<DOC>
[110th Congress House Hearings]
[From the U.S. Government Printing Office via GPO Access]
[DOCID: f:42156.wais]
DISCUSSION DRAFTS CONCERNING
ENERGY EFFICIENCY, SMART
ELECTRICITY GRID, ENERGY POLICY ACT OF 2005 TITLE XVII LOAN
GUARANTEES, AND STANDBY LOANS
FOR COAL-TO-LIQUIDS PROJECTS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND AIR QUALITY
OF THE
COMMITTEE ON ENERGY AND COMMERCE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
__________
MAY 24, 2007
__________
Serial No. 110-50
Printed for the use of the Committee on Energy and Commerce
energycommerce.house.gov
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COMMITTEE ON ENERGY AND COMMERCE
JOHN D. DINGELL, Michigan, Chairman
HENRY A. WAXMAN, California JOE BARTON, Texas
EDWARD J. MARKEY, Massachusetts Ranking Member
RICK BOUCHER, Virginia RALPH M. HALL, Texas
EDOLPHUS TOWNS, New York J. DENNIS HASTERT, Illinois
FRANK PALLONE, Jr., New Jersey FRED UPTON, Michigan
BART GORDON, Tennessee CLIFF STEARNS, Florida
BOBBY L. RUSH, Illinois NATHAN DEAL, Georgia
ANNA G. ESHOO, California ED WHITFIELD, Kentucky
BART STUPAK, Michigan BARBARA CUBIN, Wyoming
ELIOT L. ENGEL, New York JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland HEATHER WILSON, New Mexico
GENE GREEN, Texas JOHN B. SHADEGG, Arizona
DIANA DeGETTE, Colorado CHARLES W. ``CHIP'' PICKERING,
Vice Chairman Mississippi
LOIS CAPPS, California VITO FOSSELLA, New York
MIKE DOYLE, Pennsylvania STEVE BUYER, Indiana
JANE HARMAN, California GEORGE RADANOVICH, California
TOM ALLEN, Maine JOSEPH R. PITTS, Pennsylvania
JAN SCHAKOWSKY, Illinois MARY BONO, California
HILDA L. SOLIS, California GREG WALDEN, Oregon
CHARLES A. GONZALEZ, Texas LEE TERRY, Nebraska
JAY INSLEE, Washington MIKE FERGUSON, New Jersey
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York TIM MURPHY, Pennsylvania
JIM MATHESON, Utah MICHAEL C. BURGESS, Texas
G.K. BUTTERFIELD, North Carolina MARSHA BLACKBURN, Tennessee
CHARLIE MELANCON, Louisiana
JOHN BARROW, Georgia
BARON P. HILL, Indiana
______
Professional Staff
Dennis B. Fitzgibbons, Chief of Staff
Gregg A. Rothschild, Chief Counsel
Sharon E. Davis, Chief Clerk
Bud Albright, Minority Staff Director
(ii)
Subcommittee on Energy and Air Quality
RICK BOUCHER, Virginia, Chairman
G.K. BUTTERFIELD, North Carolina, J. DENNIS HASTERT, Illinois,
Vice Chairman Ranking Member
CHARLIE MELANCON, Louisiana RALPH M. HALL, Texas
JOHN BARROW, Georgia FRED UPTON, Michigan
HENRY A. WAXMAN, California ED WHITFIELD, Kentucky
EDWARD J. MARKEY, Massachusetts JOHN SHIMKUS, Illinois
ALBERT R. WYNN, Maryland JOHN B. SHADEGG, Arizona
MIKE DOYLE, Pennsylvania CHARLES W. ``CHIP'' PICKERING,
JANE HARMAN, California Mississippi
TOM ALLEN, Maine STEVE BUYER, Indiana
CHARLES A. GONZALEZ, Texas MARY BONO, California
JAY INSLEE, Washington GREG WALDEN, Oregon
TAMMY BALDWIN, Wisconsin MIKE ROGERS, Michigan
MIKE ROSS, Arkansas SUE WILKINS MYRICK, North Carolina
DARLENE HOOLEY, Oregon JOHN SULLIVAN, Oklahoma
ANTHONY D. WEINER, New York MICHAEL C. BURGESS, Texas
JIM MATHESON, Utah JOE BARTON, Texas (ex officio)
JOHN D. DINGELL, Michigan (ex
officio)
------
Professional Staff
Sue D. Sheridan, Senior Counsel
John W. Jimison, Counsel
Rachel Bleshman, Legislative Clerk
David McCarthy, Minority Counsel
C O N T E N T S
----------
Page
Hon. Rick Boucher, a Representative in Congress from the
Commonwealth of Virginia, opening statement.................... 1
Hon. John Shimkus, a Representative in Congress from the State of
Illinois, opening statement.................................... 3
Hon. Edward J. Markey, a Representative in Congress from the
Commonwealth of Massachusetts, opening statement............... 4
Hon. Mike Rogers, a Representative in Congress from the State of
Michigan, opening statement.................................... 5
Hon. Mike Doyle, a Representative in Congress from the
Commonwealth of Pennsylvania, opening statement................ 6
Hon. Joe Barton, a Representative in Congress from the State of
Texas, opening statement....................................... 7
Hon. John D. Dingell, a Representative in Congress from the State
of Michigan, opening statement................................. 8
Hon. J. Dennis Hastert, a Representative in Congress from the
State of Illinois, opening statement........................... 9
Hon. Jane Harman, a Representative in Congress from the State of
California, opening statement.................................. 10
Hon. Tom Allen, a Representative in Congress from the State of
Maine, opening statement....................................... 11
Hon. Jay Inslee, a Representative in Congress from the State of
Washington, opening statement.................................. 12
Hon. Tammy Baldwin, a Representative in Congress from the State
of Wisconsin, opening statement................................ 13
Hon. Albert R. Wynn, a Representative in Congress from the State
of Maryland, opening statement................................. 14
Hon. Mike Ross, a Representative in Congress from the State of
Arkansas, opening statement.................................... 15
Witnesses
David Rodgers, Deputy Assistant Secretary, Energy Efficiency,
U.S. Department of Energy...................................... 16
Prepared statement........................................... 19
Kateri Callahan, president, Alliance to Save Energy.............. 28
Prepared statement........................................... 30
Jay Birnbaum, vice president and general counsel, Current Group,
LLC............................................................ 41
Prepared statement........................................... 44
Submitted material........................................... 113
Katharine A. Fredriksen, Principal Deputy Assistant Secretary,
Policy and International Affairs, U.S. Department of Energy.... 73
Prepared statement........................................... 76
Dan Maley, vice president, Leucadia International Corporation.... 81
Prepared statement........................................... 82
Daniel A. Lashof, science director, Climate Center, National
Resources Defense Council...................................... 96
Prepared statement........................................... 98
DISCUSSION DRAFTS CONCERNING ENERGY EFFICIENCY, SMART ELECTRICITY GRID,
ENERGY POLICY ACT OF 2005 TITLE XVII LOAN GUARANTEES, AND STANDBY LOANS
FOR COAL-TO-LIQUIDS PROJECTS
----------
THURSDAY, MAY 24, 2007
House of Representatives,
Subcommittee on Energy and Air Quality,
Committee on Energy and Commerce,
Washington, DC.
The subcommittee met, pursuant to call, at 10:10 a.m., in
room 2123 of the Rayburn House Office Building, Hon. Rick
Boucher (chairman) presiding.
Members present: Representatives Butterfield, Barrow,
Markey, Wynn, Doyle, Harman, Allen, Gonzalez, Inslee, Baldwin,
Ross, Weiner, Matheson, Dingell, Hastert, Hall, Upton,
Whitfield, Shimkus, Shadegg, Pickering, Buyer, Bono, Rogers,
Burgess, and Barton.
Staff present: Sue Sheridan, John Jimison, Chris Treanor,
Laura Vaught, Margaret Horn, David McCarthy, Kurt Bilas, and
Matt Johnson.
OPENING STATEMENT OF HON. RICK BOUCHER, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF VIRGINIA
Mr. Boucher. Earlier this year, the Speaker announced that
in July the House will debate a comprehensive measure to reduce
U.S. reliance on petroleum, 60 percent of which is imported.
That importation comes from some of the world's least
politically stable nations. To enhance our economic health and
our national security simultaneously, there is a broad
consensus that we should develop domestically produced
alternatives to petroleum in order to power transportation and
reduce energy consumption broadly across our economy for water,
energy, efficiency, and conservation measures.
A number of House committees are currently developing
legislation for the July energy independence measure, and this
committee is making a major contribution to that effort. This
morning the subcommittee is conducting a legislative hearing on
four titles that will be a portion of our contribution to the
Speaker's energy independence July agenda. In June, we will
conduct a second legislative hearing on additional titles that
are presently being constructed. For purposes of subcommittee
mark-up, we will combine the subject matter from today's
hearing with the additional titles so that our entire
contribution to the Speaker's Energy Independence Measure will
be subject to a single mark-up in subcommittee and then will be
marked up in the full Committee on Energy and Commerce.
The titles that we are discussing this morning address four
objectives. We propose to reduce energy consumption through the
adoption of 29 separate new energy efficiency measures. They
range from new consensus appliance standards to requirements
for improvements in lighting efficiency, green building
provisions, industrial waste energy recovery, and new processes
under which DOE will expedite the approval of future energy
efficiency standards.
A second title will promote the development of a smart
electricity grid so that consumers can elect to save money by
shifting electricity consumption to off-peak hours, a step that
will help maximize the capacity of power-generating stations.
Many exciting uses for the smart grid lie ahead, including
using plug-in vehicles as storage units for electricity
generated by utilities during non-peak hours which then can be
drawn back from the vehicle batteries during times of higher
electricity demand. Our provisions that are contained in the
second title will help to promote the deployment of that smart
grid.
Our other two titles are designed to promote domestic
alternatives to petroleum. In EPACT 2005, we enacted loan
guarantee authority for DOE to help bring innovative
technologies and biofuels to the commercial market. To date,
loan guarantees have not been awarded, and DOE has misconstrued
congressional intent by refusing to offer guarantees equal to
the full 80 percent of the project cost that the statute
contemplates. Consequently, commercial scale cellulosic ethanol
production in the United States has been held back. Our loan
guarantee language corrects that misinterpretation and upon its
passage and the award of guarantees, we can expect commercial
scale ethanol production from cellulose to commence in at least
one site in the United States and future plants in other States
are also now under consideration also pending the award of DOE
granted loan guarantees.
The final title will offer a Federal price guarantee for
six coal-to-liquids facilities resolving uncertainties in the
long-term outlook for world oil prices that have inhibited the
flow of private capital into coal-to-liquids facilities.
If we truly want to substantially lessen our reliance on
petroleum, cellulosic ethanol from biomass and coal-to-liquids
from our single, most-abundant resource which is coal offer the
promise for success. The developers of these new liquid fuel
resources have signaled a willingness to construct plants if
our provisions become law.
Finally, in this opening statement, let me re-emphasize
that the primary purpose of the legislation that we are
developing for the Speaker's July floor action is energy
independence. That is in accordance with the Speaker's
direction to various committees that are currently constructing
legislation that will contribute to that energy independence
agenda. The primary purpose of our action that we are
considering today and will consider in the legislative hearing
to follow this one in June is not greenhouse gas controls. We
have adopted a ``do no harm'' principle for this legislation
and what we will consider in our next legislative hearing with
regard to greenhouse gas emissions. Nothing that we are doing
here will worsen greenhouse gas emissions. But the primary
purpose of the legislation we are processing in this timeframe,
hearing today and also hearing in June and then marking up in
June, in this subcommittee and on the full committee, will be
achieving a greater American energy self-sufficiency.
In September, this subcommittee and the full Energy and
Commerce Committee will process a mandatory greenhouse gas
measure, and I want to stress again that that will happen in
the fall of this year. We will be processing a mandatory
greenhouse gas control measure through this subcommittee and
full committee. We have conducted 10 days of hearings in this
subcommittee this year on the subject of climate change, and
immediately following the July passage of the energy
independence bill that we are now processing, we will return
our attention in this subcommittee to climate change and the
construction if our mandatory legislation for consideration in
this subcommittee and the full committee during September.
I want to thank all of the members of the subcommittee who
have shared their suggestions with us for the measure that we
are having our hearing regarding today and for the legislation
we will be considering in a second legislative hearing in June.
Members have shared ideas with regard to alternative fuels and
energy efficiency, and many of the Members' recommendations are
reflected in the legislation that is before the subcommittee at
the present time.
This has been a broad, bipartisan process, and I want to
say thank you to Members on both sides of the aisle for their
participation and for sharing ideas and recommendations with
us. That concludes my opening statement.
I am pleased at this time to recognize the gentleman from
Michigan, Mr. Upton, for 5 minutes.
Mr. Upton. I am going to defer my time, the 3 minutes. But
I might ask unanimous consent to put in Mr. Hastert's opening
statement as I know he is on his way.
Mr. Boucher. Without objection, opening statements
submitted by all Members will be made part of the record. And
the Chair would note that pursuant to the rules of the
committee, any Member who waives an opening statement will have
the time allotted for that statement and to that Member's
question period for the first panel of witnesses.
The gentleman from Illinois, Mr. Shimkus.
OPENING STATEMENT OF HON. JOHN SHIMKUS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ILLINOIS
Mr. Shimkus. Thank you, Mr. Chairman. I will be brief. I
want to commend you on the movement on energy security
legislation. I think it builds on what we did in EPACT 2005,
and the basic efficiency, smart grid, loan guarantees, CTL, I
can't think for all my colleagues on this side but I do think
you are going to have a lot of support on this provision, and
you can count me as an ally as we move this piece of
legislation forward.
The best thing we can do on energy security and high prices
is have more supply. We started that with EPACT 2005 with the
renewable fuel standard. We are going to do that in this bill
with using a great resource of coal. And when you have more
supply, especially internally, the coal-to-liquid applications,
you not only have the commodity product, but you will build
refineries. I mean, that is what we are missing. We are missing
the commodity product and we are missing refinery capacity, and
with this we can get both. And everybody is worried about high
prices, but the best thing you can do is get more competitive
fuels into the mix. So I really applaud you on that. Thanks for
working with me, and I yield back my time.
Mr. Boucher. Thank you very much, Mr. Shimkus. The
gentleman from Massachusetts, Mr. Markey, is recognized for 3
minutes.
OPENING STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman. Thank you for the
excellent series of oversight hearings which you have had on
this legislation of the energy efficiency and smart grid drafts
inside of your proposal. Both move in the right direction, and
I commend you and your staff for all the work that went into
these provisions. On appliance efficiency, you have built on
the foundation laid out by the committee in 1987, 1992, and
2005 when we gave to you the power to issue National Appliance
Efficiency Standards and then expand those powers. You have
responded to some of the concerns raised by efficiency
advocates, about problems with DOE's management of this
program. And I look forward to working with you and the
committee members on additional ideas to strengthening these
provisions.
For example, today I will be introducing companion
legislation to Senator Pryor's bill to strengthen the Federal
Government's Energy Efficient Buildings Program and the Federal
Government's ability to use energy savings performance
contracts.
At the same time, I do have some real concerns about the
coal-to-liquids bill before us today. At the subcommittee
hearing 2 weeks ago on alternative fuels, EPA confirmed that
without sequestration, coal-to-liquids would increase carbon
dioxide pollution by 118 percent compared to diesel fuel made
from petroleum. EPA also said they were only assuming only 85
percent capture in the sequestration models, meaning that there
would be a 15 percent leakage in their estimates for carbon
capture and sequestration systems. Rather than subsidize
transportation fuel that at best fails to reduce carbon
emissions, and at worst increases carbon pollution
substantially, it seems to me that a much better way for coal
as well as the rest of the electric power sector, is to get
into the business of providing electricity for the
transportation sector that not would be to accelerate efforts
to develop plug-in electric hybrid vehicles. And for coal, we
should accelerate efforts to demonstrate carbon capture and
sequestration on a commercial scale.
The discussion draft before us does however omit the most
important and easy step we can take to reduce our dependence on
foreign oil and that is a CAFE standard, an increase in the
fuel economy by 4 percent per year, up to 35 miles per gallon.
The draft also omits an energy efficiency resource standard.
Today I am introducing a bill which would call for a 10 percent
improvement in electric utility efficiency, and a 5 percent
improvement in natural gas utility efficiency by 2020. Then I
might also add that the legislation also does not include a
renewable energy standard, renewable portfolio standard, which
is the single most important thing which would drive green,
renewable energy generation standards. And I think as we move
forward, it would be important for us to find ways to include
all of these in any final legislation.
I thank the chairman for all of his great work, and I yield
back the balance of my time.
Mr. Boucher. Thank you very much, Mr. Markey. The gentleman
from Indiana, Mr. Buyer, is recognized for 3 minutes.
Mr. Buyer. I will waive.
Mr. Boucher. The gentleman waives an opening statement. The
gentleman from Michigan, Mr. Rogers is recognized for 3
minutes.
OPENING STATEMENT OF HON. MIKE ROGERS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mr. Rogers of Michigan. Thank you. Mr. Chairman, I
appreciate your efforts here and look forward to working with
you for a successful conclusion here. And I want to highlight
just the loan guarantee section of the bill, and I agree with
Mr. Markey. We need to do something. But I think there is a
better way we can get there, and I hope to use the section that
maybe we can come up with a proposal that rewards innovation
and rewards our Big 3 for unleashing intellectual capital on
the problem of alternative fuel vehicles.
A great example is General Motors announced the Volt at the
last auto show which gets 540 miles to the tank. It is a
gasoline engine that recharges lithium ion batteries, but after
several million dollars, it is not quite ready to go yet. They
still have some technical difficulties that will cost a lot of
money. If we just allow them to have access to capital,
specifically for research and development on these vehicles,
they are going to get us to where we want to go, and I think
there is some room here to work together so that we can find an
alternative. Rather than a big, heavy regulatory scheme, let us
let them unleash this lithium ion battery or maybe it is a more
efficient ethanol engine or maybe it is a more efficient
biodiesel fill-in-the blank. I think there are places that we
can go where we all can agree that meets the chairman's
understanding of how we do better at domestic alternatives to
petroleum, as he says.
I look forward to working with the committee. Hopefully we
can talk about this section, and I really applaud the
chairman's efforts on the bill. I yield back my time.
Mr. Boucher. The gentleman from Pennsylvania, Mr. Doyle, is
recognized for 3 minutes.
OPENING STATEMENT OF HON. MIKE DOYLE, A REPRESENTATIVE IN
CONGRESS FROM THE COMMONWEALTH OF PENNSYLVANIA
Mr. Doyle. Mr. Chairman, I am pleased to be here today as
we take these first critical steps toward making America more
energy secure while also beginning our fight against global
warming. It is a testament to you and this committee that the
bill before us achieves both of these critical goals.
As we all know, our Nation's dependence on foreign oil not
only results in hard times at home when we fill our tanks, but
it leads to difficult foreign policy decisions as we pursue our
national interests within the world community. It is simply not
strategically acceptable for the United States to be in a
position where we import more than 60 percent of the crude oil
our citizens consume. However, while we achieve the goal of
energy independence, it is critical that it is attained in a
manner consistent with our dual goal of combating global
warming. The bill achieves this balance. As we work to meet
these challenges, it is important to remember there is no
silver bullet that will solve them. It will take an economy-
wide balanced approach that sets a clear path that is both
ambitious and attainable. This path must recognize the
situation on the ground and set goals that can be advanced
through the development of new and innovative technologies as
well as improvements in production and efficiency. We must look
toward all fuel sources and find ways to create new forms of
power while further developing a means to use the current fuels
in a more environmentally supportive way.
I have never seen a time during my years in Congress where
we have such a real opportunity to work together from the
environmental community to our industrial base, from our home
towns to distant shores, and from Democrat to Republican to
make tremendous advances on both our critical goals. The
question is no longer if we will act, the question is how long
will it take. I stand ready to work with every option on the
table to find a solution that will not only move us forward in
the near term but will achiever our mutual goals in the long
term. After all, there isn't anybody on this planet that
believes that the question of global warming, or for that
matter energy independence, is just a 5-year problem. This is a
50-year-plus goal, a goal that we are putting our Nation on a
path to achieve. The question is not if we are going to reduce
our emissions by 80 percent, it is how we are going to do this
and how long it takes. Today is the first step. I hope my
colleagues and all stakeholders on each side of this debate
will join me on this step. While this bill does not have
everything every member of this committee would like to see in
it, I think this bill is our Nation's first down payment toward
achieving energy independence and fighting global warming. I
look forward to working with you, Mr. Chairman, and the members
of this committee and all the various stakeholders to ensure
that we are successful at meeting these critical national
goals. I thank you, and I yield back the balance of my time.
Mr. Boucher. The gentleman from Texas, Mr. Barton, the
ranking member of the full Energy and Commerce Committee, is
recognized for 5 minutes.
OPENING STATEMENT OF HON. JOE BARTON, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Barton. Well, thank you, Mr. Chairman. I want to
compliment you for the number of hearings that you have held.
The fact that you have actually circulated a discussion draft
and have held a legislative hearing on it, accepting comments
from us on the minority side. We may surprise you. We may have
a few suggestions for improvement. It is good to know that
there is at least one subcommittee that is actually trying to
use the process, so I am extremely pleased. And I must say, in
looking through the draft, the staff briefing on it yesterday,
there are quite a few items in it that I think we can work
together on. So I am very pleased that we are in the process
that you are using and hope that we will have an outcome later
this summer that results in legislation that might actually
make it to the President's desk. So I am extremely positive
about what you are undertaking.
I do think there are some priorities as we go through this
process that we ought to keep in mind. First, let us make sure
that we keep the lights on in America. Let us make sure we keep
our cars and trucks on the road, and with a choice of fuels
that are affordable, and let us try to do no harm to the
economy. Let us try in whatever we do make sure that we keep
the economy going as strongly as possible.
There are a number of things that are before us today in
your discussion draft that I believe could be helpful in
meeting those goals. Your energy efficiency title and your
smart grid technology certainly should be able to help keep our
electricity grid strong and help keep the lights on. If we
reduce the need to build additional power plants, that is
obviously something that is a positive thing; and we may be
able to utilize some of the promises of some of the new
technologies that are coming down the road.
There are some things that give me pause. You have a number
of mandates in the discussion draft. It would seem to me that
before we begin to mandate various actions, no matter how
beneficial they may appear on the surface, we should give those
potential mandates special attention. I know it is tempting to
direct that there be a beneficial outcome and just close our
eyes and close off our ears that no bad things will happen, but
I think we need to really look at the cost and the benefits on
the mandates. As the FTC economist said yesterday, the test
should be put to every proposal. Does it increase supply or
decrease demand? Because that is the only way to truly lower
energy prices. I hope that we will buy some insurance against
unintended consequences by sunsetting any mandates that we
decide should be attempted. We should recognize the technology
involving technology that is developed in the marketplace
oftentimes provides more efficient solutions than statutory
mandates.
On your smart grid proposal, I am very positive about that.
I do believe, though, that we ought to be careful that we don't
end up bureaucratizing the deployment of it so that it actually
slows it down. I am very interested in working with you and
others in doing things that speed it up as opposed to just
bogging it down in bureaucratic timetables and things like
that.
I am very pleased with the discussion draft provision on
the loan guarantee program that was established under title
XVII of the Energy Policy Act of 2005. This is a program that
needs to get up and running as soon as possible. It is an
amazement to me that plain language, 80 percent, has somehow
been interpreted by the Department of Energy and the Office of
Management and Budget to be 80 percent of 80 percent or 72 or
90 percent or whatever their latest definition is. It is also a
puzzlement to me that Internal Counsel's Office in the
Department of Energy has been put in charge of that program.
That makes absolutely no sense to me.
Your coal-to-liquid proposal is worthy of serious
consideration. As we all know, coal is our most abundant
natural resource in the United States, and in spite of some of
the ads that have been popping up around Capitol Hill in some
various periodicals, I do believe that we can work with the
technologies and that resource to find a way to make that a
reality.
So Mr. Chairman, in closing, let me simply say that it is
very refreshing to have a discussion draft circulating. It is
very positive you are holding a legislative hearing, and it is
very commendable of you that you are willing to take
suggestions from both sides of the aisle on how to improve it.
With that, Mr. Chairman, I yield back.
Mr. Boucher. Well, thank you very much, Mr. Barton, and we
very much look forward to working with you as we take further
steps on this measure. The gentleman from Michigan, Mr.
Dingell, chairman of the full committee, is recognized for 5
minutes.
OPENING STATEMENT OF HON. JOHN D. DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Chairman Dingell. Mr. Chairman, I thank you, and I commend
you for your diligence and for the extremely competent way in
which you have been pursuing energy legislation and bringing
this subcommittee to this point in the legislative process.
Over the years, energy legislation has been a major concern
of this committee but remains a continuing focus and challenge.
Less than 2 years ago, Congress enacted the Energy Policy Act
of 2005 which touched on matters ranging from electricity
markets to oil and gas policy to renewable energy. Today, the
committee proposes and prepares to take the next by holding
legislative hearings on our discussion draft as circulated by
you last week.
I commend you, Mr. Chairman, for your efforts in
identifying areas that will improve our Nation's energy policy,
help consumers, and buffer our country from market instability.
Today's hearing will receive testimony from witnesses on the
substance of the discussion drafts that address several of the
areas in the committee's jurisdiction.
The Speaker has asked the committees with energy-related
jurisdiction to report legislation before the Independence Day
district work period. These four discussion drafts represent a
solid beginning and as you, Mr. Chairman, have indicated, will
be followed by drafts on other significant matters. Today's
hearing will help Members define areas of concern and areas of
potential agreement regarding energy efficiency, smart
electricity grid, DOE loan guarantees, and coal-to-liquids
programs. This will take us one step closer toward reporting
legislation which will build upon our past work and which will
we hope benefit our Nation's future.
I look forward, Mr. Chairman, working with you and all
members of this subcommittee and the committee in the coming
weeks and to the testimony of today's witnesses. Thank you, Mr.
Chairman.
Mr. Boucher. Thank you very much, Chairman Dingell. The
ranking member of this subcommittee, the gentleman from
Illinois, Mr. Hastert, is recognized for 5 minutes.
OPENING STATEMENT OF HON. J. DENNIS HASTERT, A REPRESENTATIVE
IN CONGRESS FROM THE STATE OF ILLINOIS
Mr. Hastert. I thank you, Mr. Chairman, for holding this
hearing on draft legislation for energy efficiency, smart grid,
the Title XVII Loan Guarantee Program under the Department of
Energy and coal-to-liquids. I also want to thank the witnesses
for being here today. We have already held hearings on many of
these topics, so we have some background to help us and to
evaluate the discussion drafts. Some of it is new and may lead
to added questions. I hope our witnesses will be able to
provide us with the background we need.
I look forward to working on this legislation as it moves
through the regular order in the committee process. The draft
legislation includes a section on lighting, a topic that I am
very interested in. I understand that the industry and
efficiency advocates are working on consensus language
regarding incandescent bulbs. They have been working at this
for a while, and hopefully their efforts will come to a
fruition.
I would like to be able to include language that has been
arrived at a consensus rather than dictating a result. Advances
in lighting technology will help the United States reduce
significantly the amount of energy it uses. I support that, and
I also support good, low-energy use lighting that is also green
without the use of mercury, and we need to continue to look at
that as well.
The draft legislation also includes a fix for the Title
XVII Loan Guarantee Program that was established by the Energy
Policy Act of 2005. It is unfortunate that we even have this
piece of legislation because I think the language in title XVII
is clear. However, if this draft language gets the loan
guarantee program moving now, then I support it. We need these
loan guarantees to help finance the next generation of nuclear
power plants and alternative fuel facilities like cellulosic
ethanol and coal-to-liquid. The discussion draft also contains
a title to provide support for six coal-to-liquid projects. I
wholeheartedly support coal-to-liquids. The U.S. has more coal
than anyone else in the world, and hence, we have the ability
to have more energy than anybody else in the world. We should
use those abundant coal resources to increase our energy
security and reduce our reliance on imported oil by using coal
to make transportation fuel. The technology exists, we just
need to be able to economically deploy them in the United
States, and we should all work toward that goal.
This is the first step in getting this legislation ready
for the floor. I understand that other parts of potential
legislation dealing with alternative fuels and infrastructure
is still under development. Those sections may be
controversial. I will judge the proposed legislation on the
full package, not just on individual pieces. It is the full
package that will be voted on eventually. That is what must be
evaluated in this committee.
I look forward to working with the members of this
committee and the full committee as the full legislative
package goes through regular order. Mr. Chairman, again I thank
you, and I look forward to today's testimony.
Mr. Boucher. Thank you very much, Mr. Hastert. The
gentlelady from California, Ms. Harman, is recognized for 3
minutes.
OPENING STATEMENT OF HON. JANE HARMAN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CALIFORNIA
Ms. Harman. Thank you, Mr. Chairman. As is evidenced, our
districts are very diverse. Yours obviously is a coal-dependent
district, and I think that coal is part of our future; but like
Mr. Markey, I would much prefer to stress carbon capture and
sequestration than coal-to-liquid. Some come from Michigan, the
home of the Big 3. I would point out that my district is home
to Toyota and Honda, and Toyota is now No. 1 at least in terms
of sales in the United States and has been highly innovative
with respect to hybrid vehicles. My district also has an
enormous amount of energy efficiency technologies, and each of
us can tell a different story. You have a hard job to put all
of this in a bill that moves us forward and does what Al Gore
told us to do, which is to expand the limits of what is
possible. And I just want you to know that I will try to do my
part.
I want to thank you specifically for including my light
bulb bill in this draft as a placeholder. As you well know, I
am working with Mr. Upton to see if we can find standards that
are mutually agreeable, and I appreciate the comments that Mr.
Hastert just made about light bulb efficiency. We need to push
the industry and recognize that many parts of the country and
the world are banning the incandescent bulb because it is
inefficient. That is not what my bill would do. My bill would
push it to meet standards that fluorescent bulbs can already
meet by 2012. So I think that at least is a good starting
place.
I also want to commend you for the smart grid title of the
bill. I think it is very important. An issue there that
interests me a lot is adding some language on technology or
demonstration projects for plug-in technology. As we heard from
a witness a few weeks ago, at least in a State like California,
there is the possibility that 70 percent of our cards could be
retrofitted with plug-in hybrid technology. And that could use
excess power from the grid at night, and a smart grid format
could make that possible.
So there are many exciting options. Your bill is beginning
to capture some of them, and as one member of your team, I hope
we will all be successful and feel good about the result. Thank
you, Mr. Chairman.
Mr. Boucher. Thank you very much, Ms. Harman. The gentleman
from Texas, Mr. Hall, is recognized for 3 minutes. The
gentleman from Texas waives his opening statement, and the
gentleman from Maine, Mr. Allen is recognized.
OPENING STATEMENT OF HON. TOM ALLEN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MAINE
Mr. Allen. Mr. Chairman, thank you for holding this hearing
and for your work on the legislation before us. I welcome the
witnesses today. I am pleased that the draft legislation
increases energy efficiency standards for appliances,
buildings, and lighting, the proposals for which I have long
advocated. I strongly support the portion of the proposal that
would encourage the deployment of smart grid technology. Smart
grid systems will make our electricity transmission network
more energy efficient and allow consumers greater control of
their energy use.
I also support the section of the draft that improves the
Title XVII Loan Guarantee Program. This language has been
worked out on a bipartisan basis and will significantly improve
the program. However, I do have grave concerns about providing
Federal support for the construction of coal-to-liquid plants.
Making liquid fuel from coal is the least efficient way to
utilize coal as an energy resource. Under the best case
scenario, coal-to-liquid plants would be carbon neutral. At the
worst case, coal-to-liquid plants would increase carbon
emissions. Under no circumstances will we achieve rapid
reductions. But there are to my knowledge no significant
reductions in carbon emissions from vehicles that use fuel from
coal.
I have another concern. Subsidizing coal-to-liquid plants
may well undermine the development of biofuel technologies. We
need to investigate whether or not the low cost of coal will
cripple the development of a vibrant market for cellulosic
ethanol which can reduce our use of oil and significantly
reduce carbon dioxide emissions at the same time. The
development of a global coal-to-liquids industry is truly
troubling for the future of carbon emissions. I prefer plug-in
hybrids. I think if we encourage plug-in hybrids, together with
coal plants that deploy the latest technology for carbon
capture and sequestration, plus state-of-the art technology to
scrub the stacks with SOx, NOx, and mercury. We could achieve
cleaner air, carbon dioxide reductions, and energy independence
all at once. Coal-to-liquids takes us in the wrong direction.
Further, any true energy independence factors should contain a
renewable energy standard as well as language similar to Mr.
Markey's CAFE proposal so we can get serious about making our
automobiles more efficient.
Finally, Mr. Chairman, cleaner air and a comprehensive
strategy to combat global climate change go hand in hand with
energy independence but in my opinion must be part of this
subcommittee's long-term strategy. I look forward to working
with you to achieve this goal, and I yield back the balance of
my time.
Mr. Boucher. Thank you very much, Mr. Allen. The gentleman
from Kentucky, Mr. Whitfield is recognized for 3 minutes.
Mr. Whitfield. Mr. Chairman, I waive my opening statement.
Mr. Boucher. Thank you very much, Mr. Whitfield. The
gentleman from Texas, Mr. Burgess, is recognized for 3 minutes.
Mr. Burgess is not here at the moment. The gentleman from
Texas, Mr. Gonzalez, is recognized for 3 minutes.
Mr. Gonzalez. I waive.
Mr. Boucher. Mr. Gonzalez waives his opening statement. The
gentleman from Washington State, Mr. Inslee, is recognized for
3 minutes.
Mr. Inslee. Wait.
Mr. Boucher. The gentleman waives his opening statement.
Mr. Inslee. I will be there in just a moment.
Mr. Boucher. He is sending me an e-mail.
OPENING STATEMENT OF HON. JAY INSLEE, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WASHINGTON
Mr. Inslee. Actually, what I was trying to do is first I
wanted to express my appreciation to the Chair's handling of
this in such an open and comprehensive manner, and I really do
appreciate it.
What I was looking for is a release from Speaker Pelosi,
who is addressing sort of our charge to our committee for this
summer, and I want to make clear that it is my understanding
our charge is to produce bills this summer that address not
only energy independence for the United States but also global
warming. And as soon as I get my BlackBerry in the right file,
I can read that.
She made it very clear to us that we have a twin charge
this summer, is to address the twin challenges of energy
independence and global warming. And I think it is very
important for us to make that point now because we cannot solve
either unless we solve both.
I am just reading her language. She says, ``Our committees
are already working hard on hearings of legislation designed to
meet our June timetable in taking crucial legislative steps to
achieve energy independence and reduce activities that
contribute to global warming.'' It would be a huge mistake for
us to take a policy this summer that would harm or retard the
ability to solve either one of those challenges. Many folks
have talked about the coal-to-liquid issue. I want to suggest
that despite the considered efforts to draft this bill to not
shoot ourselves in the foot. In fact, coal-to-liquid would
inevitably harm our ability to move forward on global warming.
And the reason I think was made even clearer to me when I was
talking to a gentleman who is involved in efforts to develop a
cellulosic ethanol industry in the United States which would
reduce CO\2\ by over 50 percent compared to gasoline. Why would
we ever establish an industry that would at best be equivalent
to gasoline and essentially retard the development of an
industry that can reduce CO\2\ emissions by 50 percent? That is
cellulosic ethanol.
And I want to address my colleagues from the farm community
States that have a tremendous potential with cellulosic
ethanol. My colleagues who want to develop the farm industry
are going to be hurt if they get on this train of coal-to-
liquid because coal-to-liquid would be a direct competitor to
cellulosic ethanol. And those who want to see a future for
rural America with biofuels are going to have to make a
decision whether they want to shoot themselves in the foot and
to develop that by trying to support these coal-to-liquids
which is never going to be a significant reduction in CO\2\. I
think that is important.
With that being said, I hope Mr. Chairman that we will
address this summer some of the other issues that will address
global warming including a renewable portfolio standard, an
advanced low-carbon fuel standard, incentives for plug-in
hybrids, additional incentives for the solar to wave energy
industry, healthcare for hybrids, and our green building
standards which should include green building standards for
residences as well as commercial construction.
So I will look forward to dealing with two problems this
summer, not just one, Mr. Chairman. Thank you.
Mr. Boucher. Thank you, Mr. Inslee. And let me just note
that the Speaker's office indicated some time ago that, to use
the phrase of the Speaker's office, cap and trade would not be
a part of the July agenda, meaning that a comprehensive
greenhouse gas control program would be considered later, and
we intend to take that charge seriously and produce it later
this year in this committee.
The gentlelady from Wisconsin, Ms. Baldwin is recognized
for 3 minutes.
OPENING STATEMENT OF HON. TAMMY BALDWIN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF WISCONSIN
Ms. Baldwin. Thank you, Mr. Chairman. I want to begin by
thanking you for your dedication and your efforts in drafting
the legislation that we have before us. There are many
provisions in this text that will take significant steps
towards reducing our Nation's energy consumption and putting us
on a path to energy independence. For instance, I am excited
about the potential provisions in the energy efficiency title
that would require EPA to survey the quantity and quality of
industrial waste energy, heat, from major industrial combustion
sources. Estimates reveal that there is potentially as much as
60 to 90 gigawatts of heat that are currently wasted from
industrial sources. This is heat that can be converted into
energy, reducing the need for the equivalent of 60 to 90
nuclear power plants.
I understand that there are concerns about particular
provisions in the industrial energy subtitle. I hope through
continued discussions we can reach a satisfactory outcome that
enables us to prevent waste, increase efficiency, and improve
grid reliability.
I am also pleased that this bill takes significant steps
towards facilitating smart grid technologies. Smart grid is
technology of the future. It is the ability to manage peak
loads and mitigate peak prices, and it provides consumers with
the knowledge and the means to make sound energy choices. But
for a smart grid to succeed, substantial investment is required
to trigger nationwide deployment, and this bill provides the
incentives to jumpstart such an investment.
Mr. Chairman, while I have expressed my pleasure with
certain sections of the bill, in my opinion, it is not perfect.
As mentioned in earlier hearings, I have a strong concern about
coal-to-liquid projects. As we embrace the challenge of making
our Nation energy independent, I believe we must do so in a
manner that reduces our greenhouse gas emissions, in other
words, a more ambitious standard than do no harm in this bill.
And coal-to-liquid, while it may be a domestic fuel source, has
greenhouse gas emissions that could be as much as twice as high
as petroleum-based fuels.
I am hopeful that you will be open to working with Members
so that this committee can pass legislation that addresses our
concern about increasing energy independence while reducing
greenhouse gas emissions.
Finally, Mr. Chairman, I want to highlight negotiations
that are ongoing between industry and advocates. On the issue
of stand-by power, each and every one of us has electronic
equipment in our homes operating in standby mode, our
televisions, or modems, battery chargers, any device with a
continuous digital display. The problem is that for many of
these devices, they draw as much energy in standby mode as they
do when they are turned on. Recent estimates of standby use
reveal that it accounts for as much as 10 percent of household
power consumption. I will continue to work with energy
efficiency advocates in affected industries on language to
reduce standby power consumption, and I am hopeful that we will
reach consensus that can be inserted into this bill. Thank you,
Mr. Chairman.
Mr. Boucher. The gentleman from Utah, Mr. Matheson, is
recognized for 3 minutes. The gentleman from Utah waives his
statement. The gentleman from Maryland, Mr. Wynn, is recognized
for 3 minutes.
OPENING STATEMENT OF HON. ALBERT R. WYNN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MARYLAND
Mr. Wynn. Thank you very much, Mr. Chairman. I want to join
my colleagues in expressing my appreciation for the work that
you have done. You have worked very hard on this issue, and you
have also been very thorough and comprehensive in holding a
lengthy series of hearings.
I am generally pleased with the draft bill before us on a
number of fronts. First in terms of energy efficiency, I think
it is very important that we address this issue. It is pretty
well-recognized that our footprint here in America in terms of
energy consumption is much greater than that of Europe and
suggest we can do better, and the provisions relating to
appliances and lighting and better standards and more efficient
standards I think make perfect sense. A lot of people have been
saying we can't do better.
I want to note that in one of our hearings we heard from
the National Conference of Mayors that this is not just a
Federal responsibility, it is also a local responsibility and
in keeping with their suggestions, I introduced a bill for
energy independence, energy efficiency block grants which is
basically Federal funds sent to the local level for projects at
the local level to address energy efficiency, and I hope we can
consider this as we move forward.
Second, I would note that the smart grid provisions are
also very significant. A lot of people, quite frankly, have
been waiting for us to get smart. This bill begins that
process, particularly with respect to providing for matching
grants for the investment costs associated with the initial
smart grid cost. I think this is what we have to do, shift
financial resources to areas that we want to promote. I think
this makes perfect sense, also the promotion of demand response
by consumers involving the American public in this process.
Like many of my colleagues, I also support the title XVII
adjustment that would provide for full costs or loan guarantees
for the full cost of new technologies. It provides a
clarification that many people have been seeking with respect
how we can financially support new technologies such as
sequestration, such as hydrogen fuel cells. So I think that
makes sense.
I would say in closing that I have concern as do many of my
colleagues about coal-to-liquid, but if we can utilize
sequestration to address this concern, it must be in the
context of lowering emission levels below that which would come
from burning petroleum. So I know that there has been
discussion with do no harm, but I think we have to try to do
better than do no harm with respect to coal if we are to
consider coal-to-liquid in this plan. But ultimately, we have
got a long way to go but I think we have made a good start; and
I appreciate your leadership. Thank you.
Mr. Boucher. Thank you very much, Mr. Wynn. The gentleman
from Arkansas, Mr. Ross, is recognized for 3 minutes.
OPENING STATEMENT OF HON. MIKE ROSS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF ARKANSAS
Mr. Ross. Thank you, Chairman Boucher, for holding today's
hearing and all the witnesses who have come before the
subcommittee to testify. I want to first commend our chairman
and subcommittee for all their hard work on these drafts. I
especially want to thank the staff.
This legislation is a step in the right direction for
increased energy efficiency and security for our Nation. I am
particularly glad to see a title that addresses the Energy
Policy Act of 2005 Loan Guarantee Program. This program can
help finance projects involving, among other things, cellulosic
ethanol, nuclear energy facilities and clean coal projects. I
represent part of the delta region of this country, one of the
poorest in America; and I believe we can see an economic
revival in the delta as a result of investing in cellulosic
ethanol.
Alternative and renewable fuels like cellulosic ethanol,
biodiesel, and nuclear energy must be part of our Nation's
comprehensive plan to combat climate change and increase our
energy security. I believe that the loan guarantee programs in
the 2005 EPACT can and should aid in that process. However,
there have been numerous concerns about the DOE guidelines that
cap loan guarantees at 80 percent for an eligible project, and
I am pleased to see that this legislation addresses those
concerns.
I am also pleased to see titles in this draft that would
help to modernize America's electric transmission through a
smart grid and a provision to assist coal-to-liquid projects.
Let me be clear. We have over a 200-year supply of coal here in
this country that can help us reduce our dependence on foreign
oil. This is not the 1950s or 1960s. We can utilize 21st
century technology and use this valuable natural resource to
lessen our reliance on foreign oil, and we can do it utilizing
21st century technology in an environmentally friendly manner.
These sections I believe are extremely important components
to putting our Nation on the path to energy independence. I am
happy to see their inclusion in this draft.
Finally, I am pleased to see a strong energy efficiency
section of the bill that addresses building and appliance
efficiency standards in the section that reauthorizes funds
through 2012 for LIHEAP, the Weatherization Assistance Program,
and the State energy program. With energy and electricity use
projected to grow over the next 20 years, enacting legislation
that promotes energy efficiency in buildings and appliances is
crucial to our country's energy independence and security. The
future energy needs in this country must be met by a number of
ways including nuclear, clean coal technology, coal-to-liquid
technology, cellulosic ethanol, and other forms of alternative
and renewable fuels.
Once again, I want to thank the chairman for his work on
this legislation, and I look forward to hearing today's
testimony and the benefits of this bill as well as possible
ways to improve on these drafts, and I yield back the balance
of my time.
Mr. Boucher. Well, thank you very much, Mr. Ross, and that
completes the opening statements from members of the
subcommittee, and I want to say welcome to our panel of
witnesses who will address the first set of subjects that we
are conducting our hearing regarding today, and I want to thank
you for your patience. We have spent about an hour talking to
you, and now we would like to give you an opportunity to talk
to us.
Our first witness is Mr. David Rodgers, the Deputy
Assistant Secretary for Energy Efficiency at the U.S.
Department of Energy. Ms. Kateri Callahan is president of the
Alliance to Save Energy, and Mr. Jay Birnbaum is the vice
president and general counsel of the CURRENT Group which is
deploying broadband over power line in a variety of locations
around the Nation. And we welcome each of our witnesses on the
first panel. Without objection, your prepared opening statement
will be made a part of the record, and we would welcome your
oral summary and would ask that you keep that to approximately
5 minutes.
Mr. Rodgers, we will be happy to hear first from you.
STATEMENT OF DAVID RODGERS, DEPUTY ASSISTANT SECRETARY, ENERGY
EFFICIENCY, U.S. DEPARTMENT OF ENERGY, WASHINGTON, DC
Mr. Rodgers. Thank you, Mr. Chairman, members of the
committee. Thank you for the opportunity to testify before you
today on the energy efficiency discussion draft that was
circulated for comment. While the administration has not had
sufficient time to coordinate interagency views of the draft
legislation, I am pleased to offer some preliminary comments.
This means the administration has no formal position on the
bill and may take a position at a later date based on the
entirety of the legislative package.
In addition I would note the administration looks forward
to working with this committee to craft an ambitious
alternative fuel standard for the President's signature before
the end of the summer driving season.
Discussion draft title I addresses a fundamental question:
how can the United States find more ways to successfully
promote energy efficiency? The draft legislation makes valuable
contributions to our national discussion on energy efficiency
addressing key areas of energy consumption, energy waste,
energy training, and the residential, commercial, industrial,
and public sectors. While there are many elements of the draft
that appear consistent with the administration's energy policy
objectives, some sections could benefit from further review,
discussion, and modification. The Department looks forward to
working with the committee to fine tune these proposals.
The discussion draft begins with the important area of
energy conservation standards for appliances and equipment.
Assistant Secretary Karsner testified earlier this month before
this committee and discussed the schedule by which the
Department has committed to clearing backlog of standards
rulemaking and strategies for expediting the rulemaking
process. This draft would augment the schedule and the process,
and the Department supports many of the sections presented
today and the tools they employ.
Secretary Bodman sent legislation to Congress in February
requesting authorization that would significantly speed up the
standards process and ultimately bring more efficient products
to the market sooner. Our fast-track legislative proposal would
streamline the rulemaking process, allow the Department to go
to a direct final rule for certain products when a clear
consensus for a standard exists among manufacturers, efficiency
advocates, the Government, and other stakeholders. This process
could shorten the time to a completed standard by nearly one-
third. The Department looks forward to working with this
committee to have that language included in this legislation.
Section 109 of the discussion draft would require DOE to
periodically review and update all standards, an objective the
DOE can support. However, the draft sets a schedule for the
Department to evaluate the need for further updates to
standards that would require rulemakings for some products to
begin before the effective date of the existing standard. In
those circumstances, DOE would not have updated information on
the cost and other attributes of the energy efficient
improvement options. We have similar concerns regarding the
maximum 3-year delay between DOE issuance of a new standard and
its effective date, and concerns about the immediate lifting of
Federal preemption of State standards if one of the statutory
deadlines was missed, regardless of cost. The end result of
some of these provisions is likely to be a substantial increase
and a burden on manufacturers and consumers.
The Department supports improving energy-efficient
practices government-wide including in the construction,
renovation, routine maintenance of Federal facilities. The
discussion draft would direct the installation of energy
efficient lighting fixtures and bulbs in GSA facilities. We are
prepared to assist GSA and all Federal agencies with the latest
developments in lighting technologies practices including
providing energy cost-saving data. Our Federal Energy
Management Program provides direct technical assistance and
training to Federal agencies on lighting and other efficient
technologies. Lighting improvements at Federal agencies are
frequently performed as part of the Comprehensive Energy Audit
and retrofit utilizing an energy saving performance contract or
utility energy services contract as appropriate, allowing them
to maximize energy savings at little or not cost to the
government.
Moving on to the area of building codes, the framework and
basic objectives of this subtitle in the discussion draft
appear to be consistent with the goals of our building
technology program. We have supported the building code and
standards activity of ASHRAE and the IECC, the major voluntary
code bodies. However, the Department has several specific
concerns related to the flexibility and implementation and
looks forward to further discussion with the committee.
Subtitle F would expand the types of projects that can be
funded by Energy Saving Performance Contracts. Broadening the
scope of this provision may serve as a significant incentive
for Federal agencies to implement more diverse projects,
demonstrate the significant role that private financing can
play in Federal energy management projects. In addition, the
Department supports permanent authorization of Energy Saving
Performance Contracts which is not included in this discussion
draft.
An essential complement to increased energy efficiency in
industry, manufacturing, and the built environment is a
national effort to reduce petroleum use, especially in the
transportation sector. In his 2007 State of the Union Address,
the President challenged our country to reduce gasoline
consumption by 20 percent in 10 years, the Twenty in Ten plan.
The President called for a robust alternative fuel standard
requiring the equivalent of 35 billion gallons of renewable and
alternative fuel in 2015. The Twenty in Ten plan holds a
promise of diversifying the sources and the volumes of fuels we
use, while reducing our vulnerabilities and dependence on oil.
The administration looks forward to working with Congress on
these initiatives.
Mr. Chairman, this concludes my prepared remarks. I will be
pleased to answer any questions the committee members may have.
[The prepared statement of Mr. Rodgers follows:]
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Mr. Boucher. Thank you very much, Mr. Rodgers. Ms.
Callahan, we will be happy to hear from you.
STATEMENT OF KATERI CALLAHAN, PRESIDENT, ALLIANCE TO SAVE
ENERGY, WASHINGTON, DC
Ms. Callahan. Thank you, Mr. Chairman, and I thank the
members of the committee for the opportunity to appear before
you today to discuss the energy efficiency provisions of the
draft legislation.
As an organization that has dedicated itself over the last
three decades to advancing energy efficiency, to tackle the
country's linked problems of growing energy demand, increasing
prices and volatility, and global warming, we think that what
you are undertaking here today is very important. We stand
ready to support your efforts in any way that we can.
I also would like to thank two of the members of the
subcommittee in particular for their leadership on energy
efficiency and their service as Alliance board members, and
that is Mr. Hall from Texas and Mr. Markey from Massachusetts,
and we have enjoyed their support.
Energy efficiency has proven to be our country's greatest
energy resource over the past 30 years, and that has happened
from good, strong public policies like you are looking at
today, appliance standards, building codes, better Federal
energy management. Energy efficiency is currently contributing
more to meeting our country's energy demand than, pardon me,
Mr. Chairman, but even than King Coal. Our studies at the
Alliance indicate that if we hadn't taken all the efficiency
measures that we have over the past 30 years, we would need 40
percent more energy today to power our economy than we are
currently using. So we have made good progress and we all
should be proud of that. However, there is much more to do.
The committee's draft continues this important tradition,
and while we support the efficiency provisions that are in the
draft currently, we also urge the committee to consider
including additional measure that can deliver even greater
energy savings. I am only going to highlight a couple of the
key provisions because as the chairman indicated, there are 29
efficiency provisions. So I will highlight a couple that we
consider most important and suggest a few additions. All of
these, along with a number of others, are included in detail in
my written testimony.
First, we support the many strong provisions on appliance
standards in the bill. Appliance standards has proven to be one
of the most effective efficiency programs this country has
undertaken. Through the appliance standards we have in place
today, by the year 2010, we estimate that we will save 7
percent of U.S. electricity use, and greenhouse gas emissions
will be 65 million metric tons lower. And that also translates
into savings for American consumers of $234 billion in avoided
energy costs. New performance standards for general service
light bulbs that many of the Members have mentioned today could
be the single most important energy savings measure in the
bill. We estimate that these technology-neutral standards could
save as much as 65 billion kilowatt hours of electricity. That
is the equivalent output of 80 coal-fired power plants. It
represents $18 billion in avoided energy costs and 158 million
tons of avoided CO\2\ emissions annually.
Mr. Chairman, many have mentioned that there is a coalition
working on negotiating consensus standards. The Alliance is
pleased to be hosting those, and I am actually leaving here
today to conclude we hope successfully the standards. We would
suggest and ask that the committee consider these negotiated
standards if we are able to deliver them as a substitute for
the language that is currently in the draft.
Second, we strongly support the innovative building code
provisions that are included in the draft. About 40 percent of
all the energy we consume in the United States and two-thirds
of the electricity is gobbled up by the building sector, and
the potential for energy savings here is enormous. Making
efficiency improvements at the time of construction is by far
the most cost-effective way to lock in energy savings for the
30 to 50 to even longer life buildings. Progressive building
efficiency codes like you have articulated in this draft ensure
that these efficiency measures are taken. And third, while we
strongly support the provisions of the bill designed to reduce
energy use by the Federal Government, we ask the committee to
consider additional provisions that will create a new paradigm
and a new structure to ensure that Federal agencies are
aggressive in pursuing efficiency upgrades. The bill that was
mentioned by Mr. Markey that he is going to introduce today and
was introduced in the Senate by our chairman, Senator Mark
Pryor from Arkansas, is one that we would commend to this
committee to consider including in the bill.
And finally, we ask the committee to consider including
provisions that foster utility efficiency programs which are a
proven and cost-effective means of delivering energy
efficiency. The Senate energy efficiency bill requires State
utility commissions to at least consider energy efficiency as a
resource and to look at structuring rates as to not encourage
greater sales of electricity. We support these provisions and
ask the committee to consider them. We also support creation of
a Federal energy efficiency resource standard that would
require utilities to implement programs that result in a
specified amount of electricity or natural gas savings. Like a
renewable portfolio standard, energy efficiency resource
standard, or EERS as they are called, represent a flexible or
performance-based and market-based regulatory mechanism that
can ensure that energy efficiency is treated by utilities as
other fuel supply resources.
In conclusion, I reiterate our offer to work with the
committee as you develop this important legislation that will
reduce energy waste and price volatility and will address
global warming in a meaningful way. Through energy efficiency,
we believe that you can transform our current energy crisis
into economic opportunities and a win-win for both Americans
and our environment.
[The prepared statement of Ms. Callahan follows:]
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Mr. Boucher. Thank you very much, Ms. Callahan. Mr.
Birnbaum.
STATEMENT OF JAY BIRNBAUM, VICE PRESIDENT AND GENERAL COUNSEL,
CURRENT GROUP, LLC, GERMANTOWN, MD
Mr. Birnbaum. Thank you, Mr. Chairman. Good morning. Good
to see you again. I would like to thank the committee for the
opportunity to speak this morning about the smart grid
initiatives. I would like to commend the subcommittee for
actually elevating smart grid to the national debate. CURRENT
has been doing this with electric utilities for several years
now. We believe that the development of a smart grid is vital
for national security, economic stability and development, as
well as energy policy in general.
The draft appropriately focuses on utilities using advanced
technologies to improve reliability, security, and efficiency
of their local distribution grids. And we would submit that it
actually is a Federal responsibility to improve the reliability
and security of the grids given the potential impact on
homeland security and our economy. We support a number of the
provisions in the bill which I will discuss.
Although well-intended, I do believe there are some
provisions that actually would have the unintended consequence
of delaying smart grid deployments, and I would like to discuss
those as well.
I think it is first important to understand that smart grid
exists today. This is a technology that we are deploying
presently in the State of Texas as well as elsewhere. Mr.
Chairman, I know you have been to our facility we have just
outside the Capital Beltway where we demonstrate the smart grid
capabilities. What we are doing in Texas will be a deployment
covering 2 million homes and businesses with full smart grid
functionality. So this is not a technology of tomorrow that
needs study or demonstration projects. We can actually
demonstrate whether it is hybrid powered vehicles or any other
applications, on a system we are building today.
What is needed is to remove the regulatory constraints that
utility companies have and the disincentives they have for
deploying smart grid technologies and to create some
affirmative incentives, which the bill does address, for rapid
action.
First I would like to just clarify what we mean at CURRENT
by smart grid. We are referring to a high-speed, two-way
communication system that has sensors that provide real-time
monitoring, diagnostics, and control for electric distribution
companies so they can manage and monitor their substations,
transformers, all the crucial points between the substation and
our homes and businesses. Right now utility companies for the
most part are deaf, dumb, and blind as to what is going on
inside our distribution grid. Hence, we have brownouts, we have
storm-related power outages that take many days and sometimes
longer to fully restore. A smart grid enables electric
utilities to maintain stable, self-healing networks pursuant to
which operators can immediately address problems, often before
they result in noticeable problems to consumers such as
outages, and often take automated corrective action.
Unfortunately, significant Federal guidelines intervention
are required. As I mentioned, CURRENT has been working with
utilities to develop smart grids for several years now. We have
found that utilities generally are reluctant to make
discretionary technology investments, and we find several
reasons for that. Their concern that regulatory rate recovery
will be denied after they spend their money on new
infrastructure. They have other investment opportunities that
bear larger returns, such as generation and transmission
facilities. And utilities actually have a disincentive to spend
on an initiative that would reduce consumption or that would
improve their own efficiencies since they would reduce their
profits for any increase in efficiencies have to be passed onto
the rate payer.
Some of the problems in the draft bill do address these
provisions. Providing for certainty that utility companies
would have with respect to cost recovery on a smart grid, any
intrastructure deployments we think that is an important
Federal guideline. Similarly, utility companies should be able
to continue to recover costs during any depreciable life on
equipment that is rendered obsolete by smart grid investments.
The utility companies have, unfortunately, an incentive to use
inefficient equipment out on the wires as long as it is working
a little bit. A totally full, depreciable life is eliminated.
Some of the things we would urge the subcommittee to
consider actually are enhanced returns. Because of the
competing investment opportunities utilities have and
restraints on capital, having an enhanced return for capital
investments on smart grid initiatives including potential
returns on operating and maintenance expenses for smart grid
investments is something that could induce utilities to deploy
smart grids, and we would urge the subcommittee to consider.
As an alternative to a return on operating expenses,
utilities when they create savings in their network create
efficiency, they are expected to pass those savingsonto their
rate payers. Utilities could instead be permitted to retain a
proportion of those savings as a result. Getting a return on
efficiency spending without actually having to build structure
actually results in a less expensive way of developing a smart
grid, and the bill does reflect some of these provisions in the
proposed Federal guideline for becoming, which several States
have started to employ.
We think that regulatory reform is important at the State
level. States need to be prohibited from impeding utilities'
ability to deploy smart grid, whether directly or
inadvertently. The draft bill does have a policy statement to
this effect, and we would actually recommend that the
subcommittee consider turning that into a Federal guideline an
actual statutory requirement.
Finally, Mr. Chairman, there are some provisions of the
bill that I think, although well-intended, might actually have
the effect of delaying smart grid deployments. As I mentioned,
we are doing this today with several utilities. There are other
technology companies out there that have developed smart grid
components. Utility companies have the capability to do so
today. They understand what the effects are on making them more
reliable and how to do so. As a result, creating additional
commissions and further development studies or demonstration
programs, although more useful for untested and underdeveloped
technologies actually in this case would probably serve to
delay deployments since utility companies would more likely
wait for the outcome of those studies and not deploy in the
immediate future. With the strain and the vulnerabilities in
the electric grids today, we would want to see smart grid
deployments expedited rather than having a sort of wait and see
approach for Federal studies. Thank you.
[The prepared statement of Mr. Birnbaum follows:]
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Mr. Boucher. Thank you very much, Mr. Birnbaum, and thanks
to each of our witnesses for sharing your thoughts with us this
morning.
Ms. Callahan, let me compliment you on the work that the
Alliance to Save Energy is doing under your leadership in order
to develop a consensus among a variety of interested parties on
performance standards for lighting. I think we all appreciate
the work that you have undertaken.
You indicated that even today you have a meeting following
this hearing among those stakeholders and that you are
optimistic about a consensus on those standards being not
developed by those conversations. We would welcome that, and we
hope that you can come forward with it. You understand, of
course, that we are operating on a pretty short timeframe.
Ms. Callahan. Right.
Mr. Boucher. And we will be having markups in June on this
subcommittee on the energy efficiency title as well as the
other three titles and other material that will be forthcoming
shortly, all of which will be marked up together. And that
doesn't leave us a lot of time. So my question to you is how
quickly do you really think that you are going to be able to
develop this consensus and present it to us?
Ms. Callahan. Thank you, Mr. Chairman. You are asking me to
look into a crystal ball, but I will for whatever that is
worth. First of all, let me say that I think the energy behind
the negotiations is really coming in trying to meet your
timeframe. Everyone is very aware of that, as well as the
Senate, so we are working very hard. It is a face-to-face
meeting today between manufacturers. People actually changed
their plans and are flying into town from literally all across
the United States to do this. We met last week face to face as
well. I am optimistic. I think we will get there. There are
significant challenges, effective dates, what the standards
need to look like, what preemption is going to look like at the
Federal level. These are tough issues to tackle. We are
committed to staying late tonight. People are changing their
Memorial Day weekend plans. We have committed to go through
tomorrow. I am hopeful that we will deliver something to you
all by early next week. I can't guarantee it, but that is our
goal.
Mr. Boucher. Just lock them in the room until they come to
an agreement. Well, thank you. We all appreciate the work that
you are doing on that.
Mr. Birnbaum, let me compliment you personally and CURRENT
Technologies for setting forth in such broad and eloquent terms
the vision for what a smart grid can accomplish. The leadership
you have demonstrated and your company has over the years is
much appreciated. We have tried to respond as best we can to
the effort to deploy the smart grid through the provisions in
that title of this bill. Understanding that the regulatory
authority over retail electricity rates resides at the State
level, and most of these issues really fall within the advent
of retail electricity regulation. We are necessarily somewhat
limited with what we can do from the Federal standpoint in
order to facilitate smart grid deployment. So given that
inherent limitation, beyond the provisions that you have
discussed that we have in our draft legislation, do you have
recommendations for us on other steps that we could be taking
on this subcommittee or perhaps through regulatory action at
one of the agencies or through grant or loan programs of some
kind that would aid in the effort to deploy smart grid?
Mr. Birnbaum. Thank you, Mr. Chairman. With respect to the
last part, being the loan or grant programs, they would
probably be most useful in the rural areas or the other
underserved, more difficult to serve areas where the electric
distribution network tends to get technology and developments
last and usually you are not served by investment from
utilities and as a result they have a more difficult time
raising capital to make those investments. The concern we have
with those types of programs vis-a-vie industrial utilities,
large municipal utilities, is generally the capital is
available. The utility understands what is necessary to make
the grid more reliable, but because of the limitations in the
State regulatory environment, as you point out, they tend to
have disincentives to do things the way they did the day before
as opposed to what we want them to do tomorrow. Providing for
some of these initiatives, and I understand you can't do rate
making at the Federal level for each State utility, but
providing guidelines at the Federal level for how State
commissions should regulate for the provision or the deployment
of smart grids we think is something that is similar to what
Congress has done in other industries as well as industry
including in 2005.
Mr. Boucher. So some sort of model guideline is what you
are suggesting?
Mr. Birnbaum. Yes.
Mr. Boucher. Where would you suggest that that guideline be
developed?
Mr. Birnbaum. As opposed to this subcommittee?
Mr. Boucher. Well, should it be in a statutory form? That
would be somewhat unusual I would think. Generally this is
something that an agency would put forward. Have you had any
discussions with the DOE about the possibility of DOE
undertaking that kind of mission?
Mr. Birnbaum. We have begun to have the conversation with
the Department of Energy.
Mr. Boucher. Let me ask this. Do you think DOE needs a
statutory directive to do something like that?
Mr. Birnbaum. I would defer to DOE on whether they think
they need that, Mr. Chairman.
Mr. Boucher. Mr. Rogers, do you have any comment on that?
Mr. Rodgers. Thank you, Mr. Chairman. I am not in a
position to comment on our statutory authorities in the area of
electricity, but I would be happy to submit for the record in
coordination with the Office of Electricity Delivery.
Mr. Boucher. OK. Well, the question precisely stated as I
comprehend Mr. Birnbaum is would you have sufficient authority
under existing law to develop a model of State regulatory
program that would be in aid of deploying the smart grid, and I
presume that would include, and Mr. Birnbaum, you can
supplement this if you like, but I presume that would include
things such as time of use pricing and also a regime for smart
meter deployment. Mr. Birnbaum, what else?
Mr. Birnbaum. Those are important aspects of a smart grid,
Mr. Chairman, but we would also provide for automation of the
network so utilities can do remote outage management, outage
prevention. A lot of the technology that we deploy along the
electricity grid tells the utility company before something is
so wrong that it results in an outage. It provides for higher
efficiency, roughly 10 to 20 percent of electricity is actually
lost before it ever reaches the end user. So by making the
networks more efficient, we can actually do more than just
smart----
Mr. Boucher. So in the interest of time, let me ask you
this. First, Mr. Birnbaum, why don't you submit to us your
proposal for what that model for regulatory program at the
State level should look like, and then we are going to send it
to you, Mr. Rogers; and once you have seen that, perhaps you
can comment to us on what additional statutory authority you
might need in order to adopt a program that roughly has those
characteristics.
Mr. Rodgers. We look forward to that work with the
committee.
Mr. Boucher. And we are going to need to do this pretty
quickly. So Mr. Birnbaum, by next week perhaps?
Mr. Birnbaum. Yes, we will do that.
Mr. Boucher. That is great. Thank you to each of these
witnesses, and I am pleased to recognize the gentleman from
Illinois, Mr. Hastert for 5 minutes.
Mr. Hastert. Thank you, Mr. Chairman. Mr. Rogers, Section
104 provides for regional variations for heating and cooling
equipment. Common sense says cooling, air-conditioning
equipment across southern California and Arizona is different
from the cooling equipment that you would find in Georgia
because of humidity you have coolers instead of air-
conditioners, dehumidifiers. And up in the north it is a
different situation. They probably only use maybe 400 hours a
year as opposed to maybe 4,000 hours. I am pulling numbers off
the top of my head but you understand. I think it is a common-
sense thing to do, but for your regulation, can you do this?
Mr. Rodgers. Thank you for the question. Under the current
statutory authority, the Department is limited to one national
standard for each product.
Mr. Hastert. So what if we change the standard or we change
the authority?
Mr. Rodgers. A change of authority would be required for
regional standards. We have a strong preference for national
standards, but there are some products for which regional
variations may allow additional energy savings.
Mr. Hastert. So let me re-ask this question. Can you do
this common-sense thing because there are products such as air-
conditioners and coolers that have different geographical needs
so thus geographical standards across the country. Can you do
it without us changing your authorization?
Mr. Rodgers. Without changes to the authorization, the only
way that we can allow States to use standards other than the
national standards is through the statutorily approved waiver
process where the States submit an application to adopt a
different standard.
Mr. Hastert. Would you provide to this committee the
authorization changes that you think need to be done in order
for you to do this on a regional basis?
Mr. Rodgers. We would look forward to working with the
committee on what might be needed in order to do this.
Mr. Hastert. Thank you. Mr. Birnbaum, you said something at
the very end of your discussion, your statement. You said the
discussion draft would delay the implementation of the smart
grid as it is now. Why?
Mr. Birnbaum. Utility companies tend to take a wait-and-see
attitude. They are economically conservative, they are very,
very risk adverse, and that is the regulatory environment in
which they have existed for decades. So we believe that
demonstration programs in addition to being unnecessary since
technology is already here and being built would simply give
utility companies an opportunity to test on a very small basis,
test the technology and then all the other utilities would wait
around and see how that test comes out, rather than actually
going to deploy themselves. And having worked with utility
companies now for several years, we have seen that one thing
they will do is they will do pilot upon pilot upon pilot before
actually implementing the technology, and usually these are the
economic and regulatory disincentives I mentioned earlier that
are a cause for their delay.
Mr. Hastert. Mr. Birnbaum, in your work obviously, can you
demonstrate to utility companies that through use of your
programs that there is not only an efficiency of moving
generation product through their grid, but also across the
country so it is an economic-driver?
Mr. Birnbaum. Absolutely. The utility companies operate
networks that they have no idea what is going on inside their
networks. So when there are outages, they spend many more times
than they should have to spend to detect where those outages
occur to figure out what the cause is and how to repair that. A
fully automated system, for instance which is one of the things
a smart grid provides, the utility company can avoid lots of
outages by detecting any irregularities in the network and as a
result not have to spend time----
Mr. Hastert. Well, let me follow up then. Because most
utilities are regulated by a State public utility corporation,
PUC's, commissions, they are given a rate of return on
investments, correct?
Mr. Birnbaum. Yes.
Mr. Hastert. And that is how they get their income
basically?
Mr. Birnbaum. Yes.
Mr. Hastert. So cost efficiency then isn't necessarily the
goal?
Mr. Birnbaum. That is correct. That is one of the problems
the utilities have. The more efficient they get, the more they
either make less profit or no more profit, so they have a
disincentive to take risk on efficiency spending because if it
doesn't result in----
Mr. Hastert. Mr. Chairman, I am going to ask your
indulgence. I want to ask him one question. I went on a little
bit, but in your estimate, in your opinion, what do we have to
do, do you have something that is a guideline to State
utilities or is there some type of economic incentive that we
can write into this bill? How do you get public utilities to
adapt to this type of change?
Mr. Birnbaum. I think it would be Federal guidelines that
tell the utilities themselves that they can--smart grid
technologies. These are infrastructure projects and as a result
that they are rate making regulatory bodies cannot deny them
the recovery for those expenses.
Mr. Boucher. Thank you very much, Mr. Hastert. The
gentleman from Massachusetts, Mr. Markey, will be recognized
for 3 minutes.
Mr. Markey. Thank you, Mr. Chairman. Ms. Callahan, on page
5 of your testimony, you recommend that we make it clear that
Federal law doesn't preempt the State appliance efficiency
standards if the Energy Department fails to actually exercise
the authority that Congress had granted it by failing to issue
any standard or by issuing a no standard. Now, the Department
of Energy was forced to sign a consent decree last year in
which they pledged to meet the deadlines set forth in the
report submitted to Congress in response to the Markey
amendment to the 2005 Energy Policy Act. If DOE misses any of
these deadlines, should we clarify in the law that the States
would no longer be preempted?
Ms. Callahan. I think that, yes. If you look at the other
provisions then that require periodic review or the appliance
standards that are there and updating, one of the things that
is included currently is that if that effort isn't undertaken,
then a preemption would lift and States could take action. I
think it is very important if the Federal Government does not
take action or takes action to establish what is in essence a
no standard, States should not have their hands tied to that.
California, New York, places that want to go forward should be
allowed to.
Mr. Markey. OK. I thank you. Disgracefully, the Bush
administration's Department of Energy has missed 34 consecutive
mandated deadlines for appliance efficiency standards, and it
is about as great a disgrace as I have ever seen agency or
given the greenhouse gas threat and energy dependency. Mr.
Rogers, if DOE fails to meet these deadlines, should the States
be able to step in and act?
Mr. Rodgers. Thank you. It is a very complicated question.
Federal preemption goes to the heart of the standards program
that Congress has established, and I think the number of
deadlines that we face, we do not plan to miss any deadlines as
you have seen from the plans that we have been submitted.
Mr. Markey. I know but you have missed 34 in a row, so as
my mother says, no, you missed 34 times in a row, and you say,
I have plans to meet it from now on. So what should we do if
you don't meet the standards, if you don't meet the deadlines?
Mr. Rodgers. I think we feel that the Federal preemption is
a critical part of the program that Congress has established,
and it should only be changed with very careful clarification.
Mr. Markey. OK. I am not inclined to give you that
latitude. I think it has been just absolutely disgraceful.
Ms. Callahan, in your testimony you also call for some
reforms in the laws relating to energy service performance
contracts. First, you say the authorization for Federal
agencies to enter into ESPC's should be permanently extended.
Why is that so important?
Ms. Callahan. Well, the extensions were allowed to lapse
and were then put back in place in the Energy Policy Act, and
when that happened, the agencies became reluctant, even though
they were reinstated to go forward and enter into those
contracts. And so you have companies, energy savings companies,
that are out there that are working to provide energy
efficiency upgrades at no upfront cost to the Federal
Government, and they have to have certainty that that business
is going to continue. We can't let it just continue to lapse
and wane as it did before EPACT 2005.
Mr. Markey. But you say that Congress should end any self-
imposed agency caps on the duration of the ESPC's. There is
statutory limit of 25 years and on total obligations under
ESPC's, what are the self-imposed agency caps that you are
referring to, and what can we do to fix them?
Ms. Callahan. Well, we understand some agencies are
effectively saying they are not going to use more than a
certain threshold dollar amount on ESPC's but again, we don't
see the rationale behind that because there are no upfront cost
to the Federal Government. The efficiency upgrades are made and
then there is guaranteed energy savings that are used to pay
for those over a period of time. Part of the savings revert to
the agency and then the other to the ESCO until the efficiency
upgrade is completely paid for. Then all the savings revert.
Mr. Markey. Finally, Mr. Rogers, Ms. Callahan's prepared
testimony calls for an adoption of an energy efficiency
resource standard. Does the DOE support that legislation?
Mr. Rodgers. I am not familiar with the specific proposal,
and I would like some time to analyze it but we do agree in
spirit that energy efficiency is our lowest cost, most
accessible access to energy savings.
Mr. Markey. I think you may believe it but you haven't
acted on it. That is why obviously this committee is extremely,
extremely dubious about the commitment that your agency has had
to that. Thank you, Mr. Chairman.
Mr. Boucher. Well, thank you very much, Mr. Markey, and let
me just note that I share the gentleman from Massachusetts'
dismay that the Department of Energy has missed so many
deadlines for issuing these applied standards going back
several decades. However, under Assistant Secretary Karsner I
am personally very encouraged with the progress that is being
made, and I wouldn't want to leave Mr. Rogers with the
impression that we are not appreciative of the current efforts
that are now being made in order to correct those very serious
problems from the past.
The gentleman from Michigan, Mr. Upton, is recognized for 5
minutes.
Mr. Upton. Thank you, Mr. Chairman. I appreciate this
hearing, and I also want to say I appreciate your very good
bipartisan spirit as we look to put together a very strong bill
which the American public is going to support, and I am
convinced frankly that at the end of the year and also the end
of this Congress that the legislation that we move out of this
committee will be looked at as one of the very top issues that
the 110th Congress deals with. And it is obviously certainly
appropriate as we look at these high energy costs today.
Ms. Callahan, I certainly welcome your appearance here and
appreciate your hard work as we work to put legislation
together as it relates to energy savings with light bulbs and
efficiencies across the country. And I know that as you work
through this weekend knowing that we are going to pick up the
baton very quickly when we return after Memorial Day, we have
been working hard at trying to find out where different players
in the private sector may be on the standard for light bulbs.
And we are a little frustrated in terms of looking and seeing
what signals we can get from outside sources.
I want to compliment Mrs. Harman for her good work, and the
two of us, along with Mr. Hastert and a few others have been
sitting down looking for legislative language, and I just would
like to suggest that if you are unable to reach some type of
agreement over the next week knowing that we come back on
Tuesday the 5th, that we may see your, you may share with us
the last offers by the different parties so that we can, in
fact, make a decision, knowing full well that at least under
Mr. Boucher we have a placeholder that is there, but we know
that we can do better in terms of where we are at.
Ms. Callahan. Mr. Upton, I certainly will take that back to
the manufacturers and the advocates, and we will see if they,
if we can't reach agreement, which we are hopeful that we can,
if we can give you the last round of negotiations. I can't
commit to that without checking with all the others, though.
Mr. Upton. Because we are absolutely committed to having a
title on this bill that is going to include some of those
provisions, and we are working with the Senate to try and see
that done.
One of the things that you indicated in your testimony, I
just want to get the timeframe and knowing that you are limited
on your time, you said that you expected 65 billion kilowatt
hour savings, and is that per year or over 5 years?
Ms. Callahan. Per year.
Mr. Upton. And that is the equivalent of the 80 coal fire
plants per year?
Ms. Callahan. Yes. The output from the coal-fired power
plants or 30 nuclear plants if you want to take it nuclear.
Mr. Upton. Wow. Thank you. I appreciate those numbers.
Mr. Rogers, where is the Department of Energy in terms of
looking at where we might go on light bulb standards and new
efficiencies? Have you all looked at anything?
Mr. Rodgers. Yes, sir. We are currently conducting rural
maintenance on lighting as required by the Congress, and as the
consensus process moves forward with the stakeholders, we will
make sure that they know that the full resources of the
Department and our national laboratories are available to them
if there is any technical assistance that we can provide as we
have done so in the past with home appliances.
Mr. Upton. And are you ahead of schedule or behind schedule
in terms of where you wanted to be at this point?
Mr. Rodgers. Since the publishing of the 5-year plan
submitted to Congress in January 2006, we are, have met all the
deadlines for all of our appliance standards.
Mr. Upton. And that includes lighting?
Mr. Rodgers. Includes lighting. Yes, sir.
Mr. Upton. OK. One of the things that I just might note is
that one of the things that Mrs. Harman and I are working on,
and I think we are very close to having legislative language on
is an amendment that we will be putting on each of the
appropriation bills as they pass the House, indicating that the
Federal Government itself will be buying these new energy
equivalent light bulbs beginning in the next fiscal year,
fiscal year 2008, as we feel that that will help generate a
market, where, in fact, to encourage the manufacturers to know
that, in fact, there is going to be a buyer out there. So not
only will the Federal Government give tremendous amounts of
money from the energy that it uses with the new bulbs as we
replace the ones that they built, that they burnt out, but
obviously provide the basis that individual consumers, both
business and private sector families will be able to purchase
as well.
Do you have any comment on that, proposal of that
magnitude, Mr. Rogers?
Mr. Rodgers. Thank you. It is an excellent question, and I
would be happy to share with the committee current requirements
placed on the Federal agencies by statute and through executive
order that encourage all agencies to purchase very efficient
fixtures and lighting, including Energy Star products. And I
can, would be happy to submit that information.
Mr. Upton. Great.
Ms. Callahan.
Ms. Callahan. We are very, very supportive of having not
just GSA but all Federal buildings move toward and purchase
only those Energy Star labeled and efficient lighting.
Mr. Upton. You know what we might do is, we might share
with you the language. I don't have it with me this moment, but
in the next week maybe we will get the language to you. Maybe
if you can write a letter of support that we can use during the
debate on the House floor, it will come at the end of each one
of these appropriation bills. No funds shall be used to
purchase the old stuff and be able to get the--but a support
letter might help us, particularly as we approach the leaders
on the Appropriation Committees to get that done.
Ms. Callahan. We would be happy to do that, sir.
Mr. Upton. Mr. Rogers. Same thing?
Mr. Rodgers. We look forward to working with the committee
as it moves forward on this provision.
Mr. Upton. Great, and I appreciate that.
Mr. Rogers, I have a question as it relates to the regional
efficiency standards, and I just want to know what your sense
is. We have talked about enforcement and how easy is it for the
manufacturers and the retailers to comply with a regional
efficiency standard and specific comments on that issue.
Mr. Rodgers. It is an excellent question. I think
enforcement gets to the heart of the issue concerning regional
standards. Under the current program we have one national
standards, and that is enforced upon the manufacturers. If
regional standards are produced, manufacturers would be
responsible in some way, but it is unclear how they could in
all cases enforce their supplier, the chain retailers if those
different products were marketed in different areas of the
country. That would be an area we would look forward to working
with the committee to better understand how regional variations
could be enforced.
Mr. Upton. Thank you. Mr. Chairman, I yield back.
Mr. Boucher. Thank you very much, Mr. Upton.
The gentleman from Pennsylvania, Mr. Doyle, is recognized
for 5 minutes.
Mr. Doyle. Thank you, Mr. Chairman.
Mr. Rogers, the draft legislation calls for creation of a
new commission which has the role, amongst other things, to
encourage progress on smart grid protocols in the development
of the smart grid. Is the creation of another entity the most
expedient means to accomplish this task, given that when
Congress passed PURPA and the Energy Policy Acts of 1992, and
2005, the Congress set forth the national policy, and then
directed the States, Federal entities with jurisdiction and the
industry itself to meet those goals. Could we follow this model
rather than create a new commission?
Mr. Rodgers. I really appreciate the question. We have only
begun our analysis of the discussion draft, and I don't, I am
not in a position to comment on specific provisions. Let me
just say that we know that smart grid technologies are
fundamental to the, increasing the market uptake the energy
efficient technologies and maximizing energy savings.
Mr. Doyle. I would be interested when you do get time if
you could tell us whether you think we need a new commission or
whether we can do this as we have in the past.
Also, the draft reflects there is a need for the creation
of national protocols to assure that there is two-way
communication needed all along the grid, from appliances in the
home to the large generating plant. And since this is a
standard setting exercise, should we consider the existing
agencies such as NIST to be charged with this task rather than
creating another commission?
Mr. Rodgers. That is a very good question, and, again, I
would like to work with the committee on the specific details
of those provisions.
Mr. Doyle. And finally, just one last question, and I will
close. The draft requires the development of specific data that
consumers are entitled to, but that only seems to encourage
progress on the development of technology and regulatory
reforms needed to insure that the information can be
realistically provided to consumers. There seems to me to be a
disconnect between the information requirements and the steps
needed to insure that real time information can be timely
provided.
If the draft were adopted, how could we be assured that the
infrastructure is in place to insure that the information which
the legislation says consumers are entitled to can actually be
provided?
Mr. Rodgers. The, again, we have just begun our review of
the draft. I would like some additional time to get back to you
on that. I do think that consumers have a growing body of
information available to them, that that is one of the most
critical parts. And I do hope that in the next panel there will
be some additional opportunities to, for the DOE witnesses to
talk about these issues, including the smart grid.
Mr. Doyle. Thanks. Just one more question. The legislation
also provides training for State and local officials to
implement energy codes, and it also provides for training for
Federal contracting officers for energy performance contracts
and related energy efficiency services associated with those
agreements.
Now, the effective way to make sure these codes and
performance contracts are successful, I think is to make sure
we have a skilled workforce to assist us in implementing these
programs. Shouldn't worker training be a part of any
comprehensive approach to making America an energy-efficient
Nation?
Mr. Rodgers. That is a very good question. I don't think in
my position at the Department of Energy I can speak to the
issue of worker training. I would say that the Department's
existing program in the area of building codes we find
education training of code officials to be extremely beneficial
and important, and the materials that we provide in that area
are very, very popular.
Mr. Doyle. In your opinion do you think it would be
appropriate to have training funds in this legislation to make
sure that workers are properly trained to meet the legislative
objections of this bill?
Mr. Rodgers. I would like to work with the committee on
whether or not we need additional authorizations. Our current
billing codes program as renewed under the Energy Policy Act
gives us tremendous flexibility to work with the State and
local code officials in that area.
Mr. Doyle. Thank you, Mr. Rogers.
Mr. Chairman, thank you. I yield back.
Mr. Boucher. Thank you very much, Mr. Doyle.
The gentleman from Illinois, Mr. Shimkus, is recognized for
5 minutes.
Mr. Shimkus. Thank you, Mr. Chairman. I also want to
highlight the frustration that the committee has when agencies
don't meet guidelines, and of course, when it is the Republican
administration and they can attack the DOE for that. It, as
Republican I take great offense. So these two questions deal
with some of the draft.
Section 109 requires a precise schedule for DOE to update
its rulemaking and findings. Can DOE make the schedule in this
section, or is it likely that DOE standards will sunset because
dates were not met?
Mr. Rodgers. We have just begun our analysis of section
109, but I would say that we would like to work with the
committee, because I am concerned that some of the deadlines
are, and the durations are so close together that it might
impair our ability.
Mr. Shimkus. My follow-up was going to be: can you give us
some information how we can modify that? Because we want to set
attainable standards, but we don't want to delay it. I mean, we
would rather set standards that you can reach versus
unreachable standards and then have delays and all this
frustration, and I, if you would work with us, I think we would
have some receptivity, as long as it is not an issue of delay.
What about the, do you have the resources to accomplish the
standards updated in section 131? I know, you are going to work
with the committee, and we will receive great information and
help and assistance from you to look at those provisions.
Mr. Rodgers. I would, well, I couldn't have said it better
myself.
Mr. Shimkus. You have. A couple times.
Mr. Rodgers. I would say that we believe very strongly in
building codes and have moves forward on that aggressively
since the Energy Policy Act of 2005, and in 2007, under the
continuing resolution we were able to allocate additional
resources to the building codes effort. The section language in
the discussion graft does set a new bar, very high, and we
would look forward to working with the committee on what it
might take to implement that section.
Mr. Shimkus. Great. As you know the committee's going to
move rapidly, so we are going to need pretty quick movement
from the Department.
Mr. Birnbaum, quickly if you could comment on the DOE study
on homeland security benefits of the smart grid.
Mr. Birnbaum. Congressman, the problem with Department
studies is they tend to serve further delay. The homeland
security implications of having wide-scale power outages in Los
Angeles and New York, other large cities in small areas, so we
don't necessarily see a large need for further study, rather
trying to incent the utilities to deploy smart grid where they
think the focus should be.
Mr. Shimkus. And let me follow up with the issue of is a
smart meter and a smart grid, are they complimentary, or could
they be, can you promote one over the other and that whole
debate?
Mr. Birnbaum. They are different. A smart grid would
include smart meters and load control devices in consumer
homes, but it is much more than just smart metering. It is,
again, a fully-automated distribution network, so the utilities
can do real-time monitoring and maintenance and preventive
maintenance on its network, just the way the total medications
network works today.
Mr. Shimkus. But the smart metering would have some energy,
I mean, cost benefit analysis as you look at cost and
deployment and time, smart metering is probably a way to be
very successful.
Mr. Birnbaum. Smart metering is part of the solution. Yes.
Mr. Shimkus. And finally, Ms. Callahan, the, we know that
when the automobile came, the people who made the buggy whips
went out of business.
Ms. Callahan. Yes.
Mr. Shimkus. We know that when the first light bulbs
arrived, the candle makers were, had a great loss of jobs. Will
there be any job losses in the lighting industry associated
with phasing out or banning incandescent light bulbs? How many,
and which States?
Ms. Callahan. That is, I appreciate the question. I am not
sure I can give you a detailed answer, but we will provide it.
There are, from what I understand from the manufacturers, there
are maybe, and this is just a ballpark figure, maybe 3,000 jobs
by two different manufacturers in the United States making
light bulbs and derivative products to use in the assembly of
the light bulbs. Whether or not those jobs are lost I think is
a question that will get answered over time, because we are not
going to stop making light bulbs. We are only going to stop
making the inefficient junk that is on the market. So they are
going to be made, and right now CFLs are largely manufactured
outside the United States. You probably know that.
Mr. Shimkus. Yes.
Ms. Callahan. But we are looking at LED lighting and
efficient halogen lighting, and those are going to need to be
made somewhere. So the hope would be that we can work with
manufacturers and try to keep those jobs in the United States.
Mr. Shimkus. Yes, and I hope that you do that, and just my
final comment because my time has expired, is that there is
concern that you can't retrofit these old plants.
Ms. Callahan. Right.
Mr. Shimkus. And there will be job loss, and that whole
debate of capital formation, taking assumption of the risk,
what happens to these jobs. I think the job training issue was
part of this whole debate, too, and that is why I want to throw
that in the arena for discussion.
Ms. Callahan. If I could just also say that when you look
at deploying energy efficiency, there is investment into the
economy, and there are new jobs created from that. So if you
look at the Energy Star, for example, for every dollar we
invest in Energy Star, the savings show that that results in
about $20 of energy savings for consumers, but it also sparks
investment of about $15 into the economy.
Mr. Shimkus. You said that right when Inslee was walking
in, too, and I bet you he appreciated that, because that is
kind of what he says all the time.
I yield back my time.
Mr. Boucher. Thank you very much, Mr. Shimkus.
The gentleman from Washington State, Mr. Inslee, is
recognized for 5 minutes.
Mr. Inslee. Well, I appreciate that because some people
haven't listened. Maybe they will now when someone else said
it. I don't know.
I was unable to hear your testimony. I am sorry. I was in
another committee, so if I repeat this, my apologies. I want to
ask you in the discussion draft there is a proposal to
essentially create a price mechanism for coal to liquids that
would give presumably investors confidence that there will be a
price that will be worthy of their investment and therefore,
spur development of that technology. And I don't want to argue
that issue whether it is good or bad at the moment, but if, is
that idea, should it be equally applicable to other emerging
technologies? In other words, if we are going to create price
supports for emerging technologies, would it make sense to also
do it for emerging solar thermal plants, which have new methods
of heating liquids to 1,100 degrees and running steam turbines
to new thin cell photo technology that perhaps a grid-based
electricity in a few years, to wave power generation that we
now have the first buoy going off the west coast of the United
States, going to create electricity, to advanced forms of
cellulosic ethanol, which I personally think has a bright
future but has some technological advancements, and of course,
we want to see. I guess the question is if we are going to have
a price guarantee signal for one fuel, doesn't it make sense to
have it for several of these emerging technologies? And all of
the ones that I just listed have the added benefit of at least
50 percent reduction of CO\2\ compared to their competitor,
fossil fuels. Would that make sense?
Mr. Rodgers. That is a very good question, sir, and I
believe that the second panel will get more into the details of
the coal-to-liquids issue and the price and the signals that
you are talking about. As a manager of our technology
development programs I can tell you research and development
can deliver breakthroughs in technology, but those technologies
then need to be adopted in significant quantities in the
marketplace. And as Congress considers who to move forward on
these important issues, I think you will have to look at all of
those issues.
Mr. Inslee. Obviously we need to commercialize these
technologies.
My review of these various technologies that I just listed,
I think all of them are very promising, and I think have in my
view probabilities of commercial application and commercial
success. Can you make any comments about that relative to coal
to liquid, coal to liquid has some challenges. You got to
figure out how to sequester the CO\2\ in the production
process.
If you were going to compare this emerging solar thermal,
thin cell, photo tag, wind energy technology, cellulosic
ethanol, and plug-in hybrids, I just drove the first car that
gets 150 miles a gallon, I think those technologies are at
least as well developed and at least as promising as coal to
liquid.
Do you have any comments on that?
Ms. Callahan. It is not my area of expertise.
Mr. Birnbaum. Same here, Congressman.
Mr. Rodgers. Well, I will tell you. I am a big fan of all
the energy efficiency and alternate fuel technologies. I think
we need a balanced portfolio. I believe the next panel will get
into some of the issues related to coal to liquids, and I would
say any time we introduce a new, higher-performing technology
that delivers national security, energy security, environmental
and economic benefits, we also have to address how those
technologies are brought to the marketplace and provide it at
reasonable costs to the consumers.
Mr. Inslee. Now, you may have heard some discussion about
what we are going to try to do this summer and what we are
going to try to do later in the year. Later in the year this
committee is going to have under the great leadership of our
Chair a discussion of how to develop a carbon system to have a
price on carbon dioxide, which will help in the
commercialization of these technologies because it would make
them economically competitive. But some of us believe there are
many, many things we need to do in addition to that to help
these emerging technologies, solar, wave, several others. Along
the lines potentially of this price signal that has bound with
discussion draft about coal to liquids, along the lines of
renewable portfolio standards, along the lines of low carbon
fuels standards, along the lines of incentives for consumers
and producers.
I am just going to ask you for any comment about that,
whether it makes sense to consider those now, even
independently of a cap and trade system. I guess the question
is do those ideas make sense even independent of a cap and
trade system?
Ms. Callahan. I will make a comment from the perspective of
energy efficiency. It is, in my mind that is a no-regrets
policy. So all of the provisions, the 29 or so provisions that
are in here, are going to have a significant impact on
greenhouse gas emissions, and we need to go forward and take
those actions.
With respect to, because that gets us down the road and
gets us toward the goal that we all want to see. With respect
to a cap and trade program, it is not necessarily going to
drive energy efficiency particularly in the end-use sector.
There are going to need to be complementary policies or you are
going to need to look at how you best advantage both energy
efficiency and I would argue renewable energy, too.
Mr. Inslee. And I was very pleased that the Chair had
commercial building standards, rebuilding standards we are
going to hold to to include residential standards as well.
Thank you.
Mr. Boucher. Thank you very much, Mr. Inslee.
The gentleman from Mississippi, Mr. Pickering, is
recognized for 5 minutes.
Mr. Pickering. Thank you, Mr. Chairman. I appreciate this
hearing and the panel.
Let me ask Mr. Birnbaum first. As we heard from Ms.
Callahan that the context of the savings if we adopted more
efficient standards on light bulbs, what that would mean from
an energy capacity and efficiency, what savings do you see with
smart grid and smart technology, smart metering technologies?
What is the equivalent if we were to broadly adopt these
technologies from saved production of energy and cleaner
consequences?
Mr. Birnbaum. Several fold, Congressman. As far as the
distribution facilities themselves, cannot be officially
managed today if the utility company doesn't have any insight
as to how well everything is performing. So the fact that the
utility company can then measure every device in its network
and replace them only when necessary----
Mr. Pickering. Has there been any study of how much we are
talking about as far as more efficient energy production? Like
the equivalent of 80 coal-fired plants, I guess is what I am
asking.
Mr. Birnbaum. I don't think there were such specific
studies. We do know that energy of roughly 10 to 20 percent of
energy is lost before it ever even gets to the end user. You
have had testimony before the committee previously of over $100
billion in financial loss in the country due to averages each
year.
So these are the things that smart----
Mr. Pickering. That you can quantify.
Mr. Birnbaum. Yes.
Mr. Pickering. The language has, of our current draft, has,
the issue that you addressed as far as making sure that our
States allow the recoverable costs for these investments. Do
you support that language? Is it sufficient? Do you need to
strengthen it, modify it?
Mr. Birnbaum. We do support it. I had made some suggestions
earlier about strengthening the language to try to provide for
either added incentives or increased returns for utility
companies or returns on other types of expenditures as well.
Mr. Pickering. Are there other things that we can do that
may not be under this committee's jurisdiction would be
accelerated depreciation? We discovered in Mississippi after
Katrina that if we accelerate depreciation, it will allow the
doubling of expensing. This serves as a tremendous incentive
for that capital investment. Would that also be something that
you would support?
Mr. Birnbaum. Absolutely, Congressman.
Mr. Pickering. Mr. Rogers, do you believe that incentives
work, whether it is grants, long guarantees, accelerated
depreciation, monetary incentives, would help us adopt these
new technologies and efficiencies?
Mr. Rodgers. It is an excellent question. I think evidence
is in that in many cases consumers, industrial purchasers do
not always see the life-cycle cost benefits of adopting energy
efficiency technologies and best practices. And so we have seen
in many cases where in the Energy Policy Act of 2005, or at the
State level or at the utility level, that incentives can help
consumers and businesses overcome those first thoughts and
yielding net savings to the economy from the adoption of the
energy efficiency.
Mr. Pickering. Do you think incentives can help the
Department of Energy meet its deadlines if we were to adopt a
number of deadlines in this? And by that, for example, I know
each agency has bonus performance payments that we give from
Senior Executive Service all the way through the lower ranks.
What are the bonuses at the Department of Energy? Do you know?
Can you quantify what the bonuses are?
Mr. Rodgers. I am not in a position to respond to those
questions which are primarily in the personnel department, but
on the subject of bonuses, I have already said this before, I
really want to work with the committee on this subject for
Federal employees.
Mr. Pickering. But, Mr. Rogers, what we like to do, I don't
always agree with Mr. Markey. Many times we disagree, but I
think it is a legitimate issue that there are 34 deadlines that
have come and gone without being met, and to be honest, we are
seeing this across bureaucracies across the Government. And
maybe it is time for this committee to say that bonuses will be
tied to the compliance with congressional deadlines of doing
their work, because maybe if incentives work for the private
sector, I think incentives as part of human nature, it works in
the Government sector as well.
And, Mr. Chairman, I would like to work with you to
possibly tie bonus performances to comply with congressional
deadlines. That is one way to make sure that all of us do our
job.
And in closing, Mr. Birnbaum, would you want any definition
in this legislation of what a smart grid would be?
Mr. Birnbaum. Yes, Congressman. We think that the
definition should be broader than just smart metering or low-
control devices, but a fully-automated network. As I mentioned
during my testimony a full, two-way, high-speed communications
network through which the utility can monitor and manage the
devices all along the grid.
Mr. Pickering. And would you want that to be competitively
and technologically neutral?
Mr. Birnbaum. Yes.
Mr. Pickering. Thank you very much.
Mr. Boucher. Thank you very much, Mr. Pickering.
The gentlewoman from Wisconsin, Ms. Baldwin, is recognized
for 5 minutes.
Ms. Baldwin. Thank you, Mr. Chairman.
I am going to start on the provisions in the draft on
industrial energy efficiency, waste energy. Ms. Callahan, in
your written testimony you commend the committee on its draft
provisions on industrial energy efficiency. You don't go into a
lot of detail, and so I am wondering if we can get you to
elaborate a little bit on the benefits of creating a database
that quantifies the industrial waste energy for major
industrial combustion services, and also we ware aware that
concerns have been raised about language in the sub-section
that would allow industrial sites to sell their excess power.
Ms. Callahan. Yes.
Ms. Baldwin. And so I am wondering if the Alliance to Save
Energy supports the language as it currently stands, or if you
have suggestions for the committee of any alternative ways we
can provide a use for the excess power, make sure that it is
not wasted, and address the concerns that have been raised.
Ms. Callahan. We haven't taken a position yet as an
organization on what to do with the excess power. It is just
not something that has been raised or considered. We have on
our board of directors competing interests that do have great
concerns; utility representatives as well as environmental
representatives. So it is something that we will need to take
to them and work with.
With respect to a database, though, one of the things that
we have found is information is key to getting people to take
action on energy efficiency, so the more that is there, the
more readily available it is, the more action that will be
taken. And what we are seeing particularly on the industrial
side when you have leaders like Dow Chemical, and you have Wal-
Mart and others taking action, other businesses take notice,
and then they in turn, that leadership engenders more activity.
So the database, I think, is a very important tool for
making sure that the information is made available.
Ms. Baldwin. Mr. Rogers, you note in your written testimony
that the discussion draft only covers a small part of a wider
industrial energy efficiency need and opportunity. And I wonder
if you could elaborate on some of the things we haven't
addressed that are opportunities out there.
Mr. Rodgers. I very much appreciate the question. As a
former manager of our industrial technologies program, it is
easy to sometimes be ignored because buildings are everywhere,
everyone lives in a building, everyone drives a car, not
everyone operates a steel facility or another facility, but it
provides currently 30 percent of our energy consumption, equal
share of our greenhouse gas emissions. There are significant
opportunities to apply energy-saving technologies and best
practices. We continue to invest heavily in research and
development on new energy technologies, and I would be very
welcome to work with the committee and brief you on some of our
existing activities such as the Save Energy Now audits that
found more than 10 percent savings on 200 industrial facilities
in the last year, our industrial assessment centers, and our
existing regional assessment centers that promote combined heat
and power.
Ms. Baldwin. On the issue, I raised the issue in my opening
statement of standby power and estimates that it accounts for
as much as 10 percent of our household power consumption. We
had a hearing earlier on the appliance efficiency standards,
and at that hearing the Consumer Electronics Association
testified that they supported an expedited process for creating
standby standards for external power supplies.
And so the first question is do you agree that it is
possible to expedite the standard? I place that question to Ms.
Callahan.
Ms. Callahan. We would hope that the standard would go as
quickly as possible. I mean, whether or not it is expedited
through DOE is really a question for Mr. Rogers, but we would
work on that, and I just note, it is 10 percent, but it also is
a growing share.
Ms. Baldwin. Right.
Ms. Callahan. So we really need to tackle it.
Ms. Baldwin. Mr. Rogers, any comment?
Mr. Rodgers. I agree that the standby power, consumer
electronics, very important and growing part of our energy
consumption--mandated under the statute and the administrative
procedures, it could be awhile, and we would urge consideration
of the Secretary's fast-track legislative proposal for
consensus rulemakings, and we would look forward to working
with all the stakeholders to see if the consensus approach
might work for those type of products.
Ms. Baldwin. Then I just want to end with standby power
crosses certainly hundreds of, if not thousands, of appliances
and not just those with external power supplies. So it is
difficult to keep a list of all appliances using standby power
up to date.
And I wonder if, Ms. Callahan, would you support an across-
the-board standard, for instance, a 1 watt standard that
includes exceptions for certain products where it is not
feasible to reduce the standby power consumption, for instance,
medical devices?
Mr. Callahan. I am sorry, but I am not prepared to answer
that today. We need to look at it, and I apologize for that,
but we certainly will get back to you. In general, we support
all standards that are shown to be cost effective and are
technically doable. I don't see a real problem with it, but I
would want to ask our experts in-house as to exactly what the
proposal is and whether or not we can endorse it.
Ms. Baldwin. Thank you.
Mr. Boucher. Thank you very much, Ms. Baldwin.
The gentleman from Arizona, Mr. Shadegg, is recognized for
5 minutes.
Mr. Shadegg. Thank you, Mr. Chairman, and I want to thank
you for this entire series of hearings. I think they have been
very educational, I think the witnesses have been superb. I
certainly have learned a great deal. I want to thank our
witnesses today.
I believe there is a lot of good, reasonable, and sound
proposals in the draft, discussion drafts and I am encouraged
by the fact that I think we can do some good things. I would
hope that at some point we can look at the issue of
transmission line siting which is one of the issues that was
raised here with discussion about windmill energy being able to
be produced in Texas but not being able to get it to market.
And I would hope we could also at least consider the issue of
new source review, because new source review was cited as
another example of where we might make energy production more
efficient but for reasons of, I guess, bureaucratic fear or
regulatory fear, we aren't going to do that. So I hope those
will be on the table in the future.
Mr. Rodgers and Ms. Callahan, I would like to ask you each
in pursuing my education on energy and energy efficiency, I
commented to a paper home in Arizona, you show me a politician
that is not interested in efficiency, and I will show you a
politician that is not interested in staying in office very
long. So I commend you for your efforts.
One of those discussions or a number of those discussions
have led me back home to a kind of an inconsistency, and that
is most of the large buildings built in America are built and
owned by one entity.
Ms. Callahan. Yes.
Mr. Shadegg. Operated by a second entity.
Ms. Callahan. Right.
Mr. Shadegg. And builders seem or builders/owners seem not
to have that incentive to care about the efficiency of the
building.
Ms. Callahan. Right.
Mr. Shadegg. Somebody else is operating it, they pass the
costs onto the tenants, the tenants eat the cost, and pass them
onto their customers. Now, obviously, one way and Mr. Rogers, I
apologize for missing part of your testimony and being late but
I had other things going on, one of the options for that, of
course, is building codes, looking at the future building codes
which might make these buildings more efficient. That I think
is at least one option, though sometimes I worry about
political agendas being advanced in building codes.
I guess my question of you, for you is No. 1, do you agree
that that is an issue, kind of the advertence between the
incentives, between the tenants and operator using a building
and the builders who build the building, and second, have you
looked at other incentives that this Congress might be
including in this legislation which would incentivise builders
both to produce efficient buildings in the future but also to
retrofit the buildings we have at the moment?
Mr. Rodgers. That is a very good question, sir, and our
laboratories and scientists even have a name for the problem.
It is the problem of agency, in that the owner and the operator
are different from the builder. Certainly the Energy Policy Act
of 2005, and the incentives provided to the commercial builders
for adopting energy efficiency have made a dramatic impact. We
also believe that the current promotional efforts by many to
adopt green building standards such as the U.S. Green Building
Council, are having a demonstrable affect. Energy Star
Program--those programs, as well as codes, are going to be
critical to address the problem that you have identified.
Mr. Shadegg. Have you looked at----
Ms. Callahan. Can I do to----
Mr. Shadegg. Sure.
Ms. Callahan. We call it split incentives, and it is a
critical concern, and there are two ways at least that you can
attack it. One is building codes. We are very supportive of the
progressive or advanced building code that is in this bill that
would require the code setting bodies to improve the building
codes for both house and commercial buildings by 30 percent by
2010, and 50 percent by I think it is 2030. I am not familiar
with that.
The second way is to provide incentives for the builders to
build the buildings correctly the first go around, and EPACT
2005, has a set of very important incentives for both
commercial buildings that give $1.80 a square foot for
efficiency improvements. That is for new construction and for
existing buildings, and then there are an additional set of
incentives for new homes and then for existing homeowners. We
are hopeful, it is outside the jurisdiction of this committee,
but we are working with the Ways and Means Committee to both
extend those and expand those tax incentives, because I think
it is going to take both. You need the building codes to
continue to improve, but you also need to provide the
incentives to get people to go beyond that threshold.
Mr. Shadegg. I would certainly encourage that.
In the time I have left I want to go to you, Mr. Birnbaum.
I had a load controller on my house in Phoenix, Arizona. We
face a heat problem. It occurs late in the day, and say 8 years
ago, maybe 15, 10 years ago, our local utility pushed very
aggressively load controllers, and it makes a lot of sense. If
you look at Phoenix, Arizona, and we have a huge peak demand at
3:00, 4:00, 5:00, 6:00, 7:00 p.m. before it begins to cool off
in the evening, you do not want to be doing your laundry or
running a dryer, clothes dryer, and other multiple appliances
at the same point in time.
Well, regrettably, that has literally disappeared. At the
home that I lived in at the time it got to where nobody
bothered to adjust their load controllers anymore. They did not
seem to produce savings, and there are thousands, I think, of
load controllers in Arizona on homes that may not be used. And
I guess I am curious why that is, and have you examined that,
because it seems to make a lot of sense to me to encourage that
kind of the intelligent use of electricity through the day, so
that we don't have to build to the highest possible peak and so
that people use electricity or energy wisely.
Mr. Birnbaum. Yes, Congressman, that is actually a common
problem. I had the same thing 20 years ago. I was living in
Washington, DC. The problem is twofold.
One, most of us don't have the time to really go program
those devices. Two, what you need is a network, a smart grid if
you will, that can communicate with those devices, therefore,
all we have to do on one day is assign it to a program that
says when the peak pricing gets this much or if load
constraints hit this level, I give you authority to turn off my
air conditioner or my pool pump or my dishwasher, whatever the
case may be, for this amount of time or during these hours of
the day. And as a result now a utility, rather than you and I
trying to do it one device at a time, one home at a time, when
we are not home, the utility now can do that by hundreds of
thousands or millions of devices in homes. And that is the most
effective way to use load controllers. That is why we think the
smart grid is so important.
Mr. Shadegg. My time has expired, but the chairman is busy
with another conversation, so let me ask you a question.
What happens if they try to turn, let us say they decide,
OK. I am going to turn off your air conditioning, but it just
so happens that is the day you invited people over for a party.
Mr. Birnbaum. Absolutely.
Mr. Shadegg. Does the smart grid allow you to override that
as the consumer?
Mr. Birnbaum. Yes, it would. I mean, obviously the smart
grid wouldn't know you were having a party, but you would have
effectively an override button, and you have a consumer control
device, a display or LED in your house where you can control
all of those appliances.
Mr. Shadegg. I think we need to stop this conversation.
Thank you.
Mr. Boucher. Thank you very much, Mr. Shadegg, for your
thoughtful and extensive questions.
The gentleman from Utah, Mr. Matheson, is recognized for 8
minutes.
Mr. Matheson. Well, thank you, Mr. Chairman, and since I
waived my opening statement, I do want to acknowledge your work
and the process as well. It has been substantive, and it has
been orderly, and as a new member of the committee, I really
appreciate the fact that we are moving through this legislation
the way we have with the discussion draft and a lot of input
from other people. So I want to acknowledge that and your
efforts in that regard.
Mr. Rogers, I had, want to ask you a question about
commercial buildings and efficiency. It is my understanding
that within DOE currently it is a rather limited R&D program
right now for commercial buildings. What do you think would be
the reaction of DOE to a proposal for public, private
partnership that would be designed to measure energy
performance of commercial buildings to assemble new ideas, the
solutions, packages that could help address that? You know,
examples would be big bucks retail, different climate regions.
How do you think DOE would respond to that type of
proposal?
Mr. Rodgers. I appreciate the question very much, and not
knowing the details of the specific proposal, I would just like
to share with you that we are extremely supportive of public,
private partnerships, and we see them as vital to allowing us
to deliver an energy efficient technologies especially in the
commercial sector which is so diverse. We have had partnerships
with Wal-Mart, Home Depot, Lowe's, Petco, and other companies
as they try to understand how to better apply energy efficient
technologies. And I can't imagine us proceeding without public,
private partnerships.
Mr. Matheson. And one of the characteristics I just want to
emphasize would be it would include creating abilities, it is
the old thing I learned at business school. If you can't
measure it, you can't monitor it, and right now I think that
there is a real lack of the ability to measure energy use in
the commercial building sector. The industrials have a big
enough economic interest there doing it, but I don't know that
it is happening in commercial.
So that would kind of be a component of this. It is
creating a way to really be, upgrade our ability to measure
energy use. Once we can measure it, more rational decisions
could be made, and I think that is, I assumed DOE would be
comfortable.
Mr. Rodgers. If I understand where you are headed, I think
so. I would just point out that energy service companies do a
big, big business in the commercial buildings already, and they
know what they are doing, and capital is available, and I think
a part of what we are seeing is that we need to get building
owners, operators, and developers aware of everything that is
on the table that they can adopt to improve energy efficiency.
Mr. Matheson. Right. Ms. Callahan, do you have any reaction
to that type of proposal?
Ms. Callahan. We have put together a proposal for a public,
private partnership. We call it the Commercial Building
Initiative and would love to come talk to you about it. We have
been talking to the Department of Energy. It is actually
included in the Senate version of the bill, and I think we may
have gotten some appropriations yesterday in the House. So, we
are very supportive of it.
Mr. Matheson. OK. I appreciate that.
Mr. Rogers, one other question I wanted to ask you. In your
testimony you mentioned DOE opposition to the removal of
advanced rulemaking notices because these notices sometimes
lead to better or faster rulemakings. Do you think, are there
examples where the applied standards for that has resulted in
faster rulemaking?
Mr. Rodgers. If I understand the question, we are not
opposed to having the flexibility to skip the advanced notice.
Mr. Matheson. OK.
Mr. Rodgers. What, one concern that can arise is during the
advanced notice phase is where a significant amount of
technical analysis is presented to the stakeholders to the
public process. One issue that we want to make sure that we
deal with appropriately and we look forward to working with the
committee, is how can we continue to make that technical
analysis available to the public even as we try to accelerate
our rulemaking through the elimination of the steps.
Mr. Matheson. OK. I appreciate the clarification on that.
Mr. Chairman, I yield back.
Mr. Boucher. Well, thank you very much, Mr. Matheson. That
completes questions to this panel by all of the members of the
subcommittee, and I, again, want to thank you for sharing your
information with us today.
We will, as indicated, these questions have follow-up
questions on several matters and would appreciate your prompt
response to those.
And without objection there will be included in the record
statements that have been submitted to the subcommittee by
several organizations on the topics that have been addressed
here today.
With that this panel is excused, and we thank you very much
for your participation.
Mr. Birnbaum. Thank you, Mr. Chairman.
Mr. Boucher. And we welcome now the second panel to testify
before the subcommittee this afternoon, and that is comprised
of three witnesses: Ms. Katherine Fredriksen is the Principal
Deputy Assistant Secretary for Policy and International Affairs
at the U.S. Department of Energy, Mr. Don Maley is the vice
president of Leucadia International Corporation, and Mr. Daniel
Lashof is the science director at the Climate Center of the
National Resources Defense Council. We welcome each of our
witnesses. Without objection your prepared written statements
will be made a part of the record, and we would ask that your
oral summaries be kept to approximately 5 minutes.
And I am just looking at who is ready. Ms. Fredriksen, are
you prepared to deliver your statement to us?
Ms. Fredriksen. Yes, sir.
Mr. Boucher. We will be happy to begin with you.
STATEMENT OF KATHARINE A. FREDRIKSEN, PRINCIPAL DEPUTY
ASSISTANT SECRETARY, POLICY AND INTERNATIONAL AFFAIRS, U.S.
DEPARTMENT OF ENERGY, WASHINGTON, DC
Ms. Fredriksen. Thank you, Mr. Chairman and members of the
committee for the opportunity to appear before you today to
comment on the discussion drafts that you asked for us to look,
to examine.
While we have not had sufficient time to coordinate our
agency views on the legislation, I am prepared to offer some
preliminary comments today.
Most of my remarks today will focus on the discussion
drafts that are related to the Energy Policy Act of 2005, the
title XVII loan guarantees, and a standby loan for coal to
liquid projects.
First I am going to focus on the discussion draft to amend
title XVII of EPACT, which contains a provision that would
direct DOE to guarantee a loan amount that would likely attract
non-guaranteed investments that are adequate to capitalize a
project.
It further states that DOE may guarantee up to 100 percent
of any loan or debt obligation for an eligible project and
prevents DOE from issuing a rule or regulation of establishing
a lower percentage limit.
The Department does oppose these requirements for several
reasons. First, the provision which would direct DOE to
establish a guarantee likely to attract non-guaranteed
investments is vague and difficult to implement for the agency.
The borrower working with its lenders we believe is in a better
position to determinate the amount for which a guarantee is to
be sought consistent with its business plan, its credit and
capitalization requirements.
Second, the Department likewise opposes a limitation on its
authority for rulemaking set forth in the provision. As
reflected in our proposed rule published in the Federal
Register on May 16, 2007, the Department believes that it
should guarantee no more than 90 percent of any debt instrument
in order to limit the risk being borne by taxpayers. We believe
this is a found prudent in addition to require the parties
responsible for taking the financing to relieve some of the
risk for the success of the project.
Federal credit policy states that the level of guarantee
should be no greater than that required to achieve the policy
goals. I note that some of the pre-applications we received in
response to our first title XVII solicitation requested
guarantees of less than 80 percent. The Department also notes
that the greater the guarantee percentage for that instrument,
the greater the subsidy costs that must be paid by the borrower
up front to secure a title XVII guarantee.
Next, I will turn to the discussion draft on standby loans
for qualifying coal to liquid projects. We believe it makes
valuable contributions to our national discussion to reduce
consumption of petroleum and increase the availability of
alternative fuels. A domestic coal-to-liquid industry would
provide strategic and potential economic benefits to the United
States.
CTL production using best available emission control
technology would diversify our transportation fuel sources,
reduce U.S. dependence on imported petroleum, and provide fuel
with other benefits including potential easier control of
nitrous oxide and particular emissions from vehicles that use
those fuels.
Coal-derived liquid contains essentially zero sulfur and
requires minimal upgrading to produce commercial grade premium
fuels. They are also fungible with petroleum products. They can
be distributed through existing fuel infrastructure.
Some recent studies have concluded that a commercially-
mature coal-to-liquid plant could be competitive at today's
high-world oil prices. CTL facilities would produce emissions
comparable to modern, state-of-the-art coal gasification plants
and could be configured to cost effectively capture carbon
dioxide emissions, which if further sequestered would help
address climate change concerns evaluations at the plant.
At the same time CTL can provide an added source of
domestic supplies of liquid fuels to mitigate our country's
dependence on foreign oil imports. Some of the captured CO\2\
could potentially be used to enhance oil recovery fields, thus
increasing our domestic fuel supply.
The Department's portfolio of research and development on
CTL, biofuels, and other advanced technologies supports the
prominence alternative fuel standard that will replace 15
percent of the projected gasoline use by 2017. This is an
important element of the President's 20 in 10 Program to reduce
gasoline use by 20 percent in 10 years.
The Department's efforts are focused on overcoming the
barriers to adopting biofuels and other advanced fuels such as
CTL through forging strategic, cost-shared benefits with
private industry and collaborating with other agencies and
State and local Governments. Combined with the financial tools
already in place in the Energy Policy Act of 2005, we believe
that this is a multi-pronged effort to help expand
domestically-produced alternative fuels.
While we know that CTL plants have not been built today in
the United States because of high volatility of world oil
prices, high capital costs, and long lead time to associate
with permitting and construction, we nonetheless believe that
CTL has a viable role in our Nation's fuel infrastructure, and
we have worked to bring those financial incentives, to bring
down those technology costs and risks.
Regarding the proposed standby loans for CTL, the
Department does believe that the Title XVII Loan Guarantee
Program is a more cost-effective means of encouraging the
development of CTL projects. The provisions included in the
discussion draft provide a price floor for the producers, which
could potentially provide enormous liability for taxpayers and
cause unwarranted distortions in the marketplace.
While we have significant concerns with the draft
provisions, we would like to work with the committee to see
incentives to support the domestic CTL industry. We believe the
discussion drafts are a very good starting point and that all
could benefit from further review and discussion and
collaboration.
Mr. Chairman, I reiterate this was only a preliminary view,
and we look forward to working with you to fine tune the
proposed legislation to build on the success of EPAC 2005.
This will conclude my prepared remarks, and I will be happy
to answer any questions.
[The prepared statement of Ms. Fredriksen follows:]
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Mr. Boucher. Thank you very much, Ms. Fredriksen.
Mr. Maley.
STATEMENT OF DON MALEY, VICE PRESIDENT, LEUCADIA INTERNATIONAL
CORPORATION, NEW YORK, NY
Mr. Maley. Thank you very much, Mr. Chairman. I appreciate
the opportunity to come and talk to you today about your coal-
to-liquids legislation. I consider it a bold and responsible
plan to help kick start the development of a coal-to-liquids
industry in the United States.
When we look at the specifics of the legislation, as I have
testified before, we believe the floor price mechanism will
provide the required assurance that the investment community
will need in order to develop and invest in these projects. We
look at the repayment mechanisms in the package as an
appropriate measure to mitigate the cost of the program and
ultimately to have no costs of the program for the Federal
Government because the project will pay the upfront Government
costs.
With respect to the CO\2\ sequestration plan, which is
prominent on everybody's mind today, we view the plan as a
significant challenge for the industry but one that we are
prepared to commit to and one that we are prepared to implement
as part of any investment that we might make to the program.
One point that I would like to make in that regard is that
there seems to be a broad interest in the development of
sequestration technology, and one of the prerequisites for
implementing a sequestration technology is the actual capture
of CO\2\. The only plant that I am aware of today in the United
States that actually captures its CO\2\ in a pure form is the
North Dakota Gasification Project that sells its CO\2\ quite
profitably for enhanced oil recovery. If we are going to
advance the whole question of sequestration, we need to
actually build some projects that capture CO\2\ and that allow
us to then take that CO\2\ and implement it in the
sequestration plan.
The projects that Leucadia is developing in this area, all
have a sequestration plan as part of the conception, and we
will be actively developing that as part of our overall
development of the project.
The other thing specific to the coal-to-liquids technology
is that it does have environmental benefits with regards to the
emissions of criteria pollutants. We are developing a project
in Illinois and working with the city of Chicago, that has zero
sulfur emissions and the lower particulate emissions which have
an immediate health benefit to that market. Chicago is a
serious non-attainment market, and they see the introduction of
coal-to-liquids project manufacturing transportation fuels as
an immediate benefit to their local community. The city of
Chicago is actively encouraging the development of our project.
[The prepared statement of Mr. Mr. Maley follows:]
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Mr. Boucher. Thank you very much, Mr. Maley.
Dr. Lashof.
STATEMENT OF DANIEL A. LASHOF, SCIENCE DIRECTOR, CLIMATE
CENTER, NATIONAL RESOURCES DEFENSE COUNCIL, WASHINGTON, DC
Mr. Lashof. Thank you, Mr. Chairman. It is a privilege to
appear before the committee again.
As you know, Speaker Pelosi has committed to passing
groundbreaking legislation that addresses global warning and
energy independence in this Congress, and while I recognize as
you stated earlier that the primary goal of the legislation we
are hearing today is the energy security component of that. I
believe that it is nonetheless essential to evaluate the
proposals we are considering in light of this longer-term
objective.
In particular the U.S. Climate Partnership, which as you
know, is a broad diverse group of leading companies,
environment, and other public interest organizations has called
on the Congress to pass legislation as quickly as possible and
reducing emissions of greenhouse gases by 60 to 80 percent by
2050.
Any energy legislation enacted in this Congress should in
my view at a minimum be consistent with and make a down payment
on achieving that goal, even if its primary purpose is to
reduce dependence on petroleum.
Before turning to the primary subject of this panel on the
coal-to-liquids legislation, I would just like to echo the
comments of Ms. Callahan in the previous panel. NRDC strongly
supports the work they are doing on energy efficiency and
particularly the energy efficiency standards, and I would just
note that in particular the forcing function to insure that DOE
meets its statutory deadlines is particularly important given
their shameful record in missing deadlines as has been brought
out previously in this hearing.
Unfortunately, I can't say the same thing about the coal-
to-liquids provisions as you know. I would like to call your
attention to two recent studies that have concluded that even
if coal-to-liquids plans fully employed carbon capture storage,
full lifecycle greenhouse gas emissions from using the fuels
will still be worse than conventional diesel fuel, in
particular Michael Wang of Argonne National Laboratory is the
developer of the model that has been used by EPA and others to
analyze different fuels on a consistent basis. He presented his
findings to the Society of Automotive Engineers this week, and
his study shows that without carbon capture the emissions could
be as much as two and a half times as much as diesel fuel, but
even assuming a high efficiency conversion process and carbon
capture and storage, lifecycle greenhouse gas emissions from
coal-to-liquid would still be 19 percent higher than using
conventional diesel fuel.
Given that result it is not surprising that another recent
study by Battelle found that a significant coal-to-liquids
industry is simply not a good investment in the context of a
program that is limiting greenhouse gas emissions to prevent
the concentration from rising above twice pre-industrial levels
or to a lower level, which I believe is needed.
Battelle found that, in fact, if there were no constraints
on greenhouse gas emissions, a significant coal-to-liquids
industry would make sense and would grow to replace
conventional oil during the next several decades. But in the
context of the need to significantly reduce greenhouse gases in
their economic models coal-to-liquids does not develop, and
instead, we would need to rely much more heavily on biofuels
and efficiency to meet our transportation needs.
There has been some discussion on plug-in hybrid vehicles
today. I just would reiterate my view that to use coal in the
transportation sector the best pathway is through making
electricity to go into plug-in hybrids. There is a huge
potential there, and in fact, a ton of coal used for that, in
that way could displace twice as much oil as using a ton of
coal to produce liquid fuel. And the emissions on a graduate
mile basis could be one-tenth as much as with liquid fuels.
As you know, Mr. Chairman, and I know you were none too
pleased to receive a letter from NRDC and nine other
environmental organizations opposing the provisions we are
looking at today, we noted a number of things. I would
highlight that in addition to reducing oil use, renewable fuels
on the market today generate on average 20 percent lower
greenhouse gas emissions than conventional fuels. And we urge
that Congress adopt fuel alternatives that should be held to at
least that standard.
Let me comment a little bit on the specifics of the
legislative proposal you have out. I appreciate the fact that
you put in the greenhouse gas performance standard.
Mr. Boucher. Well, Dr. Lashof, your time is almost expired,
and we have votes pending on the floor, which will require our
going over there. So could you wrap up in maybe 15 or 20
seconds, please?
Mr. Lashof. I will do that. You authorized the use of
CO\2\. We have no objection to using CO\2\, but an
environmental benefit should only be assigned if CO\2\ is
demonstrated to be permanently stored and kept out of the
atmosphere.
The other point I would like to make is that your
legislation calls on plants to have a plan certified by EPA. We
believe it is essential to insure that the plan is actually
carried out and that plants actually implement carbon capture
and store it to be eligible for any program.
I will conclude there. Thank you.
[The prepared statement of Mr. Lashof follows:]
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Mr. Boucher. Thank you very much, Dr. Lashof, and thanks to
each of our witnesses.
We have 7 minutes remaining to respond to the roll call
votes on the floor, and there are four votes pending.
Experience tells us that it will take approximately 45 minutes
to complete these votes, and so I am going to declare a recess
in these proceedings until we have finished. And we would
appreciate your patience in remaining here until we can
pronounce some questions to you.
So the subcommittee stands in recess for 45 minutes or
until about 5 minutes after the last roll call vote is
completed.
[Recess.]
Mr. Butterfield [presiding]. The committee will reconvene.
It is now time for each one of the committee members to ask
questions of the witnesses. We are going to ask each of the
Members to hold their questions and answers to no more than 5
minutes.
I was not here during the testimony, and I regret that I
was not in place, but we were multi-tasking this morning, and I
am sure all of you have an appreciation for that. We can solve
a lot of problems on Capitol Hill, but one thing we cannot do
is to be in two places at one time. So I apologize for my
absence, but the staff has summarized your testimony, Mr.
Maley, and I want to thank you very much for the preparation
that you made, and thank you for coming forward today for this
purpose.
Before I recognize Shimkus I want to simply ask two
questions, and the first one will be to Mr. Maley. I believe in
your testimony you mentioned price guarantees, and I guess my
question to you is why would a price guarantee for coal-to-
liquids be preferable to the traditional loan guarantees?
Mr. Maley. What we like about this legislation is that we
believe it puts the proper incentives on the owner and the
investment community to make the project perform properly. A
loan guarantee tied together with a tax incentive package for
the equity investor to induce people to invest basically puts a
project structure in place where the lender really has no risk
whether or not the project ever works and even the equity
investor really has no risks whether or not the project ever
works because if it doesn't work, he has gotten his tax
incentives and can recover his investment that way.
In this program with the cap and the ceiling, the ultimate
performance of the plant, whether it actually generates the
barrels that it is projected to produce and does it at a cost
that works with the economics, really resides with the investor
and the financial community. So we think it keeps the proper
incentives and keeps the parties aligned to make the project a
long-term success.
Mr. Butterfield. We have worked very hard on this
legislation. Hopefully we are going to get it out in pretty
short order, and if that happens will Leucadia be willing to
build a coal-to-liquids facility if the bill passes?
Mr. Maley. Yes, we will. We think this is the legislation
that we would need. We have been actively developing a coal-to-
liquids project in Illinois. It has been on a relatively low-
scale effort at this point, but we are quite ready to
accelerate that effort and commit very significant dollars to
the development of one of these projects.
Mr. Butterfield. Thank you very much.
The Chair recognizes the gentleman from Illinois, Mr.
Shimkus.
Mr. Shimkus. Thank you, Mr. Chairman. This is one of the
charts that I brought out about 2 years ago when we first drew
up the legislation, and I think it is important to just
highlight the benefits based upon some of the debate.
You have U.S. coal underground, not in the Gulf Coast
areas, which are highly at risk for hurricanes as we know. You
build a plant hopefully somewhere in the Midwest, in the coal
fields of the Midwest. You have a pipeline facility already
established, centralized in the Midwest to be able to do a lot
of things. To be able to fund our fighter planes in the
military, to create cleaner fuel than currently is available
for diesel engines today.
And I have, we had a chart in one of our hearings that
talked about low diesel fuel, and everybody agrees that is a
great advancement. When you compare to what this technology can
do on SOx, NOx, particular matter with respect to low diesel
fuel, it is incomprehensible why the environmental community
will not work with us to try to make this happen. And we are
going to keep fighting for these provisions for national
security.
And I want to keep highlighting the aviation fuel aspect
and the diesel fuel aspect because you are going to have folks
talk about, as my friend talked about cellulosic debated
ethanol and no one can out ethanol me I don't think on this
committee, but that is gasoline. That is for automobiles, and
we are talking about liquid fuel competition across the board.
So I just wanted to highlight that.
The last is a thousand jobs, in fact, in the first hearing
we had a lot of, I saw a lot of my friends from Morgan Heights.
They were building trades, good building trade jobs to create
these refineries, these pipelines, a lot of construction jobs,
15 million tons of coal per year and up to 500 coal mining
jobs. That is why I am obviously very excited for all those
reasons.
So my follow-up questions deal with this as I am sure no
one would be surprised. First, Kathy, if you would talk about
the recently released feasibility study that DOE just a couple
days ago, and it talked about a barrel of oil, $60, a 20
percent return on that investment. So essentially this study
the plant is breaking even at $48 per barrel, and really the
question is does this include investment in CCS?
Ms. Fredriksen. You are referring to the NETK study that we
just released on May 21, and it looked at the feasibility of a
commercial, 50,000 barrel per day coal-to-liquids facility in
the Illinois coal basin. Based on its use of approximately
24,000 ton per day of coal we got an output of around 28,000
barrels per day of diesel fuel, 22,000 barrels per day of
naphtha, and 124 megawatts of net electricity that could be
returned to the grid after the production was used for the
generation of the plant itself.
It did incorporate our recapture. It used carbon capture.
It accounted for the carbon capture and then actual compression
into a pipeline, so if you injected, there would be a little
different configuration, but it did look at commercial reuse or
sale of CO\2\. And that feasibility study, as you pointed out,
showed a 20 percent return on investment, oil being at around
$60 a barrel, with a net present value of $1.5 billion and a
payback period of 5 years. That did not incorporate any loan
guarantee from the Federal Government.
If you do put a Federal loan guarantee into the mix, you
could raise your return to almost 30 percent, which is a pretty
hefty return on investment for an investor.
Mr. Shimkus. And I think our proposal is obviously if they
apply to this price provision, they are not going to be
applicable for other loan guarantee provisions. But it is a
good point well taken.
Now, we have Mr. Maley from Leucadia. I appreciate all the
work you are doing. We have been following to date. I know your
excitement in the process.
We know CCS, and we have talked about that, but can you
talk to me about the use of biomass and how that can be
involved in having refinery emissions that are in essence equal
to or less than regular petroleum refinery locations today?
Mr. Maley. I am not an engineer or an expert in that area,
but just in discussions with some of the technology firms,
there has been discussion about biomass either as an add on to
a coal-to-liquids project or as a blend. Using biomass as part
of that process helps achieve very significant reductions.
Mr. Shimkus. And Mr. Chairman, if I just may end on this
line, equal-opportunity questioner here, for my friends at the
NRDC, you came before the committee before when we were kind of
talking about this proposal, and your testimony, I don't have
it in front of me, but we were very optimistic or at least
presently kind of excited about your support that if CCS was
used, again, this is a statement that is in the record if I
wanted to get the quote, but it made it a little bit more
doable than if it wasn't. And it was qualified, I think. I
think Chairman Boucher would agree, qualified at least, I can't
say the word support, but you are less adamant in opposition if
CCS were used. Is that still your position?
And then in the follow up because I am running over time
would just be the whole issue of, and I asked this in the last
time you all came before us, the ability to, do you believe
that there is an ability to sequester now, and would you be
involved in any litigation to deny the ability to a long-term
geological store? Have you in the past and do you foresee the
ability of your organization to take this issue to the Courts?
Mr. Lashof. Thank you, Mr. Shimkus. Fewer emissions are
better than more emissions, so to the extent that carbon is
being captured and instead of going into the atmosphere, that
is better. I think what I suggested in today's testimony and
what I think some other members of the subcommittee suggested
is we need to be looking at how this might or might not fit
into a long-term reduction in global warming emissions.
And the conclusion I reach is that it doesn't fit into that
strategy. If you compare it to some of the other alternatives,
yes, ethanol is more applicable to a light-duty market but
biodiesel obviously is applicable, and that part of the EPA's
analysis produces about a 60 percent, 66 percent reduction in
lifecycle greenhouse gas emissions compared with conventional
diesel.
We believe that fundamentally, I would like to see the
committee move away from focusing on any particular feedstock
or technology and focus instead on our goals, which I think we
share, which is reducing global warming emissions and reducing
oil consumption. I think if we can work in that way we may be
able to cut through some of this controversy.
And to your last point just quickly, we are not as far as I
know involved in any litigation related to carbon capture and
storage. We actually are urging EPA to move quickly to set
regulations so that everybody would have an understanding of
what is required to license and operate a carbon capture
project.
Mr. Shimkus. Thank you. Mr. Chairman, just, I know it will
be just a short response.
Mr. Butterfield. Certainly.
Mr. Shimkus. I appreciate my friend's waiting.
Do you, back to Mr. Lashof, do you agree that at least the
analysis of the technology on coal-to-liquids refineries has
less emissions than a conventional petroleum refinery? Do you,
if they are CCS? I mean, CCS is greenhouse gas. I am talking
about the NOx and the SOx and the particular matter. Do you
agree with those analysis?
Mr. Lashof. Fisher Tropes fuel regardless of the feedstock
at end use does provide some benefits in terms of NOx, SOx.
Yes. I reviewed analysis, and I agree with that.
Mr. Shimkus. Thank you very much. Thank you, Mr. Chairman.
Mr. Butterfield. Thank you, Mr. Shimkus.
The gentleman from Utah. Looks like we are going to have a
vote in about 10 minutes.
Mr. Matheson. OK.
Mr. Butterfield. Yes.
Mr. Matheson. Well, I don't think I will take 10 minutes.
I just want to, Mr. Shimkus mentioned hoping the plant
would be built in the Midwest. I want to remind him there is
some coal further out west, too.
Mr. Shimkus. Real coal?
Mr. Matheson. Just a little bit. Yes.
Ms. Fredriksen, just to follow up, you mentioned that with
the study that was just issued in the last couple of days and
the 20 percent return and you said if you assume a loan
guarantee that bumps up the return to 30 percent. Is that, I
think this is straightforward, but is that based on the loan
guarantee will provide cheaper financing costs through lower
interest rates?
Ms. Fredriksen. Yes, which is the goal of the Loan
Guarantee Program as you----
Mr. Matheson. I want to make sure people understood that. I
think that in Mr. Maley's testimony I just think the committee
ought to note that you went through a discussion of the
strengths and weaknesses of loan guarantee and the price
guarantee where you said it is a price band so the price moves
inside or outside of a range. It affects it different ways. And
also the strengths and weaknesses of just the production
payment, if you will, a sense, pre-allen type payment, and I
think that that reflected a good discussion how I think this
legislation has thought that through a little more carefully
than past Government programs on price support and loan
guarantee. I just want to acknowledge that, because I think
that was a helpful discussion in your testimony to go through
that.
One question I, change the topic now for Ms. Fredriksen, I
noted that DOE is supportive of the coal-to-liquid provisions
included in the discussion draft. Does, has DOE looked at how
comparable provisions might work relative to a different
resource? In this case it would be the oil shell or tar sands
would fit into this type of model. Do you know where the
administration is on that?
Ms. Fredriksen. We have looked at that, sir. We still
believe that a title XVII program is going to help defray a lot
of that new technology. I mean, that is what we are
fundamentally getting to here is not off-the-shelf technology.
It is very new, it is very unproven, and that is what the
investors are a little afraid of. And so we are trying to help
buy down that technology risk with a loan guarantee program. We
did, however, look at other options and explored other options
in an analysis of whether or not this collar approach would
work. We have considered things such as a variable production
tax credit that does float with a price index but is sort of
term limited to a production capacity to get production where
you need it to be, and then you can get out, the Government can
get out of the way and let the market take over.
Mr. Matheson. Right.
Ms. Fredriksen. So there are a lot of options that we can
consider, and I think they would be applicable to all
technologies.
Mr. Matheson. So other fuel stocks as well that I mentioned
there?
Ms. Fredriksen. Yes.
Mr. Matheson. OK. That is all I got, Mr. Chairman. Thanks.
I yield back.
Mr. Butterfield. Thank you very much.
All right. Do we need a second round? Do you have any other
questions?
Mr. Shimkus. No, sir.
Mr. Matheson. No, sir.
Mr. Butterfield. All right. Do you have any other
questions? All right. Thank you once again for your testimony.
I apologize for the disruption in our schedule, but I am
certain all of you understand.
The hearing is concluded. Thank you.
[Whereupon, at 2:00 p.m., the subcommittee was adjourned.]
[Material submitted for inclusion in the record follows:]
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