[Senate Hearing 109-37]
[From the U.S. Government Publishing Office]
S. Hrg. 109-37
COAL CONFERENCES
=======================================================================
SYMPOSIUMS
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
on
THE FUTURE OF COAL CONFERNECE
__________
MARCH 10, 2005
APRIL 21, 2005
Printed for the use of the
Committee on Energy and Natural Resources
______
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
PETE V. DOMENICI, New Mexico, Chairman
LARRY E. CRAIG, Idaho JEFF BINGAMAN, New Mexico
CRAIG THOMAS, Wyoming DANIEL K. AKAKA, Hawaii
LAMAR ALEXANDER, Tennessee BYRON L. DORGAN, North Dakota
LISA MURKOWSKI, Alaska RON WYDEN, Oregon
RICHARD BURR, North Carolina TIM JOHNSON, South Dakota
MEL MARTINEZ, Florida MARY L. LANDRIEU, Louisiana
JAMES M. TALENT, Missouri DIANNE FEINSTEIN, California
CONRAD BURNS, Montana MARIA CANTWELL, Washington
GEORGE ALLEN, Virginia JON S. CORZINE, New Jersey
GORDON SMITH, Oregon KEN SALAZAR, Colorado
JIM BUNNING, Kentucky
Alex Flint, Staff Director
Judith K. Pensabene, Chief Counsel
Robert M. Simon, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
John Peschke, Professional Staff Member
Patty Beneke, Democratic Senior Counsel
Jennifer Michael, Democratic Professional Staff Member
C O N T E N T S
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STATEMENTS
March 10, 2005
Page
Allen, Hon. George, U.S. Senator from Virginia................... 18
Beamon, Alan, Energy Information Administration.................. 2
Burke, Frank, Vice President, Science and Technology, Consol
Energy......................................................... 3
Clayton, Bret, President and CEO, Kennecott Energy............... 21
Conrad, Greg, on Behalf of the Interstate Mining Compact
Commission and the National Association of Abandoned Mine Land
Programs....................................................... 23
Denett, Lucy Querques, Minerals Management Service, Department of
the Interior................................................... 9
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 1
Dorgan, Hon. Byron L., U.S. Senator from North Dakota............ 2
Gerard, Jack, National Mining Association........................ 6
Habicht, Hank, Commissioner, National Commission on Energy Policy 23
Hawkins, David, Natural Resource Defense Council................. 7, 25
Holdren, John, Co-Chair, National Commission on Energy Policy.... 5
Kendall, Sara, Director, Western Organization of Resource
Councils....................................................... 25
Koppelmann, Bob, Florida Municipal Electric Energy............... 20
Lackner, Klaus, Columbia University.............................. 20
Lavin, Jack, Director, Department of Commerce and Economic
Opportunity, State of Illinois................................. 8
Owens, David, Executive Vice President, Edison Electric Institute 4
Pronske, Keith, Clean Energy Systems............................. 19
Salazar, Hon. Ken, U.S. Senator from Colorado.................... 2
April 21, 2005
Alexander, Hon. Lamar, U.S. Senator from Tennessee............... 35
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 36
Bunning, Hon. Jim, U.S. Senator from Kentucky.................... 45
Dalton, Stuart, Director for Generation Research, Electric Power
Research Institute............................................. 38
Hadley, David, Commissioner, Indiana Utility Regulatory
Commission, on Behalf of the National Association of Regulatory
Utility Commissioners.......................................... 40
Hamberger, Edward R., President and CEO, Association of American
Railroads...................................................... 46
Heller, Thomas J., CEO, Missouri River Energy Services........... 48
Lowe, Ed, General Manager of Gasification, General Electric
Energy......................................................... 41
McCullough, Glenn, Jr., Chairman, Tennessee Valley Authority..... 50
Mohre, David, Executive Director, Energy and Power Division,
National Rural Electric Cooperative Association................ 49
Owens, David, Executive Vice President, Edison Electric Institute 47
Palmer, Fredrick, Executive Vice President, Legal and External
Affairs, Peabody Energy, on Behalf of Coal-Based Generation
Stakeholders Group............................................. 36
Rosenberg, William, Senior Fellow, Kennedy School of Government,
Harvard University............................................. 39
Salazar, Hon. Ken, U.S. Senator from Colorado.................... 45
Szabo, Robert, Executive Director and Counsel, Consumers United
for Rail Equity................................................ 47
Yamagata, Ben, Executive Director, Coal Utilization Research
Council........................................................ 37
COAL CONFERENCE
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THURSDAY, MARCH 10, 2005
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 2:41 p.m., in
room SD-106, Dirksen Senate Office Building, Hon. Pete V.
Domenici, chairman, presiding.
OPENING STATEMENT OF HON. PETE V. DOMENICI,
U.S. SENATOR FROM NEW MEXICO
The Chairman. First of all, for those of you who are going
to be at the table and talk with us and for those of you who
came because of the nature of this event and the subject matter
and those who have submitted ideas, we received about 80
different concrete ideas, evaluations, suggestions, and the
like.
First, I cannot do anything about the Senate schedule. We
are making headway there, so I would not dare. It has taken us
8 years to get a bankruptcy bill, and if we have to vote all
day and all night, you are just going to have to be
inconvenienced along with me and the rest of us Senators. So we
are going to try. Right now there are three more scheduled, but
we have about 20 minutes, and then we will run down and see
what happens. It may be a chance for Senators to exchange here
where one can stay while one votes.
Having said that, I think you all know why we are here.
Clearly, the United States of America desperately needs to look
to a future where we have a diversified use of energy sources.
Some people speak of renewables. We think we ought to do
everything we can in that regard. Some speak of adding more and
more natural gas to our use here in America. We are trying to
look at that. All the other kinds of energy, including nuclear,
everybody is looking at those, but clearly the king of all that
is coal. We currently get 50 to 52 percent of our electricity
from coal, and there is plenty of coal in America at various
places.
We just have to find out here today and in our
deliberations and legislation in the next 3 or 4 months how we
can best move ahead to use more of our coal in a cleaner manner
so that we can say coal is contributing to our future in an
environmentally sound way. We all understand that is relative
depending upon one's view with reference to the pollutants and
how much we can and cannot do.
Nonetheless, we must proceed with evaluating what there is
and we have tried very hard to put together a different
approach. If we had a hearing, we would have three of you and
that would be it. Today we are going to have more of you,
provided that you cooperate and be very brief. If you will do
that, that will help us immensely.
Having said that, it is only fair that I ask if a member of
the minority would concur that we should proceed or you may
make a statement, whatever you would like, Senator. You can
start with a statement. Then we will proceed.
STATEMENT OF HON. BYRON L. DORGAN, U.S. SENATOR
FROM NORTH DAKOTA
Senator Dorgan. Mr. Chairman, I did not hear all that you
said, but let me concur with whatever it was.
[Laughter.]
The Chairman. I think you would agree with what I said.
Senator Dorgan. But let me just make the same point just in
30 seconds. There is no question that when we write an energy
bill--and we need a new energy policy--it needs to include
coal. The aggressiveness with which we pursue clean coal
technology to try to advance the interests of developing our
coal resources, hopefully at some point in the future in zero
emission plants, which I believe we can do if we decide to do
that, I think that is just a very important part of
understanding what new energy policy will be. Yes, there will
be new things but included in an energy policy has to be the
use of these vast resources of coal reserves. So I think this
is an excellent opportunity to share views.
One thing has happened, Mr. Chairman. They have actually
just added another vote. So it is not always very convenient to
do things around here as we run back and forth to votes. But I
want to thank everybody who has come to this discussion.
The Chairman. Senator Salazar, you are always a faithful
attendee. If you want to make a couple of comments, go ahead.
You might not have a chance before the afternoon is out, and I
will get back here.
STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR
FROM COLORADO
Senator Salazar. Coal is an extremely important resource
for all of us in this country, and in my State of Colorado, in
particular, we have many members of the mining industry who
have been very active, especially in the area of clean coal in
the western part of Colorado. So I am very much looking forward
to the presentation of the panel. I applaud our chairman and
the members of this committee who have pulled together this
conference.
The Chairman. Thank you, Senator.
We are going to proceed, Senator Craig, and you will have
an opportunity in between here to make a statement. We are
going to start right down the line this way. Alan Beamon, EIA.
STATEMENT OF ALAN BEAMON, ENERGY INFORMATION ADMINISTRATION
Mr. Beamon. Thank you very much. I appreciate the
opportunity to appear before you today and give our view on the
long-term outlook for U.S. coal markets. As you said, my name
is Alan Beamon. I am responsible for the EIA's long-term
projections for electricity and coal markets. I am joined today
by two colleagues at the end of the table here, Betsy O'Brien
and Rick Bonskowski who work on current coal data issues and
analysis.
The projections I am going to be discussing are from our
recently released Annual Energy Outlook 2005. The full report,
with more than 30 scenarios, is available on EIA's web site
today.
Driven by growing needs for electricity generation, total
coal consumption is expected to increase by 38 percent between
now and 2025. Overall, coal consumption in the electric power
sector is expected to grow as existing plants are used more
intensively and new plants are added. We project that between
now and 2025, 87 gigawatts of new coal capacity will be added,
and coal plants are expected to continue to produce roughly
half the power in the country.
Increased coal production from the West is expected to be
the primary supply source for growing power needs. Little
change is expected in Appalachian coal production. Western coal
production has been growing steadily since 1970 and is
projected to continue to grow, especially in the Powder River
Basin where vast reserves are contained in thick seams
accessible to surface mining.
Following a trend that began in the early 1990's, U.S. coal
exports are expected to continue to decline gradually, falling
from roughly around 43 million tons to 26 million tons. Our
coal imports are projected to grow slightly again from 25
million tons to 46 million tons in 2025.
Minemouth coal prices are expected to rise in the near term
because of growing demand and then level off as demand slows
down until we start building new powerplants. By 2025, we are
expecting coal prices of a little over $18 a ton.
That completes my statement. We are certainly able and
willing to answer any questions that you have.
The Chairman. Thank you very much.
Mr. Frank Burke.
STATEMENT OF FRANK BURKE, VICE PRESIDENT, SCIENCE AND
TECHNOLOGY, CONSOL ENERGY
Mr. Burke. Mr. Chairman, thank you very much for inviting
me. My name is Frank Burke. I am vice president of science and
technology for Consol Energy. We are a major U.S. coal and
coalbed methane producer.
Under any foreseeable circumstances, coal will continue to
be used in the United States and elsewhere as the predominant
fuel for electricity generation for the next century and
beyond. With proper investment, domestic coal can meet the
increasing demand for electricity while satisfying
environmental and economic goals. Otherwise, we become
increasingly dependent on foreign sources to fuel our
electricity supply.
The recent DOE Annual Energy Outlook underscores the risk
of failing to make sufficient investment in coal production and
transportation and use.
DOE forecasts that by 2025 natural gas will be used to
generate 24 percent of our electricity, doubling natural gas-
fired generation in absolute terms. Effectively this growth
will come from imported LNG and imports in total will grow to
about 30 percent of our total natural gas consumption. How
ironic to emphasize the need for less dependence on foreign
energy while making our electricity supply increasingly
dependent on those same foreign sources.
The necessity of expanded domestic coal use can first be
met by assuring regulatory certainty for the criteria emissions
of SOX, NOX, and mercury to ensure
continued use of our existing generating fleet and to
accommodate new coal fuel generating capacity. Enactment of
provisions such as those embodied in S. 131 would provide this
kind of certainty.
Second, advanced clean coal technologies must be developed
and deployed. We recommend enactment of comprehensive energy
legislation such as H.R. 6 that provides authorizations for
coal R&D, the clean coal power initiative, and financial
incentives for deployment of clean coal technologies.
Finally, we believe that necessary investments must be made
in coal transportation infrastructure and particularly the
locks and dams of the inland waterways that are vital to the
transportation of 120 million tons of coal annually. Congress
must appropriate adequate funds and utilize the Inland
Waterways Trust Fund for this purpose.
Thank you.
The Chairman. Thank you very much.
We are going to now move to David Owens from Edison
Electric. Thank you very much for coming. We appreciate your
comments also, sir.
STATEMENT OF DAVID OWENS, EXECUTIVE VICE PRESIDENT, EDISON
ELECTRIC INSTITUTE
Mr. Owens. I am David Owens, executive vice president of
the Edison Electric Institute. I certainly do appreciate this
opportunity to discuss the future use of coal. Using the poster
boards that I brought with me, I would like to make several key
points about current and future coal consumption in this
country.
The United States is the Saudi Arabia of coal. Coal is the
fuel for more than half of our electric generation. As the
purple area of figure 2 shows, coal is the predominant fuel in
five of the nine major regions of the country. This is due to
its reliability, affordability, and fuel source security. In
addition, even as the industry has significantly increased the
amount of electricity from coal-fired generators, we have been
successful in significantly decreasing emissions of sulfur
dioxide and nitrogen oxide. Controls to reduce these emissions
also are reducing our mercury emissions by about 40 percent as
well. Thus, coal can be used to be compatible with our
environmental goals.
As you all know, our society is becoming increasingly more
dependent upon electricity and electricity will continue to
power our economic growth. As the blue area of figure 1 shows,
the Energy Administration projects that coal use for electric
generation will continue to grow. That was certainly the point
that Alan emphasized. This is true even if there is greater
market penetration of renewables and other resources that
increase reliance on natural gas if natural gas prices decline
significantly. Thus, under any reasonable scenario, coal is
needed for baseload electricity growth.
But for the electric industry to be able to depend on coal
to meet future electricity demand, the industry needs greater
regulatory certainty in several areas.
First, our industry continues to be a strong supporter of a
sensible multi-emissions bill to harmonize overlapping
requirements to reduce SO2, NOX, and
mercury emissions.
Second, as the industry prepares for the construction of
major new baseload generation, we are also working to improve
Federal-State cooperation, recognizing that the Federal Energy
Regulatory Commission, which regulates wholesale power
transactions, and the States that regulate retail electric
service and planning and resource adequacy, need some harmony.
And finally, we support public policies that foster greater
deployment of advanced clean coal and integrated gasification
combined cycle technologies. As you know, these technologies
help reduce carbon intensity and hold the promise of cost
effective capture of CO2 emissions and provide for
permanent carbon storage.
To help to bring these technological improvements to
market, we strongly support tax credits, accelerated
depreciation, and other methods. We also support more rapid
amortization of pollution control equipment.
Thank you for this opportunity. I look forward to your
questions.
The Chairman. Thank you very much.
We are moving to NCEP, John Holdren. Mr. Holdren, thank you
very much.
STATEMENT OF JOHN HOLDREN, CO-CHAIR, NATIONAL COMMISSION ON
ENERGY POLICY
Mr. Holdren. Thank you, Mr. Chairman.
This country needs to expand coal use both for electricity
generation and for reducing dependence on oil and natural gas
in other applications, but it also needs to take serious steps
to reduce the risks from climate change. Reconciling those two
objectives requires a three-pronged approach, as recommended in
the recent report of the bipartisan National Commission on
Energy Policy that I had the privilege of co-chairing.
The first of those prongs is to provide a market signal
that begins to slow the growth of carbon emissions, but at a
pace that does not force premature retirement of existing coal-
fired capacity. The commission's proposal for a carbon emission
permit system that starts in 2010, phases in gradually, and
controls the permit costs with an initial safety valve price at
$7 per ton of carbon dioxide is designed to achieve that.
The second prong is speeding up the commercialization of
integrated gasification combined cycle multi-purpose coal
plants which can sharply reduce emissions of criteria air
pollutants, which offer the potential for affordable, cost
effective retrofit to capture CO2, and which can
produce liquid and gaseous fuels, as well as electricity. The
commission proposes $400 million a year in Federal early
deployment incentives over the next decade in order to bring
into operation 10 gigawatts of carbon capture-capable IGCC
plants.
The third prong is accelerating the development and the
commercial scale demonstration of the carbon capture and
sequestration technologies needed to realize the potential of
IGCC plants to drastically and affordably reduce their carbon
dioxide emissions. For that purpose, the commission has
proposed $300 million a year in Federal support over the next
decade.
The commission's analysis indicates that under its
proposals coal use in the United States would increase from 1.1
billion tons in 2003 to 1.3 billion in 2020, while U.S.
greenhouse gas emissions in 2020 would be 540 million tons of
carbon dioxide equivalent below the business-as-usual
trajectory.
I also want to emphasize the commission's proposals are
revenue neutral. The costs of all of the recommended R&D and
the costs of the early deployment incentives would be covered
by the revenues from the emission permit sales.
I finally want to note that a further benefit of pursuing
U.S. leadership in advanced coal technologies would be to
advance the use of those technologies in China and India where
large impending increases in coal use are going to imperil the
whole world's capacity to limit climate change risks unless
that coal is used in ways that capture and sequester the
resulting carbon dioxide.
Thank you.
The Chairman. Thank you. Very interesting.
Now, you are with the first person here.
Ms. O'Brien. Yes.
Mr. Bonskowski. Yes.
The Chairman. Why did they set you up? Did they think he
needed your help?
[Laughter.]
The Chairman. Jack Gerard, National Mining Association.
STATEMENT OF JACK GERARD, NATIONAL MINING ASSOCIATION
Mr. Gerard. Thank you, Mr. Chairman, and members of the
committee.
The coal industry is grateful for this opportunity to spell
out the future role of our Nation's most abundant domestic
source of energy. This conference is especially relevant to the
larger question before the Congress, which is how to meet the
Nation's growing needs for energy in the most environmentally
and economically responsible way.
Today coal generates more than half of the Nation's
electricity and is expected to generate one-half or more of the
50 percent increase in electric power the country is projected
to need by 2025. This means electricity generation will require
at least 1.425 billion tons of coal in 2025, or about 42
percent more than is used today.
The factors that account for this resurging coal demand are
often overlooked, even though they are persuasive to energy
markets. In a time of growing energy dependence on offshore
sources, when geopolitical uncertainty and growing demand for
finite fuels haunts global energy markets, coal provides the
United States with a 250-year supply of energy safely from
within our own borders. At a time of energy price volatility,
the price of coal remains remarkably stable and is expected to
remain so. EIA projects that coal will maintain its significant
cost advantage over natural gas well into the future.
And while the environmental challenges of coal utilization
should not be overlooked, neither should the impressive
reductions that coal-fired plants have already made or the
continuing environmental contribution expected from a suite of
advanced clean coal technologies.
For these reasons, coal is and will remain the primary
provider of electric power to the Nation. The marketplace is
choosing coal and we hope public policy will support this
choice to meet the future demand and bring the Nation closer to
energy independence.
Thank you.
The Chairman. Thank you very much.
Now let us proceed with David Hawkins, NRDC. Mr. Hawkins,
it is nice to see you again.
STATEMENT OF DAVID HAWKINS, NATURAL RESOURCES DEFENSE COUNCIL
Mr. Hawkins. Mr. Chairman, it is nice to see you again.
Thank you very much.
Coal can continue to play an important role in the U.S.
energy mix, but public acceptance of new coal investments
depends on improving coal's environmental performance. In
particular, attempts to build new coal plants that do not
control CO2, the global warming pollutant, will
encounter growing community opposition, along with resistance
from regulators and investors.
Global warming is real. It will not go away. Global warming
policy will change early in the operational life of projects
that are being planned today. As Excel Energy's resource
planner stated last month, you would be crazy not to consider
CO2 costs in planning a new coal plant.
Now, coal can be made compatible with a safe climate, but
only if we act without delay to deploy new technologies that
capture CO2 and keep it out of the air.
To do this, we urge Congress to adopt a program that
combines a schedule for binding limits on CO2 with
substantial financial incentives for the construction of low
CO2 energy systems, including coal gasification with
CO2 capture and geologic storage. This program not
only will put us on the right track to leave our children with
a safe climate, it will also reduce our dependence on less
secure sources of energy and it will position U.S. businesses
to take advantage of an emerging global market for clean energy
products.
Thank you.
The Chairman. Thank you very much.
Jack. How do you say your last name?
Mr. Lavin. Lavin.
The Chairman. Lavin. You are from the State of Illinois?
Mr. Lavin. State of Illinois.
The Chairman. What is your title?
Mr. Lavin. I am the director of the Department of Commerce
and Economic Opportunity for the State of Illinois.
The Chairman. All right. Please proceed.
STATEMENT OF JACK LAVIN, DIRECTOR, DEPARTMENT OF COMMERCE AND
ECONOMIC OPPORTUNITY, STATE OF ILLINOIS
Mr. Lavin. Mr. Chairman and members of the committee, on
behalf of Governor Rob Blagojevich, I thank you for this
opportunity to discuss coal and Illinois' innovative efforts to
cleanly use it. This discussion is quite timely because of the
high price of natural gas, fertilizer, and transportation
fuels. Coal is here for the digging and not under the control
of a government or cartel that may not have America's best
interests at heart.
But coal, as we rely on it today, cannot be sustained as a
reliable source of energy if it goes into aging powerplants so
old some are eligible for Social Security.
[Laughter.]
Mr. Lavin. Any future scenario for coal-fueled energy must
include a serious, detailed plan with meaningful deadlines to
replace old, inefficient coal plants. We must not tune out coal
critics in this regard.
The Department of Defense recently announced its clean
fuels initiative to catalyze domestic industries to produce
military fuels from alternative, secure domestic resources,
including coal through gasification.
Coal can also promote food security. High, volatile natural
gas prices have caused high, volatile fertilizer prices. As a
result, U.S. fertilizer plants are shutting down, and we now
import over 50 percent of America's fertilizer needs from the
Middle East, Russia, and China. America's food security is at
risk. We need a change in feedstock.
That is why Governor Blagojevich is supporting at the East
Dubuque nitrogen plant in East Dubuque, Illinois, a coal to
corn initiative. We are converting its natural gas feedstock to
coal to produce fertilizer, ultra-clean transportation fuels,
and electricity, leading to coal mining jobs, manufacturing
jobs, and lower cost for farmers, a triple crown, all while
utilizing clean coal technology.
Steelhead Energy in Johnson City, Illinois is proposing a
500 megawatt coal gasification project. They want to make
substitute natural gas from coal.
These projects are not dreams. They are America's path to
energy independence and the security that comes with it.
FutureGen is also an essential part of this strategy.
We are, plain and simple, a Nation energized by a fuel mix
that includes coal, and today we also are a Nation who must
face up to the challenge of using all of our resources in an
efficient, effective, and environmentally safe manner. Coal
must be included in a diversified energy portfolio. We must
continue developing renewable energy technologies, as we use
coal gasification to produce ultra-clean, low sulfur fuels for
transportation, national defense, and electric generation. We
have a number of items here up for a call to action.
I thank you for allowing me to give you my thoughts today.
The Chairman. You are very welcome. You talked about the
old plants in need of Social Security. Do you think that some
of them could go into personal accounts?
[Laughter.]
The Chairman. They might grow that way. Right?
Mr. Lavin. I think we need another hearing for that.
[Laughter.]
The Chairman. Okay, we will not have an argument over that.
Who is next? Could you tell us who you are?
STATEMENT OF LUCY QUERQUES DENETT, MINERALS MANAGEMENT SERVICE,
DEPARTMENT OF THE INTERIOR
Ms. Denett. Yes. Good afternoon. I am Lucy Querques Denett
with the Department of the Interior's Minerals Management
Service. Our agency is responsible for collecting coal
royalties from Federal and Indian lands, and I am here to
respond to any technical questions that the committee may have.
The Chairman. Both of you are technical experts?
Ms. Pierce. Yes.
The Chairman. Okay. Have you been prompted to give us any
technical advice yet from what you have heard?
Ms. Denett. No.
The Chairman. No? All right.
Senator, do you want to talk to the witnesses about
anything or ask the ones who have already appeared and talked?
Senator Thomas from the State of Wyoming.
Senator Thomas. Just very briefly.
Wyoming is one of the largest producers of coal.
I guess I would be interested in just a general comment of
what do you think are the current, most difficult obstacles to
moving toward what you all have talked about to getting coal
more used, to be able to do other alternatives, and so on. What
are the principal obstacles that exist? Just very briefly.
Mr. Lavin. Well, I think one thing is we have a system that
perpetuates the old coal plants. We have a utility industry
that is very risk-averse, and so why are they going to invest
in new technology? We need this new technology for coal
gasification and sequestration, and if we do not take some of
those risks, we are never going to get to that point. That is
the only way the future of coal will be essential to this
country. Right now we have a system that perpetuates being
risk-averse and sticking with these old coal plants.
Mr. Holdren. We also lack a market signal to tell the
industry that there will ultimately be a price on carbon
emissions, and the quicker we get that signal, the quicker we
will make the transition to the advanced coal technologies
which really are the future of the coal industry in the United
States and around the world.
Senator Thomas. What do you think the signal is now?
Mr. Holdren. There is no signal at all on carbon right now.
There is no price on carbon. There is no indication of when
there will be one in the United States. The recommendation of
our National Commission on Energy Policy is that we should
announce that there will be a price on carbon starting in the
year 2010 and gradually escalating, again, as I mentioned in my
remarks, at a pace that does not force the premature retirement
of existing coal plants, but which does encourage a transition
in new plants to ones that can control carbon emissions.
The Chairman. What do you mean price on carbon? What does
that mean?
Mr. Holdren. There would be any number of ways to do it.
The simplest would be a carbon tax, a tax on carbon emissions,
but nobody likes the T word. So the proposal of the Energy
Commission was that you have what is called a cap and trade
scheme, where you have a target on carbon emissions based on
carbon intensity of the economy, that is, the ratio of carbon
emissions to real gross national product, and you allocate
permits for that amount of carbon emissions and you put a price
on it.
The Chairman. Yes, we understand.
Senator Thomas. There are scientists, of course, who do not
agree with your analysis.
Mr. Holdren. Of course.
The Chairman. I understand now what you are saying, but I
will tell you what I think it is too. Go ahead, Senator.
Senator Thomas. Jack.
Mr. Gerard. Senator, we obviously do not agree with John
and his view on the carbon question.
However, I think it underlies a more fundamental point, and
that is the industry needs certainty. Where we are right now
under the Clean Air Act and the proposed amendments and other
things, we do not know what the rules of the game are. If you
talk about a chilling effect to investment and other things, we
need to know what the regulatory landscape and the legal
landscape is going to look like, 5, 10, 15 years down the road.
We are willing to push hard. We had an unfortunate turn of
events yesterday on the multi-emissions Clear Skies
legislation. But that is a perfect example of what we need.
That bill would cost the industry over $50 billion. Yet the
industry supported it because it will provide us the certainty
we need to make those costly investments looking into the
future to preserve the coal burner.
Senator Thomas. Mr. Chairman, we are going to have to go
vote.
Thank you. Let me just say one other thing, it seems to me,
one of the reasons we have had gas are the smaller electric
generating units closer to the market. So we are going to have
some transmission grid that is going to be able to take this
to--to build good, efficient coal plants, they have to be a
little larger than 500 megawatts.
The Chairman. Well, I asked about price. I understood your
very direct approach to the trading and the tax. But also, when
you have a regulatory scheme in place that is reasonable and
implemented over time, that will also be a price. The price
will be the cost versus doing business. And you will have to
invest in it to get there, and that is the price. That is part
of what we are looking at too.
One last before I go, Mr. Hawkins.
Mr. Hawkins. Well, unusually I would like to agree with
Jack Gerard on his point about the value of regulatory
certainty. This is an important feature and it is especially
important for carbon dioxide. If you are planning a powerplant
today, that powerplant is probably not going to be on line for
10 years. If you think that policy may change sometime in the
next 15 years, that means that powerplant is only going to be 5
years old when the policy has changed. That is not a situation
that is going to encourage people to put $1 billion in a new
coal plant. You need to know, and if you set the rules now, you
can give the industry 15 years of lead time. If you wait for 10
years of political pressure to build, then you are not going to
have anywhere near that lead time. You are not going to have
the business certainty, and you are going to have a lot of coal
plants built that are not designed to deal with CO2.
The Chairman. I am going to go and Senator Craig is going
to take over.
I want to just make this last observation. This committee
does not have jurisdiction on the Clear Skies and the
regulatory schemes, but we have an energy bill. It is going to
get to the shore, I am sure. If the Environment and Public
Works Committee does not get one out, we are going to be
confronted with the issue sooner or later. So we hope they get
one and we hope you continue working on it.
My question has to do with the investment in technology.
Everybody says we must invest in the technology and somebody
said we should be putting up $400 million a year. I hope you
have told us for the record what companies are investing in
research and development for new technology. They certainly
cannot leave it all up to us.
And secondly, since the research has to be kind of
consolidated, not just one research, but you cannot have every
company doing the kind of research with the kind of dollars we
need in it. I wonder if there has been any scheme heretofore
where money would be pooled from the companies to do concerted
research, and I would like to kind of know about that. But if
you would state for Larry while I am going, and he will take
over and finish you and take the next panel.
Mr. Burke. There is, in fact, a process that has been
ongoing for some time with industry and the Government to
develop a road map for clean coal technologies and to establish
a cost estimate for the ability to follow that road map with
specific performance goals. It is the combined Coal Utilization
Research Council, Electric Power Research Institute, and the
Department of Energy to put this road map together. It
estimates a cost of about $10 billion over 20 years to develop
technologies that meet specific energy efficiency and
performance goals. It includes efficiency as well as criteria
pollutants and carbon management goals.
I think the issue with respect to uncertainty and carbon is
importantly linked to the availability of technology to deal
with carbon emissions on a large scale in contrast to
technologies for sulfur and nitrogen control, which have been
around and developed and are relatively mature technologies.
There is a great deal of uncertainty about the feasibility of
carbon control at the kind of scale that would have to be done
not only in this country but worldwide if carbon sequestration
is in fact the answer to dealing with the carbon issue. The
quantities of carbon that would have to be dealt with are very
large, and the necessary technology for capture of carbon and
principally for the storage or sequestration of carbon is very
immature technology.
So the risk associated with any policy that would assume or
demand the use of that technology in the future I think is very
imprudent at this point. We need to do the research. We need to
develop the technology. We need to know how it works and what
it is going to cost before we make significant public policy
decisions regarding carbon management.
Senator Craig. Jack.
Mr. Gerard. I was just going to comment to Chairman
Domenici's question about pooling resources to help in the R&D
side of this. Thinking of the history of the clean coal
technology program, we spent about $5.2 billion since its
inception in the mid-1980's. About $3.5 billion of that has
come from the private sector. Now, a lot of those are one-off
different R&D efforts, but there has been a tremendous amount
of R&D to date from the private sector, in cooperation in the
public/private partnership.
The other one now that the President has proposed is the
FutureGen initiative. We have gotten together an alliance of
coal producers and the major utilities and we are committing
and we are in the process now of working with the Department of
Energy to commit upwards of $250 million to look at a
gasification platform that would help us capture carbon and
hopefully sequester carbon, at the same time create a stream of
hydrogen. So I think that is one good example where the
Government has stepped forward in some of these high-risk
ventures and has been willing to bring some money to the table
and, in turn, has incentivized the private sector to try to
match it where possible.
Senator Craig. Jeff, do you have any questions of this
crowd?
Senator Bingaman. I do not.
Senator Craig. Let me venture into the area of tradeable
credits. Senator Hagel has introduced legislation that I am
supportive of that offers that. I have looked at that and
talked about that in the past, offering a clear alternative I
think to some legislation that is venturing around out there.
Establishing its value downstream in future use and future
technology I think is the concern we have. I say that in light
of the risk of caps driving a market in the wrong direction
without reasonable alternatives and without the technology in
place to sustain the current energy base.
Would any of you like to visit about that for a few
moments? Tradeable credits, yes. David?
Mr. Hawkins. Thank you, Senator.
The thing that is very good about the cap and trade
mechanism is that it is flexible not just as to compliance but
also as to timing. So it is possible for you in the Congress
today to adopt a schedule that is far enough in the future in
terms of significant constraints that you will create the very
market signal that is needed to drive this technology. That is
what is going to mobilize private sector resources more than
anything else, more than a subsidy program, more than an R&D
program. It is a signal that there is a market out there for
money to be made.
If you set a schedule now, you can set it 10-15 years in
the future. As I said before, if you wait until pressure builds
and until the consequences of global warming are so
indisputable that all of you will agree that it is here and
that we need to react quickly, then that lead time will shrink
and you will not have used the time that we have right now to
create those market signals and to drive technology
improvements.
The technology is there. What it needs is optimization, and
you will get that optimization by applying it in real-world
commercial-scale operations. You will not get it by doing it in
the laboratory.
Senator Craig. Does anyone else wish to comment? I am not
talking capping. I am talking about building trading at this
moment, credits if you will.
Mr. Gerard. Senator, let me make a general point. We
obviously do not necessarily agree with David in terms of the
cap question. If you look at what is going on in the
marketplace now, in the last year there have been 118 proposed
coal-fired powerplants. That is more than we have had in the
previous decade. So I believe the marketplace is beginning to
drive in the direction of coal-fired power, and there is a lot
more talk now about IGCC technologies and others that David and
others now support in terms of being carbon-capable, et cetera.
But I think there is also enough unknown out there right
now that there is the potential, if we go too far with a
mandatory cap or anything along those lines, than we are going
to send a chilling effect to the marketplace. I see some of my
friends from General Electric and others here who are very
active in this area now who are looking at that marketplace. I
think we need to be very, very careful in any deliberation or
signal that you send from the Congress as it relates to carbon
for fear that we might chill the current interest, if you will,
in moving to cleaner technologies and moving down that road.
Mr. Owens. And I would agree with Jack. The attitude
certainly of the electric power industry is that a voluntary
approach is preferable. I do disagree with David. If you assess
what has taken place in the industry today, something like
20,000 megawatts are currently on the drawing board. There is a
clear commitment in the industry to build baseload coal-fired
powerplants. I think if you sought to have a mandatory cap and
trade program, that would certainly have a very chilling impact
on the industry.
David also talked about the need to mobilize technology,
something that we are very, very much in support of, but I
certainly do agree with Frank that these technologies are
evolving aggressively and it does require significant
commitment on the part of industry and the Government for
research, development, demonstration, and deployment.
I do not agree with David that these technologies are fully
mature today, and that is really where the uncertainty lies.
Mr. Holdren. If I could just add a point or two here.
Certainly there are some disagreements in emphasis, but I think
there is actually more agreement around the table than perhaps
is apparent at the moment.
I think we all agree that advanced technologies are crucial
to the future of coal in this country and around the world. I
think we all agree that we need both more research and
development and demonstration to understand exactly what the
mix of technologies is going to be and exactly how well they
are going to work and exactly what they cost.
When David talked about what we have and what we need, he
said we need to optimize those technologies further. The
technologies are out there. Many of them are on the shelf, but
they, nonetheless, need further effort at optimization.
The principal problem is that coal-burning powerplants
operate for 40 or 50 years. If, over the next 10 or 15 years,
we build in the United States another 80 or 100 powerplants,
China builds another 300, India builds another 80, and most of
them are pulverized coal conventional powerplants, and if in
2015 or 2020 the world has reached the conclusion that carbon
capture and control is essential, we are going to have locked
in, in those hundreds of pulverized coal plants that are not
amenable to retrofit to capture carbon, an immense amount of
additional carbon dioxide emissions to the atmosphere that we
will wish we were able to affordably avoid.
That means we as a society have a strong interest in
accelerating the rate at which those advanced coal technologies
that can capture carbon are brought into commercial operation.
That is what the National Commission on Energy Policy is
recommending this multi-pronged strategy to achieve, not a cap
in the sense that we put a limit on carbon dioxide at the
current level and say you cannot go any higher than that. We
are proposing a market signal with lots of lead time that
starts to bend over the growth curve, but does it at a rate
that does not end up stranding assets in terms of large numbers
of existing powerplants that become uneconomical, does it
gradually, but combines the market signal with increased
efforts at research and development and demonstration to make
sure that the technologies come on line quickly enough to
provide us the carbon capture benefits that we need.
The Chairman. So, David, timing is everything. What kind of
timing are you talking about? What is realistic here in your
mind?
Mr. Hawkins. We think that we could get a handle on the
global warming problem with a schedule that is not that
different than the President's voluntary initiative but that
continues. As you know, the President's initiative says slow,
stop, and then reverse growth in emissions. He calls for a
slowing between now and 2012. If emissions slow more than
business as usual between now and 2012, if they plateau in
2012, and then if they begin to decline, we think that that is
a schedule that provides lead time and one that would allow us
to preserve for our kids a safe climate.
If we go beyond that, we think we are going to wind up
missing an opportunity to affect the design of these
powerplants that are in the pipeline and so load up the
atmosphere that your successors in the Senate will have no
choice but to either select a very disruptive program to
address this problem or to let the problem go in a manner that
is going to have profound risks to the environment, to human
health.
The Chairman. Frank, I think we are going to give you the
last word. Please, and then I will turn to Senator Bingaman for
a question.
Mr. Burke. Thank you. I just want to dispute one notion I
think that has been laid here, that is, that IGCC or
gasification technology is the only pathway to CO2
control. I think it is a very important distinction because it
is at the heart of a lot of what we have heard, that we need to
replace these existing plants because they are incompatible
with the CO2-constrained future, which I do not
believe is true. There are technologies that can be used to
remove CO2 from flue gas at combustion sources. The
Department of Energy, as part of this road map that I am
talking about, has plans and projects underway to develop
CO2 capture technology for combustion sources and to
bring the cost of that down to the point where it would be
comparable to what we would expect with IGCC.
I think that has two benefits. First of all, it broadens
the scope of technologies or the portfolio of technologies that
we can allow the marketplace to choose in building new plants,
and secondly, it opens up the possibility for application of
these technologies to existing plants not only in this country
but throughout the world.
We may be able to replace much of our existing capacity
with IGCC over time in this country. But, quite frankly, the
Chinese are using 1.5 billion tons of coal a year now. They
expect to use 2 billion tons of coal a year by 2020. They
expect to use 4 billion tons of coal by 2040. They are not
building IGCC's. They are building combustion sources.
So a strong program to develop technology that deals with
all sources, combustion, as well as gasification sources, is
extremely important, I believe, if there are going to be carbon
constraints and we are going to deal with this in an
international fashion. It would have to be done if it is going
to be meaningful.
Thank you.
Senator Craig. Senator Bingaman.
Senator Bingaman. I was just going to ask either David or
John to comment as to whether the development of sequestration
and capture technology is sufficiently mature, whether or not
this is a constraint on our ability to meet the deadlines that
David just talked about, or if we can do a lot of these IGCC
plants and if we do not have a way to deal with the carbon,
have we solved the problem?
Mr. Hawkins. I will start, Senator. I have come to believe,
after studying this pretty intensively since 1997, that we do
have enough information to regard geologic storage as a safe
option. We have got some important experience.
We are, as you know, in your own State injecting
CO2 for enhanced oil recovery operations. Those
operations are not being monitored as adequately as we think we
need in a future system.
In Wyoming, we have the La Barge natural gas processing
plant which is separating CO2 out from the natural
gas there, pipelining it for enhanced oil recovery in Wyoming
and Colorado.
In North Dakota, we have a coal gasification plant which is
stripping out CO2 and pipelining it north to
Saskatchewan for injection into enhanced oil recovery
operations. That one is very well monitored, and the
CO2 is behaving as the experts say it will behave
underground.
In addition, we have experience under the seabed off the
coast of Norway that has been operating for 6 years and
injecting about 1 million tons of CO2 a year, very
carefully monitored, and the experience is proving out the
theory.
British Petroleum, BP, has started injecting CO2
into a large, new natural gas field in Algeria.
Chevron-Texaco has plans to do the same in Australia.
So we are accumulating experience monthly that is
dramatically increasing the likelihood that we can do this.
We think we should accelerate that. We think we should
initiate some programs without additional delay, but we are
confident that these storage systems will be ready when the
gasifiers are built.
Mr. Holdren. If I can add very briefly to that. As David
says, it is happening in a number of places around the world,
but at the same time, it is not mature, and that is why we in
the National Commission on Energy Policy recommended a
substantial infusion of funds to accelerate the development and
the demonstration of these approaches so that they will be
ready.
I hope Frank is right in his comments about the potential
advances in removing CO2 from flue gases. It will be
wonderful if those bear fruit. There are some rather
fundamental chemical engineering reasons that it is going to be
very difficult to make flue gas removal of carbon dioxide
economically competitive with what IGCC can do. We cannot go
into those here, but it is a great challenge. At the same time,
it would be a great thing if those results bear fruit and we
have more than one way to address the carbon dioxide emissions
of coal-burning powerplants.
I want to say one word about China. China is building a lot
of pulverized coal plants, but they are also building IGCC
plants. What the mix is going to be is under continuing review.
We, in my group at Harvard, have a cooperative project with the
Chinese Ministry of Science and Technology and with the Beijing
Clean Coal Technology Institute, and we think that there is a
very considerable chance, if the United States takes a forward-
leaning role on IGCC, that we will change the trajectory in
China as well and increase the chance that they too will build
more IGCC plants and fewer pulverized coal plants in the years
ahead.
Senator Craig. All right. We are going to give you the last
word, Jack.
Mr. Lavin. Sure. I think back to what Mr. Gerard said. I
think FutureGen is a key project that the Federal Government
needs to move forward on. They have delayed it. Talking about
partnerships, the State of Illinois is ready to invest tens of
millions of dollars in FutureGen along with private sector
companies, the Federal Government, if they can move this
forward, and the Department of Energy. It is a key thing. It is
sequestration. The State of Illinois is ready to move forward
tomorrow on this and we are doing pilot projects later this
spring on sequestration. Our State Geological Survey--we have
the infrastructure to do it in the State of Illinois, and I
think this is an important project. It relates to what
everybody is saying here, and we need to move forward with it
as soon as possible.
The Chairman. Thank you very much.
Senator Bunning, did you want to make any observations? The
amendment that is up now is the Talent amendment, if you have
not voted. Senator Allen, did you vote on that?
Senator Allen. Yes, sir.
The Chairman. So did I. So did you, Lamar. Senator Bunning
did also.
Senator Bunning. Mr. Chairman, since I am coming in in the
middle, I am going to just listen for a while and see where we
are. I know how important clean coal technology is because of
the bill that we had on the floor last year, and I want to see
to it that we do the best we can. I am also very interested in
FutureGen because it is very important to Kentucky and
surrounding States.
Thank you.
The Chairman. Thank you very much.
Senator Allen, did you already get to comment or would you
like to comment or ask questions now?
Senator Allen. No. My sentiments are exactly the same as
Senator Bunning's. It is good to see Consol here and thanks for
your investment in Virginia.
[Laughter.]
Senator Alexander. I would like to say the same. I regret
my absence because we were voting. No subject interests me more
right now. I know the same is true with other Senators here
because we have talked about it in trying to understand how the
Federal Government can properly encourage clean coal
technologies, especially coal gasification and eventual carbon
capture in an appropriate way. So I will read this and I intend
to listen, and I thank you for being here.
The Chairman. Well, I am going to close this and take the
next panel.
But I just want to make an observation for those who are
wondering about the next 25 years. It is pretty obvious that
America is not going to stop using electricity, and it is
equally obvious that we are going to find the energy to develop
electricity. For those who are interested in coal playing a
role in that expanded growth, it is quite obvious that we have
got to do something about the technology of cleanup because the
alternative is clearly going to be minimal growth of coal and
maximum growth of gas.
You might say which gas. Well it will not be American gas.
It will be LNG. That is already predicted by most people that
for all the energy coal proponents are exerting, that they will
not get there and that LNG will. There are already applications
for new terminals.
I am very hopeful that we will find some prudent way to
develop the standards or whatever regulatory process we are
going to have so that coal can develop the technology and the
cleanup in a regular way with the expenditure of dollars by
industry and Government in a manner that is understood and is
bound up in some kind of reliability and credibility. If not,
we will pass an energy bill with new protection for the grid,
new reliability standards, new push for investment in the grid
and in power, but in an energy bill we cannot solve the problem
of what happens to coal if we do not get some standards and
rules set up somewhere.
It is not our job. If they send it over to us--I am not
asking. They would not. That is another committee, but we would
work our way through it, but they have a tough time too. It is
9 to 9 in that committee, I think you know that. I hope they
can work something out.
But that is my analysis. I have seen the best we can have
and it will be some more coal. 12 years from now, 15, some new
nuclear powerplants. In any event, there will be some more coal
or some old coal will be going out, but you will not get the
maximum amount unless we do something in the area we have been
speaking of. I am quite certain of that.
Thank you all very much.
Senator Allen. Mr. Chairman?
The Chairman. Yes.
STATEMENT OF HON. GEORGE ALLEN, U.S. SENATOR
FROM VIRGINIA
Senator Allen. Mr. Chairman, let me, as a new member of
this committee, thank you for all your leadership the last
several years on this. It is very important issue from our
perspective. The chairman has been more patient than anybody
could tolerate in the last few years and just a few votes short
on this in the past.
Obviously, we are the Saudi Arabia of the world with coal.
Clean coal technology is absolutely essential. The liquefied
natural gas and natural gas production does need to increase,
but in my view that should be going into tire manufacturing
plants, being used in chemical, fertilizer manufacturing, paper
plants and not for electricity generation. It would be like
using this bottled water to wash your dishes in my view to be
using natural gas to generate electricity. It is a great fuel
and we need to be, as quickly as possible, going forward with
clean coal technology and nuclear, as well as getting the
repository issue decided on nuclear. That is where this country
will be competitive.
This energy bill, of all the bills that we are going to
deal with, will help create more jobs. It will be most
meaningful for the security of this country, and it also
ultimately affects the competitiveness of our country whether
one is a technology company, a manufacturer, no matter what.
So coal, Mr. Chairman, you are exactly right, has to be the
key. We are going to have the votes I know with your leadership
to drive to get this done this year, and you all will be a key
component of it.
I know that Senator Alexander agrees with me that we need
to be looking at new technologies so it is burning cleaner, but
also using that resource and do not use natural gas on
something such generating electricity when we have other better
ways of generating it.
Thank you, Mr. Chairman.
The Chairman. I am going to close by saying the one thing
we do not talk enough about--and I urge that you all do it. I
urge that you use the numbers too. Figure them out. Our balance
of trade--everybody is worrying about it--is dramatically
affected by the fact that we import so much energy. A million
barrels of oil a day imported per day per year is $18 billion
added to our balance of trade. That is pretty good. Conversely,
if you save it, you diminish the value of the balance of trade
by $18 billion. The same will be for LNG. It is the same thing.
You import it. The money is gone. The balance of trade is
affected. So those who say it is not very big economic issue,
it is a pretty big one.
We thank you very, very much. Now we will take a 2-minute
break while we switch, and thank you all again.
[Pause.]
The Chairman. Mr. Hawkins, we thank you because you are the
only major environmental group that responded. So we are giving
you double duty. Is that all right?
Mr. Hawkins. That is fine with me, Senator.
The Chairman. I am not critical of anybody. I am just
stating the truth.
Let us start on this side. Could you tell us what does
Clean Energy Systems mean?
Mr. Pronske. Clean Energy Systems is a company in
California that believes that you can make power without
pollution from fossil fuels.
The Chairman. And how do you say your last name?
Mr. Pronske. Pronske.
The Chairman. All right. Mr. Pronske would you proceed
under the rules. They are the same rules now as we have had.
STATEMENT OF KEITH PRONSKE, CLEAN ENERGY SYSTEMS
Mr. Pronske. Yes, sir. Thank you, Mr. Chairman and members
of the committee.
To the question at hand, we believe the primary challenge
to the future use of coal is the need to eliminate all of the
adverse environmental impacts from coal combustion. We know how
to clean up coal, but with today's technology, the cost of
cleanup is simply too high.
To meet this challenge, our company and others are
developing technologies that will lead to cost-competitive coal
plants with no atmospheric emissions. The future coal plant
will not have a smoke stack. It will have coal and air going in
and it will have electricity, captured carbon dioxide, and
other useful byproducts coming out. But to achieve this goal,
there is a need for short-term support for what is known as
climate-neutral combustion technology, or zero emissions fossil
fuel.
The regulatory challenge is that today in the United States
there are no regulatory incentives for zero emissions fossil
fuel. Other countries do provide this support and we should
follow their lead.
We have made two specific proposals to this end. We suggest
an expansion of tax credits to clean energy, as well as
renewable energy, and we believe any discussion of portfolio
standards should address clean energy such as zero emissions
coal plants, as well as renewable energy.
In California, we now operate the world's cleanest natural
gas-fired powerplant. Our goal is to have zero emissions from
this plant by the end of this year.
The Chairman. How big is that plant?
Mr. Pronske. It is a 5 megawatt plant that we started up
actually in December and started making electricity just last
week. Our goal is to have that be a zero emissions powerplant
by the end of this year, and collectively, we can do the same
with powerplants fueled with coal.
Thank you.
The Chairman. I know you have got a long way to go with
that technology. What is the estimated cost?
Mr. Pronske. Where we are at today and the dilemma that we
have is that anytime you deploy a new technology, it is not
going to be the cheapest unit. So today we can make zero
emission fossil fuel at about the cost of wind power, certainly
lower than solar. Where we want it to go, though, our goal, is
coal plants without smoke stacks with the cost of electricity
below 4 cents a kilowatt hour. And we think we could have a
coal plant going in a 3- to 5-year time frame at our small
demonstration facility.
The Chairman. Very good.
Let us proceed to Columbia University, Klaus Lackner.
STATEMENT OF KLAUS LACKNER, COLUMBIA UNIVERSITY
Mr. Lackner. Thank you, Mr. Chairman. Thank you, members of
the committee, for this opportunity. I am Klaus Lackner at
Columbia University. I am also a longtime scientist.
Coal in the United States is exceedingly plentiful and
cheap. Coal produces most of the electricity and coal could, if
called upon, replace oil and gas at prices which in my mind
surprisingly are not that different from today's.
Unfortunately, environmental concerns will limit the use of
coal unless steps are taken to overcome this problem. The most
difficult challenge is carbon dioxide. Stabilizing
CO2 in the air is tantamount to stopping emissions
regardless of the stabilization level we aim for. So you may
buy some time but not much, depending on what the level is.
Coal powerplants must capture and dispose of their
CO2.
The good news in my mind is that technology solutions exist
and better ones are on the drawing boards. The Zero Emission
Coal Alliance some years ago had the first sketch of a
powerplant that put a lid on the stack, collected all of the
CO2, and showed how you can get to extremely high
efficiency. Not quite that much efficiency you can have today.
So these solutions exist. The CO2 you have you can
put underground in enhanced oil recovery and after that inject
into deep underground reservoirs. Ultimately you can bind that
carbon dioxide chemically in minerals, what I refer to as
minerals sequestration. That technology, not quite ready for
prime time, would give you unlimited supply and capacity to put
the CO2 away.
Finally, in the end coal would compete well in a world with
strong carbon constraints. It would not do so well in a climate
of uncertainty and with vague limits. Coal and the environment
need not to be in collision. What it will take is a vision that
understands the size of the challenge, putting a price on
carbon, starting sequestration soon, and provide a climate that
fosters innovation and research. After all, we are inventing a
brand new technology of carbon management.
And I thank you for your time.
The Chairman. Thank you very much.
Now we are going to go to FMEA. Bob Koppelmann.
Mr. Koppelmann. Koppelmann, yes.
The Chairman. Please tell us what are you, FMEA?
Mr. Koppelmann. Yes. That is the Florida Municipal Electric
Association.
The Chairman. Okay.
STATEMENT OF BOB KOPPELMANN, FLORIDA MUNICIPAL ELECTRIC
ASSOCIATION
Mr. Koppelmann. Chairman Domenici and members of the
committee, thank you for the opportunity to give us a chance to
provide our thoughts on the challenges facing future use of
coal.
FMEA utilities provide electric service to 2.8 million
Floridians, with 60 percent of our energy coming from clean
coal generation. We wish to highlight three issues today.
A major barrier to maintaining coal as a key component of
our energy mix is basing air quality standards for coal-fired
generation on the environmental performance of natural gas.
These energy-neutral standards penalize coal to the point of
forcing fuel switching to natural gas and constitutes a major
challenge to building new coal-fired plants.
Second, the Department of the Interior's Federal land
managers have developed visibility assessment criteria that are
so stringent that proposed new coal-fired plants, locating
within 100 to 200 kilometers of a class 1 area, are not able to
pass the visibility criteria, even after employing best
available control technology, inhibiting the construction of
even natural gas plants, and in the West, they are holding up
permitting for oil and gas drilling. These criteria should be
reviewed and revised to reflect the 50 to 70 percent emission
reductions that will occur due to the adoption of the CARE
rule.
Our final point is the need to involve multi agencies in
assessing both environmental and health effects research,
bringing valuable and differing perspectives to answering
critical environmental questions. For example, for 10 years,
EPA has focused on the size and quantity of particles and not
the chemical composition. The Department of Energy saw a hole
in this research and has funded PM Speciation Research at their
national energy technology laboratory. The OMB has indicated in
the 2006 budget that they will cut the research in this area.
We believe this is exactly the wrong the answer, and we believe
that DOE must be involved in speciation and mercury research.
In conclusion, I would like to emphasize that the
environmental standards for coal-fired generation must be based
on the best performance possible by coal-fired generation and
not that of gas-fired generation.
Thank you.
The Chairman. Thank you very much.
Bret Clayton, nice to have you here.
STATEMENT OF BRET CLAYTON, PRESIDENT AND CEO, KENNECOTT ENERGY
Mr. Clayton. Nice to be here. Thank you for inviting me Mr.
Chairman. I am Bret Clayton, president and CEO of Kennecott
Energy. Kennecott Energy is one of the largest coal producers
in the United States. We have operations in Colorado, Montana,
as well as we are headquartered and have operations in Wyoming.
Last year we produced about 130 million tons of coal that was
converted into approximately 6 percent of the Nation's
electricity supply.
Today I would like to focus my comments on the development
of technologies, technologies that will support the continued
improvement in the environmental performance of coal, and
thereby ensure coal as a long-term secure and affordable energy
source as part of a diverse portfolio of energy sources.
If the United States is to maximize its extensive coal
reserves, continued environmental performance improvement will
be required, and we believe that these efforts will need to be
expanded to include cuts in CO2 emissions.
In the short term, however, we believe the United States
needs to focus on continuing improvement in conventional
pollutants. We believe that reforming the Clean Air Act is an
important part of that and that this will help accomplish more
rapid and in a more cost effective manner these emissions
reductions in existing law. Kennecott Energy also believes that
market-based mechanisms like trade and cap programs are the
best and most effective ways to reduce emissions.
However, our long-term efforts need to focus on near-zero
emissions technologies. Although these efforts will not be felt
immediately, we believe that action is required now and that we
cannot delay any longer taking action or these technologies
will not be available when they are required.
Carbon capture and storage is an important one that has
been identified. I think we are all familiar with that and its
aspects, so I will not go into the details.
But we believe that a good example of the partnerships that
we need to put together, FutureGen is one of them, and
Kennecott Energy is a founding member of the FutureGen Alliance
and supports the President's proposed budget that fully funds
this program.
While FutureGen is a good project and worthwhile on its
own, we do not believe it is enough. The ultimate viability of
this technology will require many more large scale
demonstrations, and we believe that it is, therefore, essential
that the DOE act in a leading role not only domestically but in
international forums in pushing this forward. Public acceptance
of this technology should not be--this is an issue that I think
we should not dismiss as it is going to be a big issue that we
will have to make sure that we have the public----
The Chairman. Will you take your last two sentences and
state them over again?
Mr. Clayton. Yes. FutureGen is an important project, but in
itself it is not enough. We need to make sure that we have
multiple large-scale demonstrations that will help overcome
public issues that the public might have with this technology
and demonstrate the viability and the long-term nature and
safety of carbon capture and storage. We think that this needs
to be done not only domestically, but needs to be an
international effort to do so.
I think my time is up. I will just say there are many ways
to do this but we believe that action needs to be started now
in order to address these issues in an appropriate time frame.
The Chairman. All right.
Now, you are both technical experts here to help us. Is
that correct?
Mr. Craynon. That is correct, Mr. Chairman.
The Chairman. So far we have not asked you. So if you will
just sit there, maybe we will.
We are coming over here now to IMCC, Greg Conrad.
STATEMENT OF GREG CONRAD, ON BEHALF OF THE INTERSTATE MINING
COMPACT COMMISSION AND THE NATIONAL ASSOCIATION OF ABANDONED
MINE LAND PROGRAMS
Mr. Conrad. Thank you, Mr. Chairman. I am here representing
the Interstate Mining Compact Commission and the National
Association of Abandoned Mine Land Programs. Together these two
organizations represent all of the States who exercise primary
regulatory authority for coal mining operations within their
borders under the Surface Mining Control and Reclamation Act.
As we focus on the future of coal and the role it will play
in our Nation's overall energy picture, the States continue our
efforts to address the impacts from both current and future
coal operations on the environment and on public health and
safety. In this regard, we strive to operate high quality,
comprehensive programs that will ensure that we achieve the
necessary balance between our need for coal as a critical
energy resource and the protection of the environment.
We also remain focused on the legacy of past coal mining
operations and the impact of abandoned and inactive mines on
the health and safety of our citizens. We are advocating, for
your serious consideration, two proposals that address these
matters: one, the reauthorization of the authority to collect
fees from coal operators that support the Abandoned Mine Land
Reclamation Fund and adequate funding for State regulatory
programs. As you know, authority to collect fees under title IV
of SMCRA will expire on June 30 of this year, and so we are
under the gun to resolve this critical issue so that the
thousands of high priority AML sites that threaten coalfield
citizens will be remediated. We urge the committee and the
Congress to work again with us to accomplish this legislative
priority.
As we consider the potential for increased coal production
and use, I want to highlight the importance of adequate annual
funding for State regulatory programs. It is these programs
that address the environmental impacts associated with coal
production through permit approval and effective inspection and
enforcement. When we commit the resources necessary to support
strong and effective State programs, we can achieve the balance
we desire between developing our Nation's most abundant energy
resource while protecting our citizens and the environment.
Thank you.
The Chairman. Thank you very much.
I am very sorry. I missed what IMCC is. I apologize.
Mr. Conrad. It is a State government organization
representing the agencies that regulate the mining industry.
The Chairman. Thank you very much.
Mr. Habicht.
STATEMENT OF HANK HABICHT, COMMISSIONER, NATIONAL COMMISSION ON
ENERGY POLICY
Mr. Habicht. Thank you, Mr. Chairman, Senators. I am Hank
Habicht and I am appearing today as a commissioner of the
National Commission on Energy Policy.
The commission conducted thousands of pages of studies and
analyses over the last 3 years focusing on the economic,
security, and environmental challenges across our entire energy
system. Among many conclusions, we concluded that coal has been
and must continue to be an important component of our national
energy system going forward.
Now, on the environmental issues, coal does face three
categories we found of environmental challenges. First are the
conventional air pollutants that come from combustion. Second,
the upstream impacts we just heard a bit about on land and
ecosystems from coal mining practices, and then third, carbon
emissions from coal.
We addressed these in turn. After a lot of analysis, a lot
of debate, a lot of back and forth, we came up with a
comprehensive set of recommendations looking across the energy
system.
With regard to coal, we concluded that all these
environmental issues are addressable through the kind of
technologies, management practices, and market-based trading
systems that we have experience with in this country and that
can be implemented, including a market-based carbon emission
permit system that Professor Holdren described in the last
panel.
I would add that we spent a lot of time also understanding
an issue that was talked about in the first panel, which is the
critical need for certainty for investment. These are long-term
investments and we need as much regulatory certainty as
possible to stimulate investment.
Just briefly, with regard to conventional pollutants, we
strongly concluded that there is a need for legislation that
provides for multi-pollutant controls and a firm, predictable
schedule of emission reductions consistent with the
environmental requirements and system reliability and also that
uses market-based approaches. So that is conventional
pollutants.
With regard to upstream impacts, we commissioned a number
of studies, and I have had some experience on the enforcement
side of this area over the years. We believe that those impacts
can be addressed and are in the process of being addressed.
Third, with regard to carbon impacts of coal, we have heard
a bit about a number of different ways to address this. We
believe that a phased intensity-based carbon emission permit
system can address this issue if it is coupled with a
reasonably aggressive public/private investment program we
believe. And we recommend a public investment in 10 gigawatts
of early installation of IGCC capacity and a comparable amount
of investment in carbon capture and sequestration technology.
Very important. And our recommendations are revenue-neutral
which we can get into.
But just in the interest of time, I would say that we have
experience with national market-based trading programs. We
believe that the market signals and the time frames of this
trading program can stimulate the kind of investment on the
time frames we need in IGCC and sequestration on their own
tracks but on coordinated tracks because IGCC that is carbon-
capture-ready is a way to move forward with this technology. We
believe that by moving forward in this way, coal can continue
to play a very important role in our energy future.
Thank you for you time.
The Chairman. Thank you very much.
Now, Mr. Hawkins.
STATEMENT OF DAVID HAWKINS, NATURAL RESOURCES DEFENSE COUNCIL
Mr. Hawkins. Thank you, Mr. Chairman.
Coal has many impacts on the environment. I will
concentrate on global warming.
Global warming is a different kind of problem, first,
because of the tremendous damage that destabilizing the climate
will produce, and second, because the threat increases the
longer we continue to emit CO2 even at current
levels. Two features of global warming require action now, as
Bret Clayton has said.
First, CO2, once emitted, stays in the air for
more than 100 years. So each year's added emissions increase
the amount of global warming.
Second, the largest CO2 emission sources have
very long lives. New coal plants are likely to operate for 60
years or more, and with today's designs, those plants are
likely to emit large amounts of CO2 for their entire
lives which will lock us into additional global warming. Let me
give you just some detail.
The coal plants that are forecasted to be built around the
next 25 years will have cumulative CO2 emissions of
over 550 billion tons. That is a staggering number. That is
half the total amount of total CO2 that has been
emitted from all energy combustion since the beginning of the
Industrial Revolution 250 years ago. And we are going to commit
ourselves to that additional loading with investments that are
on the drawing boards in the next 25 years globally.
As Klaus Lackner said, we cannot secure a stable climate
and use coal unless coal's CO2 is captured. So we
should start now to deploy coal plants that can capture
CO2 for safe geologic storage.
If the United States takes the lead on this, it will speed
the day that all countries use this technology. That is
essential regardless of what we later decide is a safe target
for greenhouse gas concentrations.
So a new law that combines a schedule for binding limits on
CO2 with substantial financial incentives for
deployment of coal plants with CO2 capture will
provide multiple benefits. It will pave the way for a safe
climate. It will provide for more secure energy supplies, as
the chairman has noted, and it will create new global markets
for American businesses. We should not put off this smart
investment any longer.
Thank you.
The Chairman. Thank you very much.
Now, Sara Kendall from the Western Organization of Resource
Councils.
STATEMENT OF SARA KENDALL, DIRECTOR, WESTERN ORGANIZATION OF
RESOURCE COUNCILS
Ms. Kendall. Thank you. I am the Washington, D.C. Director
for WORC. WORC has worked for over 30 years to protect our
members and others who live near coal mines and powerplants
from the impacts these facilities have on public health, air,
land, and water.
As the Nation looks increasingly to coal to feed its
appetite for inexpensive power, we think one must ask how
inexpensive is coal really. Coal loses some of its luster when
its full costs are considered.
There are five challenges that we believe must be addressed
to ensure that the true costs of coal mining and power
generation are not passed off onto people and the environment.
First, we urge the committee to aggressively address the
emissions issues being discussed, but until we have proven
technology for zero emission coal plants, we believe that we
are better off meeting our need for additional power through
efficiency and renewables when and wherever possible rather
than building over 100 new coal-fired powerplants across the
country as is currently proposed.
Secondly, we urgently need to clean up abandoned coal mine
sites and cannot afford to interrupt, underfund, or end the
abandoned mine land reclamation program.
Third, we are concerned that the amount of mined land that
has been reclaimed but is still under bond is growing each
year. We believe that Congress should make it a priority to
ensure that mined land is not only reclaimed in a timely
fashion but that companies apply for final bond release,
thereby demonstrating to the public that they have returned
agricultural lands to productivity and also replaced water
supplies affected by mining.
Fourth, we believe that continued public funding for clean
coal technologies should be reconsidered, especially at this
time of budget shortfalls and given DOE's program has been
plagued by numerous failed attempts to build clean coal plants
and also that waste and mismanagement have been documented
repeatedly in the program.
And then finally, last year's energy bill would have
removed important protections that encourage a fair return to
taxpayers for the use of the public's coal and also ensure
diligent development of that coal. We recognize that some of
the coal leasing program's provisions may deserve review and we
are willing to work with the committee on appropriate updates,
but we urge you not to make the sweeping changes of the sort
that were in last year's bill.
Thank you.
The Chairman. Thank you very much.
Now, we have one more panel. It looks like we are going to
be okay for those who have budget votes because we are off till
5:15. That does not mean Senator Bingaman and Senator Thomas
have time. We have till 5:15 at least for those on the budget.
Well, when the floor happens, it will happen.
Senator Bingaman, would you like to proceed first?
Senator Bingaman. Sure. Thank you very much, Mr. Chairman.
Thank you all for your testimony.
Mr. Habicht, let me ask you a question on your National
Commission on Energy Policy. Your proposal, as I understand it,
contains this safety valve so that the cost to industry of
complying with the caps that you are talking about is somewhat
limited in that you can buy credits. Could you explain to us
how that would work and how you see that as an improvement on
the other types of proposals that have been put forward to deal
with the carbon issue?
Mr. Habicht. Certainly, Senator, I will be happy to.
We spent a lot of time looking at a range of options in
dealing with the carbon issue. We recognize that there is a lot
of very strong and deep-seated concern about moving to a
mandatory trading system, and we took that very seriously.
At the same time, we looked at the evidence with regard to
climate change, with what is happening around the world and
just concluded that from a risk management standpoint, it was
important for the country, particularly with our ability to
implement market-based trading systems, to move into a trading-
based system to provide for certainty and predictability.
But because of the concerns about economic impacts, as well
as international competitive impacts, we integrated into this
proposal a number of features that we thought both created a
time frame and a sense of predictability with regard to
impacts, as well as safety valves, so that the impacts would
not be unduly dire for the economy.
Having said that, we undertook an intensity-based approach,
looking for 2.4 percent reductions in intensity each year over
a 10-year period. The $7 per metric ton of carbon safety valve
was that in case the cost of control exceeds $7 a ton, at least
in this initial period, that the Government would purchase
emission credits for $7 a ton to offset any reductions that
would have cost more than that.
We also have a provision that every 5 years, we recommend
that the Congress would look at what other countries around the
world are doing, including the countries that have not signed
Kyoto, the large, developing countries, to determine are other
countries undertaking significant commitments with regard to
carbon. If in fact that is not the case, then we would
recommend that the country reexamine our carbon strategy
because there needs to be parallel action around the world.
But basically in a nutshell--and I can certainly go into it
more, but in the interest of time--the idea was to have a
phased program that would slow and ultimately reduce emissions
growth in a way that should not cause concern about economic
impacts and would not have an undue impact on retirement of
existing capacity. Under this proposal, actually coal
consumption increases by some 16 percent by 2020.
Senator Bingaman. Let me just also ask David Hawkins if he
would comment on this set of recommendations by this National
Commission on Energy Policy. Do you think this would be a step
forward, or do you think that we would be better off not
proceeding this way?
Mr. Hawkins. We applaud the commission's recommendation for
a mandatory limit on emissions. We think that is critical and
we agree with their view that the sooner we get this started,
the sooner we get established, the better off we will be.
We do have some concerns about the safety valve,
particularly the impact on technology innovation. Let me
explain very briefly. If you are an entrepreneur and you have a
technology that you think is close to the safety valve, in
terms of its price, but you are not absolutely certain you can
meet it, you may decide not to pursue that technology unless
you are clear that you can meet it because if you can meet it,
you have a market, and if you cannot meet it, if you are just
10 percent over the safety valve, you do not have a market. So
you may drop things and it may deter technology innovation.
So we would prefer to see a different way of addressing the
price concerns. We think there are lots of ones to explore and
we would like to work on that. But we do agree with the
commission's recommendation that the time has arrived for a
binding limit.
Senator Bingaman. Thank you, Mr. Chairman.
The Chairman. I am going to yield, but I just wanted to ask
Mr. Hawkins. You mentioned how much new carbon dioxide is going
to be added over the next whatever years. How many did you say?
50?
Mr. Hawkins. Between now and 2030, Senator, 25 years.
The Chairman. How much did you say?
Mr. Hawkins. Globally it is 550 billion tons of
CO2 from new coal capacity.
The Chairman. How much of that is American?
Mr. Hawkins. The American capacity is, forecast by EIA, to
be about 100,000 megawatts out of a total of 1,400 megawatts.
So about 8 percent.
The Chairman. So 8 percent of that 550 billion is American.
Mr. Hawkins. That is correct.
The Chairman. So even if America did its job, 95 percent
would not.
Mr. Hawkins. The fact that the rest of the world is
exploding with coal is precisely the reason why it is so
important for America to lead. Senator Domenici, as one of the
authors of the Clean Air Act, you know what has worked. We
adopted tight auto emission standards in 1970. China is
following. We took lead out of gasoline in the 1970's. China is
following. We required scrubbers to go on powerplants. China is
putting scrubbers on powerplants now. If we lead the way, we
will get other countries to get there faster, and it is
critical that we do that because other countries are growing
more rapidly than we are in terms of emissions.
The Chairman. Well, I agree wholeheartedly, unless in
getting there, by doing it ourselves, waiting for them to catch
up, we face an inordinate economic burden on ourselves. Of
course, that is what the contention is. You and your people do
not believe it, but those on the other side do believe it, that
it will cause this extraordinary burden.
Let me ask one further one on technology development, of
you, Hank. I have trouble with your last name. Tell me your
last name again.
Mr. Habicht. It is Habicht. I have heard it pronounced
1,000 different ways. Do not worry.
The Chairman. Just like a bad habit?
Mr. Habicht. Yes, a good one.
[Laughter.]
The Chairman. Did you say that you thought you wanted to
pursue development of the new technology all the way to zero
because entrepreneurs might stop short of it, or was that Mr.
Hawkins who said that? That was not you?
Mr. Habicht. No, that was not.
The Chairman. Okay, well, that is Mr. Hawkins again. I do
not think that is right. I think that is right if in fact you
are not going to place an inordinate economic burden on getting
there in order to get a small group of entrepreneurs to do a
little, tiny bit. It seems to me you do not have to set the
standard at the ultimate to get tremendous innovation by way of
change. I would like you to address that because that sounds
more rational to me.
Mr. Hawkins. Certainly, Mr. Chairman. I was not arguing
that we should set the emission limits at zero. The emission
limits need to be gradual, and if we start now, they can be
gradual.
I was suggesting that an arbitrary safety valve, especially
one set at a low level, may deter technology innovation. For
example, the commission's proposal of $7 a ton of
CO2 is actually below the level that some power
companies are using in their business planning today. Pacific
Corp. is using $8 a ton of CO2 for making resource
selections. Idaho Power is using $12 a ton of CO2
for making resource selections. So it is very easy to get that
number wrong and it is very easy to set it so low that it does
not stimulate technology innovation. So we are not arguing
against considerations of cost. We are just saying that we can
find more sophisticated ways of doing it.
The Chairman. You will acknowledge too that in the quest
for technology, we have made some mistakes in using best
available control technology as a definition in other laws,
because when you get to a point where you do not need it any
better, best available control technology says you can even do
better than the best. And then you have to go out and do it.
That has put a big burden in some of the areas of cleanup. Now,
that does not apply directly but it has a little bit----
Mr. Hawkins. I would just say, Mr. Chairman, that today EPA
issued a rule for cleaning up sulfur and nitrogen in the
Eastern United States. It is using technology that was produced
by the best available control technology program.
The Chairman. Right. I understand.
Dr. Lackner, let me say you wanted to speak to this issue.
I just want to ask you, before you talk, in your opinion, if we
had enough resources and put the right people in charge of a
couple of demonstration programs that are large enough, how
long would it take and how much money would it take to get to
that point where we had coal cleanup that was whatever you want
to set as a standard, zero clean, or whatever that very
wonderful standard is.
Mr. Lackner. Let me start out saying you cannot start with
a zero emission limit. You have to phase things in in some way
gradually, and putting a price on carbon would precisely do
that. So I am in full agreement with this approach.
If you ask me, can you build technology, could new
powerplants be built today which collect all of the
CO2 or nearly all of the CO2, the answer
is yes. If you go to Scandinavia, people there talk zero. There
are people talking about powerplants which run on oxygen,
collect their own CO2 to dilute that oxygen, and
then have a concentrated stream, and nearly all of that
CO2, maybe 90 percent of it, is collected. So the
technology to do that in simple forms exists. What you hear
over here can, in principle, do that. The IGCC plants can, in
principle, do that.
Now, today this will cost money. And the longer we do that
and the more experience we get, the cheaper it will get. So we
need to find a way of distributing these costs, and it will not
be cheap.
If you think about it for a moment, a single gigawatt
powerplant is a billion dollar investment to begin with. And
you probably have to do this multiple times before you really
get that right. So this is a decade of effort which gradually
will get better. On the other hand, we do not have that much
time to waste, and therefore we need to get going. I see the
price as one elegant way of putting the economic incentive in
it.
And do not forget, at the end of the day, the by far
cheapest solution is to ignore the problem. So as a result,
unless there is an economic incentive or a regulatory demand
which says you must deal with this problem up to some level,
you cannot avoid dealing with it.
The Chairman. Anybody else up here? Yes, please, Senator
Bunning.
Senator Bunning. Thank you.
I would like to ask is it Bret Clayton?
Mr. Clayton. Yes.
Senator Bunning. Kennecott, 6 percent of all the power in
the United States, coal-fired power?
Mr. Clayton. Electricity, 6 percent of the electricity.
Senator Bunning. That is all done with Wyoming coal?
Mr. Clayton. A little bit of Colorado and a little bit of
Montana.
Senator Bunning. How many dollars do you think it would
take to get beyond where we are now and to do what Klaus just
suggested? How many dollars?
Mr. Clayton. I guess that is a very hard question to
answer. What I would say is I heard in testimony earlier today
that passage of Clear Skies would have brought in about $50
billion of investment over a period of time to achieve those
reductions. So I mean, to achieve what we are talking about, we
are talking about industry investment not of billions but tens
of billions. And to get to zero emissions, including capture
and storage, you are probably talking 100.
Senator Bunning. $100 billion.
Mr. Clayton. But that is why it is so important as we
spoke--I think your earlier panel as well spoke about clarity,
clarity of regulation. These are plants that get on the
planning board, they do not get built for 10 years, and then
they operate for 50 or 60 years. For industry to make
investments of tens and hundreds of billions of dollars, we
need certainty to know how we are going to make a return on
that. And the longer and longer we put that certainty off, in
our view we lose time in pushing technologies forward and in
developing them that will allow us to actually address these
issues.
Senator Bunning. We are really familiar with that in
dealing with refineries and nuclear power. Once they start the
planning for one of those things, the agencies that control the
regulations and rules alter as they go down the path. I can
just speak of experience of one nuclear powerplant that was
being built outside of Cincinnati, Ohio, and by the time they
got ready to open the plant, they audited it and said it was
not going to work. It had spent $3.5 billion building the
plant, and they converted it to coal-fired generation.
We have to have certainty before private industry is going
to make the investments that are necessary, but in the coal and
energy program that was in the Congress last year, we had
approximately $4 billion either in direct subsidy or tax
credits. Now, that is a start.
Mr. Clayton. And I would say those are the types of levels
that we need to be funding to move these along.
And we need to be sure we are encouraging other
governments. We have a sister company in Australia that is
working very hard in that area of the world to make sure that
we are not the only government and only Nation funding this.
This is an international problem and requires an
international----
Senator Bunning. Everybody over here on this side of the
fence--both sides--knows that we have not built a refinery in
over 25 to 30 years and the reasons we have not done it. The
same thing with nuclear power. And we have to have the same
certification and positive attitude when we are going to do
clean coal and clean coal technologies so that we can get past
the emissions levels that are necessary.
Mr. Clayton. I guess that is why I would say we would
prefer to see this done legislatively rather than rulemaking
because it provides greater clarity.
Senator Bunning. Well, if somebody can read the legislation
correctly, then the rules come out pretty well. Usually we have
a lot of people making the rules that do not read the
legislation too correctly.
The Chairman. Sometimes we write the legislation so fuzzy
that they cannot help doing that.
Senator Bunning. That is absolutely true, Pete.
The Chairman. Senator Alexander.
Senator Alexander. I want to follow up Mr. Habicht's
comment. I am interested specifically in what we ought to do
here. What can Congress appropriately do that is based on good
science and making the minimum interference with the
marketplace to encourage these objectives which there is a
broad consensus about. We are all tantalized really by these
prospects, but we do not want to be clumsy about it.
You suggested if I understand, 10 gigawatts of IGCC and
then whatever was spent on that, spend about the same on carbon
recapture. That is 10,000 megawatts. That is four or five, six
plants. Was that what that would be? And to do what? To provide
some sort of floor or safety valve? Exactly what would we do to
encourage the creation of 10 gigawatts worth of IGCC?
Mr. Habicht. It is a great question, Senator. And to
Senator Bunning's point, what we see--and the challenge in
policy making, when you have a technology like IGCC--and we are
not saying that IGCC is the only way to get to clean coal, but
it certainly is one that has progressed to the point where we
see its promise. We see that there are some costs and other
issues that are keeping it kind of in the starting blocks.
So we looked at what kind of legislative clarity through
policy plus some Federal participation in getting demonstration
plants going would break the logjam and open the door to this
kind of investment. We thought the signals that would be sent
through--so it is a combined recommendation of some clarity
with regard to carbon in the economy and a trading system for
carbon, plus this demonstration program.
Senator Alexander. But you do not want the Government to
build plants.
Mr. Habicht. The Government would just provide loan
guarantees or some kind of investment----
Senator Alexander. Well, that is what I am getting to. How
much loan guarantee?
Mr. Habicht. Well, as little as possible, frankly, to move
it forward. The best way to do these programs is through a
competitive process where the private sector comes in and the
organization that has the best proposal for the least Federal
investment would move forward. The idea is just for enough
Federal investment to move some demonstration projects onto the
ground, into operation, have them carbon capture and
sequestration ready, and then also invest in the sequestration
side.
Senator Alexander. But the proper question for us is what
amount of Federal investment would it take to get 10,000
megawatts, 10 gigawatts, of IGCC up and going.
Mr. Habicht. Our estimate was that would be about $4
billion and $3 billion or so would be for the sequestration
research. This was based on a lot of analysis that we can
provide to the committee that we think would move the process
forward. There is always a question of how heavy a government
hand needs to be imposed on the marketplace to take a new
technology and get it through what is sometimes called the
valley of death into the marketplace. And we do not think that
very much is needed, as long as there is a clear set of signals
that really sort of show what the path forward over the next 15
years or so is with regard to policy and investment.
Senator Alexander. Thank you.
The Chairman. Well, we are in a real bind. The only way to
get out of it is to tell the two panels that have not appeared
yet that we are not going to be able to hear from you. We
apologize profusely, but we have seven votes on the Senate
floor starting shortly. The budget members who are here have
seven or eight votes starting about 2 minutes from now. So we
will do the best we can to use the information and we humbly
apologize. Maybe we should have tried fewer panels.
We want to thank Jeff Jarrett, Director of the Office of
Surface Mining. He is here and spent the afternoon to be our
helper.
I would just suggest to those who have such an interest in
setting these high standards, Mr. Hawkins, what happens is, if
you set them with that ideal notion that you have given us, so
that we will develop the technology for the world and in the
meantime we set it as stringent as possible, maybe approaching
zero, you do not get anything because the opposition has
economic evaluations that say how expensive it is, that they
cannot afford it. And they will win. What we need to do is find
some way to get where you want to get but to get there in a way
that we can show will be a reasonable cost economically.
What is reasonable to those who theoretically say it is
such a wonderful thing that we ought to do it, and do it for
the world, the answer is going to be what I just asked you. Are
you telling us that for 5 percent of the production of this
pollutant which America produces, we are going to take this
kind of economic gamble? I understand that it is not a gamble
totally. It is also some great leadership. Right? And maybe it
changes the world.
But I think therein lies the problem. You end up saying, as
an environmentalist, we want out of this game. You are not
going all the way, and we end up having to say, well, the
industry and the consumer is telling us that is going to be way
too expensive and we are not going to accomplish what you want.
So we need something in the middle. So I urge that we somehow
find out how to do this.
My last observation is I heard our President tell me the
other day to my ear, do not put anything in this energy bill
that gives any subsidies to the oil industry or the gas
industry because they make plenty of money these days. Now, I
know you people who think the President is something different
do not believe he said that, but he did. And we are looking at
the bill and saying, well, we better take out some of the stuff
the House put in. We do not want it.
But I have a feeling every industry that is involved today,
coal and otherwise, with the price going up like that, we ought
to find a way for the industry to pay for what we need. The
problem is, we do not know how to focus your money on projects
of this magnitude because you are 20 companies or 50. So you
look at us to do it. If we could find a way to make your money
come into a pot and we would match it and then get on with
these projects, we might have much more to sell. I do not know
how to do that yet.
We are going to reschedule you all, the people that we
could not hear from. Thank you very much. Thanks to all of you.
[Whereupon, at 4:25 p.m., the symposium was recessed, to be
reconvened on April 21, 2005.]
COAL CONFERENCE
----------
THURSDAY, APRIL 21, 2005
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The conference was convened at 3:09 p.m., in room SD-366,
Dirksen Senate Office Building, Hon. Lamar Alexander presiding.
OPENING STATEMENT OF HON. LAMAR ALEXANDER,
U.S. SENATOR FROM TENNESSEE
Senator Alexander. We thank you for coming. Many of you
were here before when, because of an uncertain Senate schedule,
we did not get everything done, and so we have invited you back
because of our interest in what you are doing.
Senator Bingaman is the ranking member of our full
committee and Senator Domenici has asked me to chair this. We
have, as is often the case in the U.S. Senate, we have a series
of votes that we will require us to leave at 4 o'clock. I am
not sure that we will be able to get back for another hour or
hour and a half after that because of a series of four votes.
So what I am going to try to do, with Senator Bingaman's
advice, is to get as much of the testimony of both panels in by
4 o'clock so that we do not keep you unnecessarily, which means
keeping the senatorial conversation abbreviated so that we can
hear as much of you as possible.
We were very pleased with what we heard before. We received
more than 50 submittals. The purpose of this is to continue our
discussion of the future of coal. We are doing that at a very
timely--at an important time, because not only is the price of
energy, including coal, going so high that it is threatening
our blue collar workers, our farmers, our homeowners, and our
standard of living--we are about to write up an energy bill in
the next few weeks that we hope will be aggressive on a number
of fronts and we need your best advice about how to do that.
You know the issues. I do not need to take more of the time
expressing them. The way we did before and the way I would ask
that we do today is that if you will give us your written
testimony, which most of you have, we will consider it. We
would like to start on the left when we start and ask each of
you to take 2 minutes, introduce yourself, say who you are.
Then Senator Bingaman and I will ask a few questions and then
we will invite the next panel to come up, so we can be sure and
get your written statement and your 2-minute statement in
before the votes start.
Let me thank you again for coming and being understanding
of the Senate schedule. Senator Bingaman.
STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR
FROM NEW MEXICO
Senator Bingaman. Mr. Chairman, I will defer to the
witnesses. I appreciate them being here and I appreciate you
chairing the continuation of this forum.
Senator Alexander. Thank you.
Why do we not start with you, Mr. Palmer, and we will go
right around.
STATEMENT OF FREDRICK PALMER, EXECUTIVE VICE PRESIDENT, LEGAL
AND EXTERNAL AFFAIRS, PEABODY ENERGY, ON BEHALF OF THE COAL-
BASED GENERATION STAKEHOLDERS GROUP
Mr. Palmer. Thank you, sir.
I am Fred Palmer of Peabody Energy. We are the world's
largest coal company. We control close to 10 billion tons of
coal on the North American continent and abroad and we do close
to--over 200 million tons of coal production a year.
It is an honor to appear before the committee and I am
appearing today on behalf of the Coal-Based Generators
Stakeholders Group. CBGS is a diverse group of investor-owned
utilities, rural electric coops, public power companies, coal
producers, coal-hauling railroads, and the associations that
represent them. Our member companies are represented at the CEO
level and it is co-chaired by Peabody Energy's CEO Earl
Engelhart and Duke Power CEO Ruth Shaw.
Coal is the fuel of the future. As demand for electricity
increases, electricity from coal will increase accordingly.
Full utilization of the existing coal fleet in the United
States will play a critical role in meeting our Nation's
electricity supply. Required new capacity will be built using a
suite of advanced technologies that range from advanced
pulverized coal to integrated gasification systems, resulting
in a continuing decline in emission of criteria pollutants even
as coal demand increases by some estimates up to 500 million
tons over the next 20 years.
CBGS has agreed on a vision for achieving ultra-low
emissions from coal-fueled electric generation and we have
submitted that document for the record, Mr. Chairman, and I
would ask that the committee give it careful consideration.
Imported natural gas for electricity generation is no
solution to America's obvious energy and electricity needs, as
the chair has identified. Liquefied natural gas is priced off
of imported oil and it is produced in many of the same areas of
the world. I have been doing this long enough to have been here
during Project Energy Independence and today it is eerie how
similar the circumstances are to the 1970's and 1980's. Dr. Jim
Schlesinger is on our board of directors, who was the first
Secretary of Energy.
We believe that the best solution is to focus on an ever-
increasing use of our vast coal reserves to generate
electricity cleanly and economically, and to do so we believe
we need passage of Clear Skies and an energy bill.
With respect to climate change policy, that does get a lot
of attention here and elsewhere, we believe that the
President's technology-based approach is sound and we believe
Future Gen needs to be fully funded. I also would like to
endorse the modified S. 388 introduced by Senator Hagel and
which the chair is co-sponsoring. We think that is a sound
approach and we identify with that.
Artificial restraints on CO2 emissions must be
avoided since a cap on carbon will chill the investment needed
in new coal-based generation. Proposals such as those advanced
by the National Energy Policy Commission, McCain-Lieberman, or
Carper-Jeffords are the wrong path in our view for our country
to follow. We need an energy bill that encourages energy
supply. An energy bill containing carbon taxes or caps, whether
hard, soft, or virtual, will be an energy rationing bill, not a
supply bill, causing even greater increases in the----
Senator Alexander. Mr. Palmer, we are well over the 2
minutes.
Mr. Palmer [continuing]. In the cost of natural gas, oil,
and gasoline, and a reduced quality of life for the American
people.
Thank you, sir.
Senator Alexander. Thank you very much.
We are interested in everything you think you have to say
and we will read carefully your comments. But so that everybody
will have a chance to say their piece, if you will maybe give
us your major points. We have a little clock over there that
will ring after 2 minutes.
Mr. Yamagata.
STATEMENT OF BEN YAMAGATA, EXECUTIVE DIRECTOR,
COAL UTILIZATION RESEARCH COUNCIL
Mr. Yamagata. Mr. Chairman, members of the committee, thank
you for having me here.
Four years ago, the Electric Power Research Institute, the
Department of Energy, and the Coal Utilization Research Council
agreed upon goals and objectives for clean coal technology
development that are embodied in the Clean Coal Technology Road
Map. If we follow the goals and objectives of the road map, by
the year 2020 we expect to have a series of options available
to the Nation that produce very clean energy from coal in a
very cost effective and efficient manner, and we recommend and
commend the road map to you as you are looking at and divining
a new clean coal--rather, a new energy bill.
I have two points that I would like to make to you today.
First of all, if you look at technology development, the curve
for technology development is very simple. There is a research
and development phase, there is a demonstration phase, and
really there is a deployment phase. That phase of deployment is
very important because it moves technology from demonstration
to first of a kind into the marketplace, and it is necessary to
have several of those types of projects available so that we
can reduce costs and the risks of the technologies in bringing
them into the marketplace.
Importantly, in the conference report that the Congress
nearly adopted 2 years, the research and development program in
H.R. 6, that was embodied in H.R. 6, is the type of research
program that we believe is important for you to have in your
next bill.
Second, with respect to the demonstration program, also
part of the technology development curve, that that actually
authorized the $2 billion clean coal power initiative that was
first recommended by President Bush, we believe that program
also should be embodied in a new bill as well.
With respect, however, to deployment, we have the notion
that you have to have a 10-year program with about the same
amount of tax incentives available for 10,000 megawatts of
power equally divided between gasification and combustion-based
systems. We applaud you, Mr. Chairman, for the work you are
already doing with respect to advanced coal gasification for
industrial and electric applications, and ask that when you
consider that you consider combustion as well.
Thank you.
Senator Alexander. Thank you very much.
Mr. Dalton.
STATEMENT OF STUART DALTON, DIRECTOR FOR GENERATION RESEARCH,
ELECTRIC POWER RESEARCH INSTITUTE
Mr. Dalton. Thank you, Mr. Chairman.
My name is Stuart Dalton. I am the director for generation
research at the Electric Power Research Institute. I would like
to make four points today based on our current research.
The first point is that, given the wide variety of coals in
the United States, multiple technologies will be needed to use
our coal efficiently and to reduce emissions to near zero. The
technologies include several types of coal gasification as well
as combustion options. Large-scale regional testing of
CO2 storage is needed as well.
The second point: EPRI has started a new collaborative
program called Coal Fleet for Tomorrow, with over 40
participants now--better than the last time I was here, so I am
glad to report that--representing more than half of all the
coal-fired generation in the United States, plus many of the
manufacturers, plus a few international participants as well.
The key objectives are to reduce costs and accelerate the
commercial use of advanced coal technologies.
Electricity from our initial integrated gasification
combined cycle plants in the United States will cost more, even
without CO2 capture, we believe 15 to 20 percent
more, than conventional coal. That is when those conventional
coal include SO2 and NOX controls.
Additional experience with full-scale IGCC plants will bring
the costs down through the learning curve and reduce or
eliminate this cost differential.
Fourth point: Incentives will be needed in our opinion to
deploy these initial IGCC plants in order to overcome higher
capital costs and the technology risks. Initial incentives
might provide a different value to different companies,
different types of companies. For example, loan guarantees
provide significant benefits to independent power producers who
have secured power purchase agreements, but little or no
benefit to others. A tax credit could provide significant value
to companies with tax liability, none to public or cooperative
entities. And the new concept of availability insurance may
provide carefully targeted value to all company types, but
requires more refinement.
We found no single incentive was able to close the gap
fully. However, we believe packages could be crafted to do so.
We plan to work with DOE to further clarify the cost of the
different incentives to the Federal Government as we have been
analyzing the cost and impact on the other participants.
We have a draft working paper which is available, and thank
you very much for the opportunity.
Senator Alexander. Thank you, Mr. Dalton.
Dr. Der?
Dr. Der. I am here as technical backup.
Mr. Bonkowski. There are three of us here from EIA if any
technical questions should come up.
Senator Alexander. Okay, all right. So we will go quickly
over to Mr. Hadley--or Mr. Rosenberg, excuse me. Sorry, I did
not mean to skip you, Mr. Rosenberg.
STATEMENT OF WILLIAM ROSENBERG, SENIOR FELLOW, KENNEDY SCHOOL
OF GOVERNMENT, HARVARD UNIVERSITY
Mr. Rosenberg. Thank you, Senator. Senator Alexander,
Senator Bingaman, members of the committee, thank you for the
opportunity to be here today. My name is William Rosenberg. I
am a senior fellow at Harvard's Kennedy School of Government
and appeared before this committee in the natural gas
proceeding a few months ago.
The natural gas bills recently introduced by Senators
Alexander and Johnson recognize the energy and environmental
benefits of widespread gasification of domestic coal and
biomass, including lower cost syngas, reductions in natural gas
demand and high prices, reduced dependence on imports, less air
pollution, and establishing a technology foundation for
CO2 capture and storage.
Over the past 2 years, my colleagues and I at the Kennedy
School have developed a loan guarantee program to jump-start
construction of a fleet of gasification projects--and this is
very important--at the lowest cost to the Federal Government. I
would like to focus on that chart over there for a moment. This
is a chart that compares, according to our understanding, the
budget cost to the Federal Government of different types of
IGCC incentives.
In the blue is our estimate of the budget cost of an 80
percent loan guarantee that is scored at 10 percent for this
one plant, a $1 billion 600-megawatt plant. The cost would be
$80 million to the Federal Government.
Alternatively, a package of grants or investment tax
credits of 20 percent would cost the Government $200 million
for this plant, and indeed a package of grant or investment tax
credits of 50 percent would cost the Government $500 million.
Here is how the loan guarantee, which is so much more cost
effective, would work. 80 percent loan guarantees would make
capital available to the projects on the most favorable terms--
the lowest interest rates and the generally most favorable
terms. This committee recognized that in the Alaskan Gas
Pipeline bill. The cost of capital as a result would be reduced
by 40 percent, which offsets the higher construction costs and
makes IGCC competitive.
For electric projects, State public utility commissions
would assure the collection of enough revenues to pay the debt
service when it is due, and for industrial projects credit-
worthy companies would sign purchase contracts. These two key
credit enhancements would minimize the Federal risk, prevent
the synfuels type losses, and limit the budget scoring to 10
percent.
The bottom line is when you look at the different
incentives direct grants and tax credits, as shown there, are
two to six times more expensive than loan guarantees. The loan
guarantee program----
Senator Alexander. Mr. Rosenberg, we are well over 2
minutes.
Mr. Rosenberg; I will just finish up.
The program would allow you to live within the budget
constraints and still have an aggressive program for developing
synthetic gas.
Senator Alexander. How many plants did you recommend?
Mr. Rosenberg. We believe that $1 billion of authority
would produce 20 plants, would support 20 plants, that would
generate 500 Bcf of gas, of syngas. $3 billion of authority
would generate as much energy as the Alaskan Gas Pipeline.
Senator Alexander. Thank you.
Mr. Hadley.
STATEMENT OF DAVID HADLEY, COMMISSIONER, INDIANA UTILITY
REGULATORY COMMISSION, ON BEHALF OF THE NATIONAL ASSOCIATION OF
REGULATORY UTILITY COMMISSIONERS
Mr. Hadley. Thank you. My name is David Hadley from the
National Association of Regulatory Utility Commissioners,
NARUC, and I am a commissioner at the Indiana regulatory
commission. While I had spent over 20 years of my life as a
United Mine Worker mining coal, today I work as an economic
regulator.
The traditional power plants that come before our
commission must add new environmental controls increasingly.
One way or another, consumers end up paying that bill. Just
several weeks ago, the EPA settled a new source review
complaint. To date those settlements have equalled over $4.5
billion for new compliance. No new power, just compliance for
environmental requirements.
Business as usual is proposed by some. Build a traditional
coal plant, pass some environmental laws, everybody sues
everybody else, and finally it comes before us with the cost
for a new retrofit and the costs are passed on to consumers
once again.
Legislation that has been introduced, Mr. Chairman, by you
and others, being discussed here this week and next, are
actually hoping to break that cycle. The debate is not if we
will burn coal. The question really is how we are going to use
that coal most efficiently and environmentally effective. New
technology offers hope to lessen U.S. dependence on foreign oil
and foreign manufactured natural gas. Today new technology
offers us the opportunity to produce domestic manufactured gas
from the United States, our Nation's most abundant coal--
resource, coal. The technology is IGCC.
The efficiencies alone mean less coal is used per equal
Btu, meaning less carbon and less other emissions from such a
plant. The same technology even adds greater value to a ton of
coal by using it as a byproduct for fertilizer that keeps the
industry from moving offshore, as Wyoming is developing a plant
or in Illinois, and a gasifier in Wyoming for ultraclean
transportation fuel.
We recommend a portfolio of credit-based mechanisms that
should include, target specific risk, be cost competitive, have
performance requirements, and used in conjunction with
expedited deployment of the initial fleets. We think this is
doable now and we thank you for this opportunity for dialog.
Senator Alexander. Thank you very much.
Mr. Lowe.
STATEMENT OF ED LOWE, GENERAL MANAGER OF GASIFICATION, GENERAL
ELECTRIC ENERGY
Mr. Lowe. Thank you, Mr. Chairman and members of the
committee. I appreciate the opportunity to be here before you.
My name is Edward Lowe. I am the general manager of
gasification for GE Energy.
The time for rapid and widespread commercialization of IGCC
is now. IGCC reduces sulphur dioxide, nitrogen oxides, and
particulate matter by approximately 50 percent compared to a
state-of-the-art pulverized coal plant. Just as importantly,
IGCC is inherently more cost effective at removing mercury and
carbon dioxide.
Initially these plants will be more expensive, as other
speakers have stated. To lower costs, GE will provide a
standard IGCC plant that is projected to rapidly achieve cost
parity with pulverized coal plants. Many power generators
operate in a deregulated environment where new generation is
competitively bid. This process penalizes higher cost advanced
technologies that might have longer term efficiency and
environmental cost advantages. Even regulated power generators
may find it difficult to select advanced technologies that come
with a significant cost premium.
Federal help is needed to address the higher initial costs
of advanced technologies. Investment tax credits, production
tax credits, and grants for early technology adopters are all
potential mechanisms. Also, first of a kind engineering
programs can drive down the initial premiums required to
utilize all ranks of coal.
To sum up, IGCC is a commercially available technology that
allows us to use our most abundant domestic fossil fuel, coal,
with environmentally superior emissions. IGCC can surpass
existing environmental regulations and offers a cost effective
solution for potential constraints on mercury and carbon
emissions. However, Federal incentives are required to
accelerate the deployment of IGCC.
Thank you.
Senator Alexander. Thank you, Mr. Lowe.
Let me thank each of you for being succinct, a good example
for Senators.
Senator Thomas and Senator Salazar have joined us. We have
to leave by about 4 o'clock to vote and there will be a series
of four votes at that time. So Senator Bingaman and I dispensed
with basically our initial comments. I would like to ask the
other Senators if it would be all right with you if--I am going
to suggest that we--I am going to ask one question, ask you to
make a very brief comment if you have something to say, maybe
30 seconds, and then you can expand on that. We and the staff
will expand on that. Then I will go to Senator Bingaman.
Then when we get to 20 'til, I will invite the second panel
to come up and we will have a chance to receive their testimony
before we vote. Does that sound all right?
Senator Bingaman. Yes.
Senator Alexander. You have talked about multiple
technologies and you have talked about a low-cost way to
provide financing for multiple technologies. What about, do you
have any suggestions for how we could introduce certainty into
your business plans? Because sometimes I get a sense that
certainty would be better than a subsidy.
Are there some things we can do legislatively that permit
these new technologies to succeed, that would be just--that
would be worth just as much to you as dollars?
Mr. Rosenberg.
Mr. Rosenberg. Senator, I think if you have a target, an
authorization for a certain number of projects, and with loan
guarantees you assure the availability of 80 percent of the
capital for those projects, so you establish a certainty for a
company that then could come forward, make an initial proposal
to the Department of Energy, and be selected, where
construction would begin say 2 or 3 years from that time.
Knowing that the capital would be there at the most
favorable rates is probably the most significant thing that
could be done in addition to making sure that the State public
utility commission in the relevant area is joining with that.
Senator Alexander. Anyone else?
Senator Bingaman? Oh, Mr. Dalton.
Mr. Dalton. Just a brief comment. Certainty in regulatory
requirements, such as emissions control requirements, what goal
will need to be met, since some of the technologies have
environmentally superior performance, if there is some
certainty to that. Now, I recognize that that is a different
question than just the energy bill. It also implies other
regulatory requirements. But that is one example of
requirements that help make the choice to put additional money
on the table to be able to meet the new energy requirements.
Senator Alexander. That might be a question that could be
addressed by the energy bill. Do not know.
Mr. Palmer.
Mr. Palmer. Senator, with respect to the question of
certainty on emissions standards, there are maybe 90 new coal
plants that are being pursued and planned in the United States
today in the face of great uncertainty. So I do not think the
emissions uncertainty as such holds back development in coal-
based generation.
I do think by involving the Federal Government in a major
way as partners in integrated gasification combined cycle, in
advanced pulverized, PC, technology, Future Gen, I think, would
send a very reassuring signal to the energy community that the
United States likes carbon-based fuels.
Senator Alexander. Thank you.
Let me go to Senator Bingaman now, just so everyone can
have a chance to comment.
Senator Thomas.Let me just--did you say 90 plants are being
planned?
Mr. Palmer. Close to 90 generation plants around the
country are being planned right now and several are actually
under construction.
Senator Thomas. Coal plants?
Mr. Palmer. Coal plants.
Senator Thomas. They must be quite a ways from being under
construction, though.
Mr. Palmer. Correct, Senator, and not all 90 will get
built.
Senator Thomas. We have not had 90 in how many years.
Mr. Palmer. Since Project Energy Independence.
Senator Alexander. Senator Bingaman.
Senator Bingaman. Yes. As I understood Mr. Dalton's
statement, there are several very promising technologies that
are of a coal gasification nature.
Mr. Dalton. Yes, sir.
Senator Bingaman. I guess I am just trying to get this
clear in my mind. Mr. Rosenberg, maybe you could tell me, what
would be the right way? Would we set performance parameters and
say that the Government would make these loan guarantees
available to companies that, or to projects that, meet certain
performance criteria as far as the reduction in emissions, as
far as the increased efficiency?
What are we measuring here? Also, if you could just
explain. I know we had in our earlier forum discussion about
the fact that this does not include the cost of capturing the
carbon, sequestering the carbon. That is an add-on. And the
technology is not there yet to know how to do all of that, as I
understand it.
How does that all relate to what we are talking about here?
Mr. Rosenberg. Senator Bingaman, indeed there should be
performance standards, and I believe Senator Alexander's bill
has performance standards and even has a provision in it that
the technology should be carbon capture-ready, which needs to
be defined. It does not mean you make the investments, but it
means that when the time comes to make those investments there
is not a penalty paid to take things out and put new things in.
I believe that should be part of the competition for the
funds. It not only should be how much does it cost the
Government if somebody comes forward with a program that would
cost less that would be preferential, but how should the
environment be treated, what would be the impact on ratepayers.
I think there would be a whole list of performance standards
that could be objectively developed and applied on these
applications.
Senator Bingaman. Thank you, Mr. Chairman.
Mr. Yamagata. Mr. Chairman, if I may, in response to
Senator Bingaman for a moment, please. That is with respect to
certainty, but also with respect to performance standards. The
type of program that we are proposing in fact includes
emissions performance standards as well as in the case of
advanced combustion systems an efficiency performance standard.
I would like to make a comment about certainty and that is
to turn it around and say the Federal taxpayer needs certainty
as well. In the context of projects and projects that are
chosen, it seems to us that we should not leave these projects
dangling if they are never going to happen. We have all had
experience in that regard with respect to Federal programs
trying to help here. But there ought to be some method of
certainty for ensuring that these projects really do take
place, and if after a period of time it does not happen then
any commitment from the Federal Government ought to be
vitiated.
Senator Alexander. Let me go to Senator Thomas, and if
anyone had additional comments on that you could submit them.
Senator Thomas. Well, I am pleased that you are here
talking about coal, of course, because I think it is our--but I
am a little confused. Are there any projects that are now
producing product?
Mr. Palmer. Brand new plants?
Senator Thomas. Yes.
Mr. Palmer. Yes, there are several plants that are under
construction.
Senator Thomas. But none are producing?
Mr. Palmer. I think, Senator, actually one unit did come on
line last year, the Springerville plant in northern Arizona.
Are you talking about gasification plants?
Senator Thomas. Yes.
Mr. Palmer. Gasification plants.
Senator Thomas. And what are they producing?
Mr. Lowe. There were two plants that were constructed in
about 1995 of approximately 250 megawatts, to demonstrate the
capability of integrating gasification-combined cycle. So the
technology has been proven. Right now there are two plants
operating in my State. The challenge is getting it to a large
enough scale and deploying it in order to drive down the cost
so there is not significant cost penalty.
Senator Thomas. I see. But they are producing?
Mr. Lowe. Tampa Electric for the Folk Station in Florida is
a reference of one plant that is operating quite well.
Senator Thomas. But what are they producing?
Mr. Lowe. They are producing electricity, using coal to
produce a synthetic gas that then is combusted and used to
produce electricity.
There is also, in the area of gasification, Eastman
Chemical ends up producing a syngas that then they use in
chemical processes for the production of methanol in our State.
Senator Thomas. What size of plant? What size do they have
to have to be economical?
Mr. Lowe. We believe it needs to be approximately 600
megawatts, which is about double the scale of the gasification
combined cycle plants that are currently operating.
Senator Thomas. Then of course, we do this, particularly if
it is mine-mouth, then we have to have the transmission system
to get it to the market.
Mr. Lowe. That is correct, Senator.
Senator Thomas. How large do you think they can be finally?
2,000, 3,000 megawatts?
Mr. Lowe. I think what you would probably do is be in the
range of traditional coal plants, or in the range of 600 to 900
megawatts, and then you put multiple plants on a site.
Certainly a site producing 2 to 3,000 megawatts is technically
feasible.
Senator Thomas. Thank you.
Senator Alexander. Thank you.
We have 3 minutes left for this panel and two Senators.
Senator Salazar.
STATEMENT OF HON. KEN SALAZAR, U.S. SENATOR
FROM COLORADO
Senator Salazar. I have three questions and you do not have
to answer them for me right now, but I would appreciate answers
in writing if you can. One is the impact that IGCC would have
on the ratepayers and specifically the differences between the
loan guarantee program and other Federal approaches that might
be taken, what ultimately is the impact for the ratepayer.
Question No. 2: What is the difference in technology to be
used with respect to eastern coal versus western coal? We have
very clean coal in my State. Are there technological
differences with respect to coal gasification of those types of
coal?
Three: Why is there reluctance among some of the electrical
generating companies to embrace this technology? I know of two
instances in my State where we are building coal plants on
pulverized coal as opposed to pursuing this technology, and the
sense is that we are not ready for embracing this technology at
this point in time.
You do not have to answer my questions, but I really would
appreciate--I would appreciate a written response to my
questions.
Senator Alexander. Thank you.
We will go to Senator Bunning and let him say whatever he
would like, ask questions, and if you could respond to those in
writing. Then we will invite the next panel up so we can get
their testimony.
STATEMENT OF HON. JIM BUNNING, U.S. SENATOR
FROM KENTUCKY
Senator Bunning. Well, my major concern obviously is the
use of coal in all capacities, to be able to burn it, to clean
it up, and use all types of coal for electric generation. The
technology some argue is not there. Some argue that we do have
the technology. We have got some programs that we actually put
in the FISC ETI bill, but there are not enough money in those
programs to really have all generators use some type of new
clean coal technology to meet the Clean Air II and beyond.
So with the new bill that we are proposing or we hope we
are going to propose, there will be about $2 billion in it
either through DOE and-or direct subsidies to coal companies
and to generators, to come up with the technologies that we
need so that you can burn my West Kentucky coal and my East
Kentucky coal, and even Wyoming coal and Tennessee coal and
anybody else that has a lot.
But we also need to realize that we have to be able to
extract from coal other synthetics, carbon--not the carbon, but
extract the carbon and use the gasification and-or the fuels
that we can get from coal, hydrogen. I think eventually
hydrogen is going to be a big, big player.
Now, there are a lot of people with technologies. So if you
have any ideas that will advance those, please get them to us
as quickly as possible.
Thank you.
Senator Alexander. Thank you, Senator Bunning.
Let me thank each of you for being here, for your
succinctness. I am quite serious. You are right on point. We do
not have a consensus of results yet, but we have a consensus of
interest and a very strong one in what you are telling us.
We thank you for coming, and I would now like to invite the
second panel to come forward.
Senator Alexander. All right, if we can get the name tags
up we will start. Why do we not start with Mr. Hamberger, and
we will ask each--we will follow the same rules we did before.
Each of you, we will thank you for your written statements and
if each of you would highlight your statements in 2 minutes
that will leave us a little time for questions, and then we
will be able to vote.
Mr. Hamberger.
STATEMENT OF EDWARD R. HAMBERGER, PRESIDENT AND CEO,
ASSOCIATION OF AMERICAN RAILROADS
Mr. Hamberger. Thank you, Mr. Chairman.
U.S. freight railroads account for roughly two-thirds of
U.S. coal movements and last year had a record year. 2005 is
starting out to exceed even the 2004 year. Not only do we move
a lot of coal, including 400 million tons from Wyoming and a
lot of coal from Kentucky bound for export, but we move that
coal at reasonable rates.
The two charts behind me illustrate that from 1981 to 2003
rail coal rates, the blue line, reduced by 63 percent in
inflation-adjusted terms. The chart also reveals that rail coal
rate declines have substantially outpaced the 25 percent
decline in average electricity prices, which is the red line,
over the same period.
The second chart shows that the delivered price of coal to
electric power plants, the blue bars, has trended downward over
the past 15 years, in stark contrast to the delivered prices of
petroleum, in yellow, and natural gas, in red, on a per-Btu
basis.
Together these graphs illustrate that railroads have played
a key role in helping hold down the cost of producing
electricity. We do that at a cost of billions of dollars each
year, in fact 17 percent of the total revenues, reinvested back
into the infrastructure and equipment. These investments have
permitted railroads to sharply increase their coal-carrying
capability as coal demand has climbed. Ton-miles are up 161
percent since 1981.
The Department of Energy estimates that total U.S. coal
consumption will increase even more rapidly in the coming 20
years. Railroads hope to be able to handle the increased demand
for coal transportation and we think we will be able to do so
as long as the ability to make the necessary investments in the
network is not constrained.
Recent dramatic increases in freight volumes across the
board have led to some service erosion affecting rail customers
and these have highlighted the importance of continued strong
rail investment in capacity. To meet future expected demand,
railroads must be allowed to earn enough to fund their
investment needs.
Policymakers can do two things: One, do no harm.
Reregulation of the industry would make it impossible for
railroads to earn enough to reinvest. Second, pass the
President's clean air bill and the comprehensive energy
legislation needed for clean coal technology and certainty for
our friends in the utility industry.
Thank you.
Senator Alexander. Thank you, Mr. Hamberger.
I did not even take the time to introduce the subject,
which is what improvements in existing transportation or
transmission structure are needed to improve the use of coal
for power generation.
STATEMENT OF ROBERT SZABO, EXECUTIVE DIRECTOR AND COUNSEL,
CONSUMERS UNITED FOR RAIL EQUITY
Mr. Szabo. Senator Alexander, I am Bob Szabo. I am the
executive director and counsel to Consumers United for Rail
Equity. We have a different story than Mr. Hamberger. Our
clients are subject to railroad monopoly power. 25 years after
railroad deregulation, there is a significant amount of
railroad monopoly power. It often attaches to people that move
railroad to power plants. The people that move the coal to
power plants are the utilities. They buy the coal at the mine
mouth and they pay for the unit trains, they often pay for the
cars, and they move the coal.
We think that probably two-thirds of the coal that moves is
captive to a single railroad. The problem with that is that the
railroads are not subject to the antitrust laws of the Nation.
So when you are subject to the monopoly power of a railroad
your remedies are at the Surface Transportation Board. We
believe those remedies do not work at all. Shippers do not win
at the Surface Transportation Board.
So what is the result of that? The result of that is that,
first of all, electric utility--electric ratepayers are paying
unduly high rates inflated by monopolistic railroad rates. We
think that where monopolies are involved they do not always get
the same price signals that they should, so we are not getting
improvements in transportation. Some day, we think, because,
dare I say, some day more capital is going to be needed to be
applied to the use of coal, coal may not be able to carry the
rail industry and new capital to burn coal cleanly.
I gave you some schematics of some of the artifices that
are used to make people captive that are not captive and get
monopoly rates, and obviously we are petitioning Congress to
try to address these problems.
Thank you very much.
Senator Alexander. Thank you very much.
Mr. Owens.
STATEMENT OF DAVID OWENS, EXECUTIVE VICE PRESIDENT, EDISON
ELECTRIC INSTITUTE
Mr. Owens. Thank you, Senator. I am David Owens, executive
vice president of the Edison Electric Institute.
In view of time, I am going to really concentrate my
statement on the issue of the transmission infrastructure. As
you know, reliable electric service and regional electricity
markets depend on a strong transmission system to move power
instantaneously to where it is needed, particularly from
baseload coal-fired generating stations, which in many
instances are very distant from the population.
Now, in my view many of the measures needed to restore our
transmission infrastructure are really contained in H.R. 6. I
just would like to take a minute and just kind of elaborate on
a couple of those provisions. H.R. 6, for example, provides for
a mandatory reliability system with enforcement mechanisms,
which is in contrast to our current voluntary system.
H.R. 6 would provide in the instance where States would not
agree on the need for transmission, it would seek to give FERC,
Federal Energy Regulatory Commission, backstop signing
authority. I think this is particularly important for coal to
ensure that electricity produced at mine mouth plants can be
delivered to distant load centers.
H.R. 6 would also improve coordination of Federal
permitting process for transmission facilities. As you know,
there is a very complicated process for getting access across
Federal lands to site transmission. H.R. 6 would seek to
facilitate that process.
H.R. 6 would also provide some very important transmission
pricing reforms for the Federal Energy Regulatory Commission
that would provide what we consider to be important signals to
encourage investment in transmission.
H.R. 6 would repeal the Public Utility Holding Company Act,
which is a barrier to new transmission investment.
We also support very strongly important tax code changes
which would provide accelerated depreciation for transmission,
moving from a 20-year period to a 15-year period. As other
participants in this conference who have appeared before you,
we certainly also do support investment for new clean coal
technologies.
I would echo some of the things that Mr. Szabo said about
rail transportation. We are members of CURE and we strongly
support many of their views. I also need to stress that coal is
also moved on waterways and we are strong supporters of
enhancing our overall waterway infrastructure.
Thank you for this opportunity.
Senator Alexander. Thank you, Mr. Owens.
Mr. Heller.
STATEMENT OF THOMAS J. HELLER, CEO, MISSOURI RIVER ENERGY
SERVICES
Mr. Heller. Senator Alexander, Senator Bingaman, and
members of the committee, my name is Tom Heller. I am with
Missouri River Energy Services. Missouri River Energy Services
is a wholesale power supplier to 58 municipal utilities located
in South Dakota, North Dakota, Iowa, and Minnesota. We own a
17% interest in the 1,650-megawatt coal-fired Laramie River
Station located in Wheatland, Wyoming, and we are participating
in two efforts to build new coal generation in North or South
Dakota.
Coal is an abundant domestic resource of critical value in
meeting our energy needs of the future. Furthermore, there is a
growing need for baseload plants and coal-fired generation must
be part of our Nation's future energy portfolio.
However, the ability to add new baseload generation is
dependent upon two things: No. 1, adequate transmission and
supporting policies to assure delivery of the power from remote
generation sites to load centers; and No. 2, relief for captive
shippers from transportation costs that have become very, very
high. Unless we break--unless these issues are successfully
resolved, the future of coal is, however, I think regrettably
bleak.
Missouri River urges congressional action to: No. 1, direct
FERC to issue rules that enable electric utilities to secure
firm transmission rights or equivalent tradable or financial
rights for the long-term delivery with reasonable price
certainty; No. 2, facilitate the planning and expansion of
transmission facilities to support such rights; No. 3,
facilitate transmission siting from a Federal level; No. 4,
promote the regionalization of costs of high-voltage
transmission facilities.
I would also like to associate myself with the comments of
CURE. The need for legislation to provide relief to captive
shippers is real and immediate. BNSF currently transports some
8.3 million tons of coal approximately 175 miles from coal
mines in Wyoming's Powder River Basin to Laramie River Station.
A longstanding contract for this service recently expired and
the new common carrier rates are now in service, and they have
doubled our cost of coal transportation. It is projected that
the cost to the owners of LRS will be a billion dollars over
the next 20 years. To us, this translates into $70 per retail
customer per year for the next 20 years.
It is our hope that Congress will provide some legislative
relief to these captive shippers.
Thank you.
Senator Alexander. Thank you, Mr. Heller.
Mr. Mohre.
STATEMENT OF DAVID MOHRE, EXECUTIVE DIRECTOR, ENERGY AND POWER
DIVISION, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION
Mr. Mohre. Senator, thank you. My name is David Mohre. I am
Executive Director of the Energy and Power Division for
National Rural Electric Cooperative Association. You are
probably aware cooperatives supply about 40 million Americans
electric power in all or parts of 83 percent of the counties in
the United States.
I believe we all agree, from what I have heard, that the
use of coal is critical not only to keeping U.S. electricity
rates competitive and reliable and secure from foreign
influence, but also to moderating the rapid increase we have
seen in natural gas prices over the past several years. I would
like to suggest that one of the most critical issues involved
here is one we do not talk about much, and that is making sure
the transmission grid is capable of carrying out that function.
This is both through timely enhancement of the existing
grid and in the longer run regionally planning for the bigger
picture, if you will. You have probably seen studies, as I
have, showing that if we could enhance the transmission grid a
little bit, the existing grid, we can probably save about a Tcf
of natural gas used through enhanced coal use in existing
plants.
If we take a look at doing that, okay, you are talking
about perhaps a 50 cent or a dollar reduction in the price of
natural gas, and that equates to about a 10 to $20 billion
reduction in the cost to consumers of natural gas and a
concomitant reduction in the cost of electricity.
Now, why is that important today? Well, I think it is
particularly important today because we have this little 2 to 3
Tcf overhang of new natural gas-fired generation that is on the
ground and waiting to go. People do not realize we use about
the same amount of gas today as we used 30 years ago. But if
these gas units are turned on there is going to be a tremendous
run-up in prices, and that is before we take into consideration
the fact that the EIA recently increased the cost projection
for this year to $6.95.
In the future, let me just say one thing. One of the
critical elements is are we going to be able to site and invest
in these $1 to $2 billion coal plants? Well, it is going to be
very difficult if you cannot get there from here. Part of the
problem is under the new regional transmission organizations
you cannot get, as Mr. Heller said, long-term transmission at
reasonable prices. We have to fix that problem.
Senator Alexander. Thank you.
Glenn McCullough, welcome.
STATEMENT OF GLENN McCULLOUGH, JR., CHAIRMAN, TENNESSEE VALLEY
AUTHORITY
Mr. McCullough. Thank you, Chairman Alexander, Ranking
Member Bingaman, members of the committee. On behalf of the TVA
board of directors and our employees, thank you for the
opportunity to appear here today. I am Glenn McCullough, Jr. I
have served as TVA's chairman since July 2001.
Coal is America's most abundant domestic source of energy.
What oil is to Saudi Arabia coal is to the United States. TVA
relies on coal for a significant portion of our generation,
just over 60 percent in 2004. Continued use of coal is an
important part of TVA's strategy to provide affordable,
reliable electric power to 8.5 million people in our service
territory. Keeping coal as an integral part of TVA and the
Nation's energy mix is essential to the economic wellbeing of
both the Tennessee Valley and our Nation.
I am going to briefly summarize our response to question
number 4 regarding the improvement, improving coal for power
generation, by saying that it may be cheaper to invest in coal
transportation rather than extra high-voltage transmission
lines, but what is sometimes overlooked in the coal-by-wire
discussion is that redundant paths are needed for transmission
lines to move major blocks of power from coal-rich areas to
population centers.
However, there are some problems in the coal transportation
area also. The major railroads and barge companies are beyond
their ability to provide timely and cost-effective delivery of
coal to utilities. For coal-fired power generation to increase
in future years, railroads and barge companies must have the
capacity in place to meet increased customer demand.
It would seem to us that a balanced approach of improving
both the coal transportation and the power transmission systems
would make the most sense. Investment in technology and
capacity improvements in power transmission, rail lines, and
barge lock systems will all be required for a comprehensive
approach to maintain and to encourage greater use of coal for
power generation in the future.
Thank you, Mr. Chairman.
Senator Alexander. Thank you, Mr. McCullough.
Thanks to each of you.
The vote has started, but I think we have time for each of
us to ask a question or make a comment, and then we would ask
you just to respond to it in writing if you would not mind. I
think all of you know how to get in touch with the professional
staff or with us if you need to.
My question would be simply, it would help me if you could
provide me with one or two examples of siting difficulties for
transmission capacity so I could--you probably have several to
choose from, but a few examples of that would be a help, and
how the energy bill that we are working on might help prevent
those kinds of problems in the future. That would be my
question.
Senator Bingaman.
Senator Bingaman. Mr. Chairman, in light of the time
constraints we have, let me just thank all the witnesses. I
think it has been useful. I wish we had more time to delve into
some of these issues. But I am sure we will try to read through
all the detailed statements that have been given to us and
digest what is in there. Hopefully, you will see some of that
reflected in the legislation that we proceed with.
Thank you very much.
Senator Alexander. Senator Bunning.
Senator Bunning. I am very interested in transmission and
certain areas of our State are having difficulty getting
transmission from one place to another. Certain transmission
lines are owned by one utility over another. We have to get
some type of cooperative effort so that we can keep rates low
and get transmission to all areas, both rural and urban, in all
parts of this country, and we have to do it as quickly and
without new regulations.
I would like to see them voluntary. A lot of people want a
mandatory regulatory scheme that I am not for.
So if you could make suggestions on transmission and how to
get it from one area of the State and/or one area of the
country, because that is a major, major problem right now, the
double use or the use of other people's transmission lines
without a huge service charge for using them, a reasonable rate
that would not blow the electricity out of the water that goes
through those transmission lines.
Thank you.
Senator Alexander. Thank you, Senator Bunning.
Thanks again to each member of the panel and to the first
panel for your thought and for the extra effort you have made
and for adjusting yourselves, as we have to, to the schedule of
the U.S. Senate. We look forward to your written answers and to
any further comments.
The hearing is adjourned.
[Whereupon, at 4:01 p.m., the symposium was adjourned.]