratio of average U.S. crude
oil imports to average domestic petroleum consumption (or products
supplied) is estimated to have been 46.0 percent. The comparable
percentage for March 2002 was 44.7 percent and for March 2001 it was
48.3 percent. For the first three months of 2003, the ratio of average
U.S. crude oil imports to average domestic petroleum consumption is
estimated to have been 43.2 percent. The comparable percentage for the
first three months of 2002 was 45.6 percent and for the first three
months of 2001 it was 46.4 percent. For the years 1997-2002, the ratio
of the annual average U.S. crude oil imports to annual average domestic
consumption ranged from a low of 44.2 percent in 1997 to a high of 47.5
percent in 2001, and for 2002 it was 46.3 percent.
Question. It is my understanding the recent reductions in crude
costs are directly related to increasing imports. Given these trends,
can you explain why your budget reduces funding for the Fossil accounts
focused on increasing domestic oil production by 65 percent from the
enacted level?
Answer. The Office of Fossil Energy has completed its Top to Bottom
Review, and is beginning to implement it. The review provides a solid
first step towards a new program direction, emphasizing results and
focusing on customer groups in order to more effectively carry out the
President's energy plan to increase energy security and improve the
environment through his Clear Skies and Climate Change initiatives.
Certain program areas and projects that do not address the specific
goals of this new direction will be terminated. As stated in the
President's Management Agenda, spending large budgets without a clear
goal does not necessarily achieve good results.
These changes were also in part a response to the results of the
Investment Criteria Scorecards that were completed as part of the
President's Management Agenda initiative for better R&D Investment
criteria.
Additionally, the Program Assessment Rating Tool (PART) was
completed for all program elements. Analysis of PART showed that the
program did not link annual activities and outputs to long-term
benefits. These outcomes reinforced the new program direction.
Question. Your own testimony before the House Interior Subcommittee
last month states, ``Previous oil program funding was spread thinly . .
.'' In my opinion reducing a ``spreadly thin'' [sic] budget by 65
percent when it is the primary budget focused on enhancing domestic oil
recovery technologies seems a little haphazard at best. Can you
reconcile this proposed reduction with your written testimony for the
House and trends in domestic production?
Answer. The completed Top to Bottom Review, conducted by the Office
of Fossil Energy resulted in a new program direction, emphasizing
results and focusing on customer groups in order to more effectively
carry out the President's energy plan to increase energy security and
improve the environment through his Clear Skies and Climate Change
initiatives.
Certain program areas and projects that do not address the specific
goals of this new direction will be terminated. As stated in the
President's Management Agenda, spending large budgets without a clear
goal does not necessarily achieve good results.
These adjustments in the program's investment portfolio were also
in part a response to the results of the Investment Criteria Scorecards
that were completed as part of the President's Management Agenda
initiative for better R&D Investment criteria.
Additionally, the Program Assessment Rating Tool (PART) analysis
completed for all program elements showed that the program did not link
annual activities and outputs to long-term benefits. These outcomes
reinforced the new program direction.
Question. An alarming highlight of last month was what appears to
be an all-time monthly record for gasoline imports. It is bad enough to
be dependent upon other nations for raw natural resources, but it is
even more alarming that we now are becoming increasingly dependent upon
foreign nations to produce refined product. Can you explain whether
this dependency on foreign gasoline is an anomaly or part of a trend?
Answer. In almost every year, gasoline demand increases. This
increase can either be supplied by more production from refineries or
increased gasoline imports. In recent years, suppliers have more
economically increased supplies through the use of imports. There are
several reasons for this.
First, for many countries, they produce more gasoline than they can
consume. In Europe, for instance, diesel fuel and other middle
distillates are the most important part of the barrel, and thus,
surplus gasoline is produced. With the United States being the world's
largest consumer of gasoline, it is thus not surprising that increasing
amounts of gasoline arrive from Europe each year. In addition, if
refiners were to increase gasoline production it would merely reduce
the amount of other products that are produced, or else would require
an increase in refinery throughput. The latter is an option only when
refinery economics dictate that it would lead to increased income. This
would usually require high product prices with comparatively lower
crude oil prices. If, however, refiners kept the same throughput, but
instead produced more gasoline at the expense of production of other
petroleum products, that would dampen prospects for rebuilding low
inventory levels for those products, e.g. distillate fuel.
That being said, it is likely that product imports, including those
for gasoline, will continue to increase over the next several years. Of
course, the alternative is to get the increased supplies needed form a
source that would be less economical, thus putting an additional strain
on the U.S. economy.
Question. What are the factors for this reliance and does the
ongoing effort of the Department to divert domestic crude into the
Strategic Petroleum Reserve have a tangible impact?
Answer. North America and Europe have long been integrated markets
for refined petroleum products. This integration has proved beneficial
for both the United States and Europe, allowing the best possible
utilization of refineries and inventories. At times the United States
is an importer of products and at others it exports to Europe depending
on market conditions. At the moment, Europe is increasing its
consumption of diesel fuel relative to gasoline, thereby making its
surplus gasoline available for export to the United States at
reasonable prices. The fact that the Strategic Petroleum Reserve is
acquiring crude oil probably has only a marginal impact on oil prices,
and whatever that impact, it is the same for United States and foreign
refiners. Therefore, whether the Strategic Petroleum Reserve acquires
or does not acquire crude oil is immaterial to the level of U.S.
imports of refined products.
FOSSIL ENERGY--DOMESTIC GAS PRODUCTION/IMPORTS
Question. In February 2003, the gas markets were subject to
unprecedented spikes as natural gas availability hit rock bottom.
You'll remember that when you were serving in the Senate, similar cost
spikes hit the electricity markets, leading to public outcry and the
subsequent failure of many businesses. Could you update us on the
natural gas markets?
Answer. Natural gas markets have recovered from the unprecedented
spikes in February 2003 but they remain tight. Spot market natural gas
prices were in the $5.24 to $6.24 range in May while natural gas
inventories were at least 29 percent below the five-year average for
this time of the year. Recent inventory additions have been at record-
levels and the situation appears to be improving. However, the Energy
Information Administration (EIA) projected in its June 2003 Short-Term
Energy Outlook that natural gas prices will remain well above average;
they are expected to average $5.50 to $6.00 per million Btu for the
remainder of the year; 2004 natural gas prices are expected to ease
slightly.
As I said at the time of that report, the nation's stocks of
natural gas in underground storage are unusually low due to weather
factors and declines in both domestic production and net imports.
Industry is already responding by significant increases in storage
rates, with record net injections reported in each of the first two
weeks of June, but a hot summer could increase demand for natural gas
that may jeopardize storage refill, and thus, exacerbate the problem.
I had previously asked the National Petroleum Council to conduct a
study of natural gas in the United States that is expected to be
released later this year but, in my view, we cannot wait to take action
on the problem. Therefore, I have called for a special meeting on June
26 during which the National Petroleum Council will gather information,
and discuss problems and solutions.
Question. What steps are the Department taking to help alleviate
these gas supply problems?
Answer. In the near-term, we are working to better understand U.S.
natural gas needs. In March 2002, we requested that the National
Petroleum Council, an advisory body to the Secretary of Energy, conduct
a comprehensive study of the North America natural gas market (supply,
transmission, and demand issues through 2025). The results of this
study will be delivered in September of this year.
We are also called on the Council to hold a National Gas Summit on
June 26 to gather information from State and Federal officials,
consumer groups, and industry experts, and discuss actions and develop
recommendations that can be taken immediately to address the near-term
natural gas situation. Among the measures expected to be discussed are
those related to energy efficiency, conservation, and fuel switching.
DOE will also publish a paper dealing with the issues associated with
expanded supplies of natural gas from the Rocky Mountain region.
Question. I know the Natural Gas Technologies accounts under Fossil
Energy focuses on exploration and production techniques as well as
developing advances in infrastructure to prevent failures and enhance
delivery capabilities. Unfortunately your budget request suggests
reducing these activities from $47 million to $26 million. Can you
explain the disconnect between the information collected by your
Department and the direction the Research and Development Accounts
appear to be headed?
Answer. The President's Natural Gas Technology research and
development program under Fossil Energy accounts is intended to
complement and enrich the existing portfolio of ongoing industry
sponsored natural gas research and help ensure that long-term, high-
risk technology options in exploration and production, gas hydrates,
natural gas storage, and delivery reliability are explored.
The Office of Fossil Energy has completed its Top to Bottom Review,
and is beginning to implement it. The review provides a solid first
step towards a new program direction, emphasizing results and focusing
on customer groups in order to more effectively carry out the
President's energy plan to increase energy security and improve the
environment through his Clear Skies, Climate Change, and Energy
Security initiatives.
Certain program areas and projects that do not address the specific
goals of this new direction will be terminated. As stated in the
President's Management Agenda, spending large budgets without a clear
Federal goal does not necessarily achieve good results.
These changes were also in part a response to the results of the
Investment Criteria Scorecards that were completed as part of the
President's Management Agenda initiative for better R&D Investment
criteria.
The Office of Management and Budget's analysis of Fossil Energy's
Natural Gas Technology Program Assessment Rating Tool (PART)
submissions showed that overall the Natural Gas Technology program did
not successfully link annual activities and outputs to measurable long-
term benefits. These outcomes reinforced the new program direction and
a reduction in the fiscal year 2004 budget request for Fossil Energy's
Natural Gas Technology research and development program.
Question. Your budget also proposes a ``new'' initiative to produce
hydrogen from natural gas sources. Much like your testimony on the Oil
Research Development accounts, I believe our natural gas infrastructure
is spread too thin. The prior administration envisioned a world based
on natural gas, but without backing the vision with investment in
technology. I fear the current administration is doing the same. While
we are shifting all this demand to natural gas, domestic production is
not increasing at a similar rate. How to you believe we prevent a
demand crunch in the natural gas markets without investing in new
technology?
Answer. The majority of the funding in our natural gas research
program is directed to long-term technology development--where the
government has a key role. These efforts will help ensure that adequate
supplies of natural gas are available to meet the long-term increase in
demand--about a 50 percent increase by 2025.
Natural Gas Exploration and Production-Sustainable Supply program
will provide new tools and technologies that can improve access,
economics and environmental performance of onshore gas operations.
Significant emphasis will be placed on public lands in the Rocky
Mountain region where much of the nation's undiscovered gas resource is
located.
Natural gas storage will also assume increasing significance as
more power plants require consistent, year-round supplies of natural
gas. A nationwide, industry-led consortium will develop ways to improve
the reliability and efficiency of the nation's gas storage system.
Over the long-term, the production of natural gas from the U.S.'s
vast deposits of methane hydrates, which is a program goal, could
strengthen energy security and provide a major component of the
Hydrogen Fuels Initiative. Understanding hydrates will also improve the
scientific understanding of greenhouse gases and offer possible
mechanisms for sequestering carbon dioxide. In the near-term,
implications for drilling or producing oil and gas near or through
hydrate formations will be defined, to avoid environmental issues that
could arise with conventional oil and gas operations.
The environmental science program will focus on defining and
mitigating issues constraining produced water from coal bed methane
production.
Question. On the same topic, you list a new $6.5 million Hydrogen
from Gas initiative under the Natural Gas Technology account. However,
you reduce the Fuels account under Fossil Energy Research and
Development from $31 million to $5 million. It is my understanding we
were already performing substantial work in the Fuels budget that
focused on hydrogen as a product. Could you detail how much DOE plans
to focus on hydrogen production in the fiscal year 2003 Fossil
Accounts?
Answer. In fiscal year 2003, the Transportation Fuels & Chemicals
budget line in the Fuels program request was $5 million for Syngas
Membrane Technology (SMT) activity with an additional $17.1 million
added by Congress to increase this activity and to support the ongoing
Early Entrance Coproduction and Ultra Clean Fuels (UCF) programs, and
the new Hydrogen from Coal Research (HCR) program. Since syngas is a
mixture of carbon monoxide and hydrogen and a few of the UCF projects
produce syngas as an intermediate on the path to liquid fuels, it is
fair to say that some of the Syngas Membrane Technology and UCF
programs could be considered Hydrogen Programs. However, to be
efficient, the projects would have to be modified with a substantial
change in direction. Thus, the funding for fiscal year 2003 that
focuses on hydrogen as a product includes the new HCR (about $2.4
million), SMT (about $6 million), and UCF (about $5.4 million).
FOSSIL ENERGY--FUELS
Question. Mr. Secretary, I am interested in your decision to
essentially stop all advanced research in the Fossil program. For
fiscal year 2003, Congress provided $31 million to continue research
aimed at developing cleaner fuels from domestic fossil sources
including coal, gas and petroleum. The strides made in producing new
fuel products such as ultra clean diesel have given hope that we can
produce and use much cleaner burning fossil fuels in the near term. Can
you explain why you believe we should abandon research that is arguably
on the verge of creating marketable solutions to near term
environmental concerns?
Answer. The President's budget request for fiscal year 2004 of $5
million for the Fuels/Transportation Fuels and Chemicals program is to
perform supporting research for the Administration's FutureGen and
Hydrogen Fuel Initiatives. In addition, $6.55 million is being
requested in the Natural Gas Technologies program--Emerging Processing
Technology budget to support research on natural gas to hydrogen as
part of the Administration's Hydrogen Fuels Initiative. The Department
believes that this budget request is appropriate to support a balanced
energy research program within the budget constraints in fiscal year
2004. In addition, considerable work is being conducted in the private
sector on natural gas to liquids processes and we believe that industry
is prepared to meet the promulgated EPA Tier II standards. The
Department believes that research dollars would be better spent in
longer-term fuels research such as that which is associated with the
production, storage and delivery of hydrogen from coal and natural gas.
Question. You assert in your request that portions of the fuel
programs proposed for elimination have been shifted to the Oil and Gas
programs, which have been reduced by 65 percent and 44 percent
respectively. Could you show the Subcommittee where exactly this
research shows up in the Oil and Gas programs, and explain what level
of funding will be provided under your proposal for fiscal year 2004?
Answer. In fiscal year 2003, the Fuels Program provides funding for
both natural gas and coal based programs even though the Fuels Budget
line is found in the Coal & Power Systems budget. However, in fiscal
year 2004, the Fuels activities, which are related to production and
delivery of hydrogen, will be split into two budget lines, one will
remain in the coal program under Fuels and the other program activity
will be moved to the Oil and Gas Program under the Emerging Process
Technology activity in the Natural Gas Program. In fiscal year 2004,
$6.555 million has been provided for this budget area.
Question. Will all ongoing contracts continue at the level of
funding agreed to by the contractors and DOE?
Answer. The President's budget request for fiscal year 2004 of $5
million for the Fuels/Transportation Fuels and Chemicals program is for
conducing research activities to develop advanced, lower cost
technology for the production of hydrogen from coal for the
Administration's FutureGen and Hydrogen Fuel Initiatives. In addition,
$6.55 million is being requested in the Natural Gas Technologies
program--Emerging Processing Technology budget to support research on
advanced, lower cost natural gas to hydrogen technology, which is also
part of the Administration's Hydrogen Fuels Initiative. The Department
believes that the budget requests are appropriate to support a balanced
energy research program within the budget constraints in fiscal year
2004. To the extent that funds are available, it is planned to continue
those projects that can adjust their scopes of work to fit the new
longer-term program goals. However, it is not likely that all contracts
can be continued.
FOSSIL ENERGY--DISTRIBUTED GENERATION--FUEL CELLS--VISION 21--HYBRIDS
Question. Mr. Secretary, I have long been a proponent of fuel cell
technology and am as frustrated as anyone else is with our inability to
mass-produce fuel cells at a price point that makes them commercially
viable to most markets. Your proposal to reduce the Vision 21 Hybrids
account by $8.4 million peaks my interest as the Department has long
touted the wonders of the Vision 21 program. With a reduction of this
amount, I can only imagine one of two outcomes. Either we have hit the
price point and these units are ready for mass development, or the
technology has underperformed and DOE is making the decision to abandon
the program. I don't believe we have Vision 21 Hybrids being produced
commercially, so can you explain the decision that led to the reduction
in this program?
Answer. The $13.5 million for Vision 21 Hybrids in the fiscal year
2003 budget is for the completion of DOE-funded work on tubular solid
oxide fuel cell systems and fuel cell/turbine hybrid systems. The
fiscal year 2004 budget request of $5 million supports a redirected
Vision 21 enabling cost reduction and performance enhancement program
to emphasize SECA-based low-cost, Vision 21 fuel cell/turbine hybrid
and Vision 21 zero-emissions system concepts.
Question. Are we on target with the goals set by DOE and will we
continue on target at this funding level?
Answer. The Department's goals for tubular solid oxide fuel cell
turbine hybrids systems will be achieved with the conclusion of
activities in fiscal year 2003. Tests on a first-of-a-kind tubular
solid oxide fuel cell/turbine hybrid system have contributed valuable
design knowledge that will be used in the next phase of the Vision 21
hybrids program, which is focused on SECA-based hybrid systems. The
funds proposed for fiscal year 2004 are appropriate for the re-directed
effort focused on SECA-type fuel cells.
FOSSIL ENERGY--DISTRIBUTED GENERATION--FUEL CELLS--SOLID STATE
ELECTRICITY CONVERSION ALLIANCE (SECA)
Question. Mr. Secretary, I am extremely interested in the SECA
program and am watching its progress with high hopes. I know that DOE
has recently decided to add two new industry teams to the program, yet
has proposed reducing funding for the core program from $33.8 million
to $23.5 million. I am concerned that reducing the funding and trying
to support additional teams will cause the program to slow, when it is
poised to make great strides. Additionally, it is my understanding some
teams may be under performing, and some of the competing technologies
may show little promise for future development. Can you update the
Subcommittee on the progress of the SECA program and explain how you
propose allocating resources in fiscal year 2004 to ensure we are
providing sufficient resources to the teams showing the most promise?
Answer. The Solid State Energy Conversion Alliance (SECA) Program
is progressing extremely well with implementation as planned and
promised. The SECA industry teams are making good progress towards
their Phase 1 performance targets for prototype demonstrations in
fiscal year 2005/fiscal year 2006. In fiscal year 2003, the second full
year for the initial four industry teams, the teams have built, tested,
and evaluated small single ``button'' cells, completed designs for
multi-cell stacks, improved performance, and reduced proof of concept
volume. The new industry teams represent design alternatives that will
enhance the prospects of success of SECA fuel cells for a broader
market.
The Department is requesting in fiscal year 2004, $33 million for
the SECA Program from several research budget elements. Primary funding
of $23.5 million will be provided from the Distributed Generation Fuel
Cells Innovative Concepts budget line. This funding will be primarily
for the six industry teams. In addition, $6.0 million for SECA from
Fuel Cells Advanced Research will be used for the SECA core technology
program, $1.5 million for SECA from Advanced Research--for research on
materials for coal-based SECA systems, and $2.0 million for SECA from
Advanced Metallurgical Research (Albany), for metallurgical research
applicable to general SECA systems.
NAVAL PETROLEUM AND OIL SHALE RESERVES--ROCKY MOUNTAIN OIL TECHNOLOGY
CENTER (RMOTC)
Question. I notice the Naval Petroleum Account proposes closing the
Rocky Mountain Oil Technology Center (RMOTC). Could you provide the
committee with the number of industry proposals to partner with this
facility for each of the past five years?
Answer. RMOTC received 151 proposals from fiscal year 1999 through
the current fiscal year 2003. These proposals were from a variety of
small businesses, major industry leaders, and international consortia
and cover testing related to: drilling technology, coal bed methane,
oil shale production, enhanced oil recovery, CO<INF>2</INF>
sequestration, produced water management, environmental rehabilitation,
renewable energy development, homeland security, reservoir services and
flow assurance. The proposals are broken down accordingly; 25 in fiscal
year 1999; 25 in fiscal year 2000; 31 in fiscal year 2001; 29 in fiscal
year 2002; and 41 fiscal year 2003 (YTD).
Question. It is my understanding industry partnerships to promote
advanced oil recovery utilize this center with great success. I am also
aware of renewed interest by industry to re-examine the potential of
oil shale production. If we were to follow your recommendation to
reduce the oil program by 65 percent and close RMOTC, what other
avenues are available for independent producers to partner with DOE to
research avenues of increasing domestic production?
Answer. The President's budget does request $41.6 million for
research and development in oil and natural gas, and that money will be
targeted to the most promising opportunities. We hope that industry
will independently increase its funding for recovery research, which
would be appropriate, and the Administration supports across the board
tax incentives for R&D and investment in domestic production of all
kinds. An important action the Government could undertake is to
increase access to lands for oil and gas exploration resulting in
increased domestic production without any cost to taxpayers.
If the Center were closed, those activities would have to be
conducted at private facilities such the Gas Technology Institute's
Catoosa test facility in Oklahoma.
Question. Is it your belief DOE holds no responsibility to work
with industry to advance domestic fossil fuel production?
Answer. The Department of Energy supports private industry
development of domestic fossil fuels in every way. We are committed to
research to increase the recoverable resource base of oil and natural
gas and research to reduce the cost of production and protect the
environment. We have a national laboratory working on ways to mitigate
the environmental impacts of fuels production and consumption. We
support tax and regulatory changes that would encourage domestic energy
production, and we support making Federal lands available for
exploration and development of fossil fuels. The Department of Energy
fully supports the Administration's National Energy Plan, which makes
explicit its support for more domestic energy production of every type.
FOSSIL ENERGY--FUTUREGEN
Question. Mr. Secretary, we talked a little bit about the FutureGen
proposal when you came to see me earlier this week. Montanans are very
excited about this project and my office has been working with our
Governor's office and a large group of other entities wanting to make
sure Montana is given full consideration as a possible site for the
project. Can I have your assurance the Department will work with me and
the State of Montana to make sure Montana's unique geographic and
geological offerings are taken into full consideration as the site
selection process moves forward?
Answer. I can assure you that we will be glad to work with Montana,
and any other interested states, to ensure that the FutureGen site
selection process will be a fair and open competitive process. Montana
will be given full consideration, along with other sites proposed for
evaluation.
SOLID STATE LIGHTING
Question. In reply to: believe you're aware of the Solid State
Lighting Initiative, which this subcommittee supported last year with
an appropriation of $3 million. Your budget request includes $5 million
for this program, which has significant promise in terms of energy
savings, environmental benefits, and lower costs to consumers. I
understand that the Department has investigated and calculated these
potential benefits while developing a ``Road Map'' for the solid-state
lighting program. Would you share with the Committee the Department's
conclusions?
Answer. The Department believes that solid state lighting has the
potential to create the technical foundation to revolutionize the
energy efficiency, appearance, visual comfort, and quality of lighting
products for general illumination by achieving efficiencies upwards of
70 percent (source efficiency). In consultation with industry, the
Department has estimated long-term benefits, which include annual
savings of nearly 40 percent of lighting energy and $19 billion in
consumer expenditures by 2020. As with all benefits modeling, the
assumptions have a large impact on the results. Because modeling
procedures and assumptions used to generate this estimate are different
from those used in EERE GPRA models, we cannot directly compare the
estimated benefits of this initiative to other EERE or other
Departmental applied R&D activities. But we intend to improve the
consistency in our modeling efforts. As a stand-alone document, the
multi-sector forecast, Energy Savings Potential of Solid State Lighting
in General Illumination Applications, is available at:
www.eere.energy.gov/buildings/documents/.
As solid state lighting represents the most promising approach to
more efficient lighting systems of the future, success in the
initiative will retain the technology base and jobs in the United
States (while facing increased product competition from Pacific Rim
corporations supported by their governments) and will widely enable
more efficient lighting systems to be applied widely. The potential for
such technology is quite significant, given the very low performance
characteristics of present incandescent (1 percent efficient in
delivered, useful light) and fluorescent systems (20 percent).
The Department has held seven workshops over the past two years to
plan out a broad agenda for research and development focused on
improving the performance of compound semiconductor science in the
application of general illumination. More than 300 participants
attended these workshops (including the conventional lighting industry,
compound semiconductor industry, academia, National Labs, research
institutions, and other government agencies). In general, R&D is
necessary in several areas: quantum efficiency, lifetime, performance,
packaging, infrastructure, and first cost. The most recent summary
document on this research agenda, The Promise of Solid State Lighting
for General Illumination, is available at: www.eere.energy.gov/
buildings/documents/.
SOLID STATE LIGHTING
Question. How far has this technology developed and what is the
nature of the research that has to be concluded?
Answer. Solid state lighting (SSL) exists today in a monochromatic
form (i.e. single color such as red or green). Currently, SSL is used
for ``exit'' signs and traffic control lights, and offers several
attributes beyond energy savings, such as durability and longer
lifetime. Additionally, the auto industry is converting incandescent
lamps applications to solid state devices (e.g. LED tail lights). To
save significant energy, the science and engineering of SSL needs to
mature in several performance metrics to be capable of competing in the
general illumination market with high quality white light, which is the
focus of the DOE SSL research.
White light SSL is in its infancy, with many prototypes in the 5 to
10 lumens per Watt (LPW) range. Newer prototypes perform in the 15 to
25 LPW range, about what an incandescent can do. Future research needs
cover six concept areas:
Efficiency.--The ability of solid state light sources to convert
electrons into photons is governed by three basic elements: (1)
materials systems; (2) internal quantum efficiencies (IQE); and (3)
external quantum efficiencies (EQE). Materials system research
evaluates semiconductor materials, studying the performance and
limitations of materials. IQE measures a material's ability to convert
electron-hole pairs into photonic emissions, and is largely a function
of the material system selected. EQE measures the amount of light that
leaves the semiconductor device and is available for collection and
use.
Lifetime.--Technologies lasting in excess of 50,000 hours are
sought. SSL research will focus on advancing our basic science
understanding of the role of impurities, defects, crystal structure and
other factors closely related to materials systems choices.
Lighting Performance.--(a) basic material properties and (b)
semiconductor physics directly impact the evolution of photon
wavelength, emission bandwidth and ultimately, color. For the future,
emission spectrum approaching the spectral power distribution of
natural sunlight is required.
Device Design.--Research will focus on (a) geometrical optical
engineering and (b) optical simulation within the compound
semiconductor--increases of 5 to 10 times present levels of optical
coupling are predicted. Research on structures of the individual layers
of materials will be required, as will integration of the substrate
geometry and optics.
Packaging.--Investigate packaging requirements such as sealing out
moisture and oxygen, managing heat transfer, and protecting optical
material from UV degradation. SSL technology will assemble them into an
optimized light delivery system.
Manufacturing.--Research will concentrate on significant first cost
reduction through aggressive development of suitable manufacturing
technologies and technical elements of the distribution infrastructure,
such as technology standards.
CLIMATE CHANGE TECHNOLOGY INITIATIVE (NCCTI)
Question. The budget request includes $40 million for a new Climate
Change Technology Initiative; $23 million of which is funded through
this subcommittee. Why is it necessary to establish a new, separate
program for this purpose?
Answer. The President's National Climate Change Technology
Initiative Competitive Solicitation program is intended to complement
and enrich the existing portfolio of ongoing research throughout the
Federal government and help to ensure that all possible technology
options are explored. The program is unique and warranted because
funding will be allocated solely on the basis of the potential for a
technology to contribute in significant ways future reductions or
avoidances of greenhouse gas emissions, and/or their capture and
sequestration (permanent storage). No program, past or present, has
made technology-neutral funding allocations in this manner. In general,
successful proposals would be focused on novel approaches for
contributing to broader technological goals, or on innovative ways of
solving or circumventing technical barriers to progress along a
plausible line of technology development
Question. Weren't climate change objectives already folded into
many of the Department's R&D programs like the Carbon Sequestration
program within the Office of Fossil Energy?
Answer. Many of the existing DOE R&D programs aim to provide
multiple public benefits such as increased energy security, reduced
emissions of pollutants, and reduced emissions of carbon dioxide. The
purpose of the NCCTI program is to focus solely on potential climate
change benefits. In doing so, we expect to identify R&D opportunities
that complement and enrich existing R&D programs. The responses to the
NCCTI Request For Information, released in November 2002 and closed in
January 2003, suggest that there are certain categories of novel
concepts (e.g., crosscutting evaluation methodologies, research that
does not clearly fall into the basic or applied research areas) that
show great promise for reducing greenhouse gas emissions and that are
unlikely to be eligible for or selected in procurements conducted under
existing DOE programs.
______
Questions Submitted by Senator Pete V. Domenici
CLEAN COAL POWER INITIATIVE
Question. I compliment the Administration on continuing its
commitment to the Clean Coal Power Initiative and Coal Research
initiative in the fiscal year 2004 budget with a request of $320.5
million overall. I firmly believe that we should capitalize on our two
greatest strengths in electricity supply--coal and nuclear. In both
cases, we should address risk areas. I'd like to ensure that the coal
initiatives would address issues associated with mining as well as the
subsequent combustion processes. For example, a small New Mexico
company in Raton has worked with Russian institutes, through the
Department's Initiatives for Proliferation Prevention program, to
develop instruments that allow remarkable refinement in how coal is
mined. This instrument, which actually mounts on the drill head,
enables the drill to automatically leave the last few inches at the top
and bottom of a coal seam. The majority of the serious heavy metal
contaminants in the seam are concentrated at the edges of the seam;
thus this new tool allows dramatically cleaner coal to be mined. When
burned, that coal then burns much more cleanly. I continue to believe
that we should focus on coal at the source in the coal R&D program and
in the Clean Coal Power initiative. Mr. Secretary, does the Clean Coal
Power Initiative include opportunities for advancing exciting new
technologies like this, no matter what part of the overall coal
utilization cycle they impact?
Answer. The current structure of the Clean Coal Power Initiative
(CCPI) focuses on demonstrating advanced technologies that will provide
clean, efficient, reliable and affordable electricity from coal. In
order for a technology to qualify for consideration under CCPI, it must
be proposed as part of an integrated power system that utilizes clean
coal. If a proposed technology, associated with another part of the
coal utilization cycle (such as mining), is integrated into the coal
power system, it could be considered under CCPI.
OIL AND GAS RESEARCH
Question. I'm very disappointed to note that oil and natural gas
technology research and development funds were again sharply cut in the
Administration's budget. Oil technology R&D is reduced by nearly 65
percent below the fiscal year 2003 enacted level (from $42.3 million to
$15 million in the President's request), and natural gas R&D is reduced
by nearly 44 percent from ($47.3 million to $26.3 million in the
President's request). These two energy sources play major roles in
current national energy supplies. In New Mexico, I've noted how
improved extraction technologies, which depend on continued research
and development, have helped to boost production of old wells. The
Senate bill would support R&D of the type done at the Petroleum
Recovery Research Center at New Mexico Institute of Mining and
Technology in Socorro. How would the Administration's reduced budget
for oil technologies impact ongoing strong R&D programs, such as this
one at New Mexico Tech?
Answer. The proposed budget would have no impact on the Petroleum
Recovery Research Center at New Mexico Institute of Mining and
Technology in Socorro, as there are no outstanding mortgages on
projects with this institution. The proposed fiscal year 2004 budget
does require the elimination of $5.9 million for projects being
conducted at other universities. However, only $1.3 million is for
projects that support the newly aligned oil program. This shortfall
will be addressed by extending the projects over a longer period of
time.
The new direction for the oil program resulting from a complete
strategic review of the program, emphasizes results and focuses on
customer groups in order to more effectively carry out the President's
energy plan to increase energy security and improve the environment
through his Clear Skies and Climate Change initiatives.
These changes were also in part a response to the results of the
Investment Criteria Scorecards that were completed as part of the
President's Management Agenda initiative for better R&D Investment
criteria.
Additionally, the Program Assessment Rating Tool (PART) was
completed for all program elements. Analysis of PART showed that the
program did not link annual activities and outputs to long-term
benefits. These outcomes reinforced the new program direction.
Question. What is the Administration's rationale for nearly
terminating these R&D programs as the nation makes a comprehensive
effort to increase our energy security and independence through
reducing dependence on foreign sources and developing new sources of
domestic energy?
Answer. The Office of Fossil Energy has completed its Top to Bottom
Review, and is beginning to implement it. The review provides a solid
first step towards a new program direction, emphasizing results and
focusing on customer groups in order to more effectively carry out the
President's energy plan to increase energy security and improve the
environment through his Clear Skies and Climate Change initiatives.
Certain program areas and projects that do not address the specific
goals of this new direction will be terminated. As stated in the
President's Management Agenda, spending large budgets without a clear
goal does not necessarily achieve good results.
These changes were also in part a response to the results of the
Investment Criteria Scorecards that were completed as part of the
President's Management Agenda initiative for better R&D Investment
criteria.
Additionally, the Program Assessment Rating Tool (PART) was
completed for all program elements. Analysis of PART showed that the
program did not link annual activities and outputs to long-term
benefits. These outcomes reinforced the new program direction.
OIL AND GAS--FEDERAL TRANSMISSION SITING
Question. Congestion and inadequate transmission infrastructure has
an impact on consumers. The Electric Power Research Institute estimated
that transmission reliability losses cost the economy $120 billion
annually. Contained in S. 14 is a provision to accelerate the
permitting of transmission lines across federal lands. The provision
requires the Department of Energy to take the lead in coordinating the
federal permitting efforts in order to accelerate and improve the
siting process. Do you believe that DOE can assist in this role and
reduce the time and costs associated with permitting transmission
facilities?
Answer. The process for obtaining permits for transmission lines
across federal lands has been a major source of delay and unnecessary
cost in the development of new transmission projects, particularly in
the West where much of the land is federally owned. Better coordination
is needed among a wide range of parties, including project developers,
state agencies, Native American tribes, and federal agencies. DOE is
well positioned to help facilitate this coordination.
FUEL CELLS
Question. The Administration's proposed initiatives for fuel cells
and hydrogen R&D have been very well received in the scientific
community and in the Congress. The FreedomCAR and FreedomFuel proposals
would receive about $235 million in the Energy Conservation budget
specifically to work on vehicle technologies ($157.6 million) and fuel
cell technologies ($77.5 million). Another $88 million would go to
hydrogen technology R&D through the Energy Efficiency and Renewable
Energy budget. These initiatives hold great hope for this nation to
move away from our heavy reliance on petroleum products for
transportation.
Mr. Secretary, you know of my strong support for moving toward a
hydrogen economy, but I have some concerns about the mix of the program
between essential R&D and demonstration programs. A recent letter
report of the National Research Council raised this issue essentially
saying that in its assessment the number of fuel cell demonstration
projects seem to be getting ahead of our progress on essential fuel
cell R&D. Mr. Secretary, do you share my concern that we need more
fundamental R&D to make progress on fuel cell technology?
Answer. The April 4, 2003 interim letter report from the National
Academy of Sciences (NAS) recommended that fundamental and exploratory
research should receive additional budgetary emphasis, and the DOE
should develop a careful plan for evaluating, funding, and validating
emerging technologies for hydrogen production, transportation, storage,
and end-use. Within the background, the interim report stated that,
when properly used, demonstrations have a place in a balanced research
program because they can lead to cost reductions and accelerate the
development of codes, standards, environmental permitting, and
strategies for inspection and monitoring. But, demonstrations also risk
distorting budgets and diverting effort toward technology with limited
potential. Development of a careful plan for funding and evaluating
demonstrations to address this risk will serve the public interest.
Since the time of the NAS letter, the DOE Office of Science (SC)
hosted a workshop to determine the basic science needs that support
hydrogen and fuel cell technology development. SC is currently
developing a research plan based on the outcomes of that workshop. The
DOE plan is based on the Hydrogen Vision and Roadmap that were
developed in collaboration with over 200 technical experts. The current
DOE plan includes 80 percent of funding for research and development
and 20 percent of funding for technology validation. These technology
validation projects are cost-shared 50/50 by industry partners. Strong
leveraging of Federal dollars indicates private sector support of the
RD&D pathway we have outlined and that our research validation approach
is sound. The results of technology validation are critical to refining
and directing future research and development efforts.
Question. What is your assessment of the progress of R&D on liquid
hydrogen, compressed gas, and on several carrier fuels that would
transport hydrogen in vehicles?
Answer. Liquid and compressed hydrogen tanks are relatively mature
technologies that are suitable for near-term demonstrations of
hydrogen-powered vehicles. Development of pressurized insulated vessels
has reduced evaporative losses in liquid tanks. However, liquid tanks
do not meet the volume targets for on-board storage and liquefying
hydrogen incurs a sizable energy penalty. Development of low-permeation
liners, high-strength fibers, and conformable tanks has led to
fabrication of 5,000 and 10,000 psi gaseous hydrogen tanks. However,
these compressed gas tanks do not result in the required 300-mile range
while also meeting vehicle weight and space requirements. Therefore,
the long-term effort of the DOE program will be the development of low-
pressure, solid-state materials that store hydrogen, such as carbon
nanotubes, hydrides and alanates.
Question. What in your view is the appropriate mix of fuel cell R&D
and demonstration projects?
Answer. Every research activity must be evaluated with
consideration to its own particular factors, including the state of
research progress. At this point, we believe that an 80/20 fuel cell
R&D/demonstration mix, where demonstration projects require a minimum
50 percent cost share by industry, is appropriate.
Question. I note that researchers at Los Alamos National Lab
continue to make great progress in fuel cell research and are poised to
be a center of excellence in this area. I believe the nation needs this
center to integrate a number of separate specialties to more
efficiently develop commercially-ready fuel cell systems. Previous
budget submissions led me to believe this was also part of the
Administration's thinking. What is the Department's current position on
establishing a national fuel cell research center?
Answer. We appreciate the major advances that Los Alamos National
Laboratory (LANL) has made in polymer electrolyte membrane (PEM) fuel
cells and that they hold seminal patents in the field. For example,
LANL scientists were responsible for achieving the breakthrough that
allowed a 90 percent reduction in the platinum required by fuel cell
electrodes. This breakthrough significantly lowered the cost of PEM
fuel cells and stimulated the large-scale automotive industry
investment that exists today.
With respect to establishing a national center for fuel cell
research, the Department is currently studying this concept.
Question. What level of funding for fuel cells could be effectively
utilized to advance this exciting technology as rapidly as possible?
Answer. The Fossil Energy and Energy Efficiency and Renewal Energy
Fuel Cells Programs are working with partners to accelerate the
development and successful market introduction of these technologies.
In fiscal year 2004, the Fossil Energy Budget Request is $44.5
million for the continuation of the entire program, with emphasis on
the Solid State Energy Conversion Alliance (SECA) where efforts are
underway to drastically reducing fuel cell costs to make them more
broadly applicable and widespread commodity in the competitive, mature
distributed generation and auxiliary power markets. Funding at the
requested level will allow six competing SECA industry teams and about
19 core technology participants to advance the technology at an
accelerated pace.
In fiscal year 2004, the Energy Efficiency and Renewal Energy
(EERE) budget request is $77.5 million for development of polymer
electrolyte membrane fuel cells in support of the President's
FreedomCAR and Hydrogen Fuel Initiative. This request level is
appropriate for EERE's planned fuel cell R&D and is consistent with our
technology roadmap plans. Research in membranes, electrodes, fuel
processing and system components will lead to $30/kW engine costs, 60
percent energy efficiency and 5,000 hours durability on hydrogen.
Fiscal year 2004 funding for fuel cells and hydrogen is the first year
of the President's Initiative, which will accelerate commercialization
of hydrogen fuel cell vehicles by 15 years to 2015.
HIGH TEMPERATURE SUPERCONDUCTIVITY
Question. If I could change subjects for a moment, I would like to
ask you about the Energy Efficiency and Renewable Energy budget, and
high temperature superconductivity R&D. It is my sense that within DOE
there is support to move into grid-level demonstration projects to
begin effective utilization by utilities of high-temperature
superconductivity technology for more reliable supplies of electricity.
The request of $76.9 million for electricity reliability activities is
9 percent below the $85 million approved for fiscal year 2003 and does
not move us in that direction.
Answer. Within the $76.9 million request, there are significant
grid-level demonstration projects that will be more visible in fiscal
year 2004 in which utilities will begin effective utilization of high
temperature superconductivity. The most notable is a planned Long
Island installation of a superconducting transmission power cable able
to serve 300,000 homes. This could lead to a future superconductivity
``backbone'' being put in place to supply electricity to most of Long
Island. Similar projects are planned in Albany, NY, and Columbus, OH.
Our intent is to move as rapidly as possible to effective utilization
of several types of grid technologies (transmission and distribution
cables, transformers, generators, and fault current limiters) while
maintaining research on higher capacity, cost-effective,
superconducting wires and other key enabling technologies.
Question. What is the major thrust of the Department's fiscal year
2004 budget proposal for high-temperature superconductivity?
Answer. In the Department's fiscal year 2004 budget proposal for
high-temperature superconductivity, the major thrust is to improve
Second Generation superconducting wire (longer lengths, higher
capacity, lower-cost processing) through collaboration of university,
national laboratory, and private company scientists; while
simultaneously moving as rapidly as possible to effective utilization
of transmission and distribution cables by installing and testing
different cable types in the electric grid. The latter work is carried
out by industry teams consisting of a utility, cable manufacturer,
superconducting wire supplier as well as special expertise from the
national labs and universities.
______
Questions Submitted by Senator Robert C. Byrd
TECHNOLOGY TRANSFER--CLEAN ENERGY TECHNOLOGY EXPORT (CETE)
Question. Mr. Secretary, Congress has urged the Administration to
support increased opportunities to open and expand international energy
markets and export U.S. clean energy technologies to developing
countries and other nations abroad. These efforts are very important to
helping meet our own energy security needs while at the same time
addressing related economic, job creation, trade, environmental, and
climate change objectives. Additionally, such efforts could
significantly aid in meeting other nations' infrastructure and
development needs while also increasing the deployment of a range of
U.S. clean energy technologies, including clean coal technologies. The
Clean Energy Technology Exports (CETE) Initiative will help meet that
challenge. It had its genesis within the Senate Appropriations
Committee and has had broad bipartisan support. The administration has
talked about such ideas on occasion, but despite such rhetoric, the
participating federal agencies have done little, if anything, to
implement the strategic plan. It seems you are just sitting on your
hands and missing a critical opportunity. Because the Department of
Energy is a leading agency involved in the implementation of the CETE
Initiative as called for by the Congress and released by the
Administration in October 2002, what specific actions is your agency
taking to work with the other federal agencies and engage non-
governmental organizations, private sector companies, and other
international partners with regard to this plan?
Answer. The Department is involved in many activities with other
federal agencies, non-governmental organizations, private sector
companies and international partners to expand the market for clean
energy technologies. One such effort is the current joint working group
on U.S.-China Olympic cooperation. This cooperative effort is
consistent with CETE objectives and aims to deploy clean energy
technologies for the 2008 Summer Olympic Games, by facilitating U.S.
industry interest in the Chinese market, and promoting U.S.-made
equipment and services while protecting the global environment. One of
the eleven areas of mutual interest for cooperation is clean coal
technology. To this end, the Department's Office of Fossil Energy has
developed a plan to: use U.S. NO<INF>X</INF> Control Technologies for
Beijing region power plants; jointly design coal preparation plants;
and reach out to U.S. industry on business opportunities.
Question. Can you tell me when the Appropriations Committee will
receive the required annual CETE strategic plan progress report that
was due to this committee on March 1, 2003?
Answer. The Department expects to submit the CETE report to the
Congress by the end of July 2003.
______
Questions Submitted by Senator Dianne Feinstein
NUCLEAR WEAPONS TESTING
Question. Mr. Chairman, thank you for holding this hearing and
Secretary Abraham, thank you for coming. I am interested to hear your
answers to many subjects important to Californians. Among them are the
Administration's position on the use and development of low-yield
nuclear weapons; banning fraud and manipulation in the energy sector;
and the President's hydrogen fuel and fuel cell car proposals in the
fiscal year 2004 Department of Energy Budget. First and foremost, I
want to focus on the Administration's position on the use and
development of low-yield nuclear weapons. The President is right that
the greatest threat facing the United States lies in the global
proliferation of Weapons of Mass Destruction, and terrorist access to
those weapons. But I am deeply concerned that by appearing to focus its
national security strategy on its nuclear arsenal, current U.S. policy
may well actually encourage proliferation, alienate our friends and
allies, and promote a backlash against the United States. Instead of
ratcheting back on our reliance on nuclear weapons with the Cold War
over, the administration seems to be looking for new ways to use our
nuclear advantage to restructure our forces so that they are more
``usable''--blurring the lines between nuclear and conventional forces
and legitimizing the idea that nuclear weapons can be used.
Like it or not, the United States sets the pace when it comes to
international norms regarding nuclear weapons, and, in fact, just
considering the use of these weapons much less actually using them
threatens to undermine our efforts to stop proliferation and makes us
less safe, not more.
The administration's Nuclear Posture Review, released in January
2002, stressed the importance of being prepared to use nuclear weapons.
The review noted that we must plan to possibly use them against a wider
range of countries. And it said that we need to develop new types of
weapons so that we can use them in a wider variety of circumstances.
According to press reports the review also explicitly listed seven
nations Russia, China, Iran, Iraq, Syria, Libya, and North Korea
against which the United States should be prepared to use nuclear
weapons even though most of those nations do not have nuclear weapons
themselves. That means the Administration is contemplating the first
use of nuclear weapons in a conflict.
Indeed, a few months after issuing the nuclear posture review,
President Bush signed National Security Presidential Directive-17,
which, according to press reports, abandons a bipartisan policy of
ambiguity and explicitly says that the United States might use nuclear
weapons to respond to a chemical or biological attack. Clearly the
administration seems to be moving toward a military posture in which
nuclear weapons are considered just like other weapons in which their
purpose is not simply to serve as a deterrent but as a usable
instrument of military power, like a tank, a fighter aircraft, or a
cruise missile.
I believe that such an approach is not in our nation's interest,
nor is it consistent with our standards and values. A first use of
nuclear weapons by the United States should be unthinkable, and
responding to a non-nuclear attack with nuclear weapons violates a
central tenet of just war and U.S. military tradition. There is no
question that in the post 9/11 era a full range of policy options for
dealing with new and uncertain events should be on the table. But in my
view, nuclear options should not be considered as an extension of
conventional options because this inevitably lowers the threshold for
use.
So, if the United States is seeking to develop nuclear weapons
which blur the distinction between conventional and nuclear forces and
lowers the threshold for the possible use of these weapons, we must
consider the message that this sends to the rest of the world. I
believe that it is critical that the United States sets a very high
international standard for nuclear restraint. If we do not, we may well
encourage others to develop their own standards and their own nuclear
arsenals.
Using nuclear weapons, even ``small'' ones, would cross a line that
has remained sacrosanct for almost 60 years. Using a small nuclear
weapon makes the use of all nuclear weapons more permissible it
legitimizes their use and legitimizing nuclear weapons promotes their
spread. It also puts us in greater danger should we ever have to fight
a nuclear power.
Moreover, there is no real evidence that the United States needs to
use nuclear weapons in the scenarios outlined in the Nuclear Posture
Review or NSPD 17.
The most often-cited need for new nuclear weapons is to destroy
underground bunkers. But the most important factor in destroying a
deeply buried target is knowing exactly where it is. And if we know
exactly where it is, we can either destroy it with conventional weapons
or deny access to it by destroying entrances and air ducts.
Earlier this year, at an Energy Committee Hearing, I asked you
whether Secretary Rumsfeld had been quoted correctly in The Washington
Post, on the 20th of February, when he said that the Administration had
no plans to develop new low-yield nuclear weapons. You said yes, he had
been quoted correctly, that the Administration was only studying
adaptations of existing weapons.
This week on the Floor of the Senate I offered an amendment to
strike the controversial provision in the Defense Authorization Bill
that will end a 10-year-old ban on research and development of low
yield nuclear weapons.
The Defense Authorization Bill would repeal the decade old
``Spratt-Furse'' provision, which bans all development leading to the
production of nuclear weapons with yields of fewer than five kilotons.
I believe this prohibition should remain in full force because
repealing it:
--Provides the United States no military benefit;
--Could lead to the resumption of nuclear testing;
--Undermines efforts to halt the proliferation of Weapons of Mass
Destruction; and
--Blurs the line between conventional and nuclear weapons.
Now that the ban will be repealed, what are the exact plans for the
Administration's study, development, and testing of low-yield nuclear
weapons?
Answer. The Department has no research currently under way to
develop low-yield or other new nuclear weapons at the Department's
nuclear weapon design laboratories. However, the Department of Defense
and Department of Energy have begun a two to three-year study on
potential modifications to current stockpile gravity bombs, the B61 and
the B83. The study, known as the Robust Nuclear Earth Penetrator (RNEP)
phase 6.2 study, will assess the feasibility, design definition, and
cost for modifications of providing a robust earth penetrating weapon
to address the threat posed by hard and deeply buried facilities.
The RNEP concept is being studied as one of a number of possible
means to deal with emerging threats. Development, production and
fielding of the RNEP concept would not require nuclear testing.
There has been no decision to move the RNEP to engineering
development. Should this occur in the future, the Department of Energy
would request funds from Congress as a separate budget line item,
consistent with Section 3143 of Public Law. 107-314, in the President's
budget request for that year.
I appreciate your observation that ``a full range of policy options
for dealing with new and uncertain contingencies should be on the
table.'' I believe that the Department's work will not blur the
distinction between nuclear and conventional weapons. I also encourage
you to seek the views of the Department of Defense on the issues you
raise regarding military utility of low-yield weapons and their
potential contribution to the deterrent.
Question. What exactly will you do differently when this Defense
Authorization Bill is passed?
Answer. Repeal of the prohibitions of Spratt-Furse would allow the
NNSA's weapons laboratories to examine more fully the technical
options, the investigation of which is currently prohibited by law and
to a lessor extent by the Spratt-Furse provisions of the House bill.
There are problems in attempting to confine intellectual efforts to
``research only'' rather than ``research and development'' because
these lines are often not clear. In the end, Congress controls these
activities which could lead to a recommendation to initiate engineering
development, since the Department of Energy would request funds from
Congress as a separate line item in the President's budget request for
that year.
Question. Will the Administration seek to test these weapons?
Answer. The Administration remains committed to adhering to a
moratorium on nuclear weapons testing. At the same time, the
Administration has no intention of resubmitting the CTBT to the Senate
for ratification.
ENERGY MARKETS
Question. Now I would like to turn to the energy markets. Over the
past few years, we have seen corporate scandal after corporate scandal
in the news--and nowhere has there been more fraud and market abuse
than in the energy sector. In March, the Federal Energy Regulatory
Commission issued its ``Final Report on Price Manipulation in Western
Markets'' which confirmed there was widespread and pervasive fraud and
manipulation during the Western Energy Crisis. The overwhelming
evidence uncovered demands that California receive full and complete
refunds and that FERC revise the state's long-term contracts to remedy
the manipulation that has taken place and to deter future abuse.
Three years ago, this month California's energy market began to
spiral out of control. The crisis forced the State of California into a
severe budget shortfall. It forced the state's largest utility into
bankruptcy and nearly bankrupted the second-largest utility. Now three
years and $45 billion in costs later, we have learned how the energy
markets in California were gamed and abused.
Yet the Senate Energy Bill doesn't prevent the type of gaming that
went on during the energy crisis. The Senate bill only bans one type of
specific manipulation--wash trades in the electricity market--but it
does not address the natural gas market, nor does it prevent other
forms of fraud and manipulation that took place in California and were
detailed in the Enron memos as ``Fat Boy,'' Ricochet,'' ``Death Star,''
and ``Get Shorty.''
Does the Bush Administration support banning the type of fraud and
manipulation that Enron engaged in?
Answer. The Administration strongly opposes illegal market
manipulations and supports the prevention of fraud and manipulation in
the nation's energy markets. It would not be appropriate to discuss
cases involving Enron, and other energy firms that are still pending
before FERC and in other forums, and this answer should not be
understood as presuming the outcomes of those cases.
Question. FERC Chairman Pat Wood and FERC Commissioner Bill Massey
support conforming the penalty and refund provisions in the Federal
Power Act with those of the Natural Gas Act. Does the Bush
Administration also support these changes?
Answer. Yes.
Question. Section 1121 of Senator Domenici's Energy Bill prevents
the Federal Energy Regulatory Commission from issuing any rulemaking on
the proposed Standard Market Design until July 1, 2005. What are the
Bush Administration's views on delaying the Standard Market Design
rulemaking until this date--especially in light of the recent revisions
proposed by the FERC Commissioners in their White Paper?
Answer. In the White Paper FERC demonstrated its willingness to
work with state regulators and industry to accommodate regional
perspectives in the design of regional transmission organizations
(RTOs) and other matters related to the formation and operation of
regional wholesale markets for electricity. The Administration opposes
blocking the FERC from any final rulemaking in this area for two years,
which could prevent FERC from taking needed action to maintain
stability in regional electricity markets.
Question. In a speech last week to the National Petroleum Council,
you made some comments about the current conditions in our natural gas
markets. As you know, low U.S. production, low inventories, and high
prices are battering industries that rely on natural gas as a raw
material or energy source. In addition to the chemical, aluminum, and
fertilizer industries--the ethanol industry is also dependant on
natural gas. Since most ethanol plants rely solely on natural gas, is
this the time to mandate billions of gallons of ethanol into our fuel
supply and force many more ethanol plants to be built?
Answer. New, modern dry mill ethanol plants use about 40,000 BTUs
of natural gas per gallon of ethanol produced (76,000 BTUs). A small
additional amount of natural gas will be used in the production of
fertilizer used to grow corn. For the incremental 2.5 billion gallons
that would need to be produced to reach the 5 billion gallon per year
target under a renewable fuels standard, natural gas demand would be
about .075 TFC higher in 2015. This would be an increase of about half
of 1 percent in expected 2015 gas demand. We do not believe this is a
significant amount given the potential factors that will drive natural
gas supply and demand over the next 10-20 years.
Question. Is the ethanol mandate something DOE is considering in
evaluating our long-term natural gas needs?
Answer. As discussed in the answer above, we do not believe that
the impact of a 5 billion gallon per year renewal fuels standard will
have a significant impact on future natural gas demand.
HYDROGEN FUEL
Question. I support research and development efforts to make
hydrogen fuel and fuel cell powered automobiles a reality. In fact,
companies and universities based in California have been at the
forefront of developing hydrogen and fuel cell technologies. However, I
am concerned about the overwhelming amounts of energy it will take to
extract hydrogen fuel on a large scale. Since the actions we take today
will influence what kind of hydrogen economy develops 10 or 20 years
from now, how does the Administration propose to generate this large
amount of energy?
Answer. A big advantage of hydrogen as a transportation fuel is its
potential to be produced efficiently and economically via a number of
processes and from a variety of domestic resources, such as natural gas
and other fossil fuels, abundant renewables, and nuclear. The
Department has established a balanced effort to research and develop
hydrogen production capabilities from all of these resources. Today,
the most cost-effective and efficient process is steam reforming of
natural gas. Natural gas reforming is a route for producing hydrogen,
particularly in the near term because of its current economics and the
availability of existing infrastructure. Use of coal with
sequestration, renewable resources, and nuclear are other routes for
producing hydrogen over the long term. Although hydrogen production in
the future is not likely to come from natural gas alone, an Energy
Information Administration (EIA) calculation indicated that if 36
million hydrogen fuel cell vehicles were on the road by 2025, it would
add about 5 percent to total natural gas that will be used in the
United.States that year. This increase would be more than offset by
natural gas demand reduced by new advanced technologies and efficiency
improvements to existing technologies under development within the EERE
portfolio. EERE's analysis, based on our fiscal year 2004 budget
request, indicates that by 2020 the industrial, buildings, and other
portions of our portfolio will be freeing up some 11 percent of
expected natural gas demand. In the future, hydrogen will likely be
produced from a diverse suite of domestic resources, such as
renewables, nuclear, natural gas and, if carbon capture and
sequestration technologies are perfected, coal. Thus, the domestic
resources needed to produce large amounts of hydrogen are available
and, with continued research and development, the necessary production
processes should meet required efficiency and cost objectives to
facilitate a fuel cell vehicle commercialization decision by industry
in 2015.
ELK HILL
Question. The Department of Energy entered into a Settlement
Agreement with the State of California to compensate the State for its
interest in the Elk Hills oil reserve. The Settlement Agreement calls
for the State to receive compensation in seven annual installments. The
Department has met its obligations for the first five installments. Mr.
Secretary, will the Department continue to meet its obligations under
this Agreement?
Answer. Estimates for the total for the remaining payments have
been as high as $118 million; however, until final equity and final
cost determinations are made, the precise amount is speculative. The
President's budget for fiscal year 2004 requests $36 million for the
payment to California, indicative of the Department's intention to meet
its obligation to California. Under the agreement, if equity has not
been finalized by July 2003 (which it will not be), DOE and the state
should confer, and DOE must determine whether any or all of the seventh
installment should be deferred.
Question. DOE has held back $26 million in compensation due to the
State because DOE has taken 6 years to finalize the split of the
proceeds from selling Elk Hills. Under DOE's Settlement Agreement, for
the sixth installment in fiscal year 2004, the State is entitled to
half of the balance in the Elk Hills School Lands Fund that's left
after this holdback. Thus, the State is entitled to $59 million in Elk
Hills compensation for fiscal year 2004, not the $36 million requested
in your budget. Mr. Secretary, what is the Department's view of an
appropriation of the full $59 million?
Answer. The Settlement Act provided for 9 percent of the net sales
proceeds to be reserved in a contingent fund in the Treasury for
payment to the State, subject to appropriation. The Department's
estimate of 9 percent of the net sales proceeds was $324 million, of
which $298 million has already been deposited into the contingent fund.
The Department will adjust the amount in the contingent fund once all
divestment related costs and final equity have been determined. It is
now apparent that the final equity determination will not be completed
until fiscal year 2006. Since 9 percent of the net revenues can only be
calculated after final equity and final costs are determined, the
amount of the two ``equal'' final payments is contingent upon events
that have not yet occurred, and it will be impossible for Congress to
appropriate an amount for fiscal year 2004 that would be known to be 50
percent of the remaining payment.
CONCLUSION OF HEARINGS
Senator Burns. Thank you all very much. The subcommittee
will stand in recess subject to the call of the Chair.
[Whereupon, at 10:56 a.m., Thursday, May 22, the hearings
were concluded, and the subcommittee was recessed, to reconvene
subject to the call of the Chair.]