House Hearing, 112TH Congress - Energy and Water Development Appropriations For 2013

ENERGY AND WATER DEVELOPMENT
APPROPRIATIONS FOR 2013

HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT
RODNEY P. FRELINGHUYSEN, New Jersey, Chairman
JERRY LEWIS, California
MICHAEL K. SIMPSON, Idaho
DENNY REHBERG, Montana
RODNEY ALEXANDER, Louisiana
STEVE WOMACK, Arkansas
ALAN NUNNELEE, Mississippi
PETER J. VISCLOSKY, Indiana

ED PASTOR, Arizona
CHAKA FATTAH, Pennsylvania
JOHN W. OLVER, Massachusetts
NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mr. Dicks, as Ranking
Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees.
ROB BLAIR, JOSEPH LEVIN, ANGIE GIANCARLO,

LORAINE HECKENBERG, and PERRY YATES,
Staff Assistants
PART 6
DEPARTMENT OF ENERGY
Page
Environmental Management, Legacy Management, FY

2013 Budget ...........................................................................
Energy Efficiency and Renewable Energy, Fossil
Energy, Electricity Delivery and Energy Reliability,
FY 2013 Budget .....................................................................
Science ........................................................................................
Loan Guarantee Program and ARPAE, FY 2013
Budget .....................................................................................
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PART 6ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 2013
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HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT
RODNEY P. FRELINGHUYSEN, New Jersey, Chairman
JERRY LEWIS, California

ED PASTOR, Arizona
NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mr. Dicks, as Ranking
Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees.
ROB BLAIR, JOSEPH LEVIN, ANGIE GIANCARLO,

LORAINE HECKENBERG, and PERRY YATES,
Staff Assistants
PART 6
DEPARTMENT OF ENERGY
Page
Environmental Management, Legacy Management, FY

2013 Budget ...........................................................................
Energy Efficiency and Renewable Energy, Fossil
Energy, Electricity Delivery and Energy Reliability,
FY 2013 Budget .....................................................................
Science ........................................................................................
Loan Guarantee Program and ARPAE, FY 2013
Budget .....................................................................................
1
113
359
535
Printed for the use of the Committee on Appropriations
U.S. GOVERNMENT PRINTING OFFICE

80791
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HAROLD ROGERS, Kentucky, Chairman
C. W. BILL YOUNG, Florida 1
JERRY LEWIS, California 1
FRANK R. WOLF, Virginia
JACK KINGSTON, Georgia
RODNEY P. FRELINGHUYSEN, New Jersey
TOM LATHAM, Iowa
ROBERT B. ADERHOLT, Alabama
JO ANN EMERSON, Missouri
KAY GRANGER, Texas
JOHN ABNEY CULBERSON, Texas
ANDER CRENSHAW, Florida
JOHN R. CARTER, Texas
KEN CALVERT, California
JO BONNER, Alabama
STEVEN C. LATOURETTE, Ohio
TOM COLE, Oklahoma
JEFF FLAKE, Arizona
MARIO DIAZ-BALART, Florida
CHARLES W. DENT, Pennsylvania
STEVE AUSTRIA, Ohio
CYNTHIA M. LUMMIS, Wyoming
TOM GRAVES, Georgia
KEVIN YODER, Kansas
NORMAN D. DICKS, Washington

MARCY KAPTUR, Ohio
NITA M. LOWEY, New York
E. SERRANO, New York
JOSE
ROSA L. DELAURO, Connecticut
JAMES P. MORAN, Virginia
ED PASTOR, Arizona
DAVID E. PRICE, North Carolina
MAURICE D. HINCHEY, New York
LUCILLE ROYBAL-ALLARD, California
SAM FARR, California
JESSE L. JACKSON, JR., Illinois
STEVEN R. ROTHMAN, New Jersey
SANFORD D. BISHOP, JR., Georgia
BARBARA LEE, California
ADAM B. SCHIFF, California
MICHAEL M. HONDA, California
BETTY MCCOLLUM, Minnesota
1 Chairman Emeritus
WILLIAM B. INGLEE, Clerk and Staff Director
(II)
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WEDNESDAY, MARCH 21, 2012.
DEPARTMENT OF ENERGYENVIRONMENTAL MANAGEMENT & HEALTH, SAFETY, AND SECURITY FY 2013
BUDGET
WITNESSES
DAVE HUIZENGA, SENIOR ADVISOR FOR ENVIRONMENTAL MANAGEMENT (ACTING), OFFICE OF ENVIRONMENTAL MANAGEMENT, DEPARTMENT OF ENERGY
GLENN PODONSKY, CHIEF HEALTH, SAFETY, AND SECURITY OFFICER,
OFFICE OF HEALTH, SAFETY, AND SECURITY, DEPARTMENT OF ENERGY
Mr. FRELINGHUYSEN. The hearing will come to order. Good morning, everybody. Thank you for being here. We have before us this
morning David Huizenga, senior advisor for Environmental Management to the Secretary of Energy. We also have Glenn Podonsky,
the departments Chief Health Safety and Security officer. We welcome you both to the subcommittee and we look forward to your
testimony.
Before we begin I would like to note that a colleague of yours,
Brad Peterson, died last week in New Mexico due to injuries from
a car accident. He was most recently with the Office of Secure
Transportation. And I think I speak for everybody on the panel
here on the subcommittee on extending our condolences to his family, his colleagues at the office, and to the department.
Mr. HUIZENGA. Thank you, Mr. Chairman. He was a great guy.
Mr. FRELINGHUYSEN. We are pleased to note his work and we regret his passing.
The Environmental Management budget request for Fiscal Year
2013 is 5.009 billion for defense cleanup activities, a $14 million reduction from last years inactive level. While it is clear that many
tough decisions have been made in putting together this request,
you have even tougher decisions ahead. Many of your current
cleanup agreements relied upon continued large increases in funding, increases that are unrealistic even with the strong support we
have for these activities within the committee. It is the responsibility of the department to explain where those timelines are in
jeopardy and to work constructively with its stakeholders to establish affordable milestones which would meet our legal commitments and our financial restraints.
Mr. Podonsky, your budget request is $246 million, a reduction
of 2 percent from last years level. At the same time, you are under(1)
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taking a review of the departments safety and security model. I

hope you will be able to show us this morning that this budget request will fully support that important work.
Gentlemen, you are appearing together before the committee for
the first time in order to better explain some of the challenges and,
yes, some of the opportunities the EM Program and other nuclear
operations that the department are facing. This subcommittee is
taking a note of some very serious issues facing the department.
Reports of poor project management leading to out-of-control cost
growth and an apparent weakness in nuclear safety culture to
name two of the most worrisome.
The EM Program is at the middle of these concerns and the
Health Safety and Security Office is mandated to evaluate and help
resolve them. Over the past few years, the Department has taken
some positive steps to address these issues such as updating its
project review procedures. More recently, EM has been re-evaluating its bureaucracy to see if it should be realigned. We will be
watching closely to make sure that safety in project management
is adequately resolved and that management reforms are actually
effective.
Gentlemen, reports have identified major problems at the waste
treatment and immobilization plant in Hanford. It appears that the
Department of Energy has not yet been able to resolve significant
design problems and changes may be on the horizon which will undoubtedly impact that projects cost and schedule, and could put
the milestones of the Tri-Party Agreement in jeopardy. There are
reports that as these troubles have festered, the safety culture of
the site has deteriorated to such an extent that some find them to
be a major risk to the project itself. The reforms you put in place
must address these issues both at Hanford and anywhere else they
threaten to come up.
Mr. Podonsky, your group has done some good work looking into
the sources of the safety culture problems, and we are looking forward to hearing your findings. Ensuring that these facilities will
operate safely is one of our greatest responsibilities, and the subcommittee cannot support any plan that would place the safety of
your employees and the public in any jeopardy. Please ensure that
the hearing record, responses to the questions for the record, and
any supporting information requested by the subcommittee are delivered in final form to us no later than four weeks from the time
you receive them. And I also ask that if members have additional
questions they would like to submit to the committee for the
record, they please do so by 5:00 p.m. tomorrow.
With these opening comments, I would like to yield to our ranking member, Mr. Visclosky, for any opening comments he may care
to make.
[The information follows:]
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Mr. VISCLOSKY. Thank you very much. Mr. Huizenga and Mr.
Podonsky, thank you very much for being with us today.
Mr. Huizenga, this will be your first time before the subcommittee as the leader of the Office of Environmental Management and I do have faith that you are up to the challenge ahead
of you. The appearance of both of you will give the subcommittee
a perspective on the individual programs and, also, the opportunity
to understand how they interact and work together to ensure DOE
projects are meeting the mission while also maintaining a safe
work environment.
The Manhattan Project and resulting nuclear weapons complex
was an unparalleled scientific achievement. Today, we must obviously address the environmental impacts of this monumental undertaking, ensuring the health and safety of those communities affected. The Federal Governments obligation to remediate these
sites is without question. However, given the constrained physical
environment it will be paramount that all resources are used to
their fullest potential. I understand that the department is undergoing a review of the implications of flat funding to the cleanup effort, and I would be interested today in hearing if you have any initial feedback for the subcommittee.
Mr. Huizenga, I will make a point to you that I made to both
Secretary Chu and NNSA Administrator DAgostino. Issues of
project management, corporate governance, and workplace safety
are not the most electrifying issues to tackle, but I attach special
importance to them and I do believe they are vital to the success
of the departments mission. A strong leadership and fundamental
management reform are not forthcoming at the Department of Energy after all of these many years. It will significantly inhibit the
execution of your mission as well as the departments credibility.
I hope that you will take some time today to update us on your specific actions in this regard, in particular any progress that you have
made in getting EM off the GAOs high-risk list.
Mr. Podonsky, in my opinion, worker health and safety is one of
the most important elements in meeting the departments mission.
In particular, given the materials and facilities under EMs charge,
the potential human and financial losses that have come from having an unsafe worksite are mindboggling. I appreciate that you
have taken seriously your charge to ensure the safety of the departments projects and look forward to discussing in detail your offices progress on this front.
Mr. Chairman, thank you very much for the time.
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Mr. FRELINGHUYSEN. Thank you, Mr. Visclosky. Mr. Huizenga,
can you speak to what the Environmentalexcuse me, I apologize.
Your statements.
Mr. HUIZENGA. Thank you, Mr. Chairman. Good morning, Chairman Frelinghuysen, Representative Visclosky, and Representative
Simpson. I am honored to be here today to discuss the positive
things that we are doing for the Nation through our ongoing efforts
in the Environmental Management Program and, of course, to address your questions regarding our fiscal 2013 budget request.
Our request of 5.65 billion enables the Office of Environmental
Management to continue the safe cleanup of the environmental legacy brought about from five decades of nuclear weapons development and government-sponsored nuclear energy research. Our
cleanup priorities are based on risk and our continuing efforts to
meet our regulatory compliance commitments. Completing cleanup
promotes the economic vitality of the communities surrounding our
sites and enables other crucial DOE missions to continue. By reducing the cleanup footprint, we are lowering the cost of security
and other overhead activities that would otherwise continue for
years to come.
In August 2011, the Office of Environmental Management was
aligned under the Office of the Under-Secretary for Nuclear Security. This realignment promotes the natural synergies that exist between EM and NNSA. For example, at Oak Ridge Laboratory, we
are working closely with NNSA now to accelerate the transfer of
certain components of the Uranium233 inventory.
This inventory is valuable for National Security applications and
supports NNSA missions. Removing this material and transferring
it to NNSA for their use will result in cost savings for our program
and enable us to move forward with cleanup at the Oak Ridge National Laboratory.
Over the years, the Office of Environmental Management has
made significant progress in accelerating environmental cleanup
across the complex. For example, last December, at the Defense
Waste Processing Facility at our Savannah River Site in South
Carolina, we solidified a record 37 canisters of highly radioactive
waste. These are more canisters than we have filled in one month
in the facilitys 15-year history. Out west at our Moab site in Utah,
we celebrated the removal of five million tons of uranium tailings
from the site to a safe location away from the Colorado River.
Through 2011, we safely conducted over 10,000 shipments of transuranic waste to the Waste Isolation Pilot Plant in New Mexico, the
worlds largest operating deep geologic repository. As you can see
from some of these accomplishments the EM has made great
progress and will continue to do so with your help.
We could not have achieved such notable accomplishments without an outstanding Federal and contractor workforce. The safety of
our workers is a core value and is incorporated into every aspect
of our program. I am sure we are going to be talking about that
and I welcome the opportunity to talk more about it with Mr.
Podonsky and you today. We maintain a strong safety record and
continually strive for accident and incident-free workplaces. We
seek to continue improvements in the area of safety by instituting
corrective actions and aggressively promoting lessons learned
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10
across our sites. In collaboration with Mr. Podonskys office and our
field sites, we are working to achieve a stronger safety culture
within our Program and ultimately improve safe construction and
operation of our facilities.
We will continue to identify opportunities to reduce the life-cycle
costs of our program, including the development of new technologies and other strategic investments. For example, in fiscal
year 2013, we will continue our efforts to develop technologies that
allow for the segregation and stabilization of mercury-contaminated
debris and improve groundwater monitoring.
Finally, we continue to work with the Government Accountability
Office as we institutionalize the improvements in contracting and
project management which I know are important to you. We have
established project sponsor positions at Headquarters for all of our
capital asset projects and conduct regular peer reviews of our most
complex projects. We are including the U.S. Army Corps of Engineers personnel in some of these teams because of their project and
contract management expertise. We are committed to becoming a
best-in-class performer in the area of project management.
Chairman Frelinghuysen, Representative Visclosky, and Representative Simpson, we continue to apply innovative cleanup technologies so that we can complete our quality work safely, on schedule, and within costs thereby demonstrating value to the American
taxpayers. Thank you and I would be pleased to answer your questions.
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Mr. FRELINGHUYSEN. Thank you for your testimony. Mr.
Podonsky, good morning.
Mr. PODONSKY. Thank you, Mr. Chairman and ranking member
Visclosky and members of the Subcommittee for inviting me here
today to testify on the 2013 budget of the Health Safety and Security Office. With your permission, I would like to submit my written testimony for the record.
Mr. FRELINGHUYSEN. Consider it done. Thank you.
Mr. PODONSKY. I would like to take a moment just to describe
the role that the HSS plays within the DOE. And also address an
issue that has received a lot of attention lately, and that is the
safety culture within DOE and its role in ensuring the DOEs ability to accomplish its mission. First and foremost, I want to tell the
committee, subcommittee that the secretary and the deputy secretary are extremely committed to maintaining a safe and secure
work environment for employees and to ensure that its operations
are not adversely affecting the health, safety, or security of the surrounding communities or of the Nation.
My organization, HSS, is charged with helping DOE fulfill that
commitment. We are very proactive advocates for the protection of
DOEs workers as well as the protection of the DOEs assets. We
are passionate about our mission. We have pursued every day with
a sense of urgency and with a personal commitment. We strive to
use and influence this commitment throughout the rest of the
DOE.
Our program consists of a wide variety of activities that are described in details in our budgets proposal but the essential elements are responsible for internal policies that govern health, safety, and security of the department, providing technical assistance
to help align, implement those policies, and, maybe most importantly of all, to provide independent oversight of the DOEs performance as well as providing an enforcement of health safety and
security requirements when necessary. The execution of our mission is accomplished through a variety of outreach efforts that include current and former workers, national labor union leadership,
the Defense Nuclear Facility Safety Board, contractors, community
leaders, and the Congress.
We support the secretary and deputy secretarys commitment to
a strong safety culture where all employees are encouraged to
bring up safety concerns without fear of reprisal. The goal of safety
in executing this mission is not just show or a bumper sticker. It
has to be believed by the leaders and carried out through their actions.
A robust safety culture is needed, especially for a large costly
construction project, from designing and planning through construction operation to decommissioning, in order to reduce potential
of escalating costs and to ensure DOE meets its commitments. HSS
has been assessing the safety culture up at the Hanford Waste
Treatment Immobilization Plant, which, as you know, is the DOEs
largest ongoing project with an estimated cost of over $12 billion
and over 3,000 Federal and contract workers.
We found in our recent inspection that most people working on
the project believe that safety was a high priority, but, alarmingly,
there was a significant number that expressed reluctance to raise
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safety issues or concerns. We have provided recommendations to

the department and to the Federal and contracted management at
the site. And the recommendations have been accepted by the department, by the secretary, by the deputy secretary, by the under
secretary for NNSA, and by my colleague Dave Huizenga. And we
will be working with them to make sure that full implementation
of those recommendations take place.
As a result of this review, the secretary and the deputy secretary
directed HSS to then do a center review condition of safety culture
at all large projects within the department. We have started that.
I would be happy to talk to you more about that.
These are the projects that are over $1 billion in costs. The review will determine if those projects are being managed in the way
that could pressure contractors or DOE managers to disregard nuclear safety in order to demonstrate acceptable project performance. We look forward to actually coming back and brief you, the
subcommittee, the results which will be complete that end of the
project in the fall.
I would like to thank this committee and the staff for the interest you continue to show in HSS and our role in providing independent, unbiased, unfiltered information to the DOE of management, the leadership of the department, the secretary, and the deputy secretary on how well or how poorly the department is performing. Thank you.
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Mr. FRELINGHUYSEN. Thank you very much, Mr. Podonsky.
There are good reasons that the both of you are sitting together
here. And each of you have a mission and to a certain degree you
somewhat have to be independent. But in reality, where I think the
bipartisan concern is support for both of what you are both doing.
Mr. Huizenga, can you speak to what the Environmental Management organization is doing to evaluate the implications of the
reduced budget, or the other term is constrained fiscal environment, and what it means to the departments cost and schedule
projections for meeting the many constant milestones?
Mr. HUIZENGA. Yes, I can, sir. First of all, let me just point out
that 2013 request will enable us to fully meet our compliance
agreements and our milestones in Fiscal Year 2013. It is a request
that takes into account all of these issues. That being said, I do not
want to underestimate the difficulty I believe we are going to have
in the out years. In prior years, we have signed up for a number
of milestones at many of our sites and we did this in a sense when
we thought we might have slightly higher budget projections when
things were different a few years ago. And we are in the process
now of working complex-wide to understand if we were stay at relatively flat budgets for the next few years what that would mean
for our compliance agreements.
We started this discussion with our stakeholders in a meeting
last November in New Orleans. We were being upfront with people
that we are going to have to have open and transparent dialogue.
If indeed we are going to need to make some adjustments, we want
to give people a chance to understand our thinking and our rationale. We will be looking at the highest risk activities across the complex to make sure we are continuing to focus on them on those. Of
course, this is a complex issue. It will take us another month or
two to get our arms around completely the
Mr. FRELINGHUYSEN. So, you are working on a new strategic plan
having touched base as I assume you do on a regular basis with
all your stakeholders, the municipalities, and localities?
Mr. HUIZENGA. Exactly.
Mr. FRELINGHUYSEN. And so, we are going to be getting a new
strategic plan?
Mr. HUIZENGA. We are going to have to assess what we think we
can do assuming a flat budget. Last time we did this we thought
about $6 billion range. We are looking now closer to $5.5 or $5.65
billion consistent with our budget request. Obviously, if we baselined our program and signed agreements at $6 billion there is
going to be things that are going to have to be moved out if we are
coming in
Mr. FRELINGHUYSEN. So, we are going to be apprised of what
those might be?
Mr. HUIZENGA. We will be in consultation with our stakeholders
and with you, of course, to explain what we think this ultimately
Mr. FRELINGHUYSEN. So, you are going to lay out a pathway
here?
Mr. HUIZENGA. That is our
Mr. FRELINGHUYSEN. Based on flat budget?
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Mr. HUIZENGA. In our fiscal year 14 budget build, we are trying
to take this into account complex-wide.
Mr. FRELINGHUYSEN. So, this and a lot of what you are dealing
with is incredibly complex? All these sites have a degree of complexity and some are involved with consent decrees. And you are
taking all of that into consideration?
Mr. HUIZENGA. Correct. We are currently
Mr. FRELINGHUYSEN. Not only do you have expectations, but
states and localities and I assume the courts have some expectation
that certain things are going to be done within a timetable. So, are
you taking a look at that timetable?
Mr. HUIZENGA. Absolutely. We recognize our commitments to the
local people in these areas that have made sacrifices over the years
for the country. And we want to move ahead with the cleanup activities as expeditiously as possible. With that being said, we recognize that there are fiscal constraints that need to be addressed and
we need to try to take those into account.
Mr. FRELINGHUYSEN. Mr. Visclosky.
Mr. VISCLOSKY. Thank you, Mr. Chairman. Mr. Huizenga, in the
fiscal year 2012 Appropriations Act there is a requirement that the
secretary notify the committee not later than 30 days before any
uranium transfer takes place. Twice, as recentlymost recently, I
should say, as Wednesday, the department has violated the provisions of this statute as far as congressional notification. What is
the problem?
Mr. HUIZENGA. We had two administrative errors, and we will
not have another one.
Mr. VISCLOSKY. That is the proper answer. Another question is
the issue of benefits for workers who transfer from USEC to the
D&D contract. And Portsmouth has been an issue recently, and on
March 9th, United Steelworker President Leo Girard wrote a letter
that, among other things, said that we ask that DOE and its contractors at the site restore their benefits, including pensions and
retiree health care, their seniority, any vacation time they have
lost, any seniority credits to which they are due, and any other
wages and benefits that have been scrimped as a result of the
flawed 2011 service contract transition. What, from your perspective, is the problem at Portsmouth, and what action is the department taking or not taking?
Mr. HUIZENGA. This is a complex issue and we met with the
USW representatives several times. I met with him personally. I
know that they have been in discussions with the Secretarys staff,
as well. We fundamentally have a different view of the nature of
when the employees change from USEC to working for Fluor-B&W
Portsmouth LLC, the new contractor, our view is that they, the
contractor, Fluor-B&W Portsmouth LLC, it is their responsibility to
negotiate the benefits package. It really is not the Department of
Energys position. We set broad guidelines to make sure that they
are doing this lawfully. They have to have some curbstones of
which they need to stay in between. But it is up to Fluor-B&W
Portsmouth LLC to work this out with the Steelworkers.
Mr. VISCLOSKY. Could I ask, assuming the worst and it is not
worked out and the steelworkers file suit, there will be legal ex-
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penses and court costs involved. Are those reimbursable to the contract by the Department of Energy?
Mr. HUIZENGA. In general, my understanding is that we pay the
court costs for these type of issues.
Mr. VISCLOSKY. Will the steelworkers legal expenses and court
costs be reimbursed by the Department of Energy?
Mr. HUIZENGA. That I do not know. I would have to get back to
you on that, sir.
Mr. HUIZENGA. The Department of Energy (DOE) does not have a contract with
the Steelworkers Union. DOEs prime contractors negotiate collective bargaining
agreements between themselves and individual unions. If a union sues a DOE contractor operating under a cost-type contract, the contracts generally provide that
most legal costs incurred by the contractor, including settlements, are allowable.
There are a number of exceptions, however, and those would have to be reviewed
in the context of a particular matter. The larger question is whether a judgement
against the contractor would include the legal expenses and court costs of the union;
that is generally not the case in American litigation. However, to the extent a judgment against the contractor includes legal expenses incurred by the opposing party,
they would likely be allowable to the same extent as other costs incurred by the contractor.
Mr. VISCLOSKY. I must express a concern that you providenot

you personally, but the Department, an unlevel playing field. If
some party, whether it is in this case, the United Steelworkers, or
another party, feels themselves aggrieved and they have to pay
their own legal expenses and court costs and the contractor working for DOE gets reimbursed by the taxpayers, and somebody has
deeper pockets than another party and they just outlast people, I
think it is a very unfair proposition. So, I would ask that, while the
department may not have the ultimate liability for the contract,
that special attention should be paid because I think, in this case,
the aggrieved party, at least that is the allegation, is in a very unfair situation legally.
Mr. HUIZENGA. Yes.
Mr. VISCLOSKY. Thank you, Mr. Chairman.
Mr. FRELINGHUYSEN. Thank you, Mr. Visclosky. Mr. Simpson.
Mr. SIMPSON. Thank you. And thank both of you for being here
today. We appreciate it very much. We mentioned fiscal constraint
that we are under and probably will be under even greater after
the budget resolution passes today whichnever mind, I will not
go there.
Let me ask you. I think we have to find uses that maybe beyond
what the original use was for some of the facilities. Currently
INTEC at Idaho maintains a wet storage capability. The Navy is
looking to refurbish their facility for wet storage for Navy fuel. Is
it possible to keep the wet storage facility at INTEC at play and
have a shared facility, potentially with the Navy, rather than doing
the refurbishing of the Navys wet storage facility?
Mr. HUIZENGA. To continue to use the existing one?
Mr. SIMPSON. At INTEC.
Mr. HUIZENGA. I am notto be honest with you, the Navy is
moving out in their direction and
Mr. SIMPSON. I know. I am looking to try to save money here
somewhere.
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Mr. HUIZENGA. I understand that. I had not tried to interfere
with that. I could talk to the NNSA folks and see if there is some
synergy there.
Mr. SIMPSON. I am certain that the Navy would like to have their
own facility. The question is, is that fiscally the responsible thing
to do if we have a wet storage facility at INTEC that could serve
the same purposes? We share the use of the Advanced Test Reactor
with the Navy and so forth.
Mr. HUIZENGA. Absolutely.
Mr. SIMPSON. I would hope that you would explore the possibility, even though I would suspect that the Navy would like their
own facility and not have to share. That is kind of the way the
Navy is. I understand that. But it would seem to me like it might
save some money in the long run.
Mr. HUIZENGA. I would certainly agree.
Mr. SIMPSON. Without having to put the other money into refurbishing their facility, which I cannot remember how much it is, but
it is a substantial sum that they have requested, is it not? Yes. So,
I am just suggesting
Mr. HUIZENGA. I will look into that.
Mr. SIMPSON [continuing]. In this limited fiscal environment that
we need to look at other things along the way.
Along that same line, the Advancement Mixed Waste Treatment
Plan will finish its Idaho mission within the next couple years.
This is a facility that has done a fantastic job, I think. It would
seem to be a shame to shut it down. Are there other missions that
that facility could facilitate?
Mr. HUIZENGA. I believe they are already making a contribution
in that regard. Of course, they are doing a great job in Idaho with
retrieval and packaging of the transuranic waste in Idaho. And as
I understand it, they have also been successful in taking some
waste from Hanford to Idaho, packaging it up and sending it down
to WIPP so, you know, we certainly could explore
Mr. SIMPSON. So we may see a continued operation in that facility beyond the time when they finish their actual drop?
Mr. HUIZENGA. I think that your point is well taken and at these
times of fiscal constraints, we need to look at all options. And if we
have got a facility that is up and running and doing a good job,
then it can provide a more complex-wide benefit, I would be happy
to look into that.
Mr. SIMPSON. Okay. After the publication of the recommendation
of the Blue Ribbon Commission, we have heard a lot of talk about
consent-based process to identify a site to store spent nuclear fuel.
Under the Idaho Settlement Agreement, the State of Idaho consented to temporarily store Navy and DOE spent fuel in exchange
for DOEs commitment that the Idaho National Lab shall direct the
research, development, and testing of treatment, shipment, and
disposal technologies for all DOE fuel. That program did this work
under the National Spent Fuel Nuclear Fuel Program. It is not
funded in the 2013 budget. Do you plan to fund this activity at the
INL? And if not, how can you get states to consent to store spent
nuclear fuel when commitments made to those already storing
spent nuclear fuel were not kept or will not be kept?
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Mr. HUIZENGA. I talked to the folks on the National Spent Fuel
Program about this a couple times, and we do intend to continue
to fund them.
Mr. SIMPSON. Okay. I have got some other questions, but I
will
Mr. FRELINGHUYSEN. Thank you, Mr. Simpson. Mr. Huizenga
and the ranking member raised Portsmouth as a focus. The GAO,
and you mentioned the GAO, I think, in one of your opening statements, has ruled that the Departments past use of uranium transfer to fund the cleanup work at Portsmouth is illegal, violating the
Miscellaneous Receipts Statute. Is the $178 million you have requested for Portsmouth the total amount of the cleanup work that
you plan on funding in the fiscal year 2013 budget or do you plan
on using the TAILS transfer authority again in contravention of
the law?
Mr. HUIZENGA. Well, we respectfully disagree with the GAOs
view on that, Mr. Chairman. We believe that we, under the Atomic
Energy Act, have the authority to barter the uranium, and we hope
to continue to do so because, indeed, we want to continue to accelerate our cleanup work at Portsmouth. And we have an asset, and
we believe we can continue to barter this if we send some of the
natural uranium to the contractor in return for the work that they
will do for us.
Mr. FRELINGHUYSEN. Why not Paducah?
Mr. HUIZENGA. That is a good question.
Mr. FRELINGHUYSEN. Well, that is why I asked you.
Mr. HUIZENGA. Sir, I will have to look into it. I know we are focused right now. I mean
Although the Departments current Secretarial Determination on uranium transfer was approved to support the acceleration of cleanup activities at Portsmouth, it
is possible that future transfers, if any, could be considered for use to fund Paducah
activities. However, currently planned cleanup activities of Paducah are supported
by appropriated funds. Decontamination and decommissioning of the actual Gaseous
Diffusion Plant (GDP) is not within EMs current baseline scope because the United
States Enrichment Corporation currently leases and operates these facilities.
Mr. FRELINGHUYSEN. I hear a lot about Paducah.

Mr. HUIZENGA. We are doing different work at Paducah, obviously, because at the moment they are still operating and we have
got a solid budget request for Paducah, so we think we are okay
there.
Mr. FRELINGHUYSEN. The fiscal year 2012 conference agreement
directed you to, and I quote, provide the full details of any proposed barter, transfer, or sale of uranium in your budget request.
How much additional funding do you expect to generate for cleanup
activities through these transfers, and why were you not able to
provide this information in your budget request as we so clearly directed?
Mr. HUIZENGA. These numbers depend, in part, on the uranium
market, and I think that what we tried to do is provide a sense of
our intention in this regard. And then, as we continue to want to
do these on a quarterly basis, then we intend to get the signature
authority correct and then we will send the letters up to you.
Mr. FRELINGHUYSEN. Please do. Mr. Visclosky.
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Mr. VISCLOSKY. Mr. Podonsky, in the past, and I talk about the
past, the Department has tended to not give adequate attention to
the issue of safety and safety culture, and particularly at Hanford,
but not necessarily limited to Hanford. I appreciate the fact that
you had the Defense Nuclear Facility Safety Board study, contractor had a study, and the department has self-initiated two
studies. If you could, for just a minute or two, bring the subcommittee up to speed as to what you and Mr. Huizenga are doing
relative to making sure that there is transparency, there is an
openness of culture, and that safety is going to be at the forefront
here.
Mr. HUIZENGA. I attach a lot of importance to it.
Mr. PODONSKY. As we do, too. And I want to thank you for asking me that question. I was enjoying the hearing up to now.
First of all, if you will indulge me, we are responsible for independently assessing the performance of the department in terms of
environment, safety, health, safeguard cyber. Nuclear safety culture is something that is not new to the department. The recognition of its importance is what is slowly becoming more apparent.
When we look at what transpired, first with the Defense Board,
Defense Nuclear Safety Board, about a year and half ago, looking
into a whistleblower issue out at the Hanford site, the former assistant secretary on Ines Triay contacted my office and asked us to
take a look at what was going on at the same time. And that was
the genesis of the first report that we produced.
And to understand that first report, we did identify issues, but
we used our nuclear safety engineers. We used our technical capabilities, but what we did not have a recognition of, and that is the
need for experts in safety culture. So, we reached out to the NRC
and, following their years of experience, we actually brought on an
external expert in nuclear safety culture, in behavioral sciences,
and so that was the basis for our next review that we have done.
And I have to do this in order to answer your question because
it is complex. BNI, to their credit, as I would expect any good contractor to do a self-assessment, and that is what they did. They
brought in some experts that they hired to do a self-assessment on
their operation.
So, you have four reports: our two and the two you just mentioned. What they all have in common is that they all identify that
there are concerns. The varying degrees are the Defense Board, I
would characterize it as having a chilled atmosphere is what they
refer to out at the Hanford location. BNI identified it as isolated
incidents. And then our report said it was much more pervasive
than that in the second go around.
What this has done, especially the most recent report that we
did, and not meant to be a self-serving statement, but we used
some rather rigorous focus groups, very structured interviews, as
well as proven surveys of the staff out there as to what they were
really feeling so we could reach into what the workers felt and
could get to the folks that really had not already spoken before or
maybe they did not feel safe in saying anything. And we actually
penetrated that barrier through our processes using our experts.
So, that brings us to where we are now. The Department, the
contractor out there, the management out there, my colleague Dave
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Huizenga, the Secretary of Energy, all of us now recognize the extent of the problem which we did not understand before. None of
us really understood how pervasive the issues are. Not the fear of
raising issues, but as we said in our report, the concern that nobody is really interested in hearing about these issues, that the
project costs and schedule were trumping safety. That was the biggest difference. And what the Department is doing now is I believe,
with the embracing of the recommendations, both in our report, the
Defense Boards Board Recommendation 20111, some of the findings that the BNI folks identified for themselves, I have every confidence that Dave Huizenga and his leadership, with the support
of Tom DAgostino and the Secretary of Energy, are going to start
addressing these issues in a very systematic way. The proof will be
in the pudding. The workers have to believe this. The workers have
to believe that they can raise issues without concern of reprisal
without fear of retaliation, and that is a tall order for this department.
Mr. FRELINGHUYSEN. Will the gentleman yield?
Mr. PODONSKY. Absolutely.
Mr. FRELINGHUYSEN. Have conditions improved?
Mr. PODONSKY. Since our first report, Chairman, yes, there have
been improved conditions. Since our current report, I would tell you
Mr. Huizenga in his capacity as managing the EM organization for
the Secretary of Energy, whatever title you give him, he has taken
more interest than any other person that I have seen at that level.
He has been out to Hanford almost as many times as my team has
been out there and maybe more. That hands-on personal involvement of Department leadership makes all the difference in the
world because then the contractors know that we are serious. The
Federal staff begin to believe us. And I believe what Mr.
Huizengaand it is not because he is sitting next to me, I am telling you I have seen the actions, that I believe that EM is going to
move out in the direction that it has not previously done.
Mr. FRELINGHUYSEN. If the gentleman will continue. You know,
allegations come up and they have to be considered seriously. Some
of them may be old, but I assume you take a look at whether they
are fresh allegations. But the general question, are conditions better than they were? Has the safety culture improved?
Mr. PODONSKY. We have seen
Mr. FRELINGHUYSEN. Thank you for yielding.
Mr. PODONSKY. Sure. We have seen some evidence of improvement but I will tell you, just I am concerned that we must make
sure that all Federal managers and contract managers understand
the seriousness of safety culture. Just today in the Weapons Complex Monitor there was an article that talked about one of the
whistleblowers registering a concern because during the course of
our enforcement activities, that it appeared that an Environmental
and Nuclear Safety manager at URS was not being allowed to be
involved in interviews that we were conducting. And I will just tell
you, to me, as the independent overseer of the Department, that is
a clear indication that there still needs a whole lot of work to be
done within the framework of both the Federal management and
contract management to understand that even if you have best interests in mind for your corporation, you still cannot allow people
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to feel intimidated, even if you just have an attendance in a meeting.
Mr. VISCLOSKY. Or people having the opinion that no one is listening, forgetting the issue of whistleblowers. I congratulate you
because I am not an apologist, as you know, for the Department
on a regular basis. I have been disappointed in the past on the
issue of the safety culture. That too often, well, it is a disgruntled
employee. Sometimes whistleblowers are wrong or incorrect, sometimes they are very right, but it has tended to be passed off as discrete individual circumstances. I also appreciate that the culture is
very hard to change, and people do have to understand, no, we are
in this for the long haul.
So again, anything we can do to be of assistance, I would ask you
to do it. I also appreciate that you are taking this, if you would,
approach to other projects within the department. And I congratulate you for that, but would also remind you we will be attentively
following your progress on this, but wish you well on it. Thank you
very much, Mr. Chairman.
Mr. FRELINGHUYSEN. We are going to Mr. Simpson. So, was
thisI happened to see this article as well. Was this something
that occurred last year?
Mr. PODONSKY. No, no, no, sir.
Mr. FRELINGHUYSEN. What is the timetable?
Mr. PODONSKY. This was just in the last few weeks.
Mr. FRELINGHUYSEN. Just a couple weeks. All right.
Mr. PODONSKY. If the subcommittee is interested, I can give you
more articulation on this. But I do know that we expressed our
concern to Mr. Huizenga and Mr. Huizenga has already taken action.
Mr. HUIZENGA. Mr. Chairman, if I may? I have been talking to
Glenn about this and we are making it very clear, providing guidance to the Office of River Protection out at Hanford and the contractor that no one will interfere with the HSS reviews; that they
will have unfettered access to the documents and to the people that
they need to to conduct their investigation.
Mr. FRELINGHUYSEN. Thank you for your response. Mr. Simpson.
Mr. SIMPSON. Along that same line, you said that making safety
a high priority and making sure that the contractors understand
that it is a high priority to the Department. That is an initial step.
Are there process changes that need to be made in order to more
than just say it is a high priority?
Mr. PODONSKY. Mr. Huizenga I am sure will follow, but if you
will allow me, there is something called a safety-conscious work environment, SCWE, which is an environment where the workers feel
that they can raise issues without fear of retaliation. And I realize
this is a budget hearing. And we can put all sorts of money on
these projects and on these programs, but at the end, it is the leadership. It is the core values that the managers feel. And do they
believe in the safety and do the workers believe in them as well?
And if the workers do not believe the leaders and the managers,
no matter how much money we put on these projects, they are not
necessarily always encouraged to get out there and do the job because they do not always know that they are going to be able to
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do it as safely or raise issues, especially if they have issues that
might improve the process.
So the Department is looking at all sorts of experiences that
were gained today in our other like similar hazardous work, and
so there is a lot that we can do. But the most important thing that
has to happen is that the leaders, like my colleague Dave
Huizenga, like the Secretary of Energy, like the deputy secretary,
need to continuously talk about the importance of safety and prove
it through their actions. So at the end of the day, Congressman,
whether it is a project of a nuclear construction or a nuclear operation, it does not matter. What is important is whether the values
are expressed by actions, indeed by the managers that are out
there, both Fed and contractor. And that is what has to change.
And when the whistleblowerswe talked about the whistleblowers a moment ago from the ranking memberwhistleblowers,
there are some that have good points and some that do not have
good points at all. But they all need to be heard and need to be
felt that they are listened to and what happens to their issues that
they raise. All of that comes together into a safety culture. It does
not happen overnight but it has to be continuous and it has to be
from one administration after another regardless of Republican or
Democratic. It does not matter. Because at the end of the day,
these are our workers and they have to feel they are being protected.
Mr. SIMPSON. Okay. Mr. Huizenga, tell me about DOEs efforts
to respond to the recommendation of the Blue Ribbon Commission.
What is EM doing in this effort and when should we expect to see
a plan from the administration of whether they accept the Blue
Ribbon Commissions recommendations, also, that is going to require onsite storage? And what about spent nuclear fuel apparently
onsite? What is EM doing to make sure that the spent fuel is
stored and safe and its facilities are adequate for a longer than expected period of time?
Mr. HUIZENGA. Thank you. Well, we have been working, of
course, for years to stabilize our spent nuclear fuel. You know that
in Idaho, we have moved a lot of the fuel out of the old wet storage
pools into dry storage, and it can be stored safely there for many
years to come.
Similarly, we have stored Hanford production reactor fuel in a
dry storage building. So we are in the processand also, of course,
we are going to be starting up a facility at Idaho to stabilize the
remaining liquid high-level waste. And hopefully, later in April and
by the end of the year, we will have that material in a stable form.
So our goal is, given the uncertainties that we do have with the
ultimate desire to find a repository for the Nation, we want to
make sure that this material can be stored for several decades safely. And in that regard, we want to ultimately work to find a solution.
So we are working closely with the Office of Nuclear Energy
within the department. The Secretary of Energy has set up a task
force and my staff members are working with Assistant Secretary
Lyons staff members to respond to the Blue Ribbon Commissions
recommendations. I think it is in a six-month timeframe and we
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need to consult with the members of Congress and try to find the
next step and path forward.
Mr. SIMPSON. So we should see a recommendation or a plan within the next six months?
Mr. HUIZENGA. Our intention is to come back up here within that
timeframe and consult with you and put something on the table.
Mr. SIMPSON. Okay. As I understand it, your EM program is responsible for the disposition of excessive plutonium at Hanford.
Pete Lyons and the Office of Nuclear Energy owns the plutonium
at Idaho and the NNSAs. Nonproliferation program is handling
the MOX plant and the excess plutonium at Savannah River. It
seems to me that we have excess plutonium and we have got three
different entities in charge of it. Does this make sense?
Mr. HUIZENGA. I think it does. It actually might be a little bit
hard to explain. But in a sense, the nonproliferation mission that
is being supported with the MOX plant in South Carolina, they
have got a clear understanding and vision of what they are going
to do. Ultimately, they will make MOX fuel out of several tons of
excess plutonium, 34 tons of excess weapons pits. And our excess
plutonium basically is not usable, so we are packaging up the excess plutonium and sending it to WIPP.
To be honest with you, I do not know exactly what any people
I think that they are doing some separations technology and working at the Idaho facility now to try to explore backend of the fuel
cycle. So we each are working in our lane. We are working together. We know what each other is doing. And indeed at South
Carolina, at the Savannah River site, we are using our H-Canyon
Facility to generate feed for the MOX plant to take some of that
plutonium and clean it up and send it off to MOX. And we are
using the H-Canyon to package some material and send it to
WIPP.
I think we each have the plutonium that is best suited for our
particular mission and we are taking care of it.
Mr. SIMPSON. Okay. Has there been any unexpected challenges
in moving EM to under NNSA?
Mr. HUIZENGA. Other than the fact that we might have done a
little bit better job rolling it out, I think thathonestly, all kidding
aside, I really think that there was a wisdom and a vision there.
The mission of the other Under Secretaries is to focus on science
and focus on research and bring home other important activities
within the departments mission. But, of course, the defense programs actually generated most of this waste years and years ago,
so they actually know where it came from and how to deal with it.
And so the synergies that we found by coming under Mr.
DAgostino, the Under Secretary of Nuclear Security and the Administrator of NNSA, it has really made some things much easier
for us bureaucratically inside the building. We can go to him and
talk to him about issues. He has a complete understanding of the
technical nature of the issues. He has a relationship with the Defense Nuclear Facilities Safety Board, so if we have Defense Board
issuesand he is working through Defense Board issues with
NNSA. We are working through some with EM. There is a common
understanding of the terms and the issues. So we are looking for
opportunities all the time to benefit from the fact that we are
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under the Under Secretary of Nuclear Security, and indeed we
found some.
Mr. SIMPSON. Thank you.
Mr. FRELINGHUYSEN. Thank you, Mr. Simpson. Mr. Huizenga, I
would like to have a greater degree of comfort relative to the safety
culture. Did the Department pay the contractor to do its own assessment of some of the problems at the Waste Treatment Plant?
Mr. HUIZENGA. We did pay for the
Mr. FRELINGHUYSEN. Is that a common practice?
Mr. HUIZENGA. It is in the contract fundamentally that if there
are issues that need to be addressed, we will pay for things like
this Independent Review.
Mr. FRELINGHUYSEN. And last November that was done, and
then they reached a conclusion which seems to be somewhat different than Mr. Podonskys.
Mr. HUIZENGA. I think it is different. I think that Mr. Podonsky,
as he pointed out, there was kind of a gradation between the Defense Nuclear Facilities Safety Boards findings, the chilled atmosphere, the independent review by the contractor who, I guess, did
not find as chilled an atmosphere, but also found that there was
a common issue
Mr. FRELINGHUYSEN. I am not impugning anybodyI just wanted to hear how independent it could be if
Mr. HUIZENGA. Well, they selected people with a reputation for
knowing their business and working in the field for many, many
years, and we met with them.
Mr. FRELINGHUYSEN. So would your conclusion be different than
Mr. Podonskys?
Mr. HUIZENGA. No. I think, basically, what I am trying to say is
that, in the end, although each of the reports had slightly different
views on things, they all pointed out that there are issues that
need to be addressed, that there are safety culture issues at hand
that indeed we have to acknowledge and work to try to improve,
and that is indeed what we are doing.
Mr. FRELINGHUYSEN. Well, I am sure you are doing it. What is
your take on this, Mr. Podonsky?
Mr. PODONSKY. Well, I do not refer to the BNI review as independent because I do not see it as independent because it was done
for the contractor by the contractor, regardless of where the funds
came from. And I am not here to impugn their efforts. I am well
aware of all the people that served on that panel. They are very
distinguished qualified people. But again, at the risk of sounding
self-indulging, we used a process that was very structured.
And we learned from our first inspection to bring in external expertise in the area of safety culture so that we could actually get
to understand what the workers were really feeling. Because,
again, if I might, when we first went out and we conducted our
interviews, there was some artificialities in those interviews that
were unintentional. But when you put a lot of people in a room together, they are not always going to open up. The venue does not
allow for it. But the focus groups that we did in the second group,
or second inspection, we had peers talking to one another, and we
did 37 of these and they were anywhere from 5 to 10 employees
each. We had over 250 people we talked to.
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And the point I am trying to make, in our review that we ended
up with, is we ended up with understanding exactly what the
workers were saying and not our interpretation of what the workers were saying. So I think, in the end now, EM and the department I think get the picture of how pervasive the problem is.
Mr. HUIZENGA. If I may, Mr. Chairman, just for a clarification
point. I mean, I think the bottom line is, I went out with Glenn
to Hanford when he briefed out the results of his most recent
study.
Mr. FRELINGHUYSEN. And may we commend you because Mr.
Podonsky said that you have been out there an extraordinary number of times.
Mr. HUIZENGA. Yeah. I am going there again later today. But the
point really, and I think this is important
Mr. FRELINGHUYSEN. If we ever let you out of here.
Mr. HUIZENGA [continuing]. The contractor whoyou know, you
can debate who should pay for the independent review, but the contractor, and Glenn can substantiate this, said that Glenns report
trumps all the reports. I mean, they are paying attention to the
findings in Glenns report to the extent that their report might not
have been as critical as Glenns. They have embraced, and so have
we, the fact that Glenn had some findings that need to be addressed.
So they are not minimizing Glenns report in favor of their own.
We have got to move past that, frankly.
Mr. FRELINGHUYSEN. The companies that are involved in these
activities are well-known and well-respected. And the issues they
deal with are extremely complex, to say the least. But we are dealing with these consent reviews, which I think are important.
Savannah River has been invoked. Mr. Huizenga, the fiscal year
2013 budget proposes that the Savannah River site H-Canyon facility transition to, what is called a modified operations mode. What
are some of the activities that you have planned and do these include reprocessing of spent nuclear fuel?
Mr. HUIZENGA. Yes, they do. We are going to take some fuel that
we believe is at risk and reprocess it through H-Canyon. There is
some fuel that is being stored at Savannah River site that cannot
be stored for a long time. And we are going to process that fuel
over the next year or year and a half through the H-Canyon and
basically send it to the waste tanks so it will not be a vulnerability
in the future. We are also partnering in one of the synergies that
I mentioned with NNSA. So our base funding is on the order of
about $150 million a year to keep the H-Canyon in warm standby
but not actually doing much.
If you make an investment of about $20 million you can run one
of the dissolvers. So the NNSA people are pitching in $20 million
to run one of the two dissolvers to generate MOX feed. We are
going to use the other dissolver to dissolve this fuel. We will continue to actually do some repacking of waste to go to WIPP and the
HB line, which is on top of the H-Canyon. We are going to be continuing to do some R&D to try to purify plutonium that might also
serve as additional feed for the MOX.
Mr. FRELINGHUYSEN. So the bottom line is that you are working
with other programs, right
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Mr. HUIZENGA. Yes.
Mr. FRELINGHUYSEN [continuing]. Offices to identify how to use
the facility as the committee pretty much has directed throughout
the
Mr. HUIZENGA. Yes, indeed. And we are working with the Office
of Nuclear Energy as well to look at backend of the fuel cycle research and development opportunities that they might be able to
use the canyon for.
Mr. FRELINGHUYSEN. We are glad to hear that. Mr. Visclosky.
Mr. VISCLOSKY. Thank you, Mr. Chairman. Mr. Huizenga, I
would like to discuss the issue of project management and design
while under construction. The Department has said that it will no
longer begin construction on projects before the design is complete
as part of its efforts to get off the GAO high-risk list. Yet, this past
August, a contractor was allowed to weld shut the vessel heads
where the Department continued construction and despite existing
unresolved design issues. Why was that decision made and what
were the circumstances? Is this the exception to the new rule or
have we gone back to construction while design is underway?
Mr. HUIZENGA. Well, we made a decision, for better or worse, a
long time ago on the WTP project to have it be a design-build
project. And of course, the desire is always to have your design
running far enough ahead of your construction that you do not
have such a narrow gap that you run into issues. This vessel welding is probably one of those areas where we are narrowing. And the
fact of the matter is it was a management decision to keep moving,
making progress. The vessels were in the shop and the next step
was to weld the heads on. Time will tell whether, in the end, that
was a good management decision because we will be able to place
those vessels on schedule or whether we are going to have to actually take the tops off the vessels and make some adjustments to
the mixing devices that are inside.
You know, we have got an aggressive testing program that will
go on for the next year or more to test the performance of those
vessels to mix the complicated waste that will come out of the
tanks and be processed in the pretreatment facility. But at this
point, it is a function of the fact that we are moving along in a design-build mode, and we try ever as we may to not have these situations where we are creeping up on a decision before we have all
the testing done. But in this instance, and with the complicated
issues of mixing, we are running pretty close.
Mr. VISCLOSKY. When will we know whether it was the correct
decision or not? When will that determination be made?
Mr. HUIZENGA. We probably now are not realistically going to
know for about a year.
Mr. VISCLOSKY. Okay.
Mr. HUIZENGA. But suffice it to say that, you know, this comes
back to one of the safety culture issues. Some people are concerned
that we are going to install those vessels and we will not know
really whether they are actually going to function safely, and we
have got a hold on that.
The vessels are in the shop and they are being stored. They will
not ultimately be installed, because if we are going to have to actually make some adjustments as a result of our increased knowledge
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through the testing program, we are not going to be able to do it
once they are installed, and we recognize that. So we are going to
hold off, complete our testing, and then be able to install them.
Mr. VISCLOSKY. I appreciate knowing that. Are there any other
circumstances right now where we are close as far as continuing
construction relative to where we are in design, or because of just
the inertia involved whatever may be structurally, will some of
these circumstances still exist despite the Departments decision to
make sure they have extended design out far enough to avoid this
in the future? Are there others we should be cognizant of?
Mr. HUIZENGA. There are other issues associated with piping and
other vessel issues. And as a matter of fact, we, recognizing that
this is an important area and we need to get it right, we have just
recently issued direction to the contractor to demonstrate to us that
some of these things that are questionable are actually completely
consistent with our design margins. So we are actively engaged in
this discussion with the contractor.
Mr. VISCLOSKY. If you could, for the record, provide a list of the
major circumstances where this exists? Because again, I am concerned that, given past culture, we are going to design before we
construct. But that is what we have been saying for 20 years out
here, to again make sure that the contractor understands. This is
a different day.
Mr. HUIZENGA. We certainly
Mr. VISCLOSKY. I have been on this subcommittee through three
administrations. And from my perspective, it has been a bipartisan
failure with the Department that we continue to be on this highrisk list. And we are in the third year of the administration and
I would hope people, if we are serious about it, know the culture
is changing on that aspect, too.
Mr. HUIZENGA. Yes. We can provide some stuff for the record. I
would just point out, one of the issues is well-known to the Defense
Nuclear Facilities Safety Board. There are some questions on potential erosion and corrosion in these vessels. If the waste itself is
particles that are abrasive when you are shooting them through at
high velocity through the pipes and into the tanks, it can erode
some of the stainless steel. So we are looking at that very aggressively.
The two largest line item projects within Environmental Managements portfolio,
the Waste Treatment Plant and Salt Waste Processing Facility, are both being constructed under design build contracts. The design maturity of the Salt Waste Processing Facility has reached a state where there are no instances where the project
is in construction with significant design risks still in existence.
At the Waste Treatment Plant, the project is currently moving from a design and
construction focus, to construction, start-up and commissioning focus.
Mr. HUIZENGA. I guess, if you do not mind, if I can just take a

second to address maybe some of the issues that Glenn was raising.
I mean, I am on my way to Hanford for the fourth time since coming back to EM. I take this very seriously. I have had two all-hands
meetings talking with the people out there about the importance of
safety.
But back to one of the questions that was raised, you know, is
this just rhetoric? And I want to try to explain what we are doing
to institutionalize the fact that safety is important. And ultimately
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we are not going toyou know, nobody wants to run this facility
if it cannot be run safely.
So the people that have been raising the issues about erosion and
corrosion for some time now, I have sat down with them the last
time I was out there for two hours and went through their complex
and technical list of questions. And I think what we are doing, as
we are trying to do as Glenn suggested, to demonstrate that we actually are interested in understanding the problem.
And again, we might not all ultimately come to the same conclusion, but we are going to have a transparent discussion of the
issues and communicate back to people, okay, this is how you feel
and why you believe this iswe either agree with youas a matter
of fact, sometimes we have agreed with people and have actually
gotten back to them and told them that we agreed with them. So
we need to do a better job of tracking the issues and getting back
to people. And that is basically I think what we are doing to institutionalize the fact that it is a different day.
Mr. VISCLOSKY. And I would encourage you to continue those efforts. And, again, just so we can have that list of legacy, if nothing
else. I understand you may have some legacies where you are close,
and there may be extenuating circumstances, but there ought to be
a limited universe, and nobody added to it.
Mr. HUIZENGA. We do not need to keep doing that, I think is
your point.
Mr. VISCLOSKY. Mr. Chairman, one other question. On the Separations Process Research Unit in Schenectady, DOE was criticized
by EPA for a number of failures such as not properly evaluating
whether there was a risk of releasing contamination into the environment. Do you agree with EPAs criticism or take exception to it,
is the truth somewhere in the middle?
Mr. HUIZENGA. Yes. I mean, it was, again, kind of an administrative issue that needed to be worked through with EPA relative to
the NESHAPs permit requirements. We have done that now, we
are in agreement now and understand our path forward. It
stemmed, of course, from the initial problems in the fall of 2010,
when one of the tanks was pulled out inappropriately and started
to be cut up, and some contamination was released on the site. So
what we are doing now to address that and work closely with the
EPA is we are putting in closures over the two main structures, the
two main cleanup buildings. And we will have a ventilation system
so we will not have a possibility of having a repeat of the problem
we had before.
Mr. FRELINGHUYSEN. So why do you need the ventilation system?
Is the contamination such that you
Mr. HUIZENGA. There were lowthere were relatively low levels
of contamination. But, indeed, there is some contamination on the
pad in these buildings, in one of the buildings in particular.
Mr. FRELINGHUYSEN. Is this required by the EPA?
Mr. HUIZENGA. Ultimately, this was basically thought to be the
best approach.
Mr. FRELINGHUYSEN. Okay. Mr. Simpson, thank you.
Mr. SIMPSON. Thank you. I do not have anything else. I just was
going to ask you how you handle differing professional opinions,
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and how you handle whistleblower complaints and that kind of
stuff. Because I handle them as a big deal, and whether people believe that safety is a big issue and that you are concerned about
their concerns. Understanding that sometimes people that have different professional opinions or have concerns about whistleblowers
are going to hold to their opinion no matter what you do sometimes. And being able to at least say you have addressed them is
a big issue, so I appreciate your previous answer.
Mr. HUIZENGA. Relative to the differing professional opinion, this
example of erosion/corrosion, that is a particular area that a gentleman has been concerned about for some time, and he has been
respectfully working through the system. Ultimately, he filed a
DPO. But I think that he finallynow, he actually forwarded me
the letter that he worked on to forward to the contractor to tell
them to address this issue. So he is seen, he is engaged in seeing
action, he is actually part of resolving the issues that he has
raised.
Mr. FRELINGHUYSEN. Good. I appreciate it, thank you. The Paducah plant is facing some difficult choices, including a real possibility of closing down. It is in Richmond. What happens, do we end
up taking it back, or what does that mean?
Mr. HUIZENGA. Ultimately, I am sure, of course, the Paducah facilities will come back, just like Portsmouth did and the facilities
at Oak Ridge. The timing is important to us. We hope that the
USEC Corporation can continue to operate the facility for another
year or more as they are also trying to bring the ACP facility on
in Ohio. It is a little unclear right now as to whether there is a
business case for that. And we have been working actively with
them to try to look for ways to continue to have USEC operate Paducah.
Mr. FRELINGHUYSEN. Is there any funding in question in the
budget relative to this?
Mr. HUIZENGA. Not for USEC itself, obviously. We are working
with them on various ways to look for opportunities to
Mr. FRELINGHUYSEN. But taking the facility back.
Mr. HUIZENGA. Oh, I am sorry, I misunderstood. No, that is a
pretty clear answer, there is nowe have no money in our budget
to actually take over for USEC in 2013. If they are unable to continue their operations, we will have to be back up here talking with
you.
Mr. FRELINGHUYSEN. You invoked in your opening statement
Oak Ridge. The Department has recently proposed an alternative
approach for removing Uranium-233 from Oak Ridge, which would
save a significant amount of funding from the previous plan of
record, which required expensive building modifications to down
blend the materials. You expect savings from the original plan?
And, if so, how much?
Mr. HUIZENGA. I cannot quantify it, I have to take that for the
record. But I can tell you that, again, this is an area, when faced
with the fact that we have some real financial constraints, we
looked for better solutions, working smarter not harder. So about
half of the material that was at risk in this building is going to
besome of it will be reused and shipped to the Nevada site for
NNSA to use the material.
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As a result of the Phase 1 alternatives analysis, documented in January 2011, the

Department decided to pursue direct disposition (involving either the transfer of valuable U233 components to other DOE Programs for additional mission use, or the
direct disposal of eligible components without processing) of approximately half of
the U233 inventory. For the remaining inventory, decisions are yet to be finalized
regarding the location and detailed plans for required processing, but will likely remain onsite. The final Draft Phase I Alternatives Analysis Report screened all of
the Oak Ridge National Laboratory (ORNL) hot cell facilities for availability and
suitability as potential alternatives to the use of Building 3019 for dissolving and
down blending the remaining inventory to meet waste acceptance, security, and
safety requirements. Buildings 2026 and 3047 were identified as the two most suitable facilities at ORNL, and both of these facilities are being further examined in
the Phase II analysis. The Phase I report also suggested that the baseline plan involving construction of a new annex for drying and packaging the down blended material could be avoided by co-processing with a larger, existing waste stream at
ORNL that needs to undergo treatment in any case.
While a review draft of the Phase II analysis has not yet been completed, and
no decision has been made, preliminary indications are that Building 2026 (which
is located directly across the road from Building 3019) is the more attractive alternative due to cost and safety considerations and also because it has the least potential for competing programmatic demands. Building 2026 is not currently in use; the
cost of any necessary modifications to Building 2026, as well as subsequent canisterby-canister processing, is expected to be far less than the original approach that involved retrofitting of Building 3019 and U233 processing operations in a high security, high hazard environment. The Phase II report is also likely to endorse the
Phase I conclusion that after waste is moved from Building 2026, co-processing
down blended material with existing sludges at the Oak Ridge Transuranic Waste
Processing Center (TWPC) is the most cost-effective and least risky approach for
final preparation of an acceptable waste form to ship offsite.
The final cost savings are expected to be substantial when compared to the baseline estimate to process all of the remaining U233 inventory in Building 3019 and
a newly constructed an adjacent annex for drying and packaging.
Mr. FRELINGHUYSEN. This has been going on for years, has it

not?
Mr. HUIZENGA. Yes, it has. But we found there was material
there that actually had a use, I guess is the point I am trying to
make. So, instead of trying to build a facility, a complicated, expensive facility, to turn something that had a use into trash and dump
it, we are actually going to use it working with NNSA, or NNSA
will use it. So we are transferring title to NNSA.
Mr. FRELINGHUYSEN. So there is a solution in the offing
Mr. HUIZENGA. Yes, that
Mr. FRELINGHUYSEN [continuing]. And a timetable of some sort?
Mr. HUIZENGA. We have already started shipping some of this
material to the NNSA facility, so we are making steady progress.
Mr. FRELINGHUYSEN. Okay. Mr. Visclosky.
Mr. VISCLOSKY. Thank you, Mr. Chairman. The Department has
asked for a large increase for the tank farm activities to prepare
tank waste for reprocessing once WTP is operational, but we do not
have an update from the Department on project execution for WTP,
nor any details on preparations for the tank farms needs to be
completed. Why should the subcommittee support financially
ramping up the tank farm when there may be imminent changes
to the WTP program?
Mr. HUIZENGA. Yeah, that is a good question. But I think what
has happened in the past is we had ramped up funding for WTP,
and, frankly, we just recognized now that, ultimately, we need to
have feed for the tank farms come at the right time for WTP. And
we needed to actually beef up the funding and increase the funding
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for tank farms to help them, basically, be able to provide feed when
WTP is ready.
Mr. VISCLOSKY. So you are looking for the waste stream for the
stock to catch up to the WTP?
Mr. HUIZENGA. Yes, sir. They are continuing to add infrastructure and improvements that need to be taken care of. Those tanks
are, of course, many, many years old. They have characterization
activities that are necessary to understand the nature of the feed
that will be fed into WTP. They also have their own Consent Decree milestones relative to continuing to empty out the tanks. So
they have a number of drivers and are trying to be responsive to
those needs.
Mr. VISCLOSKY. And I did not know as I asked the question, I
guess that is why I am asking the question. I am assuming the
Subcommittee has information as to the time frames for both WTP
and the tank farms, then
Mr. HUIZENGA. As to
Mr. VISCLOSKY [continuing]. So that they will be coincidental as
far as the waste stream?
Mr. HUIZENGA [continuing]. Linking those up? If you do not, I am
sure that we would be happy to provide it.
The baseline for the Tank Farms Project continues to be aligned with the baseline
for the WTP Project in terms of when waste feed, secondary waste treatment, and
immobilized waste storage will need to be available. Recently, the project has also
initiated a One System approach that is focused on preparing for the startup and
operations of the WTP under a single manager with staff from both the Tank Farms
and WTP contractors. This approach represents a significant evolution in focus from
design and construction of the WTP to preparations for commissioning, startup and
eventual operations of this facility. This One System approach will integrate Tank
Farms and WTP Project contractual, schedule, technical and other elements in preparations for the start of and sustained tank waste treatment operations at Hanford.
Mr. VISCLOSKY. Okay. One other question, if I could, on baselining of major construction projects. EM has a number of ongoing
construction projects that either are trending behind schedule or
over budget. WTP and the Salt Waste Processing Facility in Savannah River now require restructuring of their project execution
plans to make up for the delays. What is the end process for rebaselining these programs and staying in touch with Congress so
that as there is a re-baselining, there is going to be congressional
support for the financing?
Mr. HUIZENGA. We are going to have to have repeated dialogue
with the WTP over the course of this year. Our intention is to
the contractor is now developing a proposed new baseline for our
consideration, it will be prepared sometime in August time frame.
And then we will take a look with our internal review, do an independent cost estimate of their proposal, and sometime by the end
of the year or early next year, we would hope to have the new baseline in the contract renegotiated and in place.
On salt waste processing, we ran into some difficulties with 10
of the vessels, similar to the vessels you mentioned that we welded
the heads on at WTP. They are similar vessels that will be used
in the Salt Waste Processing Facility, and they are being manufactured more slowly, frankly, than we had hoped. So we are having
to do some pretty significant workarounds. We are having to keep
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part of the roof open so we can lower these vessels in as soon as
they are delivered, which we hope is going to be within the next
few weeks. But after the vessels get in, we are going to have to
take a look at the remaining baseline, and we will have to come
back up and consult with Congress on that, as well.
Mr. VISCLOSKY. May I encourage your efforts on the re-baselining
and getting some resolution, becauseand, again, you and I have
not had this conversation, but I have had this conversation with
witnesses over several administrations, and it would be a relief not
to have this conversation again. So I just encourage you, and whatever we can do, we are at the end of our rope here and we are serious about this.
The first conversation I had with the Secretary when he was
nominated is, and I am not being facetious here, I do not care what
your energy policy is, but if you cannot manage some of these
major projects and have the taxpayers money controlled by Federal
employees who are charged with running these, you are never
going to be able to implement your policies. So I just really encourage, and I have a lot of faith in both of you, but just anything we
can do, because, man, I am tired of having this conversation.
Mr. HUIZENGA. I do not blame you, and I would love to not have
this conversation with you, again, sir.
Mr. VISCLOSKY. That may be one reason why you are leaving
town.
Mr. HUIZENGA. The good news is, at Idaho, we are making the
final preparations to start up the Sodium Bearing Waste Treatment Facility, one of our major construction projects. And if things
come together as we hope they do, we will start it up and finish
the job by the end of the year as the consent agreement requires
us.
Mr. VISCLOSKY. Work hard and good luck.
Mr. HUIZENGA. Yeah. I have spent some time with Gene Aloise
shortly after coming to this position to try to understand GAOs
issues and what they have been, what their concerns have been. So
I think that we havethey are institutionalizing the project reviews, working closely and getting out in the site, understanding
their issues, not letting them fester or be able to build up and be
surprises later on. I think we are making some steady progress.
Mr. FRELINGHUYSEN. Mr. Huizenga, you have worn many hats.
Mr. HUIZENGA. I have.
Mr. FRELINGHUYSEN. Did you start with EM and then move over
to NNSA?
Mr. HUIZENGA. I started at Hanford in 1985 and came to Washington in 1987 on a three-month detail. But then we worked together on nonproliferation issues for about a decade when I was in
the former Soviet Union locking up materials.
Mr. FRELINGHUYSEN. We hope they are locked up.
Mr. HUIZENGA. Glenn actually helped us on a couple of those, as
well, sharing lessons learned from his security experts with our
Russian colleagues.
Mr. FRELINGHUYSEN. From those closed nuclear cities, right?
Mr. HUIZENGA. Uh-huh.
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Mr. FRELINGHUYSEN. Well, you said such kind and positive
things about Idaho, I guess that means I have to yield to Mr. Simpson.
Mr. SIMPSON. That is all right, I am done.
Mr. FRELINGHUYSEN. You are done? I do have a question related
to your reductions for protective forces. I know there is always a
balancing act here. Can you talk a little bit about what that
means?
Mr. HUIZENGA. That, actually, is a good news story, thank goodness.
Mr. FRELINGHUYSEN. And before you leave here, at Defense hearings, I often pose the question, is there any question that we did
not ask you which you thought we ought to know about? So when
you respond to this, if either of you would like to make any comments about things that perhaps we have overlooked that are important that you would like to highlight, we would welcome that.
Mr. HUIZENGA. Yes, sir. Relative to the security budget and the
safeguard budget, the Department undertook an effort to harmonize, I think is the word they were using, the approach between
the Defense Department, DOE and NNSA on securing materials.
And we found some areas that we mayGlenn may know more
about this than I do, because he might have been more directly involved. But the fact of the matter is, we might have been overprotecting material, which is good, but if you do not need to, you do
not have to spend the money on it. So we found ways to actually
adequately protect material for less cost. So, in some areas, we reduced the cost, not because we are setting ourselves up for failure,
but because we actually believe we can do this in a more cost-effective way.
Mr. FRELINGHUYSEN. So, Mr. Podonsky, you are implementing a
new safety and security reform plan, you are moving in that direction. How do you view
Mr. PODONSKY. Well, Mr. Chairman, we are looking at how we
can spend limited resources more wisely and more effectively. And
in a post 911 environment, when none of us really understood
what was going on 10 years ago, we even had tanks on top of Hoover Dam, but we did not know what we were dealing with. And,
as Mr. Huizenga has said, we are looking at how do we save cost
but still provide effective security?
And what him and other elements of the Department are doing
in following guidance that is coming out of my organization is we
are looking at what the threat is at our sites, and how we are protecting it with our physical protection, and can we use other strategies, can we use technologies? The traditional guards, gates and
guns is not necessarily always the most effective when we look at
the world events today. So the department, in partnership with
DOD, as well as NRC, are examining what the threats are and how
best to protect, and there are cost savings to be made. I would, if
I might
Mr. FRELINGHUYSEN. Yeah, jump in.
Mr. PODONSKY. There is one thing that in your opening statement, Mr. Chairman, you asked how can we dohow can HSS do
our expanded responsibilities with the budget going down? And I
would tell you that we will continue to do our mission and we are
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prioritizing our costs so that we can, indeed, increase our nuclear
safety and nuclear security oversight for the department. Where we
are cutting our own budget that the President gave us and the
Congress approved last year and the one that we are coming into
now is we are cutting out programs that are not adding any value.
We are cutting out programs that are redundant in others areas
that we have covered. It is called being fiscally responsible.
We are not in this business to always ask for more. We are going
to do more with less, because that is what we have to do. We have
a responsibility that came out of language from last years Appropriations Bill to have us look at safety construction in the projects,
and we are going to be able to do that with the plus-up in our oversight, and taking away from areas like some of our headquarters
security posture that we have. We are also responsible for headquarters security. We do not need all the funds that we currently
have, and that is why our budget reflects a $5 million decrease.
Mr. FRELINGHUYSEN. We appreciate that effort, that degree of
conscientiousness. Mr. Huizenga, anything further for the record?
Mr. HUIZENGA. Well, I looked over my list of questions I thought
you might ask, and you did a pretty good job, so I am not going
to suggest. But if I may, I would just point out, we submitted a request that was lower than we have for the last couple years. And
we recognize that you have constraints, but we are right down to
the bone now relative to meeting our compliance agreements, and
we are hoping that you are going to be able to do what you can
do support the request. Because I think we are demonstrating that
we are making a difference at these sites and making a difference
for the taxpayers, and we would like to continue to do that work.
Mr. FRELINGHUYSEN. Well, I thank you both. Before you get out
of Dodge here, I have one question. Mr. Huizenga, this is the fourth
year in a row that the department has attempted to reauthorize
Federal industry contributions into the uranium enrichment D&D
fund as part of its budget request. Why should this subcommittee
go forward now and instruct the domestic nuclear industry to take
on additional obligations?
And, secondly, when do you predict that the fund will be exhausted, and what work have you done to understand the full cost
of the cleanup efforts? I know that is a rather all-encompassing
way to finish out the hearing here, but we want to
Mr. HUIZENGA. We know, Mr. Chairman, that ultimately this
money, of course, is for the D&D of Portsmouth and Paducah facilities and the facilities at Oak Ridge that the fund is short. So that
is why we actually are hoping to actually make a contribution to
it again this year. We would request, I think, 20 million more than
we are actually hoping to pull out so that that money can stay in
there and earn some interest, and ultimately benefit us. Relative
to the industrys view on this, I am sure they will have a view and
we will have to take that, you will have to take that into account.
But we know we are going to need more money than is in the fund
at this point, so sooner or later, we would like to try to build it
back up.
Mr. FRELINGHUYSEN. All right. Mr. Visclosky, anything further?
Mr. VISCLOSKY. Nothing, Chairman.
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Mr. FRELINGHUYSEN. Thank you both, and all the people who
worked with you, we appreciate your work. Meeting stands adjourned.
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TUESDAY, MARCH 27, 2012.

DEPARTMENT OF ENERGYENERGY EFFICIENCY AND
RENEWABLE ENERGY & FOSSIL ENERGY & OFFICE OF
ELECTRICITY DELIVERY AND ENERGY RELIABILITY
ASSISTANT SECRETARY
WITNESSES
HENRY KELLY, ASSISTANT SECRETARY FOR ENERGY EFFICIENCY

AND RENEWABLE ENERGY (ACTING)
PATRICIA HOFFMAN, ASSISTANT SECRETARY, OFFICE OF ELECTRICITY DELIVERY AND ENERGY RELIABILITY
CHARLES McCONNELL, ASSISTANT SECRETARY (ACTING), FOSSIL ENERGY
Mr. FRELINGHUYSEN. Good morning.

Ms. HOFFMAN. Morning.
Mr. FRELINGHUYSEN. I would like to call this hearing to order;
the Subcommittee on Energy and Water Development meets this
morning to hear testimony on the fiscal year 2013 budget request
for the Department of Energys research and development programs for Energy Efficiency, Renewable Energy, Fossil Energy, and
the Electricity Delivery System.
We would like to welcome Henry Kelly, the Acting Assistant Secretary for Energy Efficiency and Renewable Energy, Patricia Hoffman, the Assistant Secretary for Electricity Delivery and Energy
Reliability, and Charles McConnell, Acting Assistant Secretary for
Fossil Energy.
Dr. KELLY. Morning.
Mr. FRELINGHUYSEN. Good morning. Our country continues to
face the prospect of even higher gasoline prices. While the public
might think that the Department of Energy, and specifically the
programs represented here today might be responsible for setting
this countrys energy supplies on a more secure footing, I suspect
they should not expect much change from a year ago.
We still import nearly two thirds of the oil we use and 96 percent
of our trucks, cars, and planes still depend on oil, while demand
is skyrocketing in countries like China and India for the same energy sources we rely upon, and with much of the worlds oil supply
in the hands of those who do not like us, we must focus on our own
backyard and take a look at what should be made more accessible.
The President makes a strong call in the State of the Union
Speech for the all of the above energy strategy and I would like
to take him at his word. Unfortunately, his budget request appears
to be more ideologically driven than driven by practicality. It cuts
the very account, fossil energy, which could have the most immediate impact on the prices at the pump and electricity.
Nuclear energy, which we considered before this Subcommittee a
few weeks ago, is the other major source for todays electricity.
(113)
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That same request would cut its budget by more than 10 percent.
At the same time, the request would increase energy efficiency and
renewable energy by 28 percent.
Even the rosiest scenarios for renewable energy predict only a
marginal contribution to job creation coming from this sector. In
other words, the Presidents budget request would accept higher
prices for gasoline and electricity today in order to dump hundreds
of millions of dollars into energy sources, which will only provide
a marginal amount of power for years to come. These priorities are
raising questions among members of Congress, and across the
country, and many people at home are rightly upset.
In the Energy Efficiency and Renewable Energy account, the Administration is asking for hundreds of millions of dollars to improve electric vehicles, solar, wind, and energy efficient technologies, and to increase the sources that we actually depend on
each and every day.
The story for American based manufacturing, a top priority of
mine and I know for my ranking member, is more mixed, while the
cuts to nuclear and fossil energy research and development would
certainly be a setback for American innovation and may likely continue the flight of companies to less regulated world markets. The
request would more than double funding for advanced manufacturing research and development within EERE.
Precisely how that funding would be used and to what advantage
is not fully clear in the budget request materials. And I expect well
have much time today to explore this this morning.
I ask that each of you please ensure that the hearing record, the
questions for the record and any supporting information requested
by the Subcommittee are delivered in final form to the Subcommittee no later than four weeks from the time you receive
them. Members who have additional questions for the record will
have until close of business tomorrow to provide them to the Subcommittee Office. And at this point I turn to Mr. Visclosky, the
ranking member, for any comments he wishes to make.
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118
Mr. VISCLOSKY. Thank you very much, Mr. Chairman. I understand my statement and its entirety will be entered into the record.
Good morning, Doctor Kelly, Ms. Hoffman, and Mr. McConnell, and
along with the Chairman, thank you very much for being here
today.
The U.S. Energy Sector faces myriad challenges that pose a persistent threat to our economy, national security, and environment,
cars and trucks of our citizens. The ships, planes, and tanks of our
military rely heavily on petroleum fuels, much of which is imported
from overseas. Power prices continue to increase and our electricity
supplies depend on energy sources, they give off emissions, and operate on an aging electric power grid.
Today we consider the budget request for applied R&D activities
at the Department of Energy aimed at addressing the many difficulties we face. These programs, Energy Efficiency, Renewable
Energy, Fossil Energy, the Office of Electricity Delivery, and Energy Reliability are all critical.
The budget request for Energy Efficiency and Renewable Energy
represents a large increase of 30 percent over this years level. Doctor Kelly, in this budget setting, I hope that you have come prepared to discuss how this large increase could be used efficiently
and effectively in pursuit of our energy independence.
I am particularly interested in your justification for the large increase to the advanced manufacturing office, formerly known as the
industrial technologies program. I believe that strengthening American manufacturing and returning to making things in America is
not only the best source of job creation and economic recovery, it
is an imperative.
I am hoping that the Department has a sense of urgency in this
area and can provide details on your plan. The request for fossil
energy represents a reduction of 21 percent from the program level
of 2012. I appreciate and understand the Administrations belief in
renewable energy and that it is its preferred path towards our future.
While I agree that renewable energy is a necessity, Mr. McConnell, I hope that you can explain why the reduction in fossil energy
is appropriate at this time. Given that fossil fuels meet around 83
percent of U.S. energy demand, and I dont anticipate that is going
to significantly change next month or by this summer, I would like
to understand what the Department is doing to deliver technologies
that can provide cleaner, low carbon electricity generation using
domestic sources of coal and natural gas.
The budget request for the third participant in the hearing, the
Office of Electricity, Delivery, and Energy Reliability is approximately equal to 2012 levels. Given the importance of the electricity
grid, I would like to understand how this program will allow the
nation to maximize existing resources and allow the expansion of
clear energy generation through the modernization of the nations
electricity transmission and distribution system. Mr. Chairman,
thank you for the time.
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121
Mr. FRELINGHUYSEN. Thank you; Doctor Kelly. Thank you for
being here and your remarks, in total, will be on the record, but
please proceed.
Dr. KELLY. Thank you, sir. Mr. Chairman and ranking members,
members of the Committee, for letting me come here and talk
about the fiscal FY13 Energy Efficiency and Renewable Energy
budget proposal. And
Mr. FRELINGHUYSEN. You may have to move that microphone a
little closer.
Dr. KELLY. All right.
Mr. FRELINGHUYSEN. Thank you.
Dr. KELLY. Or talk a little louder. In the State of the Union, as
the Chairman mentioned, the President called for an economy that
is built to last and one that is built to support his commitment to
safely and responsibly harness all of Americas energy resources in
an all of the above energy strategy. And renewable energy and energy efficiency are a key part of that strategy.
So EERE has built its portfolio around three major challenges.
The first is to reduce the nations dependence on petroleum based
fuels for transportation by developing affordable fuels from more
renewable sources. Vehicles capable of using electricity, natural
gas, and hydrogen, and extremely efficient conventionally powered
vehicles.
Second, we are seeking to diversify and expand the nations electricity sources by developing renewable electricity that is competitive with other sources of electricity without subsidies.
And finally, to help families, businesses, and government offices
save on their energy bills by optimizing the efficiency of our homes,
buildings, and factories. These goals are central to a strategy for
addressing the nations energy and environmental challenges, and
meeting them will play a critical role in spurring the U.S. economic
growth and job creation.
The U.S. economy has always depended on innovation. And clean
energy technology supported by the EERE budget will spur business and job growth in manufacturing and in many other parts of
the economy. And the clean energy market has been increasing
very rapidly and has been a key source of economic growth in the
U.S. and worldwide; its increase almost a factor of five since 2004.
But the global competition is fierce and retaining Americas leadership role will require significant public and private sector investment in the next generation of renewable energy technologies and
energy efficiency solutions.
Since 2007, EERE investments have resulted in the issuance of
hundreds of patents supporting innovative clean energy research.
EERE investments in clean energy technologies have played a part
in many important commercial successes. For example, nearly
every hybrid electric vehicle sold in the U.S. uses better technology
developed under EERE.
Since 2007, EERE has successfully leveraged $60 million worth
of research investment to secure more than $1.6 billion of private
capital investment. Innovations in wind turbines developed with
the support of EERE at reduced costs and increased reliability, allowing for 47 gigawatts of installed wind capacity in the U.S. and
35 percent of all new capacity installed in the last four years.
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Standards issued since 2009 will save consumers hundreds of billions of dollars in energy costs through 2030. Now EERE plans to
build on these successes by making strategic investments that compliment those of the private sector. In FY13, our reviews of opportunities and gaps in the private investment resulted in a budget in
which 60 percent of the funding is directed towards energy efficiency activities, and 40 percent to renewables.
EEREs FY13 budget request of $2.3 billion emphasizes key investments in energy solutions and renewable technologies, where
the potential impact is largest and where federal funds are most
critical. To give some examples, the vehicle technology program
will incorporate a new grand challenge to develop technologies to
make electric drive vehicles competitive and multiple light duty vehicle markets by 2020.
This grand challenge will emphasize the accelerated R&D and
advanced battery technologies, with a major concentration on better design optimization and innovative battery manufacturing. Biomass activities will be focused on converting non food cellulosic
feed stocks to hydrocarbons such as jet fuel, that can be directly
substituted for conventional fuels at competitive prices.
Our photovoltaic SunShot Program is on target to meet our goal
of a dollar a watt installed costs by the end of the decade. On shore
wind, as I said, has been a commercial success, and we are now
going to concentrate on the next generation of challenges and opportunities, including a new focus on capturing Americas enormous
offshore wind resources at competitive prices.
And because residential and commercial buildings drive our electricity consumption, something like 70 percent of electricity goes
into buildings, we continue to emphasize energy efficient products
and integrated building systems for both new construction and for
retrofits of existing buildings.
Major emphasis has been placed on the advanced manufacturing
program, which supports the research focused on innovative energy
efficient manufacturing processes and advanced materials. And
these new approaches will reduce energy consumption and manufacturing cost, making American businesses more competitive, and
they will play a key role in driving down the costs of all clean energy products.
So in closing today, the U.S. has poised its harnessing ingenuity
of American science, the industriousness of American workers, and
the creativity of American entrepreneurs to help secure Americas
future prosperity and global leadership.
This 2012 budget request reflects tough decisions over a balanced
and diverse portfolio, with the understanding that EEREs technologies will play a critical role in addressing the nations urgent
energy and environmental challenges. The Department appreciates
the leadership of this Committee and providing the resources needed to accomplish our shared goal of creating a secure and efficient
clean energy economy, and I would be pleased to respond to any
questions that you may have. Thank you.
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132
Mr. FRELINGHUYSEN. Thank you, Doctor Kelly. Madame Secretary, welcome.
Ms. HOFFMAN. Good morning. Good morning, Mr. Chairman and
members of the Committee. Thank you for the opportunity to appear before you today to talk about the Presidents fiscal year 2013
budget for the Department of Energys Office of Electricity Delivery, and Energy Reliability.
Our offices mission is to lead the national efforts to modernize
the electric grid, enhance the security and reliability of our nations
infrastructure, and facilitate recovery from disruptions to energy
supply. This is a complex and crucial mission that involves action
on a number of fronts, including research and development of new
technologies, cyber security, policy coordination and implementation, and energy assurance.
Our fiscal year 2013 budget request is $143 million, a three percent increase over the fiscal year 2012 appropriations. This request
will keep us moving strategically and steadily towards a more reliable, flexible, efficient, and resilient grid.
To begin my discussion of our 2013 activities, I would like to
highlight several areas of the budget request that we see as critical
to the success of our mission. First, we are proposing establishing
a new electricity systems hub that will bring together experts to
solve system level challenges of grid modernization.
The nations electric grid is a complicated system that is evolving. Now it is time to tackle some of the critical issues and barriers
associated with integrating, coordinating, and facilitating the numerous changes that are happening system wide. These changes
include the addition of renewable energy resources, like wind, fluctuations of load, and the growing use of digital communications
and controlled technologies.
Given the regional nature of many of these conditions and needs
effecting the grid, such as electricity use patterns, generation
sources, energy policies and regulations, we are proposing to establishing two to three regional hubs, which may be the best way to
address both the unique demands of each region, and the commonality shared at the national level.
Therefore, the Presidents request includes a $20 million request
for the establishment of these regional centers, consistent with the
quadrennial technology review. Another priority is cyber security;
there are numerous challenges with protecting the grid from cyber
attack. Most cyber security solutions are developed for desktop information technology systems or IT systems, and these are not designed to meet the unique requirements of the energy delivery system.
Another challenge is protecting the legacy devices that were installed before cyber security became an issue. We continue to be active in this area, as seen by our recent risk management maturity
model initiative, which will provide a tool that allows electric utilities and grid operators to assess their own cyber strength and
weaknesses and prioritize investments.
The release of risk management process guidelines provides a
consistent, repeatable, adaptable process for the electric sector. Our
roadmap to achieve energy delivery system cyber security, which
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was released last September, provides a strategic direction of goals

for public private partnership activities over the next 10 years.
We are also involved in other efforts such as facilitating timely
sharing of actionable information. The 2013 budget also includes a
continued investment of $30 million to support the development of
a wide range of next generation cyber security technologies.
Another priority is advanced modeling of the electric grid. Our
2013 budget request provides $10 million for advanced modeling
grid research to focus on accelerating the performance and predictive capability of operational systems, which uses real time data
from the increasing number of sensors built out nationwide, with
the Recovery Act funding.
Researchers will develop computational mathematical understanding needed to transform the tools and algorithms that underpin the electric systems planning and operation, and applying new
scientific insights in advanced computation to grid data.
This work will involve collaboration with the Office of Science
and universities, and will lay the foundation for the next generation computational modeling programs for the private sector. We
will continue funding the permitting, citing, and analysis program
that will provide technical assistance to the states and regions on
the electricity policies and programs.
As utilities have increased their investment in next generation
energy technologies, we have seen an increase in the number of requests from states electricity officials for technical assistance on
topics such as repairs for energy efficiency, and demand response
from renewable energy.
Our 2013 budget also provides continued support for the infrastructure security and energy restoration programs work, enhancing the security and resilience of the nations critical energy infrastructure and facilitating disruptions from the energy supply. As
the lead sector specific agency for the energy sector, we closely
monitor and assess the potential impacts of events, such as tornadoes, hurricanes, and geomagnetic disturbances on the electric grid.
When a disruption to the energy infrastructure occurs, we serve as
a focal point for responding and restoration efforts.
Additionally, we have worked closely with other government
agencies in the North American Electric Reliability Corporation to
evaluate and enhance planning and operational practices, to address potential risks of geomagnetic disturbances, such as the recent solar storms, on the power system.
The Presidents all of the above strategy marries todays need for
affordable energy with a modernized electric infrastructure that
will build a stronger future. Our 2013 budget request allows us to
continue to follow a steady, constant, focused path towards grid
modernization. This concludes my statement, Mr. Chairman. I look
forward to answering any questions you may have.
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141
Mr. FRELINGHUYSEN. Thank you for your testimony. Mr. McConnell.
Mr. MCCONNELL. Thank you, Chairman and members. I appreciate the opportunity to present the Office of Fossil Energys proposed budget for fiscal year 2013. The Office of Fossil Energys mission is to ensure that we remain able to utilize our nations abundant resources of coal, oil, and natural gas by developing technology based energy options that enhance the U.S. economy, provide environmental sustainability, and ensure energy security.
Fossil also manages the Strategic Petroleum Reserve, the Northeast Home Heating Oil Reserve, and the Naval Petroleum Reserves.
The FY 13 budget request includes $420.6 million for the Fossil
Energy research and development, which is focused on advancing
technologies for carbon capture, utilization, and storage, or CCUS.
This is a business driven, not regulatory driven approach to capture and to utilize CO2 from fossil facilities, and through this utilization, to safely and permanently store or sequester the CO2 from
the atmosphere. The bulk of this R&D is directed at carbon capture
technology development, CO2 storage, and utilization options, as
well as CO2 monitoring, verification, and accounting, advanced
power systems that support CCUS and cross cutting research.
We are currently developing commercial scale demonstrations of
first generation CCUS technologies, focusing on a range of carbon
capture options. Through our regional carbon sequestration partnerships, we are also pursuing CO2 storage in a variety of geologic
formations, and the CO2 utilization will be accomplished via enhanced oil recovery, or EOR, in oil bearing formations.
The benefits of EOR are very significant. EOR increases domestic
oil supplies. It creates jobs, improves our balance of trade, and ensures that CO2 is safely and permanently stored. Our mission will
ensure that measuring, monitoring, and verifying the CO2 in these
formations will be permanent and safe.
Because of CO2, EORs substantial economic benefits and its potential to catalyze the commercialization of CCUS technology for
the future, EOR must be an important element of our R&D. With
six major CO2 EOR demonstration projects underway across the
country, we are moving in that direction.
Were also exploring additional pathways to CO2 utilization, and
our current R&D to lower the cost of carbon capture for the future
is fundamental to this.
So in addition to these first generation technology demos, we are
also concurrently conducting and supporting long term R&D to develop second generation technologies, to further lower the cost of
CO2 separation, and enable the utilization and low cost sequestration for the future. Our oil and natural gas technologies budget includes $12 million for oil and natural gas technology R&D, centering on the sustainable development of unconventional oil and
natural gas. This request also has $5 million for methane hydrates.
Efforts in FY 13 will focus on continuing collaborative R&D with
the EPA, the DOI, and the U.S. Geological Survey to minimize the
potential impacts and to ensure the sustainability of shale gas
through fracking.
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This is in alignment with the recommendations of the Secretary

of Energy Advisory Board Subcommittee which called for improved
safety and environmental performance of fracking in shale gas formations. And we are currently developing a joint MOU amongst
those agencies to ensure interagency alignment and collaboration.
The FY 13 request also includes $10.1 million for the Northeast
Oil Home Heating Reserve, which provides the Northeast with a 10
day supply buffer against disruption in heating oil supplies. The reserves stock now is comprised exclusively of low sulphur heating
oil, and it provides for storage and operation of a one million barrel
reserve. This request also includes a $6 million rescission of prior
year funds.
The FY 13 budget also includes $195.6 million for the management, operation, and security of the Strategic Petroleum Reserve.
The SPR has a capacity of 727 million barrels to protect our nation
against disruption in U.S. oil supplies, and it also allows the U.S.
to meet its IEA obligation to maintain emergency oil stocks.
Key projects for the upcoming year at the SPR include moving
the degasification plant, pursuing a capacity maintenance program,
cavern volume creep, and cavern remediation.
Finally in FY 13, the SPR will initiate plans to repurchase oil
sold in the IEAs 2011 Libya Collective Action, using the remaining
proceeds from that sale.
The Office of Fossil Energy is committed to developing the
science and technology that allow the nation to fully utilize its
abundant fossil energy resources in an environmentally and economically sustainable manner. The FY 13 budget request will be
supportive of DOEs goals to address issues of energy security and
environmental security and sustainability. Thank you.
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151
Mr. FRELINGHUYSEN. Well, Mr. McConnell, we could hear you
loud and clear. I am not sure you need that microphone. You better
push it away. So it is fine, I thought your statement was right on
target. To Dr. Kelly and Mr. McConnell, I know we often invoke
the future. What are each of you doing in your own way, in your
areas of responsibility, to lower gas prices right now?
Dr. KELLY. Well, we are, of course, an integral part of the Presidents all-of-the-above energy policy. The administration is deeply
concerned about the effect that gas prices or gasoline prices are
having on families and businesses around the country, so we are
pursuing things that can
Mr. FRELINGHUYSEN. What sort of things? What are you doing
now that could maybe give us a sense there might be some relief
out there?
Dr. KELLY. Well, in the short term
Mr. FRELINGHUYSEN. And more importantly, how is it reflected
in your budget?
Dr. KELLY. Well, our budget is, of course, principally an R&D
budget.
Mr. FRELINGHUYSEN. I realize that.
Dr. KELLY. And so we are looking at things that havethe
things that are paying off now are things that we have invested in
in the past. We have lots of things coming out of the pipeline all
the time. One of the things that we are doing is
Mr. FRELINGHUYSEN. Is there anything you have done in your recent history that is reflected in the price of gas and its production
now?
Dr. KELLY. Well, we have a successful biofuels program that
hasroughly 10 percent of the gasoline sold in the U.S. is now ethanol based. We are now moving toward cellulosic ethanol at a very
rapid rate. We think we will have a competitive product there. We
have done a lot of work on material for vehicles that have helped
lower the weight of vehicles. And the very large gain in fuel economy that has been proposed in the recent fuel economy standards
are made possible at least to some extent by the technology that
we have developed to lower the weight of vehicles, and to make engines more efficient, and, of course, now to move towards electrification.
Mr. FRELINGHUYSEN. In your position, I assume people often
come to you to get your opinion on an issue which is pretty critical
to our constituents, how do we lower gasoline prices now. How
would you react to that? How do we do that? I am going to ask the
same thing to Mr. McConnell.
Dr. KELLY. Well, there is not a
Mr. FRELINGHUYSEN. We understand, obviously, we have got the
possibility of the Strait through Hormuz and things that have happened in the Gulf that shut down production, but is there anything
specific that you would like to suggest that would help us reduce
gasoline prices?
Dr. KELLY. Well, the
Mr. FRELINGHUYSEN. In the short term.
Dr. KELLY. In the short term, you know, again, our operation is
an R&D operation.
Mr. FRELINGHUYSEN. Yeah.
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Dr. KELLY. So the impact we have had is based on initiatives
that we have funded in the past. And I think we have had a significant impact on making fuel economy more efficient, making it possible to introduce alternatives to petroleum very rapidly here in the
next 10 years. To me, the thing that we need to do is to have a
sustained, predictable, and very efficient investment in R&D and
moving these technologies out as soon as we possibly can, doing it
in partnership with industry.
Mr. FRELINGHUYSEN. And in terms of gasoline production, is that
reflected in your budget?
Dr. KELLY. That would be within the Fossil Energy Office. What
we are doing is looking at ways of using electricity as a fuel, natural gas as a fuel, and, of course, biological resources as a fuel.
Mr. FRELINGHUYSEN. Mr. McConnell.
Mr. MCCONNELL. I believe a large part of current gasoline prices
is concern about overseas speculation and a lot of concern about energy security. A big part of what we have focused our efforts on
and really begun to launch is this whole concept of utilization of
carbon dioxide in carbon capture utilization and storage. The concept of being able to take advantage of domestic oil supplies that
we have here in this country through the utilization of CO2 and enhanced oil recovery will go a long way toward improving our energy
security, as well as creating jobs and other benefits associated with
it, and not losing our mission of also permanently and safety storing CO2 from coal fired, oil fired, natural gas fired power plants
and commercial industrial facilities. That is one part of the mission
that we have shifted. And I think to the
Mr. FRELINGHUYSEN. If we were to give you $50 million to add
to your portfolio, what would you do with those dollars to address
the current high prices of gas? Could you do anything with those
dollars?
Mr. MCCONNELL. Well, sir, I suppose if you asked me as a person
if I had more in my checkbook at home to do more for my family
or my neighbors or my church, I would tell you yes. And there are
things that we have in our portfolio that are very important and
we are enthused about. And if you are asking me if I could do more
if I had more, yes.
Mr. FRELINGHUYSEN. I am asking youyou have a position, and,
you know, you have a responsibility. If we were to add $50 million
to your operation to address an immediate issue, how would you
spend the money?
Mr. MCCONNELL. I would not change anything in our portfolio in
terms of what we are doing. The activities, and the amount of demonstrations, and the continuation of the mission that we are on is
strategically correct. And I believe that if we continue on that mission, we will go a long way toward addressing your question, as
well as all of the questions associated with the all the above strategy. So strategically, I would not change anything. But if you are
asking me if I could do more if I had more, surely I could.
Mr. FRELINGHUYSEN. So if we were to give you money, there
wouldnothing you could do in the short haul to address lowering
gas prices?
Mr. MCCONNELL. The short haul that you are referring to would
be the strategic alignment of what we have in our department
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today, which I believe, in the short and long run, goes a long way
toward improving our energy security and our supply of oil, natural
gas, and the generation capacities that we have in fossil.
Mr. VISCLOSKY. Thank you, Mr. Chairman. Doctor Kelly, the
Committee has been concerned over the multi-year grants that had
become common in the Departments Energy and Science Offices.
The practice not only inhibits programs from adapting to new technology and market conditions, but it also promises, most importantly to the Subcommittee, future money that your programs simply do not know will be appropriated.
To address the issue, in the fiscal year 2012 Appropriations Conference Report that was signed in the law, there was direction for
the Department to transition away from these types of grants. The
Department, in late February, announced a grant opportunity to
lower the cost of solar energy called Bridging Research Interactions
through Collaborative Development Grants in Energy. The grant
announcement promises $9 million in grants, but the Congress has
not yet appropriated $6 million of those.
In March, the Department issued a press release entitled Energy
Department Announces $180 million for Ambitious, New Initiative
to Deploy U.S. Offshore Wind Projects. Another March release said
that offshore wind gets $180 million boost from DOE.
The problem is that only $20 million of that $180 million is actually available, and the rest depends on appropriated funds in future years. How and why was it decided to highlight these two programs with monies that have not been appropriated to the department?
Dr. KELLY. Well, we, of course, read the Committee report and
take it very seriously and are in the process of transitioning to a
system where we are going to be fully funding manya much larger fraction of our program. The Committee report also did recognize
that there were some areas where multi year funding was going to
be essential. And we fully informed the Committee of our intention
certainly on the offshore wind project. We are not going to be able
to make the full transition in one year, but we are certainly moving
as quickly as we can. Each program has a slightly different set of
subprograms. But in terms of the offshore wind, we communicated
fully with the Committeecertainly at the staff level.
Mr. FRELINGHUYSEN. Would the gentleman
Mr. VISCLOSKY. Absolutely.
Mr. FRELINGHUYSEN. You know, last August you announced
some sort of a biofuels initiative, is that right?
Dr. KELLY. With the Department of the Navy.
Mr. FRELINGHUYSEN. With the Department of the Navy, yeah.
These sorts of announcements raise expectations here. We have to
pay the bill here. You have not raised our expectations in terms of
what the Department of Energy is doing relative to maybe some
immediate issues like gas prices, but you seem to be coming out of
a panic pretty quickly to sort of announce new programs without,
shall we say checking to see whether we have the necessary appropriations to meet them. Back to you, Mr. Visclosky.
Mr. VISCLOSKY. Doctor Kelly, if I could follow up for one second.
If we are short $160 million here on the offshore wind, and the De-
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partment does not get the full request, have the staff thought about
what the configuration of that project will look like?
Dr. KELLY. Well, the early stages of the project are the least expensive parts. And, of course, everything thatthe competition
makes it very clear that everything is subject to appropriation. So
there are very clear stage gates in this project, and if funds are not
available, we can stop.
Mr. VISCLOSKY. Okay. Also, relative to congressional direction,
for the budget request for 2013, there are a number of initiatives
in the budget documents from DOE that state they were started in
fiscal year 2011. The 2013 request includes funding for the advanced grid modeling research and the innovative manufacturing
initiative.
As you know, in fiscal year 2011, your program was funded
under a full year of continuing resolution that prohibited any new
starts without congressional approval. And I am not aware that the
two initiatives that appear were begun in 2011 as new starts were
ever communicated to the Subcommittee, nor approved by us. Were
these two started in 2011 or am I mistaken?
Dr. KELLY. Well, I think that the grid modeling is a new program. The innovative manufacturing initiative funding was issued
in 2012. Am I right on that? Yes.
Mr. VISCLOSKY. Okay. So I am mistaken. On the grid?
Ms. HOFFMAN. For the advanced grid modeling, we will be running a solicitation that should be coming out this year for the advanced grid modeling activity. The activities that were related were
under the renewables integration and the work from our transmission reliability part of our organization, looking at the sensors
and the analytics around visualization.
So we have existing activities that were funded under our transmission reliability line that were looking at sensors and how we
will visualize system impacts.
But for the grid modeling activities, those activities will be funded by a solicitation that will be released this year.
Mr. VISCLOSKY. So, Ms. Hoffman, you are suggesting that the advanced grid modeling research was not begun in 2011?
Ms. HOFFMAN. Yes.
Mr. VISCLOSKY. And, Doctor Kelly, you are saying that the innovative manufacturing initiative was not begun in 11?
Dr. KELLY. No. The solicitation was issued in 2012.
Mr. VISCLOSKY. Okay. Mr. Chairman, I am done for now.
Mr. FRELINGHUYSEN. Mr. Womack.
Dr. KELLY. It did use 2011 funds.
Mr. FRELINGHUYSEN. So it does represent a new start? You started something without giving us a heads up, is that
Dr. KELLY. Well, we issued this thing in 2012, and we are trying
to use the funds available from previous years.
Mr. FRELINGHUYSEN. Mr. Womack.
Mr. WOMACK. Thank you, Mr. Chairman and thanks to the panel
here this morning. In all three cases I want to thank you personally for the splendid cooperation you give me and my staff on these
very important matters. I want to read a couple of snippets out of
this mornings Wall Street Journal which will form the basis of a
lot of my questions this morning.
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And the headline says, Steel Finds Shale Sweet Spot. I dont
know that you have seen the article, but let me just read a couple
of snippets. Production for so-called tubular goods used for pipes,
tubes, and joints in gas drilling has doubled in two years at U.S.
Steel. With prices of natural gas down more than 35 percent to
2.21 a gallon, a pretty significant number when compared to a lot
of our overseas competitors.
And after posting losses in the last three years, the company
stock price, and in the interest of disclosure, I am not a stockholder, I am only reading, is up 13 percent in the last 3 weeks. And
then the price of natural gas, down 35 percent in America, 2.21 a
gallon, in Europe it is 11.25 and in Japan, nearly $16. Now help
me out, Doctor Kelly. We have a crisis on our hands right now. An
absolute crisis, and people in my district and across America are
going to the pump and more and more of their discretionary income
is being taken up by higher and higher gas prices.
The numbers and the basis of this article that I quote this morning, relates basically to stationary power for U.S. Steel. But with
these kinds of price differentiations, if that is the word, it seems
to me that we are missing an opportunity to harness an energy
source. And I will come back to Mr. McConnell later about what
the numbers suggest in so far as our long-term capacity.
But with these kinds of prices and this kind of supply availability, what is your vision for how natural gas fits in to the overall, all of the above strategy that this president seems to want to
champion?
Dr. KELLY. Well, it certainly is fortunate that we have this resource. And again, we certainly share your sense of urgency about
trying to make sure that transportation fuel stays as low as it possibly can. This metro gas is in fact a key element of this. We have
discussedwell one of the things that is interesting of course is
that we have been putting a lot of emphasis into domestic drilling
and U.S. oil production is the highest it has been in eight years.
And in fact, imports is the lowest that they have been in 12
years. So we have been pushing very hard on this.
Mr. WOMACK. But we could do more.
Dr. KELLY. Yes, we could do a lot more.
Mr. WOMACK. So much more.
Dr. KELLY. So natural gas in transportation specifically, it certainly seems to make sense for heavy trucks. One of the things that
we have been wrestling with is what the federal government can
do to help, because the private sector, given those price differentials you have been talking about, has been very active. We know
technically how to use natural gas in trucks and cars, so there is
not really an R&D issue here.
It is purely a matter of getting the infrastructure in place. So I
would say that what is going to happen fastest is that you are
going to see truck fleet vehicles, fleet vehicles like taxis, and heavy
trucks move towards natural gas quite quickly. But the natural gas
is a wonderful addition for easy and expanded use of renewables
because you can turn it on and off very quickly. So natural gas
powered electricity generation and renewables is a nice combination.
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Mr. WOMACK. Well, if I remember in the budget correctly, we
have only allocated in this overall budget, Mr. Chairman, about
$12 to $15 million toward this natural gas phenomenon. And I
want to say, and Mr. McConnell you correct me if I am wrong, I
want to say most of that money is dedicated toward insuring that
fracking is environmentally friendly. Is that
Mr. MCCONNELL. That is correct.
Mr. WOMACK. Is that pretty accurate?
Mr. MCCONNELL. Yes it is.
Mr. WOMACK. Okay. Now I have done a lot of budgeting in a previous lifetime, and usually you could look at someones budget and
get a clear idea of what their vision is. And in this budget, I do
not get a clear idea that the vision is to harness this resource
against the backdrop of our competitors overseas who do not have
this capacity.
We do, and it is an incredible resource. And it is not just in my
district, but it is all over this country. And I would like to know,
what is our capacity long-term? What are the current projections
as to how much gas there is, and if we were able to successfully
harness it and make it important in both stationary and transportation power, how long could we sustain with available resources?
Mr. MCCONNELL. Well I would not do justice to the answer to
your question with a projection. I could give you some ideas in
terms of what is currently known today. And then there is another
whole region of geologies that have not yet been explored and that
potentially the proving of those additional reserves might answer
your question quite a bit differently.
What I can say, is that I have heard the word fortunate used several times this morning about natural gas prices, and I think it is
a combination of fortune, but it is also largely to do with the funding that the Department of Energy has had even back into the 70s
when fracking was originally developed as a technology at The National Energy Technology Laboratory. And I could have sat here
five years ago and everybody would have been certain that natural
gas would have been $13 or higher here in the United States for
the next 20 years.
And then this technology that had been developed in the 70s
came about and we are in an incredibly fortunate position today.
And that is through largely a lot of the development work that the
DOE did along with industry. In terms of the future, the other
thing we all know is, is it is a bad deal in energy to bet on any
one thing. And having a portfolio for the future is incredibly important.
And so it is important that we continue to harness natural gas
as you have described. I believe it is also important to continue to
focus on ways to improve and help our domestic oil production and
oil supplies. But in terms of the rest of our portfolio, renewable
power, solar, wind, all of the things that we have in our portfolio,
it is incredibly important for the future for anybody doing business
planning to have a portfolio approach.
Mr. WOMACK. Okay. Mr. Chairman, I have got one more question, and I am going to give this question to Doctor Majumdar
when he comes in on ARPAE, because I think it has got an
ARPAE component to it because of the risk involved. And I am
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going to throw this out on the table and any three of you, if you
would like to comment, fine. If not, it is just in my mind. I know
why the discerning public, using a normal gas-powered engine, cannot fill up, if you will, at home. I get all of that. That is loaded with
complications.
But we are talking about electrification where you plug in a car
at home and power it up so that you can get a certain amount of
mileage around town. But I have got natural gas at my house. Is
it possible with a little bit of investment, maybe in the ARPAE
area going forward, is it possible that we could develop the type of
cylinder, if you will, that you could drive home at night, or I could
drive into Mr. McConnells neighborhood and knock on his door and
say, hey I am running a little bit low, can I gas up here? Then we
might have solved the infrastructure problem. So is that crazy?
Dr. KELLY. Actually, it is not crazy. It may be difficult, but it is
certainly something that we have been looking at. And one of the
dilemmas on putting natural gas in cars, is gettingas you said,
getting the tank in. We have been working with ARPAE on trying
to find ways to make a pressurized tank that looks more like a conventional gasoline tank.
And some of these advanced materials that we have got like carbon fiber, will let you make more complicated shapes so you are not
stuck with these big cylinders. Safety and other issues associated
with actually letting people charge at home is challenging, but it
is certainly not to say that it is impossible, and we are definitely
looking at it.
Ms. HOFFMAN. I definitely think from the electric vehicle side, it
is possible and folks are looking and doingplug-in hybrids at
home and looking at plugging and charging the car. The greatest
opportunity is giving consumers that choice of what fuels, and
being able to decide what fuels are most cost effective for them to
use as they run their vehicle on a daily basis.
Mr. MCCONNELL. And I will go back the previous question that
youor comment that you raised. I think that environmental sustainability in the fracking industry today is not mutually exclusive
from the ability to harness that energy supply for the future and
make sure that people in neighborhoods and people down the street
can live in an environment with fracking that is occurring.
And so a big part of our focus will be that sustainable and environmentally correct manner in which we are able to get natural
gas and be able to enjoy that abundant resource that you have referred to.
Mr. WOMACK. Thank you, Mr. Chairman.
Mr. FRELINGHUYSEN. Thank you, Mr. Womack. Mr. Olver.
Mr. OLVER. Thank you, Mr. Chairman. I have a number of questions and I do not know what order to do them in. Let me start
with you, Mr. McConnell. It has been a number of yearsI am now
in my 20th year of Congress, I am convinced that at least for the
last 10 years, we have been talking about carbon capture, sequestration, and such. And yet, I have no real sense of what the
progress has been.
Now you spoke in rather general terms about carbon capture,
separation. You used sequestration and utilization. I think there
were really three functions among those terms. One capture, one
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which must include some separation, and then sequestration and
how you store it, and then you also used utilization. And you said,
I think, that there were options in which your office is involved for
each of those, if I may use capture and storage and utilization as
terms that I understand best.
Is there a plan for the research that is going on in your department that lays out what those options are and what the stages are
of the research? So that sort of summarizes what the status of the
research is in each of these areas, because each one of the options
that you haveif you have five different options for capture in the
first place, then each one of those might be used in one or more
of the utilization modes that you are talking about, and also of the
intermediate mode of separation, sequestrations, storage.
So is there some kind of a broad roadmap that one can see as
to where those things are? I would love to see how much money
we have spent on each of those and which ones seem to have the
best prospects for the future. Now I do not expect you to be able
to give me much of an answer other than is there such a plan and
is it possible to see such a document that would show those factors?
Mr. MCCONNELL. Well, let me try to give you a halfway decent
answer, if I could. I think any of us sitting here, 510 years ago,
as a lot of the development went on in CCS, Carbon Capture and
Sequestration, anticipation of climate legislation, etcetera, driving
industry and many in industry concerned about sequestration of
CO2 from the atmosphere.
And as we sit here today, the absence of that legislation has
caused us to look into other areas of CO2 capture and sequestration
and pursuing business-based opportunities to actually utilize that
CO2 in the sequestration. That is really the strategy that we have
moved to and begun to shift to.
To answer your question, yes, there is a large portfolio of carbon
capture technologies that is being explored in industrial applications, whether it is for stationary power, industrial applications,
manufacturing facilities. All of these opportunities for us to bring
in second generation and third generation technology through the
R&D development to be able to lower the cost of CO2 separation,
and ultimately to be able to utilize that CO2.
Just to digress just a little bit, the enhanced oil recovery industry
has for years, utilized CO2. But in todays environment, there is not
enough CO2 to continue to develop this industry at the pace in
which it could make a meaningful impact to our domestic oil supplies. So now we have a business opportunity to drive forward in
terms of developing this carbon capture technology for the future,
for the purposes of not just enhanced oil recovery, but in the process of doing so, also to safely and permanently store this CO2
through a process such as this.
Mr. OLVER. Well that is what I am looking for. I am trying to
find out whether you have some sense of where we are in the sequence of how much research and development is required before
there is a commercial end product that one can use in any of these.
And I do not see how these options in capture and in storage and
in utilization fit together at all.
Mr. MCCONNELL. Well in fact sir, what will be occurringover
the next several years, we are in the process of developing and ac-
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tually constructing several of the large scale, commercial scale facilities that have been funded and we anticipate starting up those
facilities by the 20142015 timeframe.
Mr. OLVER. How much money has been appropriated already to
do this?
Mr. MCCONNELL. There was over $3.4 billion of
Mr. OLVER. How much of that has been expended?
Mr. MCCONNELL. A small portion of it. As many of these projects
in the stage gates that they are in are in the development stages.
And so the ordering of the equipment, the installation of that
equipment, and the purchases, we will see a large amount of that
funding actually being spent over the next two to three years.
Mr. FRELINGHUYSEN. John, if we could go to Mr. Nunnelee in a
minute, please.
Mr. OLVER. Let meif I can write out a question properly that
you can answer in detail, that would be great, with documentation.
And I will try to do that. Let me just say that you mentioned at
one point the issue of methane clathrates. Well there is an enormous amount of methane clathrates in deep waters and in the permafrost.
And there is so much and methane is so critical as a very strong
greenhouse gas, that that one really deserves a lot of attention, but
I do not think anyvery much at all has been given to it yet. So
let me just leave it at that.
Mr. FRELINGHUYSEN. Thank you, Mr. Olver. Mr. Nunnelee,
thank you for your patience.
Mr. NUNNELEE. Thank you, Mr. Chairman. Mr. McConnell, you
oversee the Strategic Petroleum Reserve. Just give me an overview.
What is the function of that? And tell me how you manage the deposits and withdrawals of the SPR.
Mr. MCCONNELL. Several years ago, the United States made a
commitment to the IEA to participate in a global capability for oil
storage for the purposes of international disruption, whether they
are weather-related, wars, disruptions as such. The United States
maintains roughly half of the global supply of crude oil for those
interruptions and we operate four sites along the Gulf Coast in
Texas and Louisiana, where we utilize underground, large, salt
dome cavern storage of crude oil. We have a nameplate capacity of
727 million barrels of oil, which is roughly 90 days of supply here
in the United States for imported oil. And that is part of the responsibility that we have undertaken as a nation to the International Energy Agency. It is a responsibility that we have. Our
department funds and oversees the day-to-day O and M, Operations and Maintenance of that facility, and projects associated
with it, to keep it in a ready-to-run and safe and in a sustainable
position so that when policy decisions are made to release oil or
bring oil in, et cetera, we make sure it is ready to go and safely
done.
Mr. NUNNELEE. All right, and you released 31 million barrels
last year. Is that right?
Mr. MCCONNELL. Thirty, yes, sir.
Mr. NUNNELEE. Thirty, all right. And I keep hearing that you are
considering releasing more this year. Is that something that is
being considered?
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Mr. MCCONNELL. It is being considered and our job at Fossil Energy is to ensure that if the decision is made, we will be ready to
respond and if the decision is something different, we will be responsive to that, as well. And, so, our job at Fossil is really to have
all of the facilities in a ready-to-go condition and safely operated.
Mr. NUNNELEE. All right, so, if it is being considered, what is the
triggering emergency that is causing it to be considered?
Mr. MCCONNELL. Well, that could be anything. This past summer, of course, the Libyan Crisis generated an international response to the IEA that the United States responded to as part of
an international reaction to that activity. As things move forward,
those policy decisions and determinations are not made at Fossil
Energy, but, certainly, we have a responsibility to be ready to respond however they are.
Mr. NUNNELEE. Okay. And then the 30 million that was released
last year, has that been replenished?
Mr. MCCONNELL. No, sir, it has not. That money has been set
aside and there is a repurchasing plan in place between 2013 and
2017 where that oil, over time, will be replaced, but we continue
to maintain the caverns and the capabilities of that remaining oil
to be able to respond. So, just roughly, rather than having 90 days
of supply, today, we have approximately 80 days of supply.
Mr. NUNNELEE. Okay, so, the release last year lowered our availability by 10 days.
Mr. MCCONNELL. Yes, it did.
Mr. NUNNELEE. Or roughly 11 percent.
Mr. MCCONNELL. That and a combination of several other maintenance and project-related activity, today, we sit at approximately
81 days of capacity, yes, sir.
Mr. NUNNELEE. All right.
Mr. Chair, I will yield back at this point and go the next round.
Mr. FRELINGHUYSEN. Okay, thank you, Mr. Nunnelee.
Dr. Kelly, I want to just get back to one issue that I mentioned
a few minutes ago. And grants from your Department of Energy
Supply and Research Program I think we know when you make announcements, can affect nationwide markets. And I want to talk
about that August 16 press release, where you touted the $510 million program, which includes $170 million for the Department of
Energy to build jet biofuel refineries. This practice of putting out
press releases when there is no funding attached to it, how do you
explain why you do that?
Dr. KELLY. Well, this was a Memorandum of Understanding between the Navy, U.S. Department of Agriculture, and the Department of Energy, and it was a Statement of Intent to work together.
Obviously, all three agencies had to work with their appropriations
organizations in order to provide that funding.
Mr. FRELINGHUYSEN. There was not much enthusiasm on the Department of Defense side. The Navy was interested in it.
Dr. KELLY. Yes, but
Mr. FRELINGHUYSEN. The committee on which both Mr. Visclosky
and I serve on, Defense Appropriations, did not fully embrace the
purposes for which you were signing that memorandum.
Dr. KELLY. Well, clearly, the memorandum depends on appropriated funds and
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Mr. FRELINGHUYSEN. Yes, I know, but I think there is a potential
for affecting markets here, and I think there is a degree of inappropriateness here, and I think this is something which registers high
on the irritation scale.
My second concern, and I am not sure we heard your last words,
the issue of new starts, you issued on June 24, 2011, a financial
assistance FOA, Funding Opportunity Announcement, for innovating manufacturing initiatives.
Dr. KELLY. Yes.
Mr. FRELINGHUYSEN. How does that not constitute a new start?
Dr. KELLY. Well, it was issued in 2012. Our intention was to
send
Mr. FRELINGHUYSEN. No, wait, wait. The issue date here is June
24, 2011.
Dr. KELLY. June 2011. Okay, I was just misinformed in that
case.
Mr. FRELINGHUYSEN. Well
Dr. KELLY. Okay, but our intention is to spend FY12 money
Mr. FRELINGHUYSEN. Well, you spent 2011 money.
Dr. KELLY. No, this
Mr. FRELINGHUYSEN. Fifty million dollars.
Dr. KELLY. If I am understanding this correctly, these IMI grants
have not actually been funded yet. Well, the selections have been
made. I was not aware that there was sensitivity about using FY11
money on it. If there is, we can sit down and discuss this with you.
Mr. FRELINGHUYSEN. Well, there is some sensitivity. Your budget
calls for $100 million for the IMI and you are going to tell us a little bit about what it does in a few minutes, and we are a bit surprised to find out that half of this is to pay mortgages and awards
first made with fiscal year 2011 funds. So, when Mr. Visclosky
asked you was the IMA a new program in fiscal year 2011, you
said no.
Dr. KELLY. I was mistaken about the date when it came out. But
it is certainly going to be funded this year.
Am I getting this right? This is into a detail thatso, the funding will be FY
Mr. FRELINGHUYSEN. The information we have
Dr. KELLY. Yes, yes.
Mr. FRELINGHUYSEN. Is that you had spent 2011 funds.
Dr. KELLY. I have got to double-check this, but, so far, we have
not spent any
Ms. HOFFMAN. The awards
Dr. KELLY. Yes, the awards are being made and if we are prohibited from using FY11 funds, we will certainly not use FY11 funds.
Mr. FRELINGHUYSEN. Okay, Mr. Visclosky?
Mr. VISCLOSKY. Just following-up on the Chairmans remarks
here for a moment, relative to the program with the Navy, I think
his concern is that those types of announcements can also move
markets and lead people to make decisions in anticipation of
events. There was an Energy Trade Journal article dated January
23, and I am quoting from it: To get a commercial plant in operation, United Airlines and its partners plan to tap into the $510
million investment that the Departments of Agriculture and En-
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ergy, as well as the U.S. Navy dedicated to advance to drop in
biofuels in August.
In our earlier discussion, Dr. Kelly, you also referenced stagegates. Are those milestones when you use the term?
Dr. KELLY. Yes, they are places where you build certain performance expectations into these agreements and to say further funding
is dependent on meeting those expectations.
Mr. VISCLOSKY. Are you moving in that direction as far as your
grants and agreements with individuals that use federal monies?
Dr. KELLY. Yes, absolutely, and we are moving very aggressively
in that direction and also really making sure that we have very effective program management so that we follow the progress in each
one of these very carefully and make sure that when they claim
that they have made a stage-gate that they actually have.
The one thing I would like to say on the Navy agreement, one
of the things, that if we are actually going to be getting drop-in
fuels for the Navy, the Navy cannot use ethanol. They need really
a substitute for the jet fuel and for diesel, and we are trying to find
a way to accelerate the introduction of the fuels. Of course, the airlines need the domesticthere are a lot of other domestic uses for
this. If you can move from an alcohol fuel to something that is a
direct substitute for jet and diesel, that is a huge breakthrough and
we think we are poised on being able
Mr. VISCLOSKY. Yes.
Mr. FRELINGHUYSEN. Is it financially feasible? And the question
might be asked: Why has the commercial sector not invested in it
themselves or have they?
Dr. KELLY. Well, because of the Recovery Act, we have a number
of commercial and pilot-scale operations underway. We expect the
information from that to allow us to move to a much larger scale
fairly quickly, and that was what this project was intended to do.
It is very risky. One of the things about energy markets is the uncertainty makes it very difficult for investors to take very big
risks
Mr. FRELINGHUYSEN. Well, that is all the more reason not to be
announcing things before we really have things nailed down.
Dr. KELLY. Well, it was to demonstrate first of its kind production of this stuff. It was, in fact, not funding a commercial operation, it is to invent a commercial operation, and, so, we are working with USDA on developing new feedstock supply chains and
Navy would be
Mr. FRELINGHUYSEN. We want to make sure, if the gentleman
will yield, that it is financially feasible here.
Dr. KELLY. Yes. Well, we are saying it only makes sense if it is
economically-competitive with conventional supplies of jet fuel and
diesel.
Mr. FRELINGHUYSEN. Is it?
Dr. KELLY. Not now, but
Mr. FRELINGHUYSEN. It sure is not.
Dr. KELLY. No, it is not, and that is the reason that we are doing
this development work and
Mr. FRELINGHUYSEN. I thank the gentleman for yielding.
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Dr. Kelly, my sense is historically the department has used bilateral agreements on these milestones where both parties would have
to agree for a termination. My understanding is you are going more
in a direction with these stage-gates milestones, that if certain criteria are not met, then unilaterally, the government can terminate
these agreements.
Dr. KELLY. Yes, and this is understood by the recipient at the beginning that if they do not meet the mark there, we have to make
a tough decision.
Mr. VISCLOSKY. I, for one, appreciate you moving in that direction and I encourage you.
Dr. KELLY. Thank you.
Mr. VISCLOSKY. On mechanical insulation, buildings are responsible for about 40 percent of U.S. energy demand, and in the Fiscal
Year 2012 Appropriations Conference Report, we had language encouraging the Department to continue working with the industry
relative to the use of mechanical insulation as a means of energy
efficiency and job creation. Currently, the Industrial Technologies
Program has partnered with outside groups to execute a mechanical insulation campaign.
Besides that campaign, what other plans are there in EERE to
promote energy savings through mechanical insulation?
Dr. KELLY. Well, we have been working with people that help
train people in installing this material. We have several programs
that are encouraging retrofits of existing industrial facilities in particular to upgrade their plants. There is something called the Industrial Assessment Centers, which take teams of engineers and
students in to help develop proposals for small and medium-sized
businesses to upgrade their facilities, and, often, the recommendations will include this kind of insulation.
Mr. VISCLOSKY. With encouragment in that regard, I just think
many of these issues are unseen by the general public, but can
translate into great energy conservation.
One other question, if I could, Mr. Chairman, for this round. Dr.
Kelly, my question is about waterpower. My understanding is the
fiscal year 2013 request would reduce funding for research and development in this area by 66 percent. Why?
Dr. KELLY. The reductions are primarily in conventional hydropower, and we have done a fair amount of work on the technology
of turbines, particularly fish-friendly turbines in the past. Getting
these things used is the most important activity. So, we are trying
to make sure that we are doing work on identifying where you
could upgrade facilities or where you could put power plants on existing dams that are not powered. That is much less expensive
than doing the research. We are swinging the pendulum towards
marine and hydrokinetics, which are more of a technology issue,
which is, of course, our comparative advantage. So, we are looking
at tides, waves, and other technologies in the water area.
Mr. VISCLOSKY. For that section of your water power budget,
would that be an increase in funding as far as research dedicated
to it?
Dr. KELLY. I believe it is about equal to last year. I could look
that up and get back to you, but it
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Mr. VISCLOSKY. Yes. Are there other possibilities as far as inland
waterpower besides dams specifically? Because, to be honest with
you, being an accounting major, you never thought about various
types of turbines and lifts and buoys and the oceans. Makes a lot
of sense to me once somebody acknowledges it. Are there other
things people are looking at as far as inland water systems?
Dr. KELLY. Some of our projects, actually, we have funded last
year looking at things in rivers, canals, and other inland areas.
Mr. VISCLOSKY. Okay.
Thank you, Mr. Chairman.
Mr. FRELINGHUYSEN. Thank you.
Mr. Womack.
Mr. WOMACK. I want to go back to vehicles for a minute. I will
stay away from natural gas. I think I made my point there.
Secretary Hoffman and Dr. Kelly, the budget request puts a
large emphasis on energy storage research and in particular on
batteries. These are important technologies for the energy sector
and could be vital in manufacturing, but there are significant risks
that most advanced batteries invented through your programs end
up being manufactured overseas. So, let us not forget that while we
invented the lithium battery used in most portable electronics, that
most manufacturing for these projects has been moved offshore in
the last several decades.
So, what can you do to ensure that the innovations that we are
developing here in this country lead to manufacturing jobs here in
this country?
Dr. KELLY. Well, thank you. First of all, actually, the lithium ion
battery manufacturing, we are hoping is a success story. We had
almost lost that business completely, but because of the Recovery
Act, we are able to make significant investments in domestic manufacturing. There is now a very active lithium ion battery manufacturing enterprise in the U.S. We are going to have to make sure
that we continue to maintain this and grow it, but the general
point you are making is one that we care about very deeply, that
we are frustrated by seeing American-developed technology ending
up creating production jobs overseas.
There are several things we can do. One is in the case of clean
energy technology to make sure we have a high demand for it and
the president has called for a national clean energy portfolio standard that would certainly help. We have a 48C tax incentive that
is designed entirely to try to encourage investment in domestic
manufacturing.
And, in our case, we have been trying very hard to work with
industries in a way that would encourage them to build their prototypes and their first plants here in the United States. We have
something called the Affordable Manufacturing Initiative that is
trying to get production back in the U.S. It is a place where we had
a 40 percent market share a decade ago and it is now 4 percent.
So, we really need to jumpstart domestic manufacturing in that
area.
So, as you may know, there are certain restrictions on what we
can do with intellectual property, but within those restrictions, we
are trying to be as creative as we possibly can to encourage any
of our recipients to produce domestically.
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Mr. WOMACK. Secretary Hoffman.
Ms. HOFFMAN. And I would echo what Dr. Kelly started for our
activities. We are looking at energy storage system for the bulk
power system. So, we look at flywheels, batteries, flow batteries,
different energy storage in support of the electric system and we
do as much as possible to encourage manufacturing within the
United States, and, of course, that the deployment of the product
is directly related to the electric system asset.
Mr. WOMACK. And then my last question is: I have a company
in my district that staff of DoEs have visited in the past, Arkansas
Power Electronics, which I guess part of its genesis came out of
ARPA-E. But it produces a silicon carbide electronics component
used in electric vehicles and it is a very impressive facility. It is
a source of a number of jobs in my district.
As EERE looks kind of toward the future on the Vehicle Technologies Program, knowing that I think, if I remember in the budget correctly, about 40 percent of the Vehicle Technologies Program
was electrification, Where do you see the silicon carbide component
these technology solutions?
Dr. KELLY. So, in the electronic program, obviously, batteries are
the best cost driver and they are a significant portion of what we
are doing, but we are also looking at power electronics and control
systems where these silicon carbide devices would be very crucial
to getting high efficiencies and low cost and low volume. Of course,
we are also looking at efficient electric motors. But the silicon carbide is also a key part of our Program because the power electronics associated with turning the DC, the solar cells, into AC that
we can use goes through an inverter and the inverters would benefit enormously by the advances in silicon carbide technology.
Mr. WOMACK. So, it has a place.
Dr. KELLY. It has many places.
Mr. WOMACK. Okay. I yield back, Mr. Chairman.
Mr. FRELINGHUYSEN. Thank you, Mr. Womack.
Mr. Olver.
Mr. OLVER. Thank you, Mr. Chairman. Ms. Hoffman, you deal
with the electricity grid, essentially, with General Power and the
quality of the grid. Now just for clarity, conventional water power
would probably be in your portfolio then, I take it, because we do
produce a lot of electricity that generally goes into the grid through
the conventional land-based power system.
Ms. HOFFMAN. Actually our efforts are generation technology
neutral. So what we do is actually look at the system to ensure the
system is flexible to accept any form of generation. And then our
goal is actually to look at how do we optimize that generation portfolio, so we have an efficient system. So hydropower was originally
under the energy efficiency program. We do not do generation technologies under our portfolio.
Mr. OLVER. Okay. All right. I continually get confused as to
whos got what in their portfolio. To you, my sense is that natural
gas fired turbines and coal fired turbines and nuclear fired turbines, nuclear powered turbines all produce at least 10 percent; 20
percent in the case of nuclear and 50 percent within coal. And
water powered, what is the water power amount in what presently
is our grid electricity?
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Dr. KELLY. I will give you the right number but it is in the order
of 8 percent.
Mr. OLVER. Eight percent? All right. So that is the fourth one.
At first I did not have the water power component and should
have. But there are at least four major components that get you
to that kind of percentage. Oil is now below that, I think, by a good
deal.
In the case of renewable energy, let me switch over to you, Dr.
Kelly. The major things in renewables seem to be your sea-based
research and development issues in water power. There is wind.
There is solar. There is geothermal. There is biofuel, but biofuel
really is mainly in transportation. That would not get into grid,
particularly. That is not a grid-related issue.
Dr. KELLY. It is a little bit of biopowered
Mr. OLVER. Yes. Well there are a few burners that do that. But
I do not think that we ever expect that the accumulation of wood
burners is going to get up above the one percent. Do all of those
have a potential to produce, all the ones that I have talked about,
have a potential to produce one percent or more of renewable energy?
Dr. KELLY. Well, absolutely. This is the core of the all-of-theabove strategy. And of course, the big new contributor in the last
few years is, it has been on-shore wind. Something like 35 percent
of all capacity added in the last three years has been on-shore.
Mr. OLVER. We are above one percent on on-shore wind.
Dr. KELLY. Definitely.
Mr. OLVER. We have almost no off-shore wind yet.
Dr. KELLY. Well, we have zero off-shore wind, to be exact.
Mr. OLVER. Okay. Well on-shore and off-shore wind are a little
bit like a separation between on-shore water power and off-shore
water power, in a sense. And my real question is sort of similar to
what I asked Mr. McConnell earlier, which is, is there a document,
a planning documentit could be fairly long, I suppose, that gives
a sense of what the expectations might be, what the status is for
the research and development on each of these programs, and if
each of these programs has significant subprograms that are a significantly different path in the way you have to function? Some of
them might take years and years and years, and some of them are
fairly close. Is there a document that summarizes that so that one
can see what it is that is in our overall portfolio? What should be
in our minds, or if we were trying to think comprehensively about
what looks to be available in renewable energy?
Dr. KELLY. Yes. Of course, there is the official forecast, the annual energy outlook by the Energy Information Administration that
has their view of this. We have also done some internal planning
work to say if we succeed in meeting our technology goals.
Mr. OLVER. Well a critical component of that would be, just
where are we now at this stage of commercialization as to what the
cost is per kilowatt hour, or whatever. We sort of know what it is
for coal fired or natural gas fired or nuclear. Though in the case
of nuclear, it is quite a bit of subsidization so it is a little hard to
be certain whether you are getting it all. Is there something that
brings that aspect in, the cost now and what our prospects for how
long it is going to take to bring that cost down to the level of oth-
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ers? And does it also include with it a sort of life-cycle costing program for what one has to think about over a 50-year period, since
most of these facilities are going to last that long? Do you have a
document that would do it?
Dr. KELLY. Well we have the information you need. In fact, some
of it is actually summarized in the budget document. You will see
these curves. And what these curves are doing is saying, what is
the cost of electricity from the technology of today and what do you
have to do to get to the end point, and how long do we think it will
take to get there.
Mr. OLVER. The budget is a very long document. I will pass.
Mr. FRELINGHUYSEN. You are going to pass the baton onto Mr.
Nunnelee, are you?
Dr. KELLY. Yes. Yes.
Mr. OLVER. Certainly.
Mr. FRELINGHUYSEN. Thank you very much, Mr. Olver. Mr.
Nunnelee.
Mr. NUNNELEE. Thank you, Mr. Chairman. Dr. Kelly, I understand you are looking at regulating decorative gas fireplaces and
log sets. Just give me an update on the status of that rule.
Dr. KELLY. Well we are sort of proud of the way we are setting
rules like this. We have a very open process. We take comments.
We have gotten comments. I believe that this is now a matter of
litigation, so it is a little difficult for me to talk about it. But all
I can do is assure you that the comments of all parties are being
very carefully considered and we are going to have to wait for the
outcome of this litigation.
Mr. NUNNELEE. You used the term proud. What does that mean?
What does that imply?
Dr. KELLY. That means that we have a process for setting standards that is based on the best available data that is reviewed by
experts. It is completely transparent and open. We get public comment and we have a process of adjudication that we think has
worked very well.
Mr. NUNNELEE. I understand your hands are tied if it is in litigation. I just want you to give me your assurance that you are working with all parties. I am not sure how you come to the conclusion
that these are heaters, but I will be anxiously following your
progress on that road.
Dr. KELLY. Okay. I know that there are many opinions on this
subject, and they are certainly all being fairly considered, is the
one thing I can assure you.
Mr. NUNNELEE. All right. Also the 2012 report language included
a commitment to manufacturing from this committee, including an
investment of $12 million for state manufacturing improvements.
And I just want you to give me your assurance that in FY2012 we
are spending $12 million for solid state manufacturing improvements in your budget.
Dr. KELLY. If you told us to do it, I will assume we are doing it,
but I would prefer to make sure that I double-check this with our
guys.
Mr. NUNNELEE. Okay. Can you do that and get back with me?
Dr. KELLY. I will definitely get back to you with it.
Mr. NUNNELEE. All right. That is all I have, Mr. Chairman.
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Mr. FRELINGHUYSEN. It is good to know what you are doing. Yes.
Thank you. Mr. Fattah.
Mr. FATTAH. Thank you, Mr. Chairman. Let me apologize for
being late but I had a cyber security briefing having to do with my
other responsibilities on CJS. But I am here and I thank you for
holding this hearing. And I want to thank all of the witnesses for
the extraordinary work that the Department is doing, even in the
face of a political dynamic that is unfortunate and not really focused on I think the real challenges, so let me try to set this up.
The European Energy Alliance has just announced in the last
couple of weeks that, based on the efforts of what is being done
here in the United States, that the European Union, in order to
compete economically has to now invest in renewable energy and
energy efficiency. They have set up a series of goals related to 2030
because they say that, given the emphasis that has been placed
here, it is the only way their industries are going to be able to compete.
And, you know, I have been around. I have seen the fuel cell. I
was out in New Haven, Connecticut visiting a new supermarket
construction where they are using fuel cell technology. And, as you
know, many new supermarkets are using fuel cells and they are
very energy inefficient, generally. But now with the fuel cells, they
can operate these supermarkets, which require a lot of energy.
And right in the Philadelphia area, Bloom Energy has now hired
over 1500 people in a plant making fuel cells. UTC is making fuel
cells. All of this is a result of the investments that you have made.
And we have seen the same thing with industry in terms of trucks,
based on investments made.
I went out and visited the Argonne Lab in Chicago, which is focused on batteries. And I know that these batteries have been licensed by the Department to the private sector and that they have
a capacity that ranges between 100 and 300 times more than the
normal batteries. So I think that a lot of work has been done.
I have been a big proponent of the renewable energy sector. Notwithstanding that, I mean, the Department has been working this
term of art on all of the above, you know, the new nuclear plants
that have now been licensed for the first time in 30 years, and on
and on and on.
The politics of this, I cannot figure out. I mean, we are competing
economically with China and the European union and others. I
would like you to speak a minute about what our competition is
doing in this regard and how you see our efforts relative to this
competition for the kind of quality of life that Americans expect as
a global leader, vis-a-vie, what our competitorsand we are fine
with competition but it should bring the best out of us. So talk a
little bit about what you see internally.
Dr. KELLY. Well countries all around the world understand that
clean energy technology is a place that is going to be driving
growth and they want their share of that growth. And places like
China have made an extraordinary investment in capturing key
parts of these markets. They have been pushing for manufacturing
of photovoltaics for efficient lighting. Now they are getting into
electric vehicles, and so we are, of course, very concerned. And the
Europeans are also very active.
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If you look at something like off-shore wind, there are major
projects in Denmark, in Germany, in Korea, in Japan and China.
So we think that we can out-innovate these guys but it is going to
be tough competition. Of course, there are very aggressive government programs in many of these countries.
Mr. FATTAH. So the largest wind farm is now in Honduras? And
you also have activity in South America. And on this front you
have a lot of activity. So I just think that the community and we
as a country should be aware and I think the committee is aware.
I know the Chairman is because we have had a chance to visit
some of these national laboratories and see the work. It is critically
important that we make these investments because we are not
shadow-boxing. And it is a cost to our industry if energy costs more
here. I met with a host of CEOs of chemical companies in Philadelphia, which happens to be the home of a large share of the chemical industry, yesterday.
We were talking about howbecause of the low cost of energy,
mainly through natural gas and other vehicles, that they are able
now to bring a lot of these jobs back home that had been
outsourced. And so I think it is very, very important as we go forward that we keep in mind that the investments we make now are
not just investments, vis-a`-vis, what we can see clear to invest, but
also relative to what our economic competitors are investing, and
what it means if we lose this competition, if we lose the competition on batteries for vehicles.
The belief among the experts is that we would also lose the car
industry itself. Whatever country wins on developing these batteries, that is where these cars are probably going to end up being
made. And this is a competition that will impact not really many
of us, because we are kind of over-the-hill or headed that way, but
for our grandchildren and their quality of life, it will have a big impact. So thank you for the work that you are doing and thank you
for your appearance, and I thank the Chairman.
Mr. FRELINGHUYSEN. Thank you, Mr. Fattah. Do you agree with
Mr. Fattahs contentions that things are happening abroad that
should concern us? And let us just focus for a few minutes on the
American solar industry. How would you describe its state at the
moment?
Dr. KELLY. Well, as I said, we had 40 percent world market
share about 10 years ago and it is now 4 percent. We went from
40 percent to 4 percent. It is now around 4 percent, so we are very
concerned. And, of course, we are now coming out with a new generation of technologies, technologies that are very efficient, a new
generation of thin films and other things. And we are trying to
make sure that all of these new technologies are going to be produced here, and we are making every effort to do that.
Mr. FRELINGHUYSEN. So we commend you for that. How do you
actually protect that intellectual property?
Dr. KELLY. Well, you know, there is a Bayh-Dole Act which puts
pretty clear guidance to what the
Mr. FRELINGHUYSEN. Well, you are aware, obviously the Department of Commerce has announced new rules to address this sort
of a subsidy issue, but what about the greater intellectual property
issue here?
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Dr. KELLY. Well in the case of Bayh-Dole, the smaller companies
and the universities are given a hundred percent of intellectual
property. That is just in the statute. And the idea was, you do not
want the feds holding it; you want the private sector to have it.
Mr. FRELINGHUYSEN. We are not against That.
Dr. KELLY. Yes.
Mr. FRELINGHUYSEN. But I am just saying how do we actually
maintain it here. Both Mr. Visclosky and I and every member of
this committee are interested in what we could do to promote manufacturing jobs here and keep them here. Is that a pipe dream or
what?
Dr. KELLY. We share your concern. And as Mr. Womack was
pointing out, trying to find strategies for keeping this production
in the U.S.
Mr. FRELINGHUYSEN. So what would you suggest would be the
strategy?
Dr. KELLY. Well, one thing is certainly to make sure that we
have got a very strong domestic demand for clean energy technology and
Mr. FRELINGHUYSEN. Which we do.
Dr. KELLY. Which we do, a lot of states have various kinds of renewable or clean energy portfolio standards. Getting a national
one, we think would help the 48(c) tax credit, in our view, very successful in encouraging domestic manufacturing investments here in
the United States.
Mr. VISCLOSKY. Which tax credit?
Dr. KELLY. It is called 48(c). We requested actually $5 billion for
this, if I am correct. This is part of a program that was in place
two years ago. I believe it was part of the recovery act, but it
gave
Mr. VISCLOSKY. Was that used to import windmills?
Dr. KELLY. No, no. This was to give tax credits to companies that
build factories in the U.S. And it was solar factories, wind factories
and
Mr. FRELINGHUYSEN. How would you characterize where those
factories stand today? We have made these investments. I assume
you are familiar with how successful they have been.
Dr. KELLY. Well it is a little difficult to do a survey since it was
a tax and went through IRS, but we are trying to track them down
and make sure that we understand the effects. Of course they do
not get the tax write-off if they do not do anything.
Mr. FRELINGHUYSEN. But collectively, certainly, the Department
must have a pretty good idea who is out there. I mean, New Haven
was mentioned. I think Connecticut has an indigenous fuel cell
company, I assume.
Dr. KELLY. Right.
Mr. FRELINGHUYSEN. There used to be five or six that I was familiar with. So you have an overview of the landscape here?
Dr. KELLY. Well on that particular program I know they are collecting data. Exactly where it is, I will have to get back to you. But
I know we are
Mr. FRELINGHUYSEN. No. I wonder, because if we are going to
match what you are doing to what is out there, it might be good
to know what is out there.
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Dr. KELLY. Well we are trying to track downas I said, trying
to work through the IRS to collect this information.
Mr. FRELINGHUYSEN. Yeah. But in reality, the Department of Energy is pretty good at coming up withI forget what that component isa lot of energy information, for that portion of your operation. I am sure some people would like to eliminate it, but in reality I like the idea.
Dr. KELLY. Well in this case we are trying to go out and contact
the firms and find out exactly what is happening.
Mr. FRELINGHUYSEN. Well let us maybe work on that. I just want
to focus for a minute. Our committee has been very supportive of
the mission and goals of the Industrial Technologies Program.
Every year we seem to undergo some sort of name change but now
it is renamed the Advanced Manufacturing Program. But whatever
it is called, we are supportive of things that strengthen American
industry and manufacturing, and there is a lot more to be done on
that front.
But setting the goals aside for a moment, I would like to discuss
the implementation. We have serious concerns about the proliferation under the program of the last two years of a variety of different centers, all of which must require some sort of physical and
permanent space.
In the last few years, within just the Advanced Manufacturing
Program, the Department has established clean energy applicant
centers, industrial assessment centers, manufacturing demonstration facilities, advanced manufacturing clusters and an energy innovation hub. To say the least, I have serious concerns about the
out-year commitments that these centers require, a commitment
which is $141 million in fiscal year 2013 for a program that had
$160 million appropriated in the current year. This raises serious
concerns about the propensity to start centers here, this issue of
raising expectations. So I would like for you to comment on these
different centers, first the Industrial Assessment Centers. Tell us
a little bit aboutyou have, I think, $6 million in there?
Dr. KELLY. Mm-hmm.
Mr. FRELINGHUYSEN. Tell us about how many there are when
you first asked them for them in your budget request, when they
were established, how long we anticipate they are going to be
around.
Dr. KELLY. They have been around for a number of years, I believe over a decade. What these are
Mr. FRELINGHUYSEN. So how many are there?
Dr. KELLY. I do not know off the top of my head.
Mr. FRELINGHUYSEN. Could somebody in back of you maybe provide us with that information? Because I am going to ask you
about the manufacturing demonstration facilities, which you devoted $28 million for those in fiscal year 2012 yet they are not
mentioned in your budget request. So maybe we can put some meat
on the bones here.
Dr. KELLY. Certainly. Well, the clean energy application centers
were
Mr. FRELINGHUYSEN. Well, what about the industrial assessment
centers, the manufacturing demonstration facilities and then
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maybe give the committee some information on the clean energy
application centers.
Dr. KELLY. All right. The new facilities are the manufacturing
demonstration facilities. The other ones have been in place for
some time.
Mr. FRELINGHUYSEN. They are new but they are not mentioned
in your budget?
Dr. KELLY. They are an implementation of the program that we
described in the budget. Our thinking is that we have developed
some very specific ways of implementing what we said we were
going to do in there. So there are three concrete, three specific
things that we are going to do that account for most of the growth.
Mr. FRELINGHUYSEN. Well, where are they going to be and how
longare they going to be around indefinitely? Here we obviously
have set them up.
Dr. KELLY. Well, let me go through the new ones. As I said, there
are a number of these things that have been created by statute and
we are continuing that have been in the program for some time.
The industrial assessment centers are university based. They train
students. They do audits and retrofits for small- and medium-size
businesses. They have been very successful from our point of view.
The clean energy application centers were established primarily
to look at
Mr. FRELINGHUYSEN. How much money do they get now?
Dr. KELLY. I would have to look that up.
Mr. FRELINGHUYSEN. Does anybody know?
Dr. KELLY. Yes, I can look it up. I just do not have it in my hand.
Mr. FRELINGHUYSEN. Okay. Well, let us start on the advanced
manufacturing clusters. After some inquiry, the Department tells
us that you would like an increase of funding for them from $6.7
million to $20 million, but your official request documents do not
mention them at all. Can you give us some information on them?
Dr. KELLY. Certainly. There are a number of questions on the
table so I can start going through them.
Mr. FRELINGHUYSEN. Yeah, there are and so we need just some
basic facts on all these centers.
Dr. KELLY. The ones that have been existing are the clean energy
application centers and the industrial assessment centers. Those
have beenthose continue and I can go into the details of the
budget and find out what they are. The new things that we are
proposing here are first a program that is going to be looking
broadly at innovative proposals and research on advanced manufacturing and advanced material. And I can give you some examples of those, but these are things which both help improve the efficiency of the manufacturing process itselfand about 30 percent of
our energy goes into manufacturing so it is energy, productivity,
and manufacturingbut also driving down the cost of clean energy
products is what we do throughout our organization. So we want
to get cheaper lighting, cheaper photovoltaic, cheaper wind machines, cheaper batteries, and so on. All of that is a manufacturing
or a lot of it is a manufacturing issue.
Mr. FRELINGHUYSEN. So where does the critical materials hub
come into this?
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Dr. KELLY. So the critical materials hub is a new proposal. It is
funded in the FY12 budget. We will be putting out a solicitation
for that probably within a month.
Mr. FRELINGHUYSEN. The issue here is that we have got all these
centers and I am sure there are some remarkable people that are
working to make them successful and would work to make the new
ones successful, but I think we are going to find ourselves in one
heck of a budget squeeze here. What would be your priorities in the
overallin this sort of a budget environment?
Dr. KELLY. Well, the critical materials hub
Mr. FRELINGHUYSEN. We have to have some priorities here.
Dr. KELLY. Right, exactly, and we plainly show in the budget
that we think manufacturing is a priority. This has come out of the
concern of the entire administration and Congress. And we had a
big commission put together by the Presidents Council of Advisors
on Science and Technology that made a bunch of recommendations.
They set up this panel that is chaired by the president of MIT and
Dow that has been looking into this in detail and has had hearings
around the country. So that is where this came from.
Mr. FRELINGHUYSEN. I think we value that contribution from the
private sector and academia, but there seems to be an over-commitment here and I just want to make sure we do not raise expectations. That is related obviously to
Mr. WOMACK. Will the gentleman yield?
Mr. FRELINGHUYSEN. Yes.
Mr. WOMACK. Do these programs ever go away?
Dr. KELLY. Yes, programs go away all the time.
Mr. WOMACK. These centers, these hubs, I mean, as technology
changes, as emerging technologiesas evidenced by the line of
questioning this morningthings now become important, rare
earth, et cetera, et cetera. Do they take the place of other programs
that have previously been authorized and funded by Congress?
Dr. KELLY. Well, the increase that you see here is not just building on the, perpetuating everything we were doing before. We cut
a lot of things out to do this. For example
Mr. WOMACK. What have you cut outand maybe provide that
for the record?
Dr. KELLY. Conceptually what we are doing, for example, in biomass we are moving from ethanol to drop-in fuel. In wind we are
moving from onshore to offshore. In batteries we did nickel metal
hydride batteries for a long time. They are now successful in commercial. We just declared success and got out of that, and we are
now doing lithium. And a few years from now, we will move from
lithium to something else.
Mr. FRELINGHUYSEN. Something else. Mr. Visclosky.
Mr. VISCLOSKY. I would like to follow up in just a bit of a different fashion on the comments my colleagues, including the chairman, have just touched upon. And it gets back to the issue of manufacturing where we have gone from 40 percent to 4 percent relative to solar as I understand the statistics. I, too, am very concerned about the proliferation of centers at the Department. We
have got 46 frontier research centers. A colleague asked if we ever
get rid of anything. We have three bioenergy research centers. We
have a genome institute. You know, 13 independent programs with-
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in your jurisdiction itself. And we went from 40 percent to 4 percent on solar, and we are spending hundreds of millions of dollars
a year, billions of dollars a year, on research for energy in the
United States of America. When asked by the chairman what we
are doing to keep this intellectual property and these jobs in the
United States, you mentioned that we need to ensure we have demand for this energy. I agree with you. And to an extent, the government has a role in developing that demand by buying the energy. But that is an external demand. You mentioned the 48(c) tax
credit. That is not within your purview, although I understand you
support it. That is terrific.
You also mentioned collecting data. As I like to tell my colleagues
sometimes, we have been dialoguing with the Chinese on steel forever. Now they make four times more tonnage than we do, and we
have been dialoguing. We are going to dialogue ourselves to death.
And now we are collecting information.
If you could for the record, with solarbecause we are at the end
of our game now on solar and we are going to have more questions
on solar tomorrow and batteries, there has been a lot of emphasis
on batteriesif you could just concisely, simply, bullet-point what
are you and your department doing to make sure all of this money
we are spending stays here in jobs? I do not want to hear about
green jobs. I am sick of green jobs. No, it makes me sick. I tell people I am going to talk to the Secretary in a minute about it. My
green job is the United States steel industry using 30 percent less
CO2 since 1990 to make a ton of steel. That is a lot of trees. That
is my green job. So I would ask for the record, besides the tax credit, besides increasing demand, besides collecting information, what
are you doing to make sure we do not lose batteries and we do not
lose that last 4 percent for the record?
Now talking about the various centers and hubs. Secretary Hoffman, there is a proposal this year for an energy innovative hub. We
have five. You have made a request for another one. This is different in that as I understand it there would be multiple hubs. Will
they be called hublets?
Ms. HOFFMAN. I said regional hubs.
Mr. VISCLOSKY. Hublets, sub hublets?
Ms. HOFFMAN. If you like the term hublets, but we are calling
them regional hubs.
Mr. VISCLOSKY. Regional hubs. Besides New Jersey and Indiana,
where does the third one go?
Ms. HOFFMAN. We will be running a solicitation so the hubs will
be determined by a solicitation.
Mr. VISCLOSKY. All kidding aside, why do you need three? Why
do you need three physical locations?
Ms. HOFFMAN. Actually we are looking at two to three, but it reflects the regional nature of our electric grid. In different parts of
the country, we have different generation resources. So the generation mix in the southeast is very different than the generation mix
in the west. We have different markets and policies that are being
implemented differently across the United States. PJM is a market
whereas in the southeast they operate under bilateral agreements.
There are different state policies. So what we wanted to do with
the regional hubs was to actually build upon some of those local
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differences, to say how do we advance the electric grid in modernizing the grid, looking at data that we are getting in those regions,
looking at the capabilities of how do we deal with cyber security
in each of those regions considering the mix is different, the technology is different, the architecture is different. So we recognize
that there are differences in the regions, but we want to pull that
together and make sure that we can do a national effort.
Mr. VISCLOSKY. You cannot, with all the scientific knowledge we
have at the Department of Energy, do that from one location? As
my colleague from Pennsylvania, I am over the hill. I do not telecommute, but I understand a lot of people in the federal government do that. And a lot of research is done through the Internet
and video conferencing, and you think we need two or three centers
to do this?
Ms. HOFFMAN. We need two or three centers to reflect the different nature of the regions in the United States. There are parts
of the centers that we can pull apart and do nationally as we look
at demand response and the impact of demand response nationally.
But we need those centers to really identify those regional differences. The wind integration and the renewables are primarily in
the west. The east deals with a different generation mix and a different market and policy structure that has to be tailored to the
needs of those regions.
Mr. MCCONNELL. The pipeline is set up to deliver oil to distribution centers, most probably in the Cushing, Oklahoma area and ultimately end up in regional refineries along the Texas Gulf coast.
50 percent of the refining capacity in this country is along the U.S.
Gulf Coast. That oil and the characteristics of that oil are well-suited to be refined in those refineries along the U.S. Gulf Coast.
Mr. FATTAH. And then what will happen with these refined products, in your judgment? Based on your knowledge of the industry.
Mr. MCCONNELL. Refined products are very likely to be consumed in the United States in the domestic market.
Mr. FATTAH. Okay. Now, we are a net exporter now of oil?
Mr. MCCONNELL. No.
Mr. FATTAH. No?
Mr. MCCONNELL. No. We are a net importer.
Mr. FATTAH. We are a net importer. So, then what do we import
and how much do we import?
Mr. MCCONNELL. Well and again, if you are speaking about
Mr. FATTAH. China was at, over the last five years, double the
amount that it utilizes, right? I mean, where are we at in this? Are
we growing in the amount that we are importing? Are we decreasing? Where are we at?
Mr. MCCONNELL. Actually, over the past several years we have
decreased the amount of imported oil from approximately 70 percent to approximately 50 percent.
Mr. FATTAH. And the difference is being made up by less demand
or what? Where is the difference being made up?
Mr. MCCONNELL. It is a combination of improved domestic oil
supplies in the United States, demand, new technologies, and a
good part of the all of the above strategy.
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Mr. FATTAH. If you were looking forward, how do you see the
next five years? Is the demand for imported oil going to be greater
or less?
Mr. MCCONNELL. The way the policy and the way our efforts are
aimed is to improve and continue to work at improving energy security in this country. Domestic production versus imported production are aspects of an energy security strategy, and a big part
of what we are constantly working at in terms of a portfolio approach is to make sure that energy security at the top of the list
is first and foremost.
Mr. FATTAH. Now, we are the wealthiest economy in the world,
right? So like today there is an announcement they found oil in
Kenya for the first time, right? And oil is on the world market,
right? It would seem to me, logically, we would want to buy as
much oil from other places as we possibly could and hold on to domestic supply. Is that illogical? Why was it in our national interest
to make sure that oil was on the world market?
Mr. MCCONNELL. I am not sure I understand your question, directly, sir.
Mr. FATTAH. Okay. I am trying to understand why it is we insist,
for instanceI mean, you know, our number one foreign policy goal
vis-a`-vis Venezuela is that it all be available on all markets, right?
So, we want oil wherever it is found, right? To be sold on a world
market. That is our governments policy. And I am trying to make
sure that even though that was set a long time ago, that that is
still a good policy going forward, in your judgment.
Mr. MCCONNELL. Well in my judgment, sir, I do not know that
we are in a position to create a world policy on oil and its availability, and I think that is the biggest concern we all have in terms
of energy security. There is not any world policy, there is only our
ability to access oil as it is available, the price that it is available
from, and the ability to secure supplies necessary for this country.
So again, back to a portfolio approach of being able to access the
most available oil at the most attractive prices. That is business.
Mr. FATTAH. Thank you very much. I want to have some other
questions for the record. Thank you.
Mr. FRELINGHUYSEN. Mr. Olver.
Mr. OLVER. Thank you again, Mr. Chairman. I want to very
briefly enter the comments about the hubthe grid-related hub. It
sounds to me that it is more three parts because we developed it
at an earlier stage, before we really started hubs, a group of biofuel
centers which I do not think thatI have not seen a very different
approach from those bio-research centers. And I forget just where
they are. I guess they are under the Offices of Sciencewhat you
are describing.
It just does not seem to me that there is much difference between
the universitiesthere are lots of utilities, our big four in terms of
power generation remain coal, gas, nuclear, and maybe we ought
to have wind. Wind, you say, is in the West, but we also have some
substantial wind on-land production in the East.
So, I really do not see why there is a need for just regionalization. Although I am a supporter of the concept that one should not
put all ones energy eggs in one basket. I am trying to see how
much of the questioning here as I have heard it this morning is
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that this is a diffuse expanding universe of programs, in essence.
It is almost like a cosmic expansion of the universe, which physicists tell us is going on and has been going on since the Big Bang
in the first place. I just see it getting larger and larger and more
diffuse in the process.
I wanted to ask Secretary Kelly. You have a critical materials
hub that you are going to be going out for solicitations on that.
That will be one hub?
Dr. KELLY. One hub, yes.
Mr. OLVER. One hub. The battery hub is not under you. The battery hub is under the Office of Science?
Dr. KELLY. Correct.
Mr. OLVER. And when they get finished with proving that things
can be done scientifically, then it is your offices job to help them
to commercialization. It is really taking it farther up the development chart from the relatively long research and early development
to the development that gets you toward commercialization. So, you
do not haveyou will not have the hub, but you will get the partially-developedthe proven science. Your office would be the one
that is supposed to try and find the companies that can do this and
bring it to fruition. But you do have hubs. You are going to be putting up the critical materials, but you also have the building materials hub at theI am sorry, but my colleague from Philadelphia
has not yet raised it. In Philadelphia, it has been up there for a
while. Give us a good positive reading of exactly where we are on
that building efficiency hub.
Dr. KELLY. They are doing extraordinary work in Philadelphia.
Mr. OLVER. Okay.
Dr. KELLY. Lots of Philadelphians involved. Well first, on the
battery issue. We have a tech team in the Department that includes ARPAE, our office, and the Office of Science. They collectively put together the solicitation so we are in very close communication with them all the time.
Mr. FRELINGHUYSEN. The solicitation on the critical materials is
one that is being done by this tech team? This?
Dr. KELLY. The battery one you mentioned. So, we actually
havethe people all working on the basic science, the people working in ARPAE and the people in EERE working on batteries are
working very, very closely together, and doing exactly what you described.
Now, the Philadelphia hub. It has been up and running for about
a year. We think it has got a tremendous opportunity to help us
understand how buildings actually work. Its focus is on improving
computing models of how buildings operate, how they could work
with new technologies, how they could work as a whole, and then
validate those models against real buildings. The good thing about
having it in the Philadelphia Navy Yard is that they are going to
be retrofitting a bunch of buildings in that area, and so they will
be able to really do a first-rate job.
What they have done already is, they have built computing that
is helping researchers all around the country work together and develop this work. They have built a very interesting 3D visualization environment where architects and engineers and others can
work together to both design the building and understand the en-
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ergy implications of the way it is going to operate. They have actually installed the state-of-the-art or beyond state-of-the-art building
sensors and control system in part of their own facility that is
hooked onto a very sophisticated modeling tool.
If you compare the way energy systems operate in an airplane
with the way energy systems operate in a typical commercial building, they are just light years apart. One of the things they are able
to do is really build the kind of sophistication into buildings that
can allow you to make sure that everything is operating correctly.
Until recently, sensors and controls were very expensive, but now
you can actually imagine doing this, and that center has been really at the cutting edge of that.
Mr. OLVER. So we do not yet have any real sense of how this is
going to spread out into the general economy?
Dr. KELLY. Well you know, it has attracted 22 partners, including a lot of industrial partners who have been participating in this.
People are already using this 3D visualization center.
Mr. OLVER. Okay, I wish you the best of luck. I mean, there really is an enormous amount of energy conservation. It is still the lowhanging fruit, there is no question about that.
Dr. KELLY. Yes, and it certainly is a lot cheaper, in most cases,
to save electricity than to generate it. So there is a huge opportunity space out there.
Mr. OLVER. Thank you, Mr. Chairman, for your patience.
Mr. FRELINGHUYSEN. Thank you, Mr. Olver. Just a few brief
questions. Secretary McConnell, recoverable shale oil? Can you talk
about that? There is certainly a view that we have some real potential there.
Mr. MCCONNELL. We agree there is a real potential
Mr. FRELINGHUYSEN. And what are we doing? What is the Department doing in that area?
Mr. MCCONNELL. Well as suggested previously, a lot of the work
that went on in the 70s was a big part of hydraulic fracturing.
Mr. FRELINGHUYSEN. You gave us that history lesson. I thought
that was valuable, but
Mr. MCCONNELL. We do not have anything specific in our budget
related to shale oil, sir, for the coming year.
Mr. FRELINGHUYSEN. But if we talk about diversity and all the
above, this is not something whichyou do not believe it has
merit? Or do you think it is too complicated? It is not financially
feasible? How would you characterize?
Mr. MCCONNELL. There are a lot of challenges to shale oil development. There is a tremendous amount of uncertainty. But also at
the same time, potential for that resource.
We do not have anything on our budget for the coming year. We
were required to make strategic choices in terms of the areas that
we were going to focus on, and that was not one of them.
Mr. FRELINGHUYSEN. Is the private sector doing investments in
this area? And how would you characterize those investments?
Mr. MCCONNELL. Yes, they are doing investments. It is very
early on and very much in a discovery mode.
Mr. FRELINGHUYSEN. Okay.
Mr. MCCONNELL. And if I might?
Mr. FRELINGHUYSEN. Yes, please do.
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Mr. MCCONNELL. If I could just pick up on something that I said
earlier. I want to make sure based on the age of the Internet that
I said exactly what gets picked up. I was not speaking about any
specific release from the strategic petroleum reserve. The Administration has consistently talked about no options being off the table
in terms of where we are with the strategic petroleum reserve, or
in terms of any supply interruptions that have or may occur, but
I was not speaking specifically of anything being considered right
now, specifically.
Mr. FRELINGHUYSEN. Yes, well I did not characterize your statement as being imminent
Mr. MCCONNELL. Thank you.
Mr. FRELINGHUYSEN [continuing]. I can assure you. I think it
would be ill-advised, but we understand.
Mr. MCCONNELL. But just in case somebody else might. Thank
you.
Mr. FRELINGHUYSEN. Whoever picked that up I am sure will correct the record.
Mr. MCCONNELL. Thank you.
Mr. FRELINGHUYSEN. Very briefly, for Secretary Hoffman and Dr.
Kelly. There was an announcement recently about using the four
power marketing administrations goals. Can you talk about that,
to transforming the nations electric sector?
Ms. HOFFMAN. Yes. The Secretary sent a letter out to the power
market administrations, looking at some policies and looking at
what the power market administrations can do to advance the deployment of renewable energy, look at energy efficiency, among
other topics. The power marketing administrations are not under
either Dr. Kelly or under my jurisdiction, but we expect further information to come out with respect to how that policy will be implemented with the administrations.
Mr. FRELINGHUYSEN. So that does not provide me with very
much information.
Ms. HOFFMAN. We can provide you with more information for the
record.
Mr. FRELINGHUYSEN. So, you are going to be involved in those activities?
Ms. HOFFMAN. We communicate on a regular basis within the
Department of Energy on the activities.
Mr. FRELINGHUYSEN. Is this budgeted for? Or is this just talk?
Is this just contemplated?
Ms. HOFFMAN. I do not have
Mr. FRELINGHUYSEN. Has there been any direction?
Ms. HOFFMAN. I do not have any details on the direction. We
could probably provide that for you, for the record.
Mr. FRELINGHUYSEN. Okay. Mr. Visclosky, anything further?
Mr. VISCLOSKY. If I could, Mr. Chairman, for just a few minutes.
Keystone has been mentioned and it is relevant to the issue at
hand, but it leads back to my concern about the attention of all
three of you and your departments about the money we are spending to keep and create good-paying living wage jobs in the United
States of America for the Keystone Pipeline. I disagree with the
Presidents past position, potentially it is evolving. A great boon to
job creation. The only problem is, almost every ounce of steel for
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the pipeline was poured outside of the United States of America.

Nobody was thinking about the steelworkers then, and I am not
blaming anybody on the panel. I am just venting here a little bit.
It will be fabricated in the United Statessomebody poured it outside. It is a private pipeline, that is their prerogative.
On SPRUand I know you have not even brought SPRU up
today, Mr. Secretary. I heard nothing about SPRU. Well, the last
time there was a release, there was a waiver of the Jones Act that
allowed foreign flag vessels to transport the oil. The Jones Act is
in place for a very specific reason, and I know that is not your policy decision either but I am trying to send a message here.
There is potentially an argument there is not enough U.S. domestic-created ships. Why? Because we are not doing enough to encourage ships being built in the United States of America in the
first place to take this oil and put somebody to work in this country. Again, not a lecture to you. But, assuming all options are on
the table, I would hope waiving the Jones Act is not one of them.
I would like to talk about coal, if I could just for a minute or two,
Mr. Chairman. My understanding is in 2010 coal represented 21.3
percent of energy demand by fuel in the United States of America,
and that the EIA estimates that by 2035, 46 percent of our electricity will continue to come from coal. I mentioned the steel industry saving 30 percent CO2 per ton. A lot of trees.
I believe in global warming. I think we ought to move from a carbon-based economy. I absolutely believe that. As a pragmatist, I am
looking at the statistics saying that almost half of our electricity
is going to come from coal in 2035.
Why was the coal budget savaged? We worked on turbines for
water to get more energy from the same amount of water in those
waterways. Why not work to get more efficiency out of that ounce
of coal we are going to continue to burn until 2035. Why take all
that money out of coal?
Mr. MCCONNELL. I agree with everything that you mentioned,
and when I took this job I made a commitment to do everything
we can do with what we have available to do exactly what you just
described. And that is what I am going to continue to do as leader
of the Fossil Energy Organization.
Mr. VISCLOSKY. I assume you being a very bright individual, if
you had additional resources at your disposalmentioning your
household income earlier, you would be able to put it to good use.
Mr. MCCONNELL. Whatever
Mr. VISCLOSKY. If you volunteered to do so.
Mr. MCCONNELL. Whatever resources I have got available in fossil energy, you can bet we will put them to good use.
Mr. VISCLOSKY. Okay. Mr. Chairman, thank you very much.
Mr. FRELINGHUYSEN. Thank you. Anything else, Mr. Fattah or
Mr. Olver? Anything else? Secretaries, we thank you all for your
time and effort here this morning. Appreciate your testimony. We
stand adjourned.
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358
TUESDAY, MARCH 20, 2012.

OFFICE OF SCIENCE, U.S. DEPARTMENT OF ENERGY
WITNESS
WILLIAM F. BRINKMAN, UNDER SECRETARY FOR SCIENCE (ACTING),

DEPARTMENT OF ENERGY, OFFICE OF SCIENCE
Mr. FRELINGHUYSEN. Good afternoon, everybody. The ranking

and I want to apologize for the late start of the meeting. We had
a vote and we may be interrupted by some further votes during the
hearing process, but we want to acknowledge the fact that all of
you were here on time even if we were absent.
We have before us today Dr. Bill Brinkman, Director of the Office of Science, to discuss the Departments Fiscal Year 2013 request. Dr. Brinkman, welcome once again to our subcommittee.
Dr. Brinkman, although most of our constituents may not be
aware that the Department of Energy is one of the major government supporters of basic science, we are all well aware, acutely
aware of the importance of your mission. The scientists and technicians under your direction are responsible for world leading advances in technology, science, and intellectual property, and I
thank you and all your colleagues for their important work.
Last year our Subcommittee fought hard, given the limited funds
we had available, to ensure that your office was fully supported.
The final act provided $4.9 billion, a $46 million increase, no small
change when every dollar is carefully allocated among competing
priorities. That $4.9 billion, however, was $500 million below the
Presidents request last year. I know the request was based on a
desire to double funding for basic science research across the government, but that plan was simply not achievable under current
budget restraints.
Your Fiscal Year 2013 budget request seems to begin to recognize this reality. At $5 billion, it is a $103 million increase over last
year, and you make some hard choices within that request. We
likely will not agree with every choice you have made, and we will
be exploring these during our discussions today, but we appreciate
that you are now making them.
Unfortunately, even though your budget request is more reasonable, it still includes investments which were only supportable
under the doubling path, not under a more realistic flat-funding
outlook. We need to understand how the administration is going to
shift its longer-term planning, which is why in the conference
agreement last year we directed you to provide the committee with
a flat budget scenario by February 10th. This report has not been
submitted, and you can be sure we will ask why.
Dr. Brinkman, please ensure that the hearing record, the questions for the record, and any supporting information requested by
(359)
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the subcommittee are delivered in final form to the subcommittee

no later than 4 weeks from the time you receive them. Members
who have additional questions for the record will have until the
close of business tomorrow to provide them to the subcommittee office.
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363
Mr. FRELINGHUYSEN. At this point I will turn to my ranking

member, Mr. Visclosky, for any comments he may have.
Mr. VISCLOSKY. Thank you, Mr. Chairman. Sorry for being here
late. Dr. Brinkman, welcome.
The Secretary of Energy, Dr. Chu, has said that he regards his
two principal challenges to be energy independence and climate
change. In the long term I believe that much of the inspiration to
overcome both of these challenges will come from the Office of
Science. I appreciate that the administration continues its support
for basic science by requesting a 2 percent increase in the Departments budget, this is not the boost in funding that many advocates
had hoped for; yet in a constrained fiscal environment it is significant.
In many areas of science and technology, American researchers
arguably remain the best in the world. However, our margin of
leadership is neither as wide nor as clear-cut as it has been in the
past, and in certain areas we have fallen behind. Given the constrained environment we face, it is particularly important that we
strategically plan each program to ensure that we are proceeding
in a deliberate and thoughtful manner, increasing or maintaining
our lead in areas where we can, and limiting our investment where
we cannot.
U.S. leadership in many areas of science and technology depends
in part on the continued availability of the most advanced scientific
facilities. However, I remain very concerned that many of the infrastructure plans of the Department were developed with a far more
optimistic funding profile than the current reality will support. We
have also ensured that any redundancy is eliminated in order to
maximize the scientific and technological advances within tight fiscal constraints. It is an issue I am very concerned about. I hope to
hear from you today how the Office of Science has begun to reevaluate the strategic plans of major program areas.
While the committee has been supportive of the Office of Science
and other related programs, such as ARPAE, we also continue to
have concerns regarding the duplication and interaction of several
recent organizational initiatives. The Energy Innovation Hubs,
ARPAE, and the Energy Frontier Research Centers are just a few
examples. While the subcommittee will examine the performance of
ARPAE separately, the justification for this program in part was
that different organizational models were necessary because the
Departments existing programs were not sufficient agents for
transformational or disruptive technological advances.
While I appreciate that some of the early reviews of these new
models have been positive, I would like to hear what you and the
Office of Science are doing to ensure that this new culture is, in
fact, being integrated into other science programs.
With that, Mr. Chairman, I would yield back my time.
Mr. FRELINGHUYSEN. Thank you very much, Mr. Visclosky.
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366
Mr. FRELINGHUYSEN. Dr. Brinkman, the floor is yours.
Mr. BRINKMAN. Thank you very much, Chairman Frelinghuysen
and Ranking Member Visclosky and members of the committee. I
am pleased to come before you today
Mr. FRELINGHUYSEN. You may need to move that mic a little
closer to make sure we can hear you.
Mr. BRINKMAN. Is it on?
Mr. FRELINGHUYSEN. It is on.
Mr. BRINKMAN. Okay. I want to thank the committee for its continuing strong support for our office. Even in this challenging fiscal
environment, the Office of Science is the largest source of funding
of basic physical sciences in the United States, and the research facilities funded by the office are critical to enhancing U.S. competitiveness and maintaining U.S. leadership in science and technology.
In his State of the Union address, President Obama emphasized
the importance of basic research and urged Congress to support the
same kind of research and innovation that led to the computer chip
and the Internet, to American jobs, and to American industries.
The Presidents fiscal year 2013 budget request for the Office of
Science is $5 billion, representing a 2.4 percent increase from 2012.
Within the Presidents request for the overall flat discretionary
funding, this increase to the Office of Science demonstrates the
Presidents commitment to basic science, which is vital to producing the discovery and innovation that will strengthen our competitiveness and economic leadership.
The Office of Science is doing its part to ensure that the United
States is a global leader in clean energy science and technology.
Our three Bioenergy Research Centers are taking complementary
paths toward producing next-generation biofuels. We support 46
Energy Frontier Research Centers across the country, which conduct research in an array of material science and engineering
issues related to the solving of various energy problems.
The Fuels from Sunlight Hub is ramping up operations while already producing scientific output and publications. I would like to
thank the committee for its support of the second Energy Innovation Hub on batteries and electrical storage, which will accelerate
development of energy storage solutions for both transportation
and grid sectors. The Basic Energy Science program is on schedule
to make a selection for that hub by the end of the summer.
The ten national laboratories in the Office of Science routinely
produce cutting-edge science and technology and operate a set of
user facilities that are the envy of the world. We have created the
worlds first x-ray laser which unlocks new areas of research in
multiple fields. Our synchrotron light sources regularly make key
contributions to our understanding of protein structure and materials, our scientific computing facilities enable ground-breaking research and development to produce exascale computing, and we
will deliver a strategic plan on exascale to you soon.
In the biological and environmental research division, the Environmental Molecular Sciences Laboratory integrates computational
and experimental capabilities as well as fosters collaboration
among disciplines to characterize biological organisms and molecules. The Atmospheric Radiation Measurement facility, or ARM
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as it is called, makes critical measurements of clouds and aerosols

to aid in our understanding of the atmosphere and climate. There
are many examples of industry making use of these facilities, and
we have illustrated this, a few of these in the handouts here.
While the Presidents budget prioritizes clean energy research,
we continue to be the primary funding agency for an array of basic
sciences. That has meant making difficult choices and trade-offs in
several program areas while focusing on areas where we can make
the strongest impact. High Energy Physics continues its transition
into the intensity frontier and will deliver a report on the scientific
opportunities in the intensity frontier later this year.
This month our Daya Bay experiment, in collaboration with
China, measured one of the important characteristics of neutrinos,
the ubiquitous particle that is so poorly understood. We continue
to participate in the Large Hadron Collider and the search for the
Higgs particle now appears to be bearing fruit.
Despite a challenging budget environment for nuclear physics,
the Presidents request includes $22 million for the Facility for
Rare Isotopes Beam at Michigan State University and will allow
the project to move forward. In Fusion Energy Sciences the administration is committed to the ITER project, an international fusion
experiment involving six nations and the European Union, and the
culmination of decades of research in fusion. ITER will produce the
worlds first burning plasma, producing net energy from sustained
thermonuclear reactions. I want to emphasize that although U.S.
contributions to ITER call for us to build and deliver hardware to
the project in France, 80 percent of the ITER funding is spent in
the United States, and if you include the support of American scientists working overseas in France, that number rises to 90 percent. Although the focus of critical energy research in the Presidents 2013 budget has resulted in difficult decisions across the Office of Science, these decisions were made with extreme care, and
the resulting trade-offs remain robust, maintain robust research
programs in high-impact areas in both use-inspired and discovery
science.
I look forward to working with you, Mr. Chairman, and the rest
of the committee on the Office of Science budget request. Thank
you.
Mr. FRELINGHUYSEN. Thank you, Dr. Brinkman.
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Mr. FRELINGHUYSEN. We all know you are faced with making
some tough trade-offs this year. With limited funds, your request
almost unavoidably had to make some tough decisions by cutting
funding from some programs that this Subcommittee has historically been very supportive of, but on top of that tough reality your
request adds $92 million for new Basic Energy Science research.
Why has the Department made it more difficult for a number of
major programs, which we have supported, and made it more difficult for some of your existing laboratories and other facilities by
proposing to add new initiatives when those programs are worthy
of support on a historical basis, those types of adjustments?
Mr. BRINKMAN. I agree with you that those programs are worthy
of support on a historical basis, but at the same time, the administrations high priority is clean energy, and we regard it as a very
high priority to try to improve on our ability to make clean energy
without CO2, and the additions that we put to BES are designed
to do that. They are focused exactly on that subject.
Mr. FRELINGHUYSEN. So you defend your decision for new spending, based on the administrations priorities?
Mr. BRINKMAN. Right. It is based on the administrations priorities, that is the way it was worked out. We believe that we want
to support this idea, this program, towards directing of the Department to work on clean energy and to try every technique we can
think of to push that forward because of the importance of the program, so we added
Mr. FRELINGHUYSEN. So we are pushing some new initiatives forward, and what are we doing with the historical commitment? You
mentioned some, you mentioned within nuclear physics the request
delays by a year the start of the Facility for the Rare Isotope
Beams facility in Michigan, cuts in half the operating time for the
RHIC at Brookhaven.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. What does that mean to our overall mission
and the direction we are going if we are putting those on the back
burner here?
Mr. BRINKMAN. Clearly the budget for nuclear physics is not sufficient to keep everything going, and within the next year will we
have to look at it very carefully and figure out what to do.
Mr. FRELINGHUYSEN. Well, why dont we look at it right now?
Mr. BRINKMAN. Well, we are.
Mr. FRELINGHUYSEN. But I mean there are some layoffs at the
Fermilab in Illinois.
Mr. BRINKMAN. There will be some layoffs in Fermilab coming up
this year.
Mr. FRELINGHUYSEN. Well, let me just focus, as you might anticipate, on fusion. You are quite familiar with fusion, with all of your
Princeton connections.
Mr. BRINKMAN. Right.
Mr. FRELINGHUYSEN. I think we all understand that budgets are
tight, and we have a responsibility to make tough budgetary
choices. But I would like to take a moment just so there is a focus
on, shall we say, the fusion accounts. The Presidents budget requests funding for domestic fusion is cut by $49 million, and ITER
is cut by $50 million from its planned level, while it increases fund-
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ing for other science programs. I would say fusion comes out as a
loser here. Why is that?
Mr. BRINKMAN. Well, it is the same thing I said earlier.
Mr. FRELINGHUYSEN. Because this is one area, as are the other
areas, I assume, where only government would have perhaps the
resources to make this type of
Mr. BRINKMAN. Yes, fusion is definitely in the government domain, and we have not gotten as much money as we would like,
and we are trying to keep both these things alive. We had to make
some very hard decisions in the fusion program as to what we
would do and would not do in the coming years.
Mr. FRELINGHUYSEN. So what is literally going to happen to
those who are involved in these kindsI can certainly cite Princeton, but MIT, General Atomics, I mean there are a lot of players
in here that are involved.
Mr. BRINKMAN. Yes. It was a very hard decision that needed to
be made among those three: the General Atomics, the DIIID machine; and the Princeton NSTX machine; and Alcator C-MOD. And
our folks who run that program took a lot of time to think hard
about which one they felt was least beneficial to the future.
Mr. FRELINGHUYSEN. So the people who thought hard about it
were not the people in those facilities? It was people under you?
Mr. BRINKMAN. Well, of course the community also had its own
views of that, but mostly the people
Mr. FRELINGHUYSEN. Not people over in OMB, I hope?
Mr. BRINKMAN. No, no. That particular issue was not people at
OMB.
Mr. FRELINGHUYSEN. But there is a domestic component here.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. Because you made the point yourself that
a lot of the money that is spent here goes out80 percent I think
was the figure you mentioned, right, goes back to our economy?
Mr. FRELINGHUYSEN. What about our international obligations?
To ITER?
Mr. BRINKMAN. Oh, the insufficient funds you mean?
Mr. BRINKMAN. That is a problem that we are working right now.
We have been talking with our partners.
Mr. FRELINGHUYSEN. You made it more difficult by putting more
money into other accounts here.
Mr. BRINKMAN. Yes, that is true.
Mr. FRELINGHUYSEN. And so what will become of the ITER, if
you will pardon the expression, maybe because I had oversight of
NASA, but it is like the international space station in many ways.
Mr. BRINKMAN. I hope it is not quite that bad.
Mr. FRELINGHUYSEN. Well, it is a huge asset, and ITER will be,
too. You have a lot of contributing nations here.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. What does it mean to us that we are not
fulfilling our obligations when I assume other countries are doing
it?
Mr. BRINKMAN. We intend to fulfill our obligations. We may not
have enough money this year, but we certainly intend to fulfill our
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obligations to ITER, and the administration has stated very clearly
that they support, will support ITER, and so we intend to make
those commitments. Now, we were short this year, but we will try
to figure out how to compensate for that, and we are working at
trying to do that and figuring out the best way to do that. You
know, ITER is a very different problem than the space station, the
way it is set up.
Mr. FRELINGHUYSEN. Maybe it was an unfortunate analogy, but
there are a lot of contributors, it is an international project.
Mr. BRINKMAN. There are a lot of contributors. I think the big
difference
Mr. FRELINGHUYSEN. And our reputation to some extent is on the
line here.
Mr. BRINKMAN. Yes, I agree with that. I agree with that. We do
not want to fail. We do not want ITER to fail because of the United
States; lets put it that way.
Mr. FRELINGHUYSEN. And this does impact people on the ground
here in a variety of laboratories and in the private sector as well?
Mr. BRINKMAN. It does, yes.
Mr. FRELINGHUYSEN. And the committee has had a keen interest
in making sure that wherever we are making these investments,
there is some commensurate area where in fact we either protect
or increase employment rather than reduce employment.
Mr. FRELINGHUYSEN. You could be doing some things here in a
way that would impact, you know, the future probability of success
in some of these areas.
Mr. BRINKMAN. Oh, yes, I think we are definitely doing that.
Mr. FRELINGHUYSEN. I mean, the nuclear physics
Mr. BRINKMAN. We are taking some risks here.
Mr. FRELINGHUYSEN. There are some risks, so you feel comfortable with your recommendations here?
Mr. BRINKMAN. I feel as good as I can.
Mr. FRELINGHUYSEN. Well, we hope that you will have some by
the end of this hearing, we will convince you perhaps of some other
things. Mr. Visclosky.
Dr. Brinkman, the administration has highlighted that American
manufacturing is a major theme in this years energy budget, and
it would seem to be particularly relevant to the Departments applied research programs. Can you give us a couple of specific examples of how the Office of Science is going to specifically and discretely support manufacturing?
Mr. BRINKMAN. Yes. In the last 10, 15 years, there has been a
very major change.
Mr. FRELINGHUYSEN. Doctor, you have got to move that microphone right in front of your mouth so we can hear you, please.
Mr. BRINKMAN. A major change in our national laboratories in
the sense that we used to simply do research experiments at the
laboratories with university people involved, but we have now created over the last 15, 20 years a whole set of facilities that are
unique and that no company is really willing to build, going to
build. A synchrotron is not something a single company is likely to
build, and our high-speed computing is not something a company,
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unless they are Intel, will build. And so what has happened is we
have had a lot more interaction with U.S. industry. In fact, this little brochure which we brought along has a whole host of examples
of how we have coupled and helped industry with our facilities, and
you can look on the back side here, just this whole list of companies that have benefited greatly from the facilities we
Mr. VISCLOSKY. I see the list of companies. But the Secretary in
a conversation he had with me is saying that this is a particular
initiative in this years budget 2013. What examples can you give
me in the 2013 budget that you have that is going to provide assistance to maintaining and increasing manufacturing in the
United States of America because of the Office of Science? We are
talking about the 2013 budget.
Mr. BRINKMAN. I understand, but I think what he was talking
about is the applied energy programs when he was talking. I dont
know that he was talking about us.
Mr. VISCLOSKY. So you have no discrete programs in the office
at this time?
Mr. BRINKMAN. We have a lot, but we dont have a special program that addresses that issue specifically. There is a hub that we
are going to put together.
Mr. VISCLOSKY. We have five hubs now.
Mr. BRINKMAN. Oh, there are five hubs, but there is one hub that
is on critical materials, which is very closely working with the industry. Our biofuels centers are very closely coupled to industry, so
we are working to transfer the patents and know-how to industry
through them. Our synchrotrons are cranking out protein structures one after another these days.
Mr. VISCLOSKY. But you are doing that today. The Secretary emphasized there are going to be discrete new initiatives because of
the loss of manufacturing. What companies
Mr. BRINKMAN. But I think that that is
Mr. VISCLOSKY. What specific companies are we trading patents
and trademarks with that are going to keep manufacturing in the
United States?
Mr. BRINKMAN. As far as I know what he is talking about there
is some of the things that he has got going in the applied programs.
Mr. VISCLOSKY. Okay. If I could ask another question. On your
budget request for the Office of Science, there would appear to be
between fiscal year 2012 and 2013 some discrete decisions made as
far as priorities. For example, and the chairman has touched on it,
there is a cut of $15 million in the recommendation for high-energy
physics. On the other hand, there is a request for $105 million
more for basic science, which would lead me to believe somebody
really made a discrete value judgment, whether we agree with it
or not.
In looking at the composition of the Basic Energy Science programs, and I will give you a couple examples here, in fundamental
interactions research we have chemical physics research increased
by $3 million and atomic molecular and optical science increased
by a million. There is a differential there obviously of a factor of
2. When we get to chemical transformation research, catalystic
science is $4 million, separations and analysis is $2 million, heavy
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elements chemistry is $2 million, geosciences research is $2 million. When we get to photochemistry and biochemistry research,
photosynthetic systems is $2 million, physical biosciences is $2 million, solar photochemistry is $2 million. And when we get to
nanoscale science research centers, the Center for Nanoscale Materials is $2.2 million, Center for Functional Nanomaterials is $2.7
million, molecular foundry is $2.2 million, the Center for
Nanophase Materials Science is $2.2 million, and the Center for Integrated Nanotechnologies is $1.7 million. Those are almost all exactly the same number, and I dont have a sense anybody made a
discrete decision as to which had more value between molecular
foundry or the Center for Nanophase Materials Science or physical
biosciences. Everybody got $2 million more.
Mr. BRINKMAN. There is a whole group.
Mr. VISCLOSKY. They all have exactly $2 million more value?
Mr. BRINKMAN. You are talking about a whole group of sciences
in chemistry and materials that really are the core part of this
whole clean energy activity, and so we have tried to increase them
some. It is true that it is rather spread around, that is a fact, it
may be spread around more than you like, but it is important for
us to get in this clean energy initiative, to get all these different
areas healthy and keep them going.
Mr. VISCLOSKY. Well, if Iwith the chairmans
Mr. FRELINGHUYSEN. I just want to make sure we get Mr. Olver
and Mr. Womack in here.
Mr. VISCLOSKY. I am sorry.
Mr. FRELINGHUYSEN. But, no, I think that Mr. Visclosky needs
an answer.
Mr. VISCLOSKY. Mr. Olver is here in case he cannotI will defer,
we are coming back.
Mr. FRELINGHUYSEN. Mr. Womack, do you want to get your oar
in the water here, or Mr. Olver? I am not sure we want to have
two scientists go at it here. But we are prepared. Mr. Womack, do
you want to get in?
Mr. WOMACK. Not at this stage. I certainly hope that you are not
inferring that I am a scientist at all, because I am far from it.
Mr. FRELINGHUYSEN. Okay, Mr. Olver.
Mr. OLVER. Thank you, Mr. Chairman, thank you very much. I
was getting very interested in where my ranking member was
going with that discussion of what sounded like very small differences. Of course, I dont know what the total was for each of
those eight or ten items that he mentioned, all of which went up
$2 million essentially over the year.
Dr. Brinkman, in your testimony you point out that the infrastructure modernization has been slowed somewhat due to the
budget constraints, but is still intact. You point out that the budget
does support four continuing line-item construction projects. But I
dont know, unless the chairman has already mentioned a couple
of them by name, what are those four construction projects and
what amount of money goes into those?
Mr. BRINKMAN. Lets see. Those are SLI construction projects.
These are modernization projects.
Mr. FRELINGHUYSEN. Just to break down the acronym a little bit
for the record here.
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Mr. BRINKMAN. I have forgotten what SLI stands for. They are
a laboratory improvement program. It is a special laboratory improvement program.
Mr. OLVER. Of the U.S. science laboratories?
Mr. BRINKMAN. Right, at the U.S. science laboratories.
Mr. OLVER. National laboratories.
Mr. BRINKMAN. And so there are things like
Mr. OLVER. Which are the four that are the ones that also supports all four continuing line-item construction projects? Which
ones are those, for how many dollars? Maybe somebody has an answer.
Mr. BRINKMAN. There are four that we have going here. There
is one at the Jefferson Lab.
Mr. FRELINGHUYSEN. Put that microphone a little closer.
Mr. BRINKMAN. One at the Jefferson Lab, there is one at
Fermilab.
Mr. OLVER. Those are the two that are new?
Mr. BRINKMAN. Those are new ones, but the old one is a science
building at SLAC.
Mr. OLVER. SLAC, where is that?
Mr. BRINKMAN. I am sorry. At Stanford, linear accelerator facility
at Stanford. There is the energy science building at Argonne National Laboratory, and there is a renovated science lab phase II at
Brookhaven.
Mr. OLVER. Brookhaven?
Mr. BRINKMAN. Yeah.
Mr. OLVER. What is the fourth one?
Mr. BRINKMAN. They are all infrastructure.
Mr. OLVER. What is the fourth one?
Mr. BRINKMAN. Brookhaven. It is a renovated science lab.
Mr. OLVER. I have Stanford, Oregon, Brookhaven. What is the
fourth one?
Mr. BRINKMAN. Not Oregon. Stanford, Argonne National Laboratory.
Mr. OLVER. Argonne.
Mr. BRINKMAN. Brookhaven, andwell, there are two at SLAC,
two at Stanford. There is a research and user support building.
Mr. OLVER. So two of the four are at Stanford, one at
Brookhaven, and one at Argonne.
Mr. BRINKMAN. Those are the ones that
Mr. OLVER. What is the total amount of money involved in the
construction budget for the continuation of those, our continuing
line-item construction projects?
Mr. BRINKMAN. Yes, the highest one is $36 million, the lowest
one is 14.
Mr. OLVER. What is the sum total?
Mr. BRINKMAN. The sum total is $109 million.
Mr. OLVER. One hundred nine million dollars is the amount that
is in this budget for those four?
Mr. BRINKMAN. Right. All of them, including the new ones.
Mr. OLVER. Oh, including the new ones?
Mr. OLVER. How much are the two new ones?
Mr. BRINKMAN. Well, they are not much, $5 million.
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Mr. OLVER. There are the two that you mentioned in your testimony at Fermi, one at Fermi and one at Thomas Jefferson. Where
is the Thomas Jefferson?
Mr. BRINKMAN. Down in Newport, Virginia.
Mr. OLVER. I figured it was in Virginia, but I did not realize
there was a national lab sitting inyou do learn something around
here.
Mr. OLVER. Those two are $5 million each?
Mr. BRINKMAN. Two-and-a-half actually. They are just starting,
it is just the design phase.
Mr. OLVER. All right. So then it would sound as if there is over
$100 million for continuation of the four. Are those four going to
be complete with that $109 million or are those going to have a
continuing budget next year as well?
Mr. BRINKMAN. Lets see. I do not have those numbers. I do not
know those numbers. I think they are finished in 2014. Is that
right? That is not here.
Mr. OLVER. Well, okay, I am
Mr. OLVER. Surely.
Mr. FRELINGHUYSEN. You have some bigger projects in the offing
here, right?
Mr. BRINKMAN. Oh, yes.
Mr. FRELINGHUYSEN. Some major construction ones.
Mr. BRINKMAN. This is a program. Let me try to make sure that
you understand. This is a program of around $110, $115 million
which is meant to be for modernization of the infrastructure at the
laboratories. There have been lots of complaints about the fact that
the laboratories have really gotten old and they need new buildings, and
Mr. OLVER. We have a lot of them. It would be hard to keep
them all up to snuff at maintenance levels. You do have facilities
that will degrade over a period of time, there is no question.
The reason I asked that is that I also understand that, I think
you were here at that time, you asked for the two new ones that
are there in the 2011 budget. They were not funded in the 2011
budget.
Mr. BRINKMAN. That is right.
Mr. OLVER. You did not ask for them in the 2012 budget, but
now even though you are saying you are on constrained time, you
are asking for the start of these two new ones. I am not sure
whether the old ones will be complete.
Mr. BRINKMAN. The old ones will be
Mr. OLVER. I am not sure you indicated clearly whether the old
ones will be completed in this budget.
Mr. BRINKMAN. Can I just say one thing? We have a budget of
around $115 million, plus or minus, for this program. We try to
keep it at that level, and so we are phasing these projects in and
out to keep the total constant. That is our plan, to spend about that
much money every year on infrastructure.
Mr. FRELINGHUYSEN. Will the gentleman yield? This is relative
to modernization and renovation
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Mr. FRELINGHUYSEN. So a variety of labs, bring them up to
speed.
Mr. OLVER. So the implication of what you have just said is that
if any of the four old ongoing ones are completed
Mr. BRINKMAN. Others will come in.
Mr. OLVER [continuing]. And is no longer there, then in the next
year you are going to have others that will come along on a list of
priorities.
Mr. BRINKMAN. And we have a long list.
Mr. OLVER. Keeping the whole of this at $100 to $115 million
total.
Mr. OLVER. For all the facilities that need upgrading.
Mr. BRINKMAN. That is right. I can tell you, we have a very long
list of things that the various laboratories would like for us to do,
so we are just kind of working our way through this thing very
gradually.
Mr. OLVER. Okay. I will try to digest that.
Mr. FRELINGHUYSEN. Mr. Olver, we better let Mr. Womack jump
in here.
Mr. WOMACK. The role in maintaining U.S. Leadership in highperformance computing is a key to American innovation, economic
growth. The Office of Science, through its operation of the National
Energy Research Scientific Computing Center at Berkeley and the
leadership class facilities at Argonne and Oak Ridge, has played a
central role in keeping America in a leadership position. Unfortunately, because of a proposed nearly 5 percent decrease for highperformance computing and an apparent lack of urgency on
exascale planning, the Office of Sciences commitment does not
seem to reflect the importance of the issue. So the fiscal year 2012
enacted appropriations directed the Department to report to the
committee by February its plans for moving forward on the
exascale computing initiative, a report which to this day I do not
think has been submitted.
Mr. BRINKMAN. It is essentially ready.
Mr. WOMACK. Give us an update.
Mr. BRINKMAN. Pardon? It is there. The report will be to you
shortly. Look, we very much believe in working on exascale, but we
at the same time want to keep our computer centers that we have
at the cutting edge. And as you know, recently Japan and China
sort of beat us at this game, and we would not like to let that continue. And so we are working on that and we are working on
exascale at the same time.
In the exascale world, there are some very fundamental issues
that need to be solved in order for us to do exascale, and when
there are kind of research-type questions, you do not throw a lot
of money at them. You get good research people to work on them,
and then when you figure out what you can do, then you spend the
money. So we are a little bit slower than we might be on exascale,
but we think we are doing well on it, and so we think we will be
pushing forward at a good, fast clip, but there are just some very
hard technical problems that have to be solved.
Mr. WOMACK. Is there a timeline?
Mr. BRINKMAN. There is a timeline. We are shooting at 2020.
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Mr. WOMACK. 2020, okay.
Mr. FRELINGHUYSEN. If the gentleman would yield, we are upgrading our existing capacity in a variety of sites around the country, right?
Mr. BRINKMAN. Yes. The Office of Science has two upgrades that
are coming: one at Oak Ridge, which is a major upgrade of that facility; and there is another one, there is a Blue Gene/Q IBM machine that will be installed at Argonne National Laboratory.
Mr. FRELINGHUYSEN. So it is Argonne and Oak Ridge. But the
report you allude to is our jump over that.
Mr. BRINKMAN. That is a jump over.
Mr. FRELINGHUYSEN. A technological jump over that.
Mr. BRINKMAN. Exascale is a technological jump over that.
Mr. FRELINGHUYSEN. So the report is, what, being vetted? Where
is this report?
Mr. BRINKMAN. It is somewhat near its concurrence.
Mr. FRELINGHUYSEN. Describe to me what concurrence means
for the record.
Mr. BRINKMAN. It means various people have to approve it before
it goes out the door.
Mr. FRELINGHUYSEN. So is it variably good news? Where are we
going to be relative to the Japanese and Chinese?
Mr. BRINKMAN. No, no.
Mr. FRELINGHUYSEN. What?
Mr. BRINKMAN. We are going to take care of that issue.
Mr. FRELINGHUYSEN. Oh, we are?
Mr. BRINKMAN. Yes.
Mr. VISCLOSKY. The plan is brought forth, and you mentioned
2020, and I understand it ranges 2019 to 2022. Will you have discrete benchmarks for each of the fiscal years, so that as we proceed
the committee can review progress or lack thereof?
Mr. BRINKMAN. As I said earlier, we will, but we have to get to
a point where we have a path to get there. And that is one of the
issues right now is we have to get to a point where we understand
how to get there, and you cannot go running on a path when you
do not know what the right path is. So we are spending money now
to try to define the path.
We have these teams of people that are looking at this problem
trying to understand how we go forward with it. And for instance
even yesterday, there was a meeting looking at the hardware part
of this problem, trying to understand what we could do to solve the
energy-use problem that is a very, very big important aspect of this
problem. So we are doing those kinds of things, but we have got
to solve this problem first.
Mr. FRELINGHUYSEN. Allow me to use this opportunity, we have
two votes, so we are going to be absent from this room for maybe
half an hour.
Mr. BRINKMAN. Okay, we will be waiting.
Mr. FRELINGHUYSEN. Good, I am so happy to hear that. We will
be back. Thank you. We stand adjourned.
[Recess.]
Mr. FRELINGHUYSEN. I am happy to resume our hearing, and
thank you for your forbearance, your patience. I just want to follow
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up. I asked about exascale, and you were not dismissing me, but
I have some legitimate concerns about what the Chinese and Japanese are doing.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. And how would you characterize where
they are? I see it on the defense side. Both Mr. Visclosky and I
serve on the Defense Subcommittee, and people often say, you
know, that the Chinese will never measure up with aircraft and
submarines in their defense posture.
Mr. BRINKMAN. Right, until they do.
Mr. FRELINGHUYSEN. Until they do. And things are always, if you
will pardon the expression, accelerated. And I assume in the world
of supercomputers this is, if you will pardon the expression, our
great leap forward. And where do we stack up in that area?
Mr. BRINKMAN. Well, at the moment they have this machine that
is, I think, second in the world. The Japanese actually have the
first in the world machine, but they built that one with American
parts. The Chinese are going ahead very rapidly now to try to build
their own microprocessors and build a machine that is completely
Chinese, and I have every reason to believe that they will succeed.
They are very dedicated and looking to do that.
Now, we have our own plans which, you know, involve Cray and
IBM and Intel and Nvidia and these various companies, all of
which are working with us very closely to try to see to it that we
stay ahead, and get back in the lead; we are very much hoping to
be able to do that in the next year or two.
Mr. FRELINGHUYSEN. So the report you referenced willwhat
will that report indicate?
Mr. BRINKMAN. Well, that report will only talk about exascale,
which is a longer-term thing, which is not the immediate competition that is going on for the next couple years, and so
Mr. FRELINGHUYSEN. But the exascale is, in fact, to assure in the
future our superiority.
Mr. BRINKMAN. Right. At the moment we are only going a factor
of 10 from the petascale machine, 10 to 20, we are moving up that
much in the new machines, but exascale is a factor of a thousand
from the peta, so that is a very big step forward. The current estimate is it would take a power plant next to your computer to run
it, that is not what is going to get built, and so we have to figure
out some ways. For instance, a conference we had yesterday
Mr. FRELINGHUYSEN. Are you suggesting we do not have the ability to build a power plant? I know we have difficulty building nuclear power plants and oil refineries, but
Mr. BRINKMAN. I think I suggested that I would not have the
budget to run a power plant.
Mr. FRELINGHUYSEN. Well, at the rate you are goingno.
I want to get back, if I could, in all seriousness, to follow up
where the ranking member was going in terms of scientific research leading to something here in the U.S.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. To actual manufacturing. And the ranking
can state it, but he comes from Gary, Indiana, and whether you
come from Gary, Indiana, or you come from the pharmaceutical
capital of the world, which also includes parts of the former Bell
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Laboratories system in New Jersey. We are keenly interested in
things that are inherently of value to the United States of America.
Mr. FRELINGHUYSEN. And so I want to get into what you are
doing to assure the type of investments we are making, and we understand there are some tough decisions here, whether there is a
real focus here on American jobs and technology, our industrial
base. So give us some level of assurance.
Mr. BRINKMAN. Well, let me just say one of the things I forgot
to mention is that we have proposed as part of this whole chemistry materials work a mesoscale physics initiative, and we believe
that that initiative is very much oriented towards manufacturing.
We want to make a strong emphasis, especially for you from a
pharmaceutical State, we have very strong interactions with a
whole host of pharmaceutical companies; it is very interesting. Eli
Lilly, the company, has actually its own beamline at Argonne National Laboratory, and they have their research facility in San
Diego. They send proteins to Argonne to have the structure determined, and then come back and they use it. It is an integral part
of their drug development today, and so they very much use our
facility.
Mr. FRELINGHUYSEN. Well, Sandia has a little piece of the action,
too.
Mr. BRINKMAN. Sandia?
Mr. FRELINGHUYSEN. It actually does have some sort of pharmaceutical connection.
Mr. BRINKMAN. Oh, yeah, that is a different kind of thing completely.
Mr. BRINKMAN. I mean, there are other things, like General Electric has used Brookhaven National Laboratory a lot to look at their
development work on sodium sulfur batteries. A sodium sulfur battery is a big round thing and it has got sodium on the outside in
a membrane and then sulfur on the inside, and you need to understand all the various interfaces between those materials, and you
can do that with x-rays at our synchrotrons. They regularly come
and image the battery, look at the battery, and see what the battery is doing.
Mr. FRELINGHUYSEN. Our question to Dr. Chu, and this is my
view of where we were going when he testified before us, is that
we are involved in all these things. You are providing invaluable
assistance in terms of these types of developments, but how do we
actually keep the essential intellectual property here? Dr. Chu gave
us the impression that there is no way we could stop the migration
of some of these discoveries, and it gets back to what we would like
to do to resurrect our manufacturing base and better own the waterfront.
Mr. BRINKMAN. Look, I am certainly not an expert in international patent law, but certainly many of these things are being
patented. My impression is that we have a lot of conflict over patent law with China, but I do not know anything about that.
Mr. FRELINGHUYSEN. But you have under your jurisdiction a lot
of centers.
Mr. BRINKMAN. Yes.
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Mr. FRELINGHUYSEN. Mr. Olver pointed out some. And then there
is, what, 82 frontier centers, and
Mr. BRINKMAN. Forty-six.
Mr. FRELINGHUYSEN. You have these hubs and everybody has a
degree of excitement about ARPAE, we have got all sorts of
Mr. BRINKMAN. They all have very strong patent and intellectual
property programs, and we try to patent as much as we can. Every
laboratory has a patent office that works to do that. As you know,
we have things like CRADAs and this new thing we call Act, which
is a new way for a company to approach a laboratory, which is a
little faster and maybe a little simpler for smaller companies. So
we have worked hard to try to find new ways to do this.
For our user facilities it is a rather easy process because we are
not trying to claim their intellectual property. They have to pay full
cost recovery if they want to use the facility for company private
things, but if they are going to simply publish the data, we do not
charge them. And so we have very specific processes to try to protect our intellectual property, we have worked very hard at that.
One of the things we have done over the last few years is we
very much elevated the intellectual property technology transfer organization in the Department. It now reports directly to the Secretary, and so we have worked hard at improving this situation.
Mr. FRELINGHUYSEN. Mr. Visclosky. Thank you for your patience.
Doctor, just to catch up to where we were right before we left,
we were talking about exascale computing, and you mentioned that
you do not have milestones yet, because you have not defined the
path which will be in the final report.
Mr. BRINKMAN. Lets see. It is not defining the path, it is determining the path.
Mr. VISCLOSKY. Okay, when you determine the path.
Mr. BRINKMAN. Yeah, we have to figure that out.
Mr. VISCLOSKY. That path will be delineated in the report that
will be submitted?
Mr. BRINKMAN. Oh, no, no, no. The report you are going to get
is the next few weeks, and the path that we are talking about here
is a technology path that we have to figure out.
Mr. VISCLOSKY. Right.
Mr. BRINKMAN. In that report we will talk about how we are
going to use, to work on the technology to get there, but that is not
a complete path.
Mr. VISCLOSKY. Let me ask you this, then: In the report, will you
with any specificity be able to tell the Subcommittee when we are
sitting here next year what you anticipate will be accomplished between now and next year, so that we can see if you are making
progress or not?
Mr. BRINKMAN. Yes, there are several things that we are working
on that we need to understand. One of them I already mentioned,
this issue of the amount of power such a machine would take. We
cannot
Mr. VISCLOSKY. Right, but my timebecause I have other questions, but there will be discrete
Mr. BRINKMAN. There are these discrete things that we are
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Mr. VISCLOSKY [continuing]. Milestones that you will be able
to
Mr. BRINKMAN [continuing]. Working on to try to understand
how to go forward.
Mr. VISCLOSKY. Okay. If I could get back to my original line of
questioning. Why did everybody just get $2 million more? No, I am
serious.
Mr. BRINKMAN. No, no, I understand that. And the answer is
that this distribution was notional. We will be competing proposals
across those various subfields, and however that competition comes
out, the money will be redistributed. So that was a sort of notional
effort about how much each one of those little fields will get in that
competition, but we will have a competition.
Mr. VISCLOSKY. When you say notional, you are essentially saying everybody gets the same, we will see where the grants come in,
and then we will move money around.
Mr. BRINKMAN. And then we will move money around.
Mr. VISCLOSKY. Before the Department solicits for grants, there
is no anticipation as to what types of work, what types of research,
or what types of different proposals
Mr. BRINKMAN. No, no, no, no, no.
Mr. VISCLOSKY. There is a Department of Energy.
Mr. BRINKMAN. I am sorry. Dont get the idea that we just let
any grants come in. We have a thing called FOA, it is Funding Opportunity Announcements, that we announce what areas we would
accept grants in.
And so we put out these Funding Opportunity Announcements
and specify what we are looking for, and they tend to be fairly
broad so that they can be used, you know, within that subfield that
we are talking about there.
Mr. VISCLOSKY. In your mind, looking ahead a year, the Department doesnt come to some conclusion that separations and analysis under the chemical transformation might put more funds in
there and it creates more applications because there is more need
there?
Mr. BRINKMAN. If we get better applications then somewhere
else, we will put the funds over there. That is what it is saying,
within the confines of the larger program.
Mr. VISCLOSKY. Why do you break it down by accounts if you just
wait to see what you get in? Why even bother?
Mr. BRINKMAN. Well, we could. But we put a notional number
there. We try to
Mr. VISCLOSKY. I know. Why did you even bother? Why dont we
just have transformation research?
Mr. BRINKMAN. It is a good question. We could have done without it. We could have done without it. We thought it would be helpful.
Mr. VISCLOSKY. I find the answer very unsatisfactory.
Mr. BRINKMAN. Sorry.
Mr. VISCLOSKY. The next question I have is the budget request
for fiscal year 2012 asks for $97 million within basic energy
sciences for major items of equipment. The final conference report
passed by the United States Congress in December, signed into law
by the President of the United States, provides $97 million, explic-
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itly providing funds for each of the six major items of equipment
projects at the levels in the budget request. Doctor, how much
money did the Department allocate for these purchases for fiscal
year 12?
Mr. BRINKMAN. For MIEs?
Mr. VISCLOSKY. Yes.
Mr. BRINKMAN. I dont know if we know that number off the top
of my head.
Mr. VISCLOSKY. $73.5 million, okay.
So in spite of Congress direction for $97 million to go to these
projects, the Office of Science went in a different direction. In fact,
your 2013 budget request formallyand I might add incorrectly
states that the lower $73.5 million was appropriated in fiscal year
2012, and it begs the obvious question as to where the money went.
Of the six projects in the request and that Congress funded, what
did you cut to get to your number?
Mr. BRINKMAN. Lets see. We probably cancelled something in
there. What was it? Team II and PUP? We cancelled one of the
projects is what happened.
Mr. VISCLOSKY. The other one was the SNS power upgrade
project for $5.4 million.
Mr. BRINKMAN. Yes, SNS, yes. That one was cancelled, right?
That was cancelled.
Mr. VISCLOSKY. And you never communicated that to this Subcommittee or to the Senate Subcommittee, as I understand it.
Mr. BRINKMAN. Oh, I am sorry.
Mr. VISCLOSKY. After the fact, after the fact.
Mr. BRINKMAN. Yes. We felt that we had to do that because we
wanted to put more emphasis on the Synchrotron.
Mr. VISCLOSKY. I have got to tell you, Doctor, when people cut
down trees and put ink on a piece of paper in a sign into law, I
would expect that the administration comes back and consults with
the United States Congress, a coequal branch, before they start
moving around $23 million.
And my other question, and it is rhetorical, is out of a basic energy science budget of $1.7 billion, of which $1.5 billion is research,
that the Department couldnt find $11 million?
Mr. BRINKMAN. I dont know the answer to this. Can I get back
to you on this?
Mr. VISCLOSKY. It is a rhetorical question.
Mr. BRINKMAN. Because I just dont know the details of this.
Okay, I will get back to you on this.
Mr. FRELINGHUYSEN. Mr. Olver.
Mr. OLVER. Thank you, Mr. Chairman.
You know, I have to wander back and forth around these papers
that I have in front of me in order to find what I want to do, but,
Mr. Secretary, you at several points have emphasized that your
priorities have been for clean energy and that you, wherever there
was change, you were giving priority to clean energy.
Well, it seems to me thatI am now going into talking about the
fusion sciences. It seems to me that the high-energy physicists and
the fusion scientists and the plasma scientists, wherever they happen to beand this is similar to their talking about inertial or
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magnetic containmentthat they think that that is the Holy Grail,
truly the Holy Grail of clean energy.
Mr. BRINKMAN. Yes, I agree.
Mr. OLVER. All right. But what we are seeing here is a substantial change in the budgets. The budget forand realizing that inertial containment is in a different NNSA programthe magnetic is
all within your area, within the Office of Science. And the Office
of Science for fusion sciences is flat-funded for this coming year.
Now, the chairman has already pointed out that there had been
at an earlier time a commitment for a higher number for here than
is actually provided, a number that was up in the $200 million
range for this year, and that is down, but a sizeable amount up $50
million from what it was last year.
Mr. OLVER. And the number of dollars for the domestic programs, the various domestic programs, which include at the science
labs, at some of the universities which do theoretical work around
the country, and at the place that had experimental facilities,
mainly General Atomics and MIT and Princeton, in the major scientific experimental equipment, that the sum total for them is
down by $50 million; and I think the chairman, without driving it
home, is questioning where we are headed.
If our commitment to ITERand you are saying our commitment
has got to be wholemy impression is that ITER has gone through
some benchmark changes or goalpost movements or something so
that the timeframe has moved somewhat along, and it has become
considerably more expensive over a period of time than was the
case in the early years, 8 or 10 years ago, that the total amount
of dollars intended for that has gone up.
But in the coming years, in 2014, we go 1 more year and they
are talking about a $250 million commitment to ITER and a $300
million a year commitment in the next couple of years even going
higher than that. And if we are going to end up with a flat budget,
then the domestic programs are going to really be affected. At the
moment, while the budget seems to really take it, it puts the wood
to the program at MIT, which was one of our two functioning
well, I shouldnt say this. Maybe there are more than two functioning tokamak laboratories right now.
I understood that Princeton is waiting for an upgrade, an important upgrade that has to be done to get them back on track. And
when they come back on track, they will be in better shape. They
will be at higher capacity than others.
Mr. BRINKMAN. They will be back on track. They will be in better
shape.
Mr. FRELINGHUYSEN. Obviously, if we move ahead.
Mr. OLVER. Right. But will we have any money left in there?
How are we going to get this kind of money with ITER? ITER was
going to eat our whole domestic program essentially in the program
with the numbers that are involved here.
Mr. BRINKMAN. Look, obviously, that cant happen.
Mr. OLVER. Obviously, that cant happen. Tell me how.
Mr. BRINKMAN. You cant take ITER up to $250 million a year
and take another $100 million out of the bill of domestic programs.
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There wont be a domestic program if you do that, right? We cannot
do that. We are going to have to find another way to fund ITER.
Mr. OLVER. Well, why isnt that obvious right now?
Mr. BRINKMAN. Well, it is obvious; and we are going to work that
over the next year to make sure we get it right.
Mr. OLVER. Yes. Well, but it is kind of like a gun to the head
the way this is playing out. It is a gun to the head. Anybody that
is in any of the othersby the way, eachno two of these tokamak
programs, the magnetic programs, looks exactly alike.
Mr. BRINKMAN. No. That is true.
Mr. OLVER. Our biggest one that is operable at the moment I
think is the General Atomics facility.
Mr. BRINKMAN. That is right.
Mr. OLVER. And there are others in other countries, some of
them larger; and all of them have different shapes, different characteristics, different measures. All of them have done work, and
every one of them has done work that is ending up as the baseline
for ITER to do its work. Because ITER is just basically an upgrade
in size, in capacity, and power and so forth
Mr. OLVER [continuing]. To get us to something that, if they can
sustainably burn, which they hope to get to test by 15 years or so
from now, sustainability to burn
Mr. BRINKMAN. Yes, look, what has happened in this field of
magnetic fusion, over a period of something like 50 years there has
been a gradual building of larger and larger machines that did
more and more and got closer and closer to a burning plasma. The
last two of that sequence, one was JET in England and the other
was GFTR at Princeton, we got to that point and then it became
clear that the next machine, in order to really demonstrate a burning freezer, was a very large machine, right? That is when things
went into this international fit and took all this time to get going.
When I came on the scene, in 2009, ITER was frankly in quite
a mess because it didnt have the proper management. It didnt
have a whole bunch of things in the right place. We have straightened out a lot of that now. I believe that the program is now running much, much better than it was 3 years ago. Through all of
that, there are all these estimates of what it was going to cost, and,
frankly, they were often made almost as guesses rather than real
designs.
And now we have really real designs. We know exactly. We had
a reallyworking at detailed designs. We are trying to find ways
to save money on those designs and building them. So we are doing
a heck of a lot of work to try to understand how to keep the cost
under control and the project moving forward. It is a very, very intense period right now for the ITER project.
Mr. OLVER. We dont even yet know whether the Holy Grail is
going to be through the inertial or the magnetic mechanism, exactly.
Mr. BRINKMAN. That is true.
Mr. OLVER. Yes, that is true. Maybe they both will work.
Mr. FRELINGHUYSEN. If the gentleman will yield, but if you reduce the funding by $150 million, I mean, that is a shocker.
Mr. BRINKMAN. Peace.
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Mr. FRELINGHUYSEN. No. You must have come to some rationale
for that decision, and I would like you to
Mr. BRINKMAN. The rationale of the administration is that we
need to push harder on clean energy, that that fusion is not likely
to occur for more than 50 years, all right, 2050, maybe, and so,
from an administrative point of view, it had less priority than the
other clean energy programs. That was
Mr. OLVER. Okay, well, it is whatever provides for clean energy
now. Although many of the other things that we are doing on clean
energy are not going to happen immediately or commercialize within 10 years in many cases.
Mr. BRINKMAN. Oh, no, no, no. No, no, no, no, no. Look, nothing
happens in a few years. The kinds of things we are doing take 10
years. For instance, you cant introduce a new type of battery in
less than 10 years by the time you do all the safety things.
Lithium burns, so you cantyou have to worry about all of the
safety issues, et cetera. So typically 10 years for a new product.
Mr. FRELINGHUYSEN. I want to get Mr. Womack in here.
Mr. OLVER. Yes, fine. I will come back.
Mr. FRELINGHUYSEN. Please do.
Mr. Womack.
Mr. WOMACK. I want to come back to computing again, and I
know some of this discussion maybe has already transpired right
after the votes and before I was able to make it back in. But help
kind of a lay citizen like myself understand, in this next generation
of computing, what is your vision for what this type of speed, if you
will, or this type of data processing can actually do that we cant
do now?
And then I have a follow-up question. I know you had a military
partner in this initiative with the NNSA, and I realize there maybe
are some futuristic things that could be of some classified nature,
but what does it do for our military?
Mr. BRINKMAN. Well, lets see. Let me take first the science part,
and then I will talk about the military parts.
In the science world, there are just many, many problems for
which we still cannot model these problems and simulate the problems on our current computers. Various examples include combustion and an engine inside of this. It is a very, very difficult problem.
There are hundreds of different molecules that get created in the
process of that combustion, and a turbulence inside the cylinder
has to be modeled, and we just cant, even with petaflop machines,
we cant model that completely.
In a materials world we can model perfect crystals today, but we
want to be able to model materials with small grains and see how
the small grains of crystals interact and make better and better
materials, and that is part of the whole nanoscience initiative to be
able to do that kind of thing. We are seeing results from that
today.
Still we could go a lot further in those things. Fusion is the classic example of something that needs a much higher level to simulation before we really completely understand it. So there are lots of
problems. I am not worried about finding problems to work on.
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On the industrial side, we have worked with Boeing, for instance,
and did simulations of their wings for the 787. They went out and
bought their own petaflop machine because it was so important to
them to be able to get that simulation.
One of our favorite examples is this smart truck thing where we
used our petaflop machine to simulate the flow of air around 18
wheelers, trailers. You know, the big problem with the trucks is
they have a very flat back, so they essentially create a kind of vacuum behind them. Well, guess what? That vacuum sucks on the
back of the truck trying to pull it backwards, right? So, we invented a small part that they can slap underneath the trailer,
which greatly reduces that vacuum and, we increase the efficiency
of those trucks by 12 percent. This is a truck that gets 6 miles a
gallon. So you save one heck of a lot of gasoline with that.
So these kinds of simulations, even that simulation is not as detailed as eventually you might like it to be. So I think there is no
question that we will be able to do that.
In the military, there was a big emphasis at the Livermore laboratory which has been the simulation of nuclear weapons. That is
another very big problem because of the amount of materials and
the types of chemistry that goes on and that nuclear reaction that
goes on, and that is something that is very hard to simulate.
So these problems are very hard to attack, and I think a bigger
and bigger machine will allow us to do that.
Mr. WOMACK. Before the vote, we talked a little bit about the facilities piece and the investment that is being made in this exascale
initiative, and I know you mentioned China and Japan specifically,
and I think there was even some discussion before I came back.
But what about Europe? Where is Europe in this race, if you will?
Mr. BRINKMAN. Well, I dont know where they are as far as
where they stand on this famous Linpack scale, but they certainly
are trying as well.
We have to remember also that there is this whole international
business, and IBM and Cray are trying to sell the machines that
we helped work with them to develop. They are out there on the
market right now trying to sell these things. And that is all fine,
right? That is what it should be. That is good American industry,
making money. And so that is happening as well. You have to recognize that, as it is going on.
Mr. WOMACK. And if I heard you correctly before we ended my
last round of questions referencing China and Japan, upon implementation, you are pretty confident that the United States is going
to be looked at as, shall we say, a leader in this field.
Mr. BRINKMAN. Yes. Yes. I feel confident that we will maintain
our leadership in this field. We have a set of companies behind us
and very good people at our national laboratories, and I think we
can maintain our place in the field. I think you take Intel, you take
Cray, you take NVIDIA and IBM, these companies are very strong
in this field, and we can work with them to keep us ahead.
Mr. WOMACK. Thank you, Dr. Brinkman.
Mr. FRELINGHUYSEN. Thank you, Mr. Womack.
Just for the record, where are we doing the truck simulation?
Mr. BRINKMAN. That is at Oak Ridge.
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Mr. FRELINGHUYSEN. And we are also taking a look at tires as
well? I dont want to get into where they are manufactured, but
I
Mr. BRINKMAN. The tires work was done at Sandia, and it has
been going on for quite a long time with Goodyear. That simulation
apparently
Mr. FRELINGHUYSEN. That is worthy of simulation as well.
Mr. BRINKMAN. Oh, yes.
Mr. FRELINGHUYSEN. We hope that some of those tires might be
domestically produced.
Mr. BRINKMAN. Well, that is a different question.
Mr. FRELINGHUYSEN. I want to get back to some of the issues I
raised in my opening remarks.
Dr. Brinkman, this year is similar to the last two in that additional funding for any program is going to be exceedingly hard to
come by. The budget for the Office of Science is particularly difficult because of the existing commitments, some of which we have
talked about, to several large projects. Those budgets are scheduled
to grow this year, not all, but some of them are.
But this committee must live within its means, and that means
making extremely difficult decisions. It is very likely that we cannot count on having an additional $100 million for you to add to
the Office of Science in your budget request. This will be based on
the debate in Congress probably over the next couple of weeks but
certainly over the past year.
We look to you and the Department to help in prioritizing as we
make these decisions. To that end, the Fiscal Year 2012 appropriations conference report, which has been referenced earlier, directed
your office to provide us with what I would call a flat budget scenario. That is, if you receive funding at the 2012 level, how would
you prioritize your budget? When are we going to get that report,
and would you outline for the committee what you do with flat
funding? Because there is a strong probability it may be flat funding.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. I wish it wasnt, but, in reality, that may
be where we are going.
Mr. BRINKMAN. The answer to that, I think, is a little tricky. Because if we
Mr. FRELINGHUYSEN. The report, though, where is the report?
That isnt tricky.
Mr. BRINKMAN. It is tricky. That has not gone through. We do
not have a report ready for you at this stage, and we need to work
on that.
What I was going to say is
Mr. FRELINGHUYSEN. Let me just say, I think it is important to
accelerate that. I mean, there is a strong probability we may be put
in a position
Mr. BRINKMAN. The problem with publishing a report of what
you do over 5 years with constant level budget is that in that report, you are going to propose closing down a bunch of things.
Mr. FRELINGHUYSEN. Well, you already proposed that in your
budget.
Mr. BRINKMAN. For this year.
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Mr. FRELINGHUYSEN. No, but lets lay it out. To some extent
Mr. BRINKMAN. I am going to lay out more.
Mr. FRELINGHUYSEN [continuing]. You have already signed a
warrant for certain actions, havent you?
Mr. BRINKMAN. Yes, sir.
Mr. FRELINGHUYSEN. And that is going to ripple across the public
and private sector.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. But I just think somebody over in your operation ought to be taking a look at
Mr. BRINKMAN. Well, we certainly are doing that. The question
is whether we can show whether we can release those.
Mr. FRELINGHUYSEN. The worst-case scenariosI know we turn
to our military people, and we ask what happens when you reduce
the Army by 80,000 and the Marines by 20,000 and you have ships
under 285 and you have a reduced number of submarines? I cant
imagine we couldnt take a look at growth, the broad spectrum of
all of your centers and programs.
Mr. BRINKMAN. We do that. We do that.
Mr. FRELINGHUYSEN. Well, we have asked for something.
Mr. BRINKMAN. Well, we will try to work that out, okay?
Mr. FRELINGHUYSEN. On another issue, there was considerable
buzz last year in the science community and the general public
about a tentative of funding at the CERN, the Europeans physics
center, showing that neutrinos actually move faster than light. You
want to talk about that? I saw something actually in the Wall
Street Journal and the New York Times. What is going on?
Mr. BRINKMAN. What happened there is that the group that was
doing that discovered
Mr. FRELINGHUYSEN. And give us an overview of what CERN is
doing.
Mr. BRINKMAN. Well, what CERN is doing there is they take
their accelerators and smash muons into a target and the muons
decay and give you neutrinos. You can time very accurately when
those neutrinos are created at that point, and then you can time
it very accurately when the neutrinos are detected at the cave in
Italy.
So what you are doing, you are timing the neutrinos between
those two points, but you also have to make sure you coordinate
the timing of those two points by light and up through the GPS
satellites. What happened is that there was a connector from the
sensor that captured the signal from the GPS to put it into an optical fiber, and that connecter being loose turns out it puts a delay
in the time light takes to get from CERN to Gran Sasso cave. So,
because of this connector, not because the speed of light was anything different, because this connector had a delay in it, it looked
like light was taking longer than the neutrino. And that is where
this thing came
Mr. FRELINGHUYSEN. So do we have any labs that are doing similar type research, and knowing you have Princeton roots and this
is all about Einstein, isnt it?
Mr. BRINKMAN. Yes. This is all about Einstein. That is for sure.
Mr. FRELINGHUYSEN. And so what are we doing here at home
and where do you put Einstein on this question?
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Mr. BRINKMAN. My own belief is that is what is going to happen
here.
I think, first of all, this answer that they have, the group that
originally published this thing, is saying this is at the speed of
light. The speed of neutrinos is the same as the speed of light. My
view is, I dont think we have got to go check that again, frankly,
but we are.
Mr. FRELINGHUYSEN. So are we doing anything that relates to it
here and where are we doing it?
Mr. BRINKMAN. Yes, at Fermilab. At Fermilab.
Doctor, the long baseline neutrino experiment would focus obviously on neutrino research. The possible total construction costs of
the project as proposed at Fermilab could range in excess of a billion to $2 billion. There have been hurdles in arriving at the current design. In particular, the National Science Foundation was
slated to build and maintain the detector facility, but they announced in late 2010 that they were pulling all funding. This years
budget for your Department instead provides funding to continue
research while it evaluates the proposed plan.
Do you know when the Department is going to be making a decision as to whether they are going to proceed with this proposal or
not, given the fact that there is also now a new budget proposal
in the House that cuts discretionary spending by another $19 billion?
Mr. BRINKMAN. Yes. Let me tell you where we are on this, and
what our thinking is.
All through summer and fall of this past year we have asked
Fermilab and the high energy physics community to figure out and
settle and come up with a real design, down select the various options from the various options and give us a real plan for what this
thing would look like.
They have done all of that and they have done a really good job.
They really went at it in detail and came back to us. But the problem is they came back with a very high price. So, with constant
level of funding, I dont see us being able to do that specific experiment.
But we have a couple of smaller experiments that we are doing
in the Homestake Mine out in South Dakota. For $11 million we
can keep the pumps running and do these smaller experiments.
One of them is a dark energy experiment, and the other one is
called a Miranda experiment, it is basically a neutrinodecay.
These are two interesting experiments that will keep us with that
mine. South Dakota and their benefactor out there have put almost
a hundred million dollars into that mine at this stage, and so we
are trying to help them keep that open and do some science.
But I think we are going to be looking for other ways. The fact
of the matter is that one of the very important parameters of
neutrinos has just been measured at Daya Bay in China where we
are a collaborator with the Chinese on an experiment which looks
at neutrinos coming from reactors.
Mr. VISCLOSKY. But for budgetary purposes it is not being built
into the administrations budget in the outyears.
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Mr. BRINKMAN. Not at this stage.
Mr. VISCLOSKY. The next question I would have is the budget
proposal before us has $20 million for the Energy Frontier Research Centers, and I have been a proponent of those centers.
There are 46 of them.
Mr. BRINKMAN. No, no, no, no.
Oh, yeah, yeah. You are right. I am sorry. Yes, sir. You are right.
Mr. VISCLOSKY. I stand to be corrected. All you have to do is look
at my pocket and know I am a goofball.
Mr. BRINKMAN. Now I know what you are talking about.
Mr. VISCLOSKY. Has the Department made a decision as to how
they will distribute that $20 million between the 46 centers?
Mr. BRINKMAN. I dont think they have gotten that far. That $20
million is meant to try to help to couple those centers into projects
in EERE. That is the thought behind it, and we will see how it
works out. We havent worked that out yet.
Mr. FRELINGHUYSEN. What do you mean couple? Could you expand? What does that mean? I think we know what it means, but
maybe you could explain it.
Mr. BRINKMAN. The Energy Frontier Research Centers are creating a lot of really interesting new ideas for gadgets and devices,
and those things need to be taken further towards development
and then into development and manufacturing. That is really
EEREs job. So we want to try to enhance these things in ways that
makes that easier.
Mr. FRELINGHUYSEN. Excuse me.
Mr. VISCLOSKY. If I could have one more question, Mr. Chairman.
The budget request reduces funding for the RHIC facility at
Brookhaven National Laboratory, and it is my understanding that
this would reduce operating time in fiscal year 2013 to 9 weeks.
The facility received $156.6 million in the request, and I am led to
believe that for an additional $3 million they could run up to 15
weeks, enough to conduct a run in 2013. Why not include the additional $3 million?
Mr. BRINKMAN. I would have to go back and look at the exact
numbers, how long they can run. I know that their budget, the
budget we gave them, did not allow them to run anywhere near the
full capacity, and that is very unfortunate, but that reflects back
on the total budget of the nuclear physics program.
Mr. VISCLOSKY. Yes, if you could, for the record, what the tradeoff was and why they didnt get to three.
Mr. BRINKMAN. Well, it involves the nuclear physics program
having a reduced budget in the proposed 13 budget. So between
trying to fund FRIB and RHIC and the Thomas Jefferson laboratory, something had to give.
Mr. FRELINGHUYSEN. Before going to Mr. Olver, both Mr. Olver
and I mentioned the work at MIT. Does this basically shut down
their operation, or is there money in there to shut it down
Mr. BRINKMAN. There is money in there to see to it that we handle the graduate students and let some of them finish; it is a gradual shutdown.
Mr. FRELINGHUYSEN. A major blow, in any case.
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Mr. Olver.
Mr. OLVER. Okay, since you raised that one, Mr. Chairman,
thank you. Do any of the university programs in plasma science,
or fusion sciences have more graduate students than MIT?
Mr. BRINKMAN. Well, I am not absolutely sure, but there is a
large number. It is something like 300 graduate students outside
of MIT in the program.
Mr. OLVER. In programs around, but I was just asking if any one
has as many as they have. I think they are in the 50 or 60 level
themselves.
Mr. BRINKMAN. Well, Wisconsin is probably the next competitor.
MIT has a fairly large
Mr. OLVER. Very large.
Mr. BRINKMAN. Yes, but these kinds of considerations were all
thought about in trying to come up
Mr. OLVER. Okay. All right. I understand that things are not
easy.
But let me follow a little line in these numbers. Over a 5year
period, the budget has gone up and down. The proportion of the
budget 5 years ago for the national labs and the programs in other
institutions around the country was somewhat larger than it is
now. And it is nowfor the first time, it is coming down about $5
million.
As a side question, is the amount of money spent at Oak Ridge
as the leader of our ITER program, is that attributed to ITER, as
a contribution to ITER? That portion goes
Mr. BRINKMAN. No, no, no, no. That whole portion is attributed
to ITER and not at all to the base program.
Mr. OLVER. Okay. Then the three major ones, the major individual programs which were General Atomics and Princeton and
MIT, those represent about a third of the budget, as it looks like
for now.
Mr. BRINKMAN. Right, that sounds about right.
Mr. OLVER. And then ITER has been growing, and it is the one
that is just going up, up, up, if we are going to make those commitments.
Now my intention would be that if we wish ITER to be successful, then we have to have a successful group of these major institutions that are continuing to function. Because each one of them
puts in things. What ITER is doing is simply upscaling whatever
works. And to terminate anybody at this point in this game is a
dangerous thing to do, not only for the success of ITER but, of
course, for the success of our own domestic program as well.
I am repeating, I think, that every one of these components has
had some inputs into the development of the ITER program.
Mr. BRINKMAN. I agree with you that all three have had inputs
into the ITER program, all three of the national facilities. However,
if you asked me which has been the most productive from the point
of view of preparing for ITER, it has clearly been DIIID. They have
done a series of experiments.
Mr. OLVER. And it has grown relative to the others in the last
few years, no question.
Mr. BRINKMAN. No question. And it has just done very well. In
fact, there is an annual, international plasma physics meeting, run
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by IAEA, the International Atomic Energy Commission, and 4 out
of the last 5 years experiments at DIIID have won the best paper
at the meeting. So they have done very, very, very well.
And the other thing, I dont want to belittle MITs effort, either.
They have done some very nice work in particular on tungsten
walls and tungsten diverter walls in the bottom part of the machine. But I have to say that is also being done at JET in England.
And so this is all the kinds of things that we took into consideration.
Mr. OLVER. One needs whatever it is that JET is doing in England and whatever there are others doing in Japan or South Korea.
Mr. BRINKMAN. You want to take those into account.
Mr. OLVER. All those need to be part of this or else this Holy
Grail is going to be made hard.
Mr. OLVER. One last short question. I started asking, shortly
after we started creating hubs, was there any expectation that
some of the research, frontier research centers, which must be pretty close to hubs that are being created
Mr. BRINKMAN. Yeah.
Mr. OLVER. Are any of them to be subsumed into the hubs as reviews go forward?
Mr. BRINKMAN. Now, I would say it is very possible that that
would happen. For instance, right now, the hub that is just getting
started
Mr. OLVER. You only have one hub going at the moment.
Mr. BRINKMAN. Right. They have the Fuels from Sunlight Hub.
Mr. FRELINGHUYSEN. If the gentleman would yield, I think we
are looking for some information on the hubs. I think we are still
missing an update as to what they are doing.
Mr. BRINKMAN. I could answer his question. I mean, the answer
is that in the Fuels from Sunlight Hub, the scout tech group, that
head set actually was part of an EFRC. So, to some extent, the
technology with the EFRCs has been consumed into the hub. In
fact, Nate Lewis, who was a professor at Cal Tech, is using a whole
set of EFRCs to feed new catalyst into the hub.
Mr. OLVER. But that should also happen with ones like the battery science or the solar science one, the two hubs that are functional out of Erie.
Mr. BRINKMAN. We are just getting the proposals to start the
battery hub.
Mr. OLVER. That is right.
Mr. BRINKMAN. But here again is a situation, but I dont know
who is going to win this. But let me take Argonne National Laboratory for a minute. We have an EFRC on batteries there, and in
that EFRC they have some people who invented some of the new
cathode materials that are being introduced into batteries today,
into Volt and things like that. I am sure they are going to apply
for a hub. If they win the hub, that EFRC will be part of it.
Mr. OLVER. They will be an applicant in it. But we will still leave
the other frontier science centers sitting where they are.
Mr. FRELINGHUYSEN. The shades will be closed, but they are not
quite closed on this hearing.
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Mr. BRINKMAN. I can see that.
Mr. FRELINGHUYSEN. I dont know how you withstood it. You
could have winked at us or something, and we would have put the
shades down for you. We likeyou know, we like transparency and
openness.
I want to just focus for a few minutes on the bioresearch centers.
You are plugging in a $375 million investment again for the next
5 years; is that correct?
Mr. BRINKMAN. We are hoping to, yes.
Mr. FRELINGHUYSEN. Yes, can you tell us how you evaluate each
of these centers?
Mr. BRINKMAN. Yes. Well
Mr. FRELINGHUYSEN. How do you actually evaluate their performance and how do you match that relative to their original
goals? Each of them had a whole set of goals.
Mr. BRINKMAN. Well, we have very elaborate review processes
that we use. First of all, we have these places write a report. We
bring in outside scientists. Then they comethey either go to the
laboratory
Mr. FRELINGHUYSEN. They are independent peer reviewed.
Mr. BRINKMAN. It is totally independent peer reviewed. They will
spend at least a day either at the site or at a review here in Washington, go through the whole process of reviewing them.
We then asked each of those reviewers to write us reports on
what their views of the centers are, and a few of the reviewers actually sit on review committees for more than one center, so we get
into some intercomparison among the centers.
And that process was just finished this fall, and then that is
why
Mr. FRELINGHUYSEN. And so do each of the centers have specific
goals?
Mr. BRINKMAN. Each of the centers have specific goals.
Mr. FRELINGHUYSEN. And can you assure us they have been met
or is this still
Mr. BRINKMAN. I can get you the specific examples.
Mr. FRELINGHUYSEN. Give us an example.
Mr. BRINKMAN. Well, lets see, the simplest example is one that
was done at JBEI at Berkeley where they took an E. coli, these microbes that everybody gets sick on every now and then, but they
took them, modified the DNA and the E. coli so that the E. coli
would act as an agent for taking cellulose and making it intoI
think disabalene was the name of the molecule, which is a drop in
a substitute fuel for gasoline. So they are making that kind of
progress of finding new ways to make fuels, and we are hoping
that
Mr. FRELINGHUYSEN. So one has a particular focus on cellulose,
right, and what we might describe as next-generation biofuels?
Mr. BRINKMAN. The one in Oak Ridge, for instance, has a very
strong focus on breaking down ligon. One of the crazy things about
plants is the plant generally are coated with ligon, and that is
what makes the plant so strong. And in order to get to cellulose
to sugars you have to break down this ligon, and it is not easy. So
they have done the modification of plants, of DNA so that the plant
actually grows with a ligon that is not so strong.
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Mr. FRELINGHUYSEN. And are you focusing on plants that are not
involved with the food chain and food supply?
Mr. BRINKMAN. Absolutely.
Mr. FRELINGHUYSEN. So that is passe, is that right?
Mr. BRINKMAN. We are surely not trying to use corn.
Mr. FRELINGHUYSEN. Good, glad to hear that.
So have you uncovered any specific concerns about any of these
three centers in terms of where they are going and what they
might likely be doing in the next 5-year cycle?
Mr. BRINKMAN. We believe that they are heading in quite different directions, two I talked about. The third one is actually
heading and trying to understand what kinds of soils and what
kind of terrain you can grow these kind of plants that are not food
plants but would be good for fuel. And so they have taken that
tack, which means, all three have sort of found their own direction
to move, and I think it has been very good.
Mr. FRELINGHUYSEN. Does this program compare notes to similar
programs that might be
Mr. BRINKMAN. Yes, they go to all the conferences and that kind
of stuff, so they definitely are in the field and know what is going
on.
Mr. FRELINGHUYSEN. Okay. Mr. Visclosky, any further questions?
Mr. VISCLOSKY. I have got more, if you wouldnt mind, Mr. Chairman.
On the fusion budget, there is a request for about a $3.8 million
reduction for fiscal year 13, but I understand that there are reports that the Office of Science is exploring having American fusion
scientists do work overseas. Is that true?
Mr. BRINKMAN. Well, what is going on there is the following: we
have not built any. The newer machines that are being built are
all being built with superducting magnets, and also there tend to
be stellarators, and we are not building any machine like that. So
we believe that in order for us to be able to use and learn from
those kinds of machines we are going to have to work on some of
the international machines.
There is a machine in Germany which is a stellarator, a super
ducting stellarator, which we would very much like to do experiments on. With the kinds of budgets we havent had the kind of
money to build those kinds of machines here.
Mr. VISCLOSKY. Another question I would have is, my understanding as far as the Departments commitment for research
grantsand I certainly understand multiyear funding for these
grants, that science just doesnt start and stop on a 12-month
basisbut that the rotation right now would allow for about 6.5
percent of fiscal year 12s monies to go to new grants because of
the multiyear funding. And I am wondering, has the office looked
at that to provide a greater window for new opportunities as research is taking place, a new idea has come so that there is more
than 10 percent available in new grants?
Mr. BRINKMAN. We worry about this. We worry about the ratio
of the number of renewals. Our typical grants are 3 years. So you
would say, well, there is a third will be coming up every year. But
you dont just want to renew that third. You want to give a lot of
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opportunities for new things. So you tend to take some 10, 20 percent of those older ones and not fund them and put on new things.
Mr. VISCLOSKY. So are most for 3-year periods, Doctor?
Mr. BRINKMAN. Most of our grants are 3 years, right?
Mr. VISCLOSKY. And if I could just bring in ARPAE in for a second, my understanding of ARPAE is that at the beginning you
have got 3 years and dont come back to us for this particular idea.
Mr. BRINKMAN. Yes.
Mr. VISCLOSKY. Has the office looked at that to free up money?
Mr. BRINKMAN. I dont know thatI would not have said that
My understanding of ARPAE
Mr. VISCLOSKY. I understand I might not be correct on it, but
Mr. BRINKMAN. My understanding of ARPAE, the way they are
set up is they are saying, hey, we are not trying to fund long-term
research. We are trying to fund things that are very close to development. And so we are asking you to march down a development
path, and if you cant get down that path we are going to cut you
off.
That is the thing, that is the way they work.
But I think we are somewhat different. We are trying to fund
somewhat longer-term research, and so we have to be a little more
careful about cutting people off because
Mr. FRELINGHUYSEN. Longer-term research, some of which we
have been discussing, and we might be cutting a few off, right?
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. Mr. Olver, I just have one question. I want
to get a little focus here. In the area of basic energy sciences, you
have $42 million for mesoscale science to apply nanoscience. Tell
us a little bit about this initiative.
Mr. BRINKMAN. I described a little bit of this earlier.
Mr. FRELINGHUYSEN. I am aware of the NanoValley and a lot of
people are working in this area.
Mr. FRELINGHUYSEN. What are you doing specifically?
Mr. BRINKMAN. Well, we, of course, have had these five nanoscience centers that we have had for some time now; and these, I
think, have been very successful in doing new things like, for example
Mr. FRELINGHUYSEN. You have got to move the mike closer,
please.
Mr. BRINKMAN. These nanoscience centers that we have, I think,
been quite successful. One example, for instance, is that we found
that you can make palladium and platinum catalysts much more
effective if you make a very tiny, say, gold particle and then coat
the particle with platinum or palladium. That gives a much better
catalyst, a much more effective catalyst. This is the kind of nanoscience that we think is tremendously important, and so we are
very interested in doing that.
But we also believe we can make all kinds of new things that
reach up into the mesoscale. The mesoscale is at the micron level
and the size of cells and things like that, but also we think that
these kinds of materials where you use the nanoscale size things
to put them together in complex ways will make for morefor in-
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stance, a very high-strength steel or very high, composite materials

that are much, much stronger than what we have today. Those are
the kinds of things we are thinking about.
Mr. FRELINGHUYSEN. You are doing it. Are others doing it as
well?
Mr. BRINKMAN. Oh, yeah.
Mr. FRELINGHUYSEN. There is quite a lot of our industrial complex that is focusing on this.
Mr. BRINKMAN. Yes.
Mr. FRELINGHUYSEN. I am just hoping the twains are meeting in
terms of our support in a variety of different budget areas, that
these scientists are talking and collaborating where appropriate.
Mr. BRINKMAN. Yes, and you know the NSF also has a nanoscience program, a fairly sizeable one, in which we talk to each
other.
Mr. OLVER. Mr. Chairman.
Mr. FRELINGHUYSEN. Mr. Olver, you are batting cleanup standing between our votes.
Mr. OLVER. Oh, are we about to vote? Oh, okay.
You are talking about mesoscale and nanoscale. I was going to
ask you, but you then answered that meso is micro. I was wondering, what was this? Were we going in the other direction? Are
you involved in nano? No. Okay.
But you are doing the science, and once the science is done under
you, under your office, then that will end up in the critical materials hub
Mr. BRINKMAN. We would hope so. Yes, that is what we have
planned.
Mr. OLVER [continuing]. Over here.
Mr. BRINKMAN. Right, but you have to be careful, right? The critical materials hub is going to look at critical materials, right? So
we dont always invent new things that only use critical materials
or alternative critical materials. We will be inventing things that
will not just necessarily go to that hub.
Mr. OLVER. But you are going to be making the basic materials.
Mr. BRINKMAN. We will be making things that they use in various places.
Mr. OLVER. And then they are going to be figuring out how to
commercialize them.
Mr. OLVER. How to make them function much more economically.
Mr. FRELINGHUYSEN. Thank you, Dr. Brinkman. Thank you for
being here.
We stand adjourned.
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WEDNESDAY, MARCH 28, 2012.

DEPARTMENT OF ENERGY, ARPAE AND LOAN
GUARANTEE PROGRAM
WITNESSES
DR. ARUN MAJUMDAR, DIRECTOR, ARPAE

DAVID FRANTZ, DIRECTOR, LOAN GUARANTEE PROGRAM
Mr. FRELINGHUYSEN. Good afternoon. I would like to call the

meeting to order, and I apologize to everyone for the delay in getting going. Our hearing today is for Fiscal Year 2013 budget request for the Department of Energys Loan Guarantee Programs,
and for the Advanced Research Programs AgencyEnergy, ARPA
E. Dr. Majumdar, thank you for being here. Mr. Frantz welcome
to the committee.
We asked the two of you to appear together because of the
unique nature of your programs. Although you were authorized before 2008, you both formed the backbone of some of this administrations most visible initiatives. Now that we are into the fourth
year of the administration, you have enough of a track record that
we can have a more informed discussion about the successes you
have had, and some of your challenges.
Mr. Majumdar, this budget request for $375 million for ARPA
E activities is a $75 million increase for the Fiscal Year 2012 appropriation. This is a 27 percent increase, matched only by the 28
percent increase requested for energy efficiency and renewable energy. At the same time, the request cuts funding for fossil energy,
and nuclear energy research and development. While I would like
to believe that the present support for all of the above energy strategy is for an all-of-the above engineer strategy, the facts indicate
that this budget request, in some ways, is more ideological than
practical.
Yet, the ARPAE program has identified an important niche for
itself by supporting high-risk, high-reward projects, and given all
of the political pressures surrounding your program, you have
made some tough decisions, including the termination of projects
which were not achieving their goals. And I think that is commendable. I would encourage other parts of the Department to learn lessons from the way you have done business.
The Loan Guarantee Program, on the other hand, has been the
center of some controversy, starting with the Solyndra bankruptcy,
and now extending into questions about other companies. Apparently, even the President no longer wants to take responsibility for
this program, according to remarks he made last week.
Mr. Frantz, you are not asking for any new loan guarantee authority, but given the billions of dollars that your programs are
overseeing, you will have some hard questions. We will have some
(535)
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hard questions for you to answer today. We look forward to your

answers.
And may I say, parenthetically, I generally support loan guarantees, but I do think, to some extent, and it is unfortunate, that the
water has sort of been poisoned here because I think they have
been a valuable resource. But we are going to move on.
Please ensure that the hearing record, questions for the record,
and any supporting information requested by the subcommittee are
delivered in final form to us no later than 4 weeks from the time
you receive them. Members who have additional questions for the
record will have until the close of business tomorrow to provide
them to the subcommittee office. With that, I turn to Mr. Visclosky
for any opening comments he cares to make.
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540
Mr. VISCLOSKY. Thank you, Mr. Chairman. Doctor, it is good to

see you again, and Mr. Frantz thank you for taking the time to be
with us. Dr. Majumdar, I will be interested to hear what progress
is being made at ARPAE. As you know, despite my appreciation
for the innovation and streamline project model you use, I have repeatedly shared my concerns regarding the programss potential
overlap with other areas of DOE. Many of the activities pursued by
ARPAE are in the areas where either DOE has applied programs
or the Office of Science is also endeavoring to make progress. I believe that there is a place for competition within the Department,
but in an era of scarce funding, redundancies must be kept to a
minimum, if not eliminated.
I am interested in hearing your approach to coordinating between programs at the Department, to ensure that overlap is minimized, and how also you are working in your position to spread,
if you would, your new culture. While the subcommittee was initially a reluctant supporter of the program, I believe that given
many positive reviews, we should pursue the ARPAE model long
enough to determine if we can get a return that justifies the investment.
Mr. Frantz, the Allison Report recently requested by the White
House found that the Federal Credit Reform Act methodology the
Loan Guarantee Program office uses was appropriate. Further,
using that measure, the report estimated a potential budget impact
of the outstanding loans is less than DOEs current estimates, and
below the loan loss reserve provided by Congress.
Your own reestimate, as I understand it, confirms this, showing
that the total credit subsidy cost of the portfolio went down from
22.5 percent to 13.2 percent driven by primarily by the success of
the Ford and Nissan loan guarantees. To be fair, the statistics are
dated.
After looking at the details of the reestimate, there is a particular area of concern that I hope you will address today, loans
that have no link to a utility and are primarily projects related to
manufacturing. I also am keenly interested in the actions the Department is taking both through its own initiative and also in response to the recommendations made by the report.
With that, gentlemen, thank you very much. Thank you, Mr.
Chairman.
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Mr. FRELINGHUYSEN. Dr. Majumdar, please, the floor is yours.
We have a full house here today. There is a high interest in the
work that both of you are committed to.
Dr. MAJUMDAR. I would like to extend my thanks to the Chairman, to the Ranking Member and the esteemed members of the
Subcommittee for inviting me to present the Department of Energy
Fiscal Year 2013 budget request for the Advanced Research
Projects AgencyEnergy, or ARPAE. As I said before to many of
you, I consider you all to be my board of directors. I am here to
report to you what we have done in the past, and what we plan
to do in the future. ARPAE is focused on research to create breakthroughs in energy technologies.
Let me explain what I mean by using an example. Until the
1970s, we used to use punch cards like this to enter data into computers, and in only 30 years, we went from punch cards to this,
smartphones. Most of the innovations that allowed information revolutiontransistors, integrated circuits, wireless communication,
and the Internetwere created first in the United States, and then
used globally. We didnt make better and better punch cards. We
invented the future using technology innovations based on a strong
foundation in science and engineering. The U.S. has been doing
this all throughout the last century, from the Wright brothers and
the airplane, Jonas Salk and the polio vaccine, to Nikola Tesla and
Westinghouse creating the first AC electric grid.
These and many of the innovations by our parents and grandparents created a better and more secure life for all of us. ARPA
Es goal is to catalyze similar innovations in the energy sector so
that our children and grandchildren have a better future than we
do. ARPAEs statutory goal is to invest in research to rapidly
translate science into breakthrough energy technologies that are
too risky for the private sector, but ones that would ensure U.S.
global competitiveness and security. ARPAE does not fund incremental improvements in existing technologies, but rather quantum
leaps in energy technologies.
Let me give you a few examples of what I believe are early
ARPAE successes.
Last month, an ARPAE awardee, Envia, announced the world
record in energy density at 400 watt-hours per kilogram for a rechargeable lithium ion battery, which is double that of todays batteries. What does this mean? If we were to travel from Washington
to New Jersey, it would cost about $40 for gasoline in a conventional car, whereas in an electric car the electricity cost would be
about $6; more than six times cheaper. But the challenge in electric
cars is that the battery pack would cost about $30,000. Now
Envias battery is not yet ready for prime time, but if you were to
use Envias batteries today, it would cut the battery cost in half,
and they are trying to reduce the cost even further. ARPAEs goal
is to reduce the cost of batteries so that electric cars can have comparable range and cost as gasoline-based cars so that they can be
sold without subsidies and reduce our dependence on imported petroleum.
We all know that algae can produce oil, but those oil-producing
algae dont grow very fast. We have a team at Berkeley that is taking the set of genes that produce oil in algae, and inserting those
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genes in a plant like tobacco that grows fast and in bad soil. If this
works, you would simply squeeze the leaves of tobacco, and produce
oil. I really hope that research is widely successful because it could
put our tobacco farmers back to work and reduce our dependence
on imported petroleum by creating a renewable fuel. That is a win/
win/win proposition.
Our grid is an aging infrastructure.
Here is an example. The average age of a transformer in the
United States is 42 years, 2 years beyond its projected life span.
A typical 1 megawatt transformer in a distribution substation
weighs about 8,000 pounds and is manufactured by foreign companies. An ARPAE awardee, Cree, based in North Carolina, is creating a quantum leap in electric power technology. They are developing a 1 megawatt transistorin fact, here it is. This is a 1 megawatt electrical power transistor that can handle 1 megawatt, that
is 200 homes using a single transistor made of silicon carbide, the
size of a fingernail. If they are successful, the 1 megawatt transistor could shrink from 8,000 pounds to 100 pounds and greatly
reduce the cost and increase reliability. Now, here is the kicker.
Because the United States is the world-leading manufacturer of silicon carbide, the Cree project could transform future electrical
power technologies, and create a large export market.
These are only a few chapters of the ARPAE story, and the
ARPAE story is an American story. These pioneers are the Wright
brothers, the Salks, the Edisons, and Teslas of the 21st Century.
They will compete and sometimes fail, but they will get back up
and try again. The future prosperity and security for our Nation
depends on them. ARPAE will continue to find these crown jewels
of our Nation and invest in them.
Last month we organized the third annual ARPAE Energy Innovation Summit which was attended by about 2,500 innovators,
entrepreneurs, investors, Federal and State agencies, Members and
staffers of Congress, and the White House. We showcased ARPA
E funded technologies and also showcased technologies that ARPA
E could not fund. We want them to win as well.
We had the pleasure of having Congressmen Womack and Fattah
of this Subcommittee speak at the summit and I hope you all get
a chance to attend the summit next year and meet the pioneers
and innovators from your own districts.
Let me report what we are going with Fiscal Year 2012 appropriations.
Last year, I promised that we would focus on the use of natural
gas in transportation. In February, we have announced a new program to fund research on breakthroughs that would make it cheaper to own and operate natural gas vehicles than a gasoline-based
one, and one you could refuel at home.
I also promised that we would create a joint program with the
Department of Defense to invent dual use technologies that address
our National security needs and also a civilian economy. We are in
the process of issuing a new funding opportunity for improving the
safety, reliability, and performance of energy-stored systems.
ARPAE is unique for issuing an open funding opportunity to all
of our Nations innovators, to propose any new idea on energy. This
openness is important because innovators can integrate across tra-
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ditional silos, and create something new; ones that we could not
imagine.
ARPAE projects involve risk that the private sector is unwilling
to take. Because this is research, some may fail. Managing the risk
on behalf of the taxpayers through active program management is
part of ARPAEs DNA. We have discontinued several projects
where the idea simply did not work. This is a promise I made last
year, and one that we can have now carried out.
ARPAE will continue to proactively seek out, white spaces,
where it can fill a vital gap in early-stage research in coordination
with the Office of Science and Applied Energy Offices. In Fiscal
Year 2013, we plan to have an increased emphasis on transportation, but with adequate attention to stationary power systems.
I thank you for the opportunity to testify before you and I look
forward to answering your question. Thank you.
Mr. FRELINGHUYSEN. Thank you, Doctor.
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553
Mr. FRELINGHUYSEN. Mr. Frantz, welcome.
Mr. FRANTZ. Thank you very much, Chairman Frelinghuysen,
Ranking Member Visclosky, members of the Subcommittee. Thank
you very much for inviting me to be here to talk about our request
for the Fiscal Year 2013 budget. Mr. Chairman, as you indicated,
we are merely
Mr. FRELINGHUYSEN. Could you please just move that microphone a little closer to you, please.
Mr. FRANTZ. Thank you. As you indicated, Mr. Chairman, we are
merely requesting an increase on our admin budget of $38 million
for the Title XVII program, and $9 million to cover the admin
budget for the ATVM program. Because we are not seeking an expansion of our loan authority, or any increase in the appropriation
for the credit subsidy, I am going to focus my oral comments briefly, very briefly on an update of the program and its current and
future work plan.
At the onset, I want to particularly express my thanks to all of
you, the members of this committee, as well as your respective
staffs. You have contributed over the 5-year period of our program
immeasurably to the successes that we have had through your support and interest in the program.
Before highlighting the successes and challenges that we have
faced over the past year, I would also like to acknowledge and commend the LPO staff publicly for their unswerving commitment and
diligent work associated with the accomplishments of the program.
The staff is one of the finest project finance teams assembled in the
world today and its record over the past year is unprecedented by
world standards. It is comprised of very experienced investment officers, most of whom have worked all over the world, underwriting,
structuring, and closing financial transactions in much more challenging legal and regulatory regimes than exist here in the United
States.
I would hasten to add that the GAO in its recent audit of the
DOE Loan Guarantee Program acknowledged that commercial
lenders interviewed by GAO stated that LPOs underwriting and
due diligence standards are as rigorous as or more rigorous than
those in the private sector.
It is noteworthy that the DOE loan programs office represents
the largest single debt financing for clean energy projects in the
United States, public or private. Two transactions were recently
recognized for their exceptional structure by preeminent journals in
the project finance field as Deals of the Year. At this time, the
LPO has committed or closed $35 billion in direct loans or loan
guarantees, which financed nearly three dozen projects with total
project costs greater than $56 billion. When it ended on September
30, 2011, the Section 1705 program included a portfolio of over $16
billion in loan guarantees for 28 renewable energy projects.
Collectively, the LPO projects are expected to support more than
60,000 jobs and deploy alternative energy that will save nearly 300
million gallons of gasoline per year. It is important to note that the
commercial projects closed under Section 1705 fulfilled much of a
legislative intent of Section 1703 as well. Together, the innovative
and commercial projects closed under Section 1705 represent a
broad spectrum of technologies including biomass, geothermal gen-
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eration, solar generation, wind generation, transmission and solar

manufacturing.
In addition, the LPO issued commitments, as you all know, for
loan guarantees for one nuclear power generation and a uranium
enrichment project. To date, the LPO has closed five ATVM loans
totaling over $8.3 billion. These projects support advanced vehicle
projects in the United States. As you have indicated in your opening remarks, Mr. Chairman, we, of course, have been challenged in
our activities and we have reacted on a continuing basis to fundamental lessons learned. Particularly, in the manufacturing space,
where marketing acceptance of employed technology is much less
certain due to the absence of long-term off-take contracts, such as
those that we obtain in power purchase agreements which we have
in all of our solar, wind, geothermal power-generation projects. In
addition, the LPO has placed a high priority in developing and deploying state-of-the-art business systems, including workflow management and records management systems.
We are presently focusing on the staffing and employment of
processes and systems to support the LPO portfolio management
division. I would reiterate that these practices have been successfully employed at the U.S. EXIM bank and OPIC for many decades. On the origination side, we are working diligently to close our
first advanced nuclear power project, Vogtle, and we are continuing
final due diligence and initial closing planning for the AREVA uranium enrichment facility at Eagle Rock in Idaho.
In addition, we are continuing to perform due diligence for several fossil projects and we expect to resume within the next few
days the underwriting of Section 1703, qualified renewable
projects.
As indicated in my written testimony, we are proactively addressing the dearth of applications in the ATVM program by implementing a very proactive outreach program to the automotive industry.
In conclusion, with your support, we look forward to continuing
to promote opportunities for the United States to stay at the forefront of innovation in clean energy generation and manufacturing,
at the same time, supporting projects that offer the benefits of job
creation, and pollution reduction, while ultimately protecting the
interests of the United States taxpayer.
In administering the Title XVII and ATVM programs, we strive
continually to improve our systems and processes in order to manage loan transactions and portfolios in the most effective and efficient manner possible. Thank you very much, Mr. Chairman, and
I look forward to answering your questions.
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559
Mr. FRELINGHUYSEN. Thank you very much, Mr. Frantz.
Doctor, thank you for invoking New Jersey twice in your remarks; not only the trip in the electric car from Washington to
New Jersey, but also the role of Thomas Alva Edison, whose ingenuity continues to promote a lot of important research and development across the board.
But the reality is that most of my constituents probably couldnt
afford an electric car, so much of the focus of our committee has
been what can we do in the short-term to lower gasoline prices.
Now, my constituents cant afford a Tesla, and open sources have
suggested that the battery you referred to, it is either in The Journal or The New York Times, if that battery dies, there is not much
of an ability to resuscitate it. And so you could find yourself with
a very expensive car with a battery that could be kerplunk.
So you want to put a little meat on the bones here? I know
maybe I should be reluctant to lock horns with you, but, tell me,
is there any truth to the fact that if the battery goes out, then you
have to go and buy another battery for the same amount. Sothis
isnt foolproof.
Dr. MAJUMDAR. Well, Congressman, I think the batteries that we
are focusing on, number one, is to reduce the cost and make sure
that electric cars have the same range and cost as a gasoline-based
car so that you do not need subsidies. I firmly believe that is sustainable business. We are at the early stages, and we are investing
in a portfolio of 15 or 16 different approaches, and we dont know
which one is going to win. We just create the competition. But
these are all for rechargeable batteries, and we look for how many
cycles. There are two lives that are relevant. One is the cycle life,
how many cycles you can charge and discharge, and the other is
the calendar life. Our goal, and this is there in our programs, is
to make sure that they will outlast the carthat is really the eventual goal. Of course, as I said, this is research right now that we
are investing in, but our target is to really make sure that the battery lasts longer than the car.
Mr. FRELINGHUYSEN. But in reality, the battery that I referred
to, if it goes out entirely, you have to get a new one.
Dr. MAJUMDAR. Well, you can change the battery, but ARPA-Es
goal
Mr. FRELINGHUYSEN. Change the battery at $30,000 a clip.
Dr. MAJUMDAR. Well, ARPAEs goal is to look for technologies
not used today. This is the research stage, and translating the
science into technologies that will at least make cars in the future
that the batteries that are rechargeable and outlast
Mr. FRELINGHUYSEN. Are you looking at any innovative ways to
reduce gasoline prices?
Dr. MAJUMDAR. Well, Congressman, this is an issue that I feel
I really understand what people are going through. This is difficult
for peopleteachers, construction workersthey have to travel,
and it is really hard on them. I can assure you that we are doing
everything that we can in this Administration to reduce the burden
on our families. As you know, we now have more domestic production of oil in the last 8 years. We have for the first time in more
than a decade reduced imported petroleum to less than 50 percent,
but that is necessary, but not sufficient. I think the all-of-the-above
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strategy is absolutely important, and if you look at what are the
other things that we are doing, we have historical mileage standards that have been created, and that, will save $8,000 for an
American family per year. We are looking at natural gas, as I mentioned.
Mr. FRELINGHUYSEN. Assuming they could be met, those standards.
Dr. MAJUMDAR. That is right.
Mr. FRELINGHUYSEN. And you can impose standards, but in reality, we hope that the private sector has the capital to do it. But
from everything we have seen, you need to have substantial government support in order to bring people across the finish line. I
think my basic question, is there anything that you are actually
working on now, and we are highly supportive of what you do. You
have a lot of supporters, a lot of ingenuity, a lot of innovation, that
actually addresses the issue of reducing gasoline prices?
Dr. MAJUMDAR. Well, as I said, we are doing everything we can
within our means to do that.
Mr. FRELINGHUYSEN. For the foreseeable future, we are going to
have this incredible reliance on oil. You look at the makeup of our
energy picture, that is where the reliance is, nuclear, coal. I just
wonder whether you are doing anything in your portfolio that relates to
Dr. MAJUMDAR. Yes, we are.
Mr. FRELINGHUYSEN [continuing]. New technologies.
Dr. MAJUMDAR. Mr. Chairman, as I said, we are looking at multiple technologies. We are technology agnostic. We created a program for the use of natural gas for electric vehicles, natural gas
cars. Natural gas is abundant in the United States. It is a domestic
resource, and it is inexpensive. The problem is that if you want to
use a natural gas car and refuel at home, it is expensive. Our job
is to reduce the cost so that the additional cost of putting a heavy
duty tank for high-pressure natural gas that gives you a range of
200 miles, with the compressor cost can pay for itself in 5 years,
and after that you save money.
That is the technology that we are going to create. That is a new
program that we have created using natural gas that you could
then save money.
Mr. FRELINGHUYSEN. There is nothing you are doing in the shortterm here that is innovative to reduce gasoline prices.
Dr. MAJUMDAR. Well, ARPAE is
Mr. FRELINGHUYSEN. I understand that. That is a long-range
commitment, but obviously, you have got some of the best minds
and innovators collectively here that we have ever had. And I just
wondered in your overall portfolio, whether there has been anybody
who has come up with an ingenious idea, that in fact, could get
some traction.
Dr. MAJUMDAR. Well, at this point, we are looking at all options,
all of the above options, and I would love to engage with you in a
discussion as to how we can do that. This is a concern not just of
you, Mr. Chairman, but for all of us, and I feel empathy for all of
the people who, you know, have the burden of additional gas prices.
Mr. FRELINGHUYSEN. Okay, Mr. Visclosky. Thank you.
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Mr. Frantz, you had mentioned the nuclear program, and you
have one conditional commitment. Looking ahead for the rest of
2012, what can we expect as far as any other additional commitments possibly?
Mr. FRANTZ. At this time, Congressman, we are, as I indicated
in my remarks, working very vigorously to actually close the Vogtle
transaction. The condition of precedents to our activities are focused, as you perhaps well know, the obtaining of the COL license
from NRC for each of the projects. The next project to receive that
license is the Summer project in South Carolina, and they have not
yet received that. I understand it is possibly now within days of occurring. That project is among four of the projects that we have
had discussions with. We havent had an indication from them on
how they would like to proceed with us. We havent been actively
pursuing that until they have received their license.
Mr. VISCLOSKY. So that would be a precedent as far as any settlement.
Mr. FRANTZ. Yes, sir.
Mr. VISCLOSKY. Has the price of natural gas affected the Departments consideration of the financial viability of the loan guarantees?
Mr. FRANTZ. It has, to a certain extent, relative to those projects
that we call merchantman, that we have two projects among the
top four projects that are not rate based. Those projects clearly
have been affected by the price of natural gas, as well as, frankly,
the absence of carbon legislation. So they are both merchantmen,
one in Texas and one here in Maryland. I think you are familiar
with them.
Mr. VISCLOSKY. Yes.
Mr. FRANTZ. That clearly has been a significant factor in the decisions, particularly with respect to the investment base, the equity
investment base for those projects, to say nothing of our concerns.
So, yes, it would, in terms of moving to a closing.
Mr. VISCLOSKY. I appreciate your answer, but I have not, in my
mind, always discerned the difference between the two types and
understand exactly what you are talking about, as far as merchantbased facilities.
Mr. FRANTZ. Yes, there are twothe PGM market here in the
East Coast and ERCOT is the market in Texas. Those projects tender on a 24- to 36hour basis for their power generation. So they
are not rate-based, and their power is not guaranteed to be taken.
Now, in normal instances, it is taken because of its volume and its
reliability, but they tender on a daily basis for the delivery of that
energy. In counter-distinction to the rate base which is taken on a
full contract.
Mr. VISCLOSKY. Well, along the same lines, if I could draw your
attention to the fossil programs.
Mr. VISCLOSKY. I understand you said in your remarks you have
about $8 billion as I understand it.
Mr. VISCLOSKY. But at this point again, no commitments. What
activities, might we or might we not expect between now and the
end of the fiscal year on the fossil side?
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Mr. FRANTZ. Thank you, thats a very good question. Actually, on
our solicitation, which was issued for the fossil projects in 2008, we
obtained eight applications. Of those eight, four are in active due
diligence with us under the program. The one right now that we
are most active with is a rate-based project. We are in active due
diligence on that project, as well as three others. The first one that
I am alluding to, there isnt a chance that we can reach a commitment in this fiscal year for that project. The other three, because
of the complications of the off-take arrangements, as well as NEPA
compliance, will probably be a year from now.
Mr. VISCLOSKY. And at this point in time, you would anticipate
continuing to consider these past this fiscal year.
Mr. FRANTZ. Oh, yes, sir, yes, sir. They are in active due diligence, all four of them.
Mr. VISCLOSKY. Is there a time frame that you have established
at some point that you cross that it is time to say no?
Mr. FRANTZ. No, not for these particular projects. As I say, they
are well underway in terms of obtaining off-take contracts for their
power, the disposition of their product. Two of them are gas generators, coal-to-gas generation. One is a coal liquification, and the
other is gas-to-electric power. So these are long, complicated, large
projects that require significant amounts of time to complete those
elements.
Mr. VISCLOSKY. Just one more brief one.
Mr. VISCLOSKY. On that, the differential between the liquification
programs because of the environmental concerns, is there any additional impact relative to your consideration on that project?
Mr. FRANTZ. We are still spending a great deal of time looking
at all of the issues surrounding that project. It is a very complicated project in that regard and it is under active consideration.
Mr. VISCLOSKY. Thank you. Thank you, Mr. Chairman.
Mr. FRELINGHUYSEN. Mr. Visclosky. Mr. Simpson.
Mr. SIMPSON. Thank you. If his constituents cant afford electric
cars, then mine certainly cant, because yours are rich compared to
mine.
I have two questions that are kind of philosophical questions. We
talked a little bit about one in my office the other day. One to you,
Mr. Frantz. Ever since the Loan Guarantee Program, this cloud
came over it because of Solyndra; more than a cloud, it was a big
black cloud, came over it after Solyndra. The question comes in
from the public, why should the government be investing in these
technologies, or these programs, or whatever, if the private marketplace wont do it?
The question I have, and this is kind of a question I ask myself,
is when you compared your program to the private sector, you said
you had more stringent rules and so forth than the private sector,
the one thing that the private sector doesnt have is us looking over
their shoulder. You get your funding from us. There was criticism
in Solyndra or accusations that the administration put pressure on,
and et cetera, et cetera. The same things happen in other programs. The AREVA plant, I met with your predecessor several
times on the Loan Guarantee Program for AREVA, because it was
of interest to me. Maybe undue pressure. I am sure that there are
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people from the Ohio delegation that are probably talking to you,
or will very shortly about USEC and the potential for the loan
guarantee for them.
How does political influence, whether it is from Members of Congress, the administration, whoever, influence your decision? How
much does it influence your decision, and is there a way or should
there be a way that you can make these loan guarantees based on
the marketplace, and what is required, rather than the political
pressure from us? And I, you know, I am not criticizing the administration. I throw myself in there with the rest of the people that
have been interested in the program.
Mr. FRANTZ. Thank you, Congressman Simpson, a very good
question. It could take me hours to answer. I will try to do it very
briefly.
Mr. SIMPSON. That is why I said it was a philosophical question.
Mr. FRANTZ. Very briefly. The program with which you are familiar with, was stood up, and I did that, frankly, in 2005 with these
considerations very much in mind. And I am in the Senior Executive Service. I am not a political appointee. Both the previous administration in which we stood the program up as well as this administration has been scrupulous in avoiding putting direct pressure on the decisions we make in terms of the underwriting of
these projects, the due diligence, and the fundamental decisions
that we take on whether to go forward with the project or not.
And that is absolutely true to this very day as it has been from
the time we set this program up in August of 2005. So I can assure
you that, yes, I hear it. I see it, but it does not impact the fundamental decisions we take on these projects.
Mr. SIMPSON. Should there be a way to reassure the public that
that doesnt happen, because I am sure you hear it just like I do
from the public, well, yeah, you know, the administration comes
and tells them to loan money to their backers and so forth. Well,
and I look at them and say, well, you know what? I went and
talked to them about AREVA, and AREVA, we are talking thousands of jobs in southeast Idaho, and it was important to me.
Did I put undue influence on the administration? Should there
be a way that we can separate those two things so that we can reassure the public that that is not what is driving some of these
loan guarantees?
Mr. FRANTZ. Also, a very good question. I have scrupulously, because of the requirements on me, quite frankly, legally, to be as absolutely apolitical as I personally can possibly be. Therefore, I have
tried to the best of my ability to avoid discussions that are purely
political, and have deferred to the political appointees to handle
those conversations and those decisions.
So I, for that reason, also have not been in the public domain.
I have not felt it appropriate for me generally to be out giving
speechesand I have had enough work to do at my desk without
being in the general public. So I think your question is a very good
one. We are going to great lengths to try to communicate what is
really transpiring in the program without
Mr. SIMPSON. And I have to say that when your predecessor and
his staff would come in and talk to me, they were really talking
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to me about thewell, I always wanted more information. There
was stuff they wouldnt tell me
Mr. FRANTZ. Sure.
Mr. SIMPSON [continuing]. They were telling me about the process and where they stood and so forth. Have you ever pulled the
plug on projects?
Mr. FRANTZ. Oh, I certainly have, sir, yes, at all stages. I think
the point is, and I tried to present that in my oral comments to all
of you, I have been at this business all over the world for over 40
years. I am not atypical of the staff. We have a lot of experience
doing these projects. The other thing we emphasize clearly is that
there are no guarantee that you are going to be funded until the
day we fund. I think this Subcommittee is well aware of a project
just recently in which we had already been through the closing documentation, and we are at the point where we could have funded,
and we could not get comfortable with something that you have all
alluded to, and that is the market conditions. I recommended to the
Secretary we not proceed and we did not proceed.
I mean, that is very expensive. That is one extreme. What we attempt to do is to try to reach those conclusions much earlier in the
process, although you are well aware that we do get criticized for
that as well. You have heard that.
Mr. SIMPSON. Sure, from us.
Mr. FRANTZ. But on that, without sounding defensive, the point
and the bias is, particularly from my perspective, we are in the
business, at your behest, to complete transactions, not to find ways
to not do them. So if there is any fault, and it is my responsibility
that we draw out the process of consideration, due diligence, certainly, we do it with the bias with the attempt to try to ultimately
do the transaction, not to spend theirthe clientsmoney or to
delay them in the decision-making.
Mr. SIMPSON. Well, I appreciate that answer. It is a difficult
issue, and if I could ask one brief question of Dr. Majumdar. We
talked a little bit about ARPAE kind of replacing a lot of the Bell
Labs and those types of things that used to do this research before.
How do you decide whether you are trying to drive the marketplace
with your technology, or if you are following the marketplace, if
you understand what I am saying.
Dr. MAJUMDAR. Sure, the way we create our programs is, number
one, to recruit very smart people. Number two, we give them a little bit of opportunity to understand where the white space is. As
I mentioned before, our job is to make the U.S. globally competitive; is to reduce the cost of energy, and security for our Nation in
the future. That is really what we are trying to do. That could be
translated into whether it is natural gas for vehicles, whether it is
power electronics that I mentioned to make our grid more secure,
and lower the cost of electricity. So we get these smart people to
identify the white space, and the white space is where there is
a technological gap. We are in what we call the first valley of
death, where you have a science, and there is a future market out
there, but there is this gap of translating the signs and understanding of nature into something that is tangible.
That is how we do business. That is how we create new programs. Just to give you the natural gas one. It is obvious that we
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have a lot of natural gas, and it is inexpensive, and it is just that
we do notit is not cost-effective to use in light-duty vehicles. It
is cost-effective to use that in long-haul trucking, and we said we
are not going to go there because it is a business proposition today,
and our job is to get out of the way. In the case of light-duty vehicles, it is too expensive. Our job is, can we create breakthrough
technologies which will enable natural gas to be used in vehicles
that is not just cost-effective, but is actually cheaper. That technology does not exist, and that is where you can look at the material signs and computation techniques, et cetera, to see if you can
make a technology that will enable the market in the future and
make the U.S. more competitive
Mr. SIMPSON. Thank you. I appreciate both of your programs.
Mr. FRELINGHUYSEN. Mr. Fattah.
Mr. FATTAH. Thank you both. I am a big supporter of both of
these initiatives, and I think the chairman was correct to point out
that these programs which were launched by legislation passed by
Congress, and were started under the previous administration are
still needed.
Now, I think we can all agree that you cant have innovation
without failure. The two go hand in hand. I happen to have the responsibilities as the ranking member on the NASA appropriations.
So you know, we launch a satellite; doesnt make orbit; it falls
down; it is $500 million that is gone. We are not getting out of the
satellite business. We are going to get right back up and launch another satellite. We have done this throughout the history of our efforts in space, with a great deal of bipartisan support in this Congress and in the country, because there is a realization that innovation and failure go hand in hand. But let me just talk about the
Loan Guarantee Program for a second.
In your advanced vehicle program, the largest loan was issued to
Ford, almost $6 billion. Can you talk a little bit about that deal,
and what it portends?
Mr. FRANTZ. Well, I would prefer not to focus on specific projects
today, Congressman, but to the extent that there has been a lot of
public information associated with it, I can make a couple of comments.
Mr. FATTAH. Just what the loan guarantee provides Ford the opportunity to be able to do.
Mr. FRANTZ. Well, at the time, it happens to be one of our great
stories of the program, I think, and clearly vindicates
Mr. FATTAH. I agree. There is some notion in the public that
Ford didnt benefit and I just want to use this as an example.
Mr. FRANTZ. No, oh, not at all. They desperately needed us. That
is probably the fundamental point. The loan was made at a time
when we were in a deep recession. The automotive industry was in
serious trouble, and certainly, decisions are taken in these major
corporations with respect to new capital addition, or what we call
discretionary capital addition. It was at a time when the company
was fighting for survival, and by virtue of our program, it enabled
them to do discretionary capital expenditure and get ahead of the
curve for new innovation in automotive applications. It was purely
our program that enabled them to do that simultaneously, as they
recovered from the recession, and the huge downturn in the indus-
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try. So that is one of the great success stories, just very briefly, on
how we were very positively utilized in that automotive sector.
Mr. FATTAH. Now, in terms of ARPAE, you were modelled on
the DOD program, DARPA
Dr. MAJUNDAR. That is right.
Mr. FATTAH [continuing]. Which has been at the very forefront
of positioning our Nation in relation to National security, making
innovation critical to the development of new systems to project
American power and to protect our forces, and to kill or capture
our enemies. So the idea of ARPAE is really a model directly after
that. I want you to tell us, given the level of public investment in
ARPAE, how much has been invested by the private sector in the
same project that you have; what the leverage has been, I guess
vis a vis these investments?
Dr. MAJUMDAR. Well, so ARPAE has been around only now for
almost 3 years. And in those 3 years, what we have found, as I
mentioned before, some projects have failed. That is part of the risk
that the government has always taken, and this is research. But
the ones that have been successful, that have reached the milestones, and they are approaching the targets that we had set out
for them. Just to give you an example, 11 projects that received
about $40 million for funding from ARPAE which allowed them
to do the research, and translate it into something that is the first
breakthrough, have now received more than $200 million from private-sector funding so it is a leverage of 5 to 1, and individually,
some projects have gotten 10 to 1 or so.
On an aggregate, the amount of funding that the private sector
has made on ARPAE funded projects, is equal or now increasing
to more than what ARPAE, the Federal dollars, have actually
funded on an aggregate basis.
So that is where we are in 3 years. And the private-sector funding is going to keep on increasing.
Mr. FATTAH. All right, thank you very much. Thank you, Mr.
Chairman.
Mr. FRELINGHUYSEN. Thank you, Mr. Fattah. Mr. Womack.
Mr. WOMACK. Thank you, Mr. Chairman, and my thanks to the
gentlemen for being here today. I will focus most of my comments
and questions with Dr. Majumdar, with whom, and his team I have
had a great relationship, very splendid cooperation from the agency. And I want you to know how much I appreciate that. And also,
thanks for your visit to my district last year. That meant a lot. And
congratulations on the summit. That was a terrific well-attended
event where the attendance had to be capped, as I understand it,
because of the widespread interest. And you are to be commended
for your leadership there.
Let me open by offering something. As I was listening to the testimony today, Mr. Chairman, I received an email and I want to
read a portion of this, Dr. Majumdar, because it will interest you.
That the Small Business Administrations district office in Arkansas has named Arkansas Power Electronics International as
the 2012 small-business of the year. They will be honored at a reception next month. This is a program that has had a relationship
with ARPAE, so you might just explain very quickly what this
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power electronics organization has been doing because it fits into
what your organization is trying to champion.
Dr. MAJUMDAR. Well, thank you, Congressman, for the news. It
is great. I am delighted to hear that. Arkansas Power Electronic
International is a small business which has received funding from
ARPAE to create power electronics using chips like this to integrate into a system for battery charging of electric vehicles. And
this is going to be made in Arkansas. And they have got Toyota as
a partner in there, and Toyota is actually co-investing money into
Arkansas Power Electronics International. So I am delighted to
hear they were selected to be the top small business and, you
know, I wish them all success.
Mr. WOMACK. It is a great segue into our discussion today because I would submit, Mr. Chairmanand I am a huge fan of
ARPAE, because I was a huge fan of the DARPA model, and I
know what Dr. Majumdar is doing in his agencybut I would submit that if there were no failures, that you would have to agree
that they are into territory that probably the private sector should
primarily be in. And if there were only failures, then you would
have to agree that their model is probably off base. I think the real
test here is, there is going to be some of both, and it is the ability
of the organization. This is what I like about the model.
It is the ability of the organization to do periodic assessments
with milestone reports, and a quick determination as to whether or
not these projects are on the right track, or are not, and whether
they should continue to be funded or not. So in a recent conversation, you talked about an organization that really never got off the
ground and was canceled post haste.
Dr. MAJUMDAR. Right, thank you for bringing it up, Mr. Congressman. Here is what we do, just to explain our go/no-go milestone, and Congressman Visclosky, we had a discussion on that in
your office. We want these teams to do the impossible. That is what
we set out for them. Because if they reach that impossible, that is
innovation. So we put a target out there, reduce the cost and make
the energy density of the battery so much, or reduce the cost of gas
tank for natural gas, so on, and on the way, they have annual go/
no-go milestones because if they dont reach that first milestone or
the second milestone, or if they are off by a factor of 10, they are
unlikely to get there. So that becomes a blind alley.
That is why we, you know, we take these go/no-go milestones
very seriously. We try to help them. The people we recruit are
some of the smartest people. They go and visit them on site visits
and try to help them to become successful. But sometimes, the
ideas just dont work out, and then based on that big gap between
where they are and what the milestones are, we discontinue the
projects, and put the money where actually it is working. That is
the model that we have used, and it sends a signal to the research
community that this is something that they have to take very, very
seriously. If something is not working, it is a mutual agreement
that they would rather do something else. They learn from the failures, and go back and try again, just like Edison and Tesla, and
others have done in the past. That is the American culture that we
have created. This is really where we are trying to go.
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Mr. WOMACK. You mentioned, not to belabor the point on the
natural gas issue, but it is one that I have a significant interest
in because of the cost differentiations between what we are able to
produce with American resources, and how competitive we are with
other nations, particularly in the area of stationary power. But as
it goes back to transportation, you have indicated that your agency
does not have an interest in the long haul truck fleet operations because that is already being tried and tested in the private sector.
But on the passenger side, what specificallybecause you have
stood up this passenger car program, and I met your program manager recentlybut what specifically do you believe that this program is going to be able to demonstrate, if successful, in the near
term, to go back to Chairman Frelinghuysens remarks about what
are we doing today to lower gas prices?
People are looking for alternatives, and some of these alternatives are not ready for market. But what, on your milestones,
what do you see as being the key? Is it the tank? Is it the capacity
to be able to deliver some kind of a system at the home? I mean,
just what kind of a process are we going through here?
Dr. MAJUMDAR. Sir, we have to look at this as a system. So if
you ask the question, why arent all of the cars natural gas today?
Two things. Number one is that we dont have the infrastructure
to, like we have the gasoline infrastructure, we have 120,000 gas
stations around the Nation. Now, to create that infrastructure for
CNG, compressed natural gas, it will cost more than $100 billion,
maybe $150 billion, and that is really expensive. However, natural
gas goes to many homes. So the idea is, can you do that at home
refilling at home so that you avoid infrastructure costs. To do that,
today you can buy a compressor and put it in your home, and you
can buy a Honda CNG car. But the additional cost is cost-prohibitive for most American families.
So what we are trying to do is to create those technologies that
would reduce the cost of the system. That means lowerng the cost
of the compessors; so, if someone comes up with a really low-cost
compressor that can go from 0 to 360 psi, that is great. That is part
of the solution. But the other part of the solution is to create a tank
which is high strength, lightweight, and low cost. This is not trivial. You need science and engineering to do that. So we have to
look at it as a system so that the extra cost of both the tank
maybe it is a new absorbent material that will suck up the natural
gas be there or maybe it is a new way of making the tank materials, using carbon fiber and other materialsand the compressor:
if you could reduce the cost of the whole system to the point that
it pays back itself in 5 years and saves money, that is where we
want to go. And it needs innovation and science and engineering
to do that.
Mr. WOMACK. Thank you very much for your testimony. Mr.
Chairman, I yield back.
Mr. FRELINGHUYSEN. Thank you very much, Mr. Olver.
Mr. OLVER. Thank you, Mr. Chairman. I was trying to get a little
bit of background data on this. Lets see. We have had, for 25
years, what is called an SBIR program, Small Business Innovative
Research Program, which goes across virtually all agencies, any
agencies that do any research and development.
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Dr. MAJUMDAR. Right.
Mr. OLVER. They are required to make available for small businesses sums of money that go to programs. It is a very specifically
authorized, reauthorized several times, given sizes of programs. In
your work, the largest program that you have funded under ARPA
E is how much? How large?
Dr. MAJUMDAR. The average is about $3 million for 3 years.
Mr. OLVER. $3 million.
Dr. MAJUMDAR. The largest is about $9 million for 3 years, and
the smallest is roughly $300- or $400,000, something like that. So
that is the rough range.
Mr. OLVER. I think we talked about this and I think I asked the
same thing, but I am quite a bit older than you are, so I lose some
of these numbers over time. Are you exempt from the SBIR program, or do you have authorization under the SBIR functions, does
that have any implications for what you do?
Dr. MAJUMDAR. Congressman, as you mentioned, we have to
have an SBIR program. That is, I believe, required by law.
Mr. OLVER. Yeah. For 25 years, as I say.
Dr. MAJUMDAR. That is right. So we do have an SBIR program,
and as you know
Mr. OLVER. You have to doeven with money you get, you have
to
Dr. MAJUMDAR. Yes.
Mr. OLVER [continuing]. You have to use the SBIR approach
Mr. OLVER [continuing]. For a portion of the money?
Mr. OLVER. Really?
Dr. MAJUMDAR. Yes, I believe that is 2.5 percent.
Mr. OLVER. You actually make that available.
Dr. MAJUMDAR. That is right. We are making it available now.
Mr. OLVER. With all of the constraints that it has? I mean, the
SBIR program says exactly how much you can give as a first-stage
project and how much can you do as a second-stage project and so
forth. You must feel tremendously constrained by that.
Dr. MAJUMDAR. Well, let me just say that before I came to Washington, I was at a university, and I had actually started a company
which had received SBIR funding. So I am a former recipient of
SBIR.
Mr. OLVER. How many first-stage SBIRs did you have to apply
for before you got one funded?
Dr. MAJUMDAR. When I was outside the government?
Mr. OLVER. Yeah.
Dr. MAJUMDAR. I believe we wrote, my company wrote about, you
know, three or four proposals and got one funded.
Mr. OLVER. And got one. And then did the whole spigot open at
that point? You got new first stages, and then on to second and
third stages?
Dr. MAJUMDAR. Well, let me just say that one of the things that
we faced, and we are going to fix this is that when you do a Phase
I in SBIR, you get about 150K or so, 100, 150K.
Mr. OLVER. The most recent authorization, may be larger than
that. But yes, it used to be $75,000, I remember.
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Dr. MAJUMDAR. Right, and then there is a gap where you have
to write a proposal again. It goes through evaluation and then you
get Phase II. And that
Mr. OLVER. And then you can get up to like $750,000 or something like that.
Dr. MAJUMDAR. That is right. And that gap is actually quite difficult. Because for a small company, and this is what we faced,
cash flow is everything. So we went under because we could not
sustain our operations through the gap.
Mr. OLVER. Okay.
Dr. MAJUMDAR. So I think one of the things that we are going
to do in ARPAE, is to use this go/no-go milestone and close the
gap to zero. Because if in Phase I, you can reach the milestones of
Phase I, it should be automatic to go to Phase II, so that you dont
have a cash-flow problem, and I believe, and I have talked to many
small businesses, that this is something that they would love to
see.
Mr. OLVER. And you can do that.
Dr. MAJUMDAR. I believe we can do that within the law.
Mr. OLVER. You can do that just administratively, since you
must do SBIRs, with those 2 or 3 percent or whatever of the
money. You can then change the whole pattern of the program.
Dr. MAJUMDAR. I believe there is flexibility in doing so, but I
could take the question for the record, and get back to you in more
detail.
Mr. OLVER. Okay, that would be fine. Am I already off my time?
Mr. FRELINGHUYSEN. You are
Mr. OLVER. Off my time.
Mr. FRELINGHUYSEN. Never off your time. But Mr. Nunnelee is
ready.
Mr. OLVER. I will come back.
Mr. FRELINGHUYSEN. Mr. Nunnelee.
Mr. NUNNELEE. Thank you, Mr. Chairman. Mr. Frantz, way back
in 1976, the Congressional Budget Office had a paper entitled:
Loan Guarantees, Current Concerns and Alternatives for Control.
It was referenced by a recent Congressional research service report.
Let me just quote from that one: Commercial lenders originate
loans that are guaranteed by the government. These lenders may
be more concerned with the adequacies of the loan guarantee
agreement, than by the actual risk of the project. As a result,
projects may not receive an adequate amount of due diligence by
the lender. Therefore, increasing the Federal Governments risk of
exposure.
Mr. FRANTZ. Yes.
Mr. NUNNELEE. Can you respond to that?
Mr. FRANTZ. Oh, I certainly can. When you, in a bipartisan way,
decided to enact the 1705 program under the Recovery Act, we, in
our office, took a look at it and created what you may be familiar
with, a subset called our Financial Investment Partnership Program. We did it for two reasons. One was to extend the capability
of the private markets, to have a greater breadth in the opportunity to loan; and secondly, to drag them kicking and screaming
back into this space in terms of new innovative technologies, which
they had vacated at the time, particularly during the recession.
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So, that program, which was sunset September 30, 2011, was
enormously successful. What we did, and I want to assure you that
we did, and this was a part, in fact, of the GAO report reflected
itthose projects went through double due diligence process. The
applicants were required to be financial institutions. They had
done due diligence on the projects themselves, and then when they
came to us as an application, we started all over again on the
projects.
So that those projects actually went through a double credit underwriting and due diligence process. For that reason, by the way,
those projects are among the soundest projects we have in the portfolio today. They largely focus on generation, as you would expect,
solar generation. So I think, if anything, we have corrected, or at
least addressed maybe some of the shortcomings of the earlier program in that regard.
Mr. NUNNELEE. All right, I am still new to this committee and
learning, but your contention is that without these loan guarantees, the private sector would not have made the loan, or there are
not enough venture capitalists out there.
Mr. FRANTZ. Certainly not. I want to assure the full committee
in that regard, and that is true today. We are in constant communication on a weekly basis with the major financial private markets. It is a part of our responsibilities, and they are still in a position where, in many instances, they would not undertake these
new and innovative technologies, either in the first instance or at
utility scale where we are financing them today.
Mr. NUNNELEE. All right. Mr. Chairman, I will yield back. I will
get some more later.
Mr. FRELINGHUYSEN. Some good questions. I referred to it in my
opening remarks. I think a lot of players were shaken by some of
the challenges you have faced, and it is one of those underlying uncertainties here. I just want to talk for a few minutes, Mr. Frantz,
about the Allison Report, and
Mr. FRELINGHUYSEN [continuing]. And the report recommending
that you better define what is a reasonable prospect for repayment.
That is obviously for the purpose of the loan portfolio.
What is your understanding of this recommendation, and what
are you doing to implement it?
Mr. FRANTZ. Well, on this particular one, or all of them, Mr.
Chairman?
Mr. FRELINGHUYSEN. Well, lets just start with the reasonable
prospect of repayment.
Mr. FRANTZ. With respect to that requirement, we have taken a
very, very conservative approach to that recommendation. A 50/50
flip of the coin does not meet our criteria. So we are looking at very
high percentages, as a function of our total identification of risks
and our mitigation of those risks, to ensure that there is a very
high probability that, for the benefit of the taxpayer, our loan is
going to be repaid. It varies in terms of the percentage. It varies
by business sector, as you can well imagine, and
Mr. FRELINGHUYSEN. So who do you pull from within your organization to do this evaluation? Because I get people from the private sector, shall we say, condemning us all in Government for a
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lot of the things that have been happening. You dont have the
right people in place? How would you characterize some of the people that are doing these assessments here? Some come from the
private sector with pretty remarkable credentials.
Mr. FRANTZ. Virtually all of them do, Mr. Chairman. All of my
staff represent people who are essentially from the private sector.
For the most part, we are not career government people.
Mr. FRELINGHUYSEN. We salute you, the fact that you are in Senior Executive Service, of course.
Mr. FRANTZ. We do a very thorough due diligence and underwriting of these projects in the first instance with the origination
group. These are people who have been doing this virtually for
their entire careers. It is then reviewed by what we call a very separate credit group. That group is referred to in the Allison Report
as the risk management group. We are looking to address his recommendation in that area to tighten that up, and change a little
bit of its focus. But that group operates and views these transactions very separately from the origination group. So, that is the
first checks and balances that occur.
Mr. FRELINGHUYSEN. Well, there is a drum beat, which is maybe
over the last couple of days, that somehow we blame it all on the
Chinese. But in reality, somebody is looking, you know, we are
looking over our shoulder as to what is going on around the world,
and in China, and India. I mean, we are taking a look.
Mr. FRANTZ. Exactly.
Mr. FRELINGHUYSEN. That has to be factored into the overall
equation here.
Mr. FRANTZ. Yes, and as a matter of fact
Mr. FRELINGHUYSEN. We understand that there are subsidies
here, there is manipulation, there are currency issues
Mr. FRANTZ. Right.
Mr. FRELINGHUYSEN [continuing]. But in reality, if you have all
of these qualified people, they ought to be taking a look at that.
Mr. FRANTZ. They are, and we are putting additional emphasis
on that per the recommendation in the Allison Report with respect
to the specific responsibilities of the staff and the portfolio management group that I also alluded to. So those folks are constantly
looking at the world markets, and the more macro issues that
might pertain to these projects down the road. That is a part of
their responsibility once these projects move into the portfolio management.
Mr. FRELINGHUYSEN. The stakes are pretty high here.
Mr. FRELINGHUYSEN. We have this underlying problem that still
carries a shadow over something which had been going, I think
fairly well, prior to this administration.
Mr. FRANTZ. Sure.
Mr. FRELINGHUYSEN. And within this administration, but obviously highlighted by some really dramatic situations.
Mr. FRANTZ. We also, we diversified the staff, Mr. Chairman, so
now within our program we now have a very sophisticated technical group, and that technical group is also separate from the
origination group. It does its own analyses, and they are also looking at all of the markets impacting all of our projects.
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Mr. FRELINGHUYSEN. Tell us a little bit about the early-warning
system, and what you are doing relative to managing information
reporting systems and so forth.
Mr. FRANTZ. I am happy to address that, Mr. Chairman. The
early-warning system is a process that begins, thisnow, we are
talking about the portfolio management group.
Mr. FRANTZ. These are once the projects have moved from the
origination and closing into the portfolio management group. The
first piece of that oversight is what we call our watch list. The
watch list is for a variety of reasons and projects move on and off
the watch list continuously, but the watch list is for those projects
for a variety of different reasons, either specific to the project, or
to your suggestion specific to the markets that might be involved,
go on this list. That list is reviewed on a weekly basis. The circumstances of the projects on the list, and all issues surrounding
them. That is the first step.
The second step is that the officers are responsible on a monthly
basis for all of their projects, covering all aspects that might occur.
Those are the two first and major steps, and then that feeds into
another recommendation that was a part of the Allison Report and
that is, we have established a very separate risk committee. That
committee convenes every week on Thursdays, and that committee
oversees any updates or changes, material or otherwise, on each
one of the projects that may be occurring on a weekly basis.
Mr. FRELINGHUYSEN. How would you rate the health of your current portfolio?
Mr. FRANTZ. We think it is very solid. You know, there clearly
are unknowns, Mr. Chairman. We are not perfectly clairvoyant. We
dont overall know what the future holds.
Mr. FRELINGHUYSEN. But some loans inherently are riskier than
others, arent they?
Mr. FRANTZ. Yes, sir, they are, and I alluded to them in my oral
comment, that is in the manufacturing phase. In that regard, just
as a parenthetical for all of you, in the manufacturing in the solar
phase, we have two projects that have not even funded yet. And we
dont know if they ultimately will be. We hope they are. We have
also incurred milestones that have to be met both prior to the initial funding as well as the continuing funding, and that provides
us off ramps in case these projects get in trouble. We dont commit
all of the U.S. taxpayer dollars to the project.
Mr. FRELINGHUYSEN. There have been lots of lessons learned
here.
Mr. FRANTZ. Yes, sir, certainly there have been.
Mr. FRELINGHUYSEN. Just to the Doctor. The white spaces you
talked about, one of the things that the committee has learned is
how many new centers the Department of Energy set up. Across
the broad spectrum we have frontier centers, we have hubs. Where
do you connect to the hubs?
Dr. MAJUMDAR. Well, it is a different model.
Mr. FRELINGHUYSEN. But in reality, they want us to set up a new
hub, and we have a number of functioning hubs. I think the jury
is out as to how well they are working, but I assume, do you crosspollinate? Do you communicate?
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Dr. MAJUMDAR. From ARPAEs position, we coordinate very
closely with all of the things that are going on in the Department
including the hubs, as well as, you know, all of the EFPCs, I think
there was a question about overlap, et cetera. Let me just address
that very clearly. When we create programs in ARPAE, the first
thing we do, as I said, is to recruit really smart people, and then
have a workshop. In that workshop, we bring in all of the stakeholders, the scientific community that are relevant, and sometimes
communities that have not previously interacted with each other.
We have people from the Office of Science, and all of the relevant
applied energy offices in those workshops and manning them. They
take some positions, leadership positions in creating that workshop.
Mr. FRELINGHUYSEN. Why dont you stop there? That is sort of
why I, you know, maybe I didnt get into Mr. Frantz portfolio well
enough, is whether there are some things that you are doing that
perhaps could be directed towards a look-see at some of those within your portfolio. In other words, there are maybe some other
stakeholders that would take a look at some of the risks, or do you?
Mr. FRANTZ. We do. We do.
Mr. FRELINGHUYSEN. All right, and then I will go to Mr. Visclosky, but I just wanted to know whether there is
Dr. MAJUMDAR. Well, I think one of the questions in the appropriations report is, have some of the practices in ARPAE been
adopted by other parts of the Department? One of the test cases
is what we are doing in the SunShot initiative. And as you know,
the goal of SunShot initiative is to reduce the cost of electricity
from solar to 5 cents, or below a dollar per watt within this decade.
But internally, it is also a coordinated management of all solar activities from Office of Science, from EERE, as well as ARPAE.
What they have done is adopted many of the practices of how we
create the funding opportunity; how we have a workshop to bring
in the stakeholders; how we review application; and how we then
contract. Our contracting time in ARPAE is down to 3 months or
sometimes even less.
Mr. FRELINGHUYSEN. Well, you are sort of like the special forces.
Dr. MAJUMDAR. Special ops.
Mr. FRELINGHUYSEN. Yeah, you are special ops. You are like
Dr. MAJUMDAR. So SunShot is an experiment where we are trying to take some of those best practices and see whether they can
work. Some of them are showing some very positive results, and
that is what we wanted to know.
Mr. FRELINGHUYSEN. Special ops often doesnt have to wait 7
years for something to be procured. They take it right off the shelf.
Mr. Visclosky.
Mr. VISCLOSKY. But then I look at some of the troops behind you,
and Doctorjust a joke, I am sorry. You have to know the personalities involved. Sorry about that.
Doctor, I didnt mean to ignore you, I do appreciate your work,
and would attach myself to the observations that the chairman just
made, especially about the milestones that you had other interchanges with Members. EERE was in yesterday, and many of their
contracts are bilateral with both parties, and we did have a discussion about this, have agreed to a determination, and they now are
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beginning to more closely integrate some of the milestones and
have unilateral authority if they are not met. And again, best of
intentions, but there are limited resources, and we ought to focus
them. So I appreciate, and again, would encourage you to every degree to continue to do that.
I would just ask for the record, and not now, because I did ask
a question in EERE yesterday. You mentioned solar batteries, and
they were the two discrete programs I asked them to respond to
for the record. To make sure those jobs are clear 5 years from now,
the response yesterday was we are looking to create demand, we
are looking at tax credits which have nothing to do directly with
the Department of Energy, and we are collecting information. Not
good enough for me. If you have some ideas, and again, for the
record, just what are you looking to do? What should the Department do to make sure that on two programs, solar, and keep the
jobs here, create the jobs here? I would appreciate that.
Dr. MAJUMDAR. Well, I am sorry.
Mr. VISCLOSKY. Go ahead. I wanted to have a conversation with
Mr. Frantz there.
On the health of the portfolio, and the chairman alluded to that,
I would ask if you could address the concerns raised about the exposure concerning First Solar, as well as the Spanish firm
Abengoa, I believe it is, because of their out-sized
Mr. FRANTZ. Sure.
Mr. VISCLOSKY [continuing]. Out-sized appearance in the portfolios. Is there anything in particular you have concerns about looking at as far as your staff?
Mr. FRANTZ. No, Congressman Visclosky, your concerns are well
taken. Any time that a concentration occurs in our business, it is
of concern, and it does require particular oversight. We make it a
priority to look at it. With respect to First Solar, I would like to
make two or three comments quickly. One is that First Solar, we
have three projects with them; they are the big solar generation
projects, but remember that their participation in the projects now,
is as the EPC, the construction contractor, and the vendor supplier.
Of those three projects that we have, one of them was the deal of
the year. General Electric and Nexterra, two of the largest corporations in the United States, are the sponsors and the owners in that
project.
Agua Caliente, we just had the experience that while NRG was
the primary sponsor, it sold down 49 percent of that to
MidAmerica. That has been publicized and that is a very positive
thing in terms of the dispersion of the concentration, and Antelope
Valley Solar, is one of the largest utilities in the United States as
well. So the point is, with respect to First Solar, if there were any
hiccups on any one of those projects, which we have no suspicion
that there will be, these are sponsored by some of the largest corporations in the United States that could support a financial hiccup, and certainly would be able to readily change the vendor, or
the contractor on those projects.
Abengoa, your question, a very good one. On this one, we were
frankly delighted that Abengoa is one of our primary project sponsors in the portfolio. Abengoa is a world-class corporation in this
space. Revenues of $9 billion this year. Every one of their financial
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tests for 2011 are up. Revenues were up 46 percent; EBITDA, 36
percent; net income, 24 percent, and their leverage is going down.
They happen to be one of the most proactive and active and successful corporations in the world in the solar generation space. So
they bring to the table enormous experience worldwide, and they
have very positive financial performance. So in that regard, we are
very pleased with their participation and we are very satisfied with
the results that are taking place.
As a matter of fact, the Solana project among them is over half
constructed now and is going very, very well. Also a very important
point to make with respect to them, they bring to this Nation the
follow-down in manufacturing capacity. They have built the plant
which is now fully functional in the State of Arizona which is manufacturing to support their projects here in the United States. That
is a big, big plus for the U.S. taxpayer, and for us as portfolio managers.
Mr. VISCLOSKY. Okay, thank you. I may have some more for Dr.
Majumdar, but I will defer to the Chairman.
Mr. FRELINGHUYSEN. Mr. Nunnelee.
Mr. NUNNELEE. Thank you, Mr. Chairman. Earlier this month,
the House Oversight Committee issued a report on the loan program. I have numerous questions. I will just pick a couple of them
from that report, and just get you to respond. One, they say that
the Department of Energy invested a disproportionate amount of
its funds in solar technology leaving taxpayers vulnerable by overemphasizing a single technology.
Mr. FRANTZ. The truth of the matter is, we did invest very heavily in the solar space. It has been revolutionary. The point of it is,
and I would like to emphasize this point, that the predominance of
solar, we have 12 projects in solar generation. All of those projects
have what we call power purchase agreements that exceed the tenure of our employed loans, and that is one of the most solid aspects
of our entire portfolio.
So it is true there is a heavy concentration there, but it is also
is the safest, and ultimately will be the most successful. There is
no question about it. With respect to the solar manufacturing
space, I think I previously made the comment, Congressman, that
we had four projects in solar manufacturing. They are relatively
small amounts, in terms of loan that have been borrowed, as well
as project size, and two of the four we have not yet dispersed; and
we will not, until we are satisfied that the satisfactory milestones
have been completed. So it is true, there is a disproportionate
amount, but that was where the demand for this program is. The
good news is that we have structured those deals to the point that
they are probably going to be our strongest and most viable
projects in the portfolio.
Mr. NUNNELEE. All right, in another observation from House
Oversight it says that: The Department of Energys failure to diligently oversee cost and set prudent limitations on executive compensation, while it distributed billions of dollars in loan commitments, has created a significant moral hazard, and has created
enormous risk for the Department of Energy and for taxpayer
funds. And the report cites Beacon Power Corporation, the second
recipient of the 1705 loan, paid three executives more than a quar-
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ter of a million dollars and bonuses in March of 2010, and 18
months later declared bankruptcy.
Mr. FRANTZ. Well, a quick answer to that one and a very logical
one. First of all, generally, not just us, but generally, in the private
markets as well, senior lenders do not participate in board directorships. That is not what we do. So in effect, we do not have direct
control over the governance of these projects and these corporations. That is left to their board of directors. So the assertion may
be true, but we do not have the ability to control the compensation
levels of corporations and projects to which we lend to.
Mr. FRELINGHUYSEN. So, if the gentleman will yield, unlike the
TARP, you dont have any role?
Mr. FRANTZ. Yes, sir, Mr. Chairman, correct.
Mr. FRELINGHUYSEN. Troubled Asset Relief Program.
Mr. FRANTZ. Correct.
Mr. NUNNELEE. You need to understand the awkward position it
puts me in. I have people in North Mississippi that are spending
$4 a gallon to get back and forth to work, and they are struggling.
And they get their paycheck, and withheld from their paycheck are
Federal income taxes, and that goes to pay companies that pay
multimillion dollar bonuses that declare bankruptcy.
Mr. FRANTZ. Uh-huh.
Mr. NUNNELEE. You understand the awkward position that puts
me in?
Mr. FRANTZ. Yes, sir, I do. I do.
Mr. NUNNELEE. All right, thank you. Thank you, Mr. Chairman.
Mr. FRELINGHUYSEN. Mr. Nunnelee. Mr. Olver.
Mr. OLVER. Thank you very much. Sir, go ahead.
Mr. FRELINGHUYSEN. Mr. Fattah, sorry.
Mr. FATTAH. Thank you. The loan guarantees, you have done a
number of deals in geothermal.
Mr. FATTAH. Any of them relate to tidal-based energy, tidal
waves?
Mr. FRANTZ. Oh, no, no.
Mr. FATTAH. So all of thisnone of this is offshore.
Mr. FRANTZ. No, our geothermal projects are all deep drill programs in primarily the West.
Mr. FATTAH. Okay, now, the wind projects, any of them offshore?
Mr. FRANTZ. No, we have none presently. We have four wind
projects, and they are all on the Continental United States.
Mr. FATTAH. Now, you have a lot of international experience,
right?
Mr. FRANTZ. I do. Yes, sir.
Mr. FATTAH. Honduras has got the largest wind farm. Do you
know how that was financed?
Mr. FRANTZ. No, I dont.
Mr. FATTAH. Well, do you know anything about how our economic competitors interact with the generation of renewable energy
in general? I know 2 weeks ago the E.U. in its Energy Alliance
Agreement talked in large measure about what the United States
was doing and how the E.U. needed to compete around some of
these same issues.
Mr. FRANTZ. Uh-huh.
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Mr. FATTAH. Because not doing so would put them at a disadvantage. And I know here, we got into solar, which I totally support,
in part, because the Chinese were
Mr. FRANTZ. Uh-huh.
Mr. FATTAH [continuing]. Subsidizing it, and Germany has been
subsidizing wind in a variety of different ways. So I was wondering
whether you could share where we are relative to our competitors
in helping to grow these industries.
Mr. FRANTZ. Well, I think generally, it is true, that with respect
to the solar and the renewable space, that it is important that
there are incentives to encourage that development. As you are
well aware, the utilities in the State of California, with the endorsement of their Public Utility Commission, have permitted higher rates for the power purchase agreements which has been very
important. I would emphasize the fact, and I think, Congressman,
you are alluding to it, that the returns to employed equity on these
projects is very, very low, so most investors go into them for strategic purposes, and they go in for the long haul.
There are potentially two applicants in the offshore wind space,
and they will be in a position, we feel, that could be very viable
based on their location, and incentives that they have locally.
Mr. FATTAH. Well, I think that we have made some very significant strides. Since the chairman spoke about New Jersey, I will
mention my hometown of Philadelphia. Our international airport
terminal is now completely powered by wind energy. The Eagles,
who are going to win the Super Bowl next year, the entire stadium
in which they play is now powered by wind and solar power. So I
think that there are significant opportunities in pushing clean energy. On the nuclear side, we havent done any nuclear in 30 years;
however, the administration has really crossed a major rubicon in
the sense of moving the country out of this kind of a stagnant position relative to nuclear, with a bias towards action. You had mentioned in your testimony, that on the advanced nuclear, you have
a deal in, I dont know where it is in your process, but it is in process somewhere.
Mr. FRANTZ. Uh-huh.
Mr. FATTAH. Could you comment on that?
Mr. FRANTZ. Well, I alluded to the Vogtle project, which you are
well aware of.
Mr. FATTAH. Right, the Vogtle project.
Mr. FRANTZ. This project is well along. There are over 1,500 people employed on the site. They did receive their license. We are in
the final negotiations to close the documentation on that project. I
have talked with the senior management. I talk with the senior
management of the Southern Companies weekly. They are profoundly committed to completing this project, and we have every
expectation that it is going to be a great success story in terms of
the renaissance of the nuclear power in the United States. And by
the way, there are discussions about destruction. We are in the
process of finally negotiating that deal, but it is a classic example
of the strength of a public partnership in bringing a very complicated and very large project on line.
Mr. FATTAH. All right. Thank you, Mr. Chairman.
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Mr. FRELINGHUYSEN. Keep an eye on the small modular reactors,
too. There is a lot of excitement in that area.
Mr. FRANTZ. We have been in discussions, Mr. Chairman, on that
subject, as a matter of fact. We are very interested.
Mr. FRELINGHUYSEN. Some real excitement, a lot of different
players. Some large, some small.
Mr. FRANTZ. We will have to come back to you with a new solicitation, if you will permit us.
Mr. FATTAH. We would be interested on a bipartisan basis.
Mr. FRELINGHUYSEN. Mr. Olver, you are at the end of the line,
but always front and center for us. Want to put a plug in for your
home State?
Mr. OLVER. You are going to confuse me if you do that, because
I was going to talk again about SBIR, which my home State does
very, very well on. But instead, I wanted to talk about carbon capture, and storage, and utilization because we had a long discussion
about that yesterday, where I think I raised everybodys level of
confusion in the process. You have spoken in your testimony here
about the cost of capturing carbon dioxide from a coal-fired power
plant at $80 per ton of CO2. I take it that would apply also to gasfired plants. They would be of a very similar nature?
Dr. MAJUMDAR. More expensive, because it is
Mr. OLVER. More expensive? Why is it more expensive for
Dr. MAJUMDAR. Because the amount of carbon dioxide is of lower
concentration in pure natural gas. You have less carbon. So thereby, if you want to purify, you want to extract something out which
is more dilute
Mr. OLVER. Okay.
Dr. MAJUMDAR. As a chemist you would know that it takes more
energy to do that.
Mr. OLVER. Okay. But the technique of capture is no different.
Dr. MAJUMDAR. That is true.
Mr. OLVER. Okay.
Dr. MAJUMDAR. Well, that issee
Mr. OLVER. Now, are there other places wherewe arent yet
getting around trying to dowe are looking at the big points
sources, which are these big power plants and the action of capture. We havent done anything about capture for CO2 in the case
of our mobile sources like our transportation sources, have we?
Dr. MAJUMDAR. Well, Congressman
Mr. OLVER. Have we done anything on that? Are you doing any
research? Are you giving out projects?
Dr. MAJUMDAR. Well, I think there are several ways of addressing that. If you want to decarbonize the transportation sector, you
could look at biofuels. The goal that we have set out for ourselves
Mr. OLVER. But that is not carbon capture.
Dr. MAJUMDAR. That is not carbon capture.
Mr. OLVER. I wanted to see. How many different options are
there for carbon capture, or is the technique essentially one technique on whether it is coal, or gas-fired facilities?
Dr. MAJUMDAR. Sure. So today, there are only a few techniques
for carbon capture. A few. And they are based on chemicals or a
chemical reagent. Either you have chilled ammonia, or you have a
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solution of what is called monoethanolamine. And so you have an
air separation unit. You pass CO2 coming out of an exhaust of a
coal-fired power plant and you drop this amine solution down and
it gets absorbed. Then you take that amine solution with absorbed
CO2 to a separate location and then you have got to heat it to
about 100, 120, 150 degrees Celsius to emit the CO2 again, but now
you have got a purified form. Thereby, you can concentrate it and
you can then pump it to a location where you can do utilization and
pump it down and produce oil, which is the whole idea of carbon
capture utilization and sequestration.
You can sequester the CO2 below and produce oil at the same
time. Using that technique today is $80 a ton of CO2 for capture.
While the cost is coming down, in ARPAE what we created is that
look, we have to reduce the cost way further.
Mr. OLVER. So you have given out 15 projects which are intended
to reduce the cost.
Mr. OLVER. So it is 15 projects, each of which has a different approach to how they are going to do that.
Dr. MAJUMDAR. Exactly, that is right.
Mr. OLVER. So you are now getting two approaches, and out of
that process we might end up with a couple of these approaches
that actually meet your goals.
Dr. MAJUMDAR. That is right. And our goal is to reduce the cost
to $25 a ton, and why 25? Because the price of CO2 that is set by
EOR and it has to be on the order of 30, 35 or so.
Mr. OLVER. That is an option for utilization, and you dont go
from storage. You go from the producing, to the capturing, directly
to utilization.
Dr. MAJUMDAR. Well, that is the goal. When you pump CO2 down
to produce oil, it also gets sequestered at the same time. So this
is a win/win/win proposition, again, because you can capture the
CO2 from the coal-fired power plants, pump it down, sequester it,
and produce domestic oil. So this is something that we are deeply
interested in, and the key challenge is to reduce the cost of carbon
capture, which is where ARPAE and the Department of Energy as
a whole have focused to reduce the cost of carbon.
Mr. OLVER. What are the sizes of your 15 projects?
Dr. MAJUMDAR. On an average, about $3 million. That is a typical ARPAE project and some of them are a few hundred thousand
dollars.
Mr. OLVER. Oh, you have some techniques for people that propose to do this for much less than $3 million?
Dr. MAJUMDAR. No. In our ARPAE projects, the program that
we have created is focused only on carbon capture, because that is
the cost barrier that we have today. We are not focused on pumping down and utilization.
Mr. OLVER. No, I understand. You have all of these different
projects. You have some people who are thinking that, have I either only asked for, or you have concluded that it is risky, or something, and you dont want to spend so much to give them all the
same number?
Dr. MAJUMDAR. Well, this is on an average. These are risky
ideas. These are game-changing potentially. The average is $3 mil-
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lion; $1 million a year. This is to try out a new idea; and if it is
successful, then they will go to the next stage of scaling and putting it in a power plant, et cetera. But that comes in a pilot plant,
and that comes at a later stage. But this is to try out other avenues.
Let me give you an example. There are something called ionic
liquids. These are new kinds of reagents, and the idea is that could
you take ionic liquids to capture carbon dioxide and then move it
away at a much more cost-effective and energy-efficient way. There
are other membranes that have been created to do carbon capture.
We have enzymes. We are capturing carbon dioxide in our body
and we are exhaling it right now and we dont have to heat ourselves to 150 degrees Celsius. There is something else going on.
Mr. OLVER. Well, let me quickly repeat the question that I had
asked yesterday, and I had the impression that we had a whole
group of options for carbon capture, and we had also a whole group
of options for storage, and a group of options for utilization. And
you are not certainly contradicting that. Obviously, utilization may
be in many different things besides the EOR program, and some
of them will appear if we can cheapen the amount so that we are
producing CO2 that you can handle in serious tonnages in a better
way than we can do now.
And I was asking, as a one-time chemist, is there someplace
where I can see a compendium, not too long, because otherwise I
would never get it read, but a review paper, or something like that
about the different problems that we have like the problem of sequestration, the problem of capture, the problem of storage, and
the problem of utilization.
And sometimes it is going to have all three components, and
sometimes it may not have a long storage component. And I wanted to see what we were doing in these, and what our prospects
were, how far along we are on this area.
Dr. MAJUMDAR. I would be delighted to share the review papers
on these, and where we are on each of those components. I will be
delighted to share them with you.
Mr. OLVER. You are talking now about several review papers.
There are review papers on each of these, and I will have a pile
of paper and it will never get read.
Mr. FRELINGHUYSEN. You will make sure that Mr. Olver has
those papers?
Dr. MAJUMDAR. Yes, I will make sure. I will make sure you have
those papers.
Mr. FRELINGHUYSEN. We are going to make sure you get those
papers. And I want to get back and I think the hour is late, and
we were kind of a late start. I just want to get back, Mr. Frantz,
you mentioned the 705 loan guarantee, you know, that you ran out
of authority on that
Mr. FRANTZ. Uh-huh.
Mr. FRELINGHUYSEN [continuing]. To issue new loan guarantees.
You still have, I believe, over $500 million of emergency funding
that you have not yet obligated. Can youwhat are you going to
use this funding for?
Mr. FRANTZ. Well, we feel it is very important to have this availability, given that our tenures and the complexity of our projects,
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and there will be a requirement almost certainly that there be
modifications to these transactions. Therefore, this is a safety valve
for us to accommodate modifications that may have to be made in
these projects in the outyears, given circumstances that we cant
foresee right now, but certainly in all probability they will occur.
Mr. FRELINGHUYSEN. So just for the record, how many loan guarantees have been modified to date, and
Mr. FRANTZ. Well, none have been modified to date because we
are just in the initial stages.
Mr. FRELINGHUYSEN. So as we look ahead here, what would you
anticipate?
Mr. FRANTZ. You know, I couldnt, Mr. Chairman, put a specific
number on it, but they are almost certainly, given the complexity
and the size of these projects, there will be a requirement for those
modifications in the outyears.
Mr. FRELINGHUYSEN. Doctor, before we close-up here, Mr. Visclosky asked about, and others asked about what are we doing to
actually maintain the intellectual property that you have developed
to make sure that it stays here
Mr. FRELINGHUYSEN [continuing]. And that there is a direct relationship between the creation of American jobs. I mean, we have
heard others from the departments testify, but we dont get much
reassurance that all of the creativity, innovation that you are talking about, all of the best minds that collectively you have put together on a variety of these projects, thatwe dont have a feeling
of assurance that a lot of that is going to stay stateside here. What
are you doing?
Dr. MAJUMDAR. Mr. Chairman, I appreciate the question. This is
something that is of deep concern to me. I am very passionate
about it. Actually, I wrote an article on this called Make Locally,
Sell Globally. And I have outlined some of the issues, and I can
share this with you.
Mr. FRELINGHUYSEN. You are going to give that to me when you
give Mr. Olver his reports?
Dr. MAJUMDAR. This is a single page.
Mr. FRELINGHUYSEN. I am concerned about patents.
Dr. MAJUMDAR. I agree.
Mr. FRELINGHUYSEN. I am concerned about, you know, we are
aware thatit depends where you listen, the Chinese have a lot
more patents than we do in certain areas, and that scientific papers are lacking sometimes compared to what we used to do, and
I just wondered whether we are keeping intellectual property here
as best we can, and protecting our manufacturing base.
Dr. MAJUMDAR. Yes, Mr. Chairman. There is no silver bullet on
this one. Let me just explain. There are multiple things that have
to be done. Number one is the IP part, and what we have done is,
for example, for small businesses, there is the Bayh-Dole Act, and
we have gone a little beyond Bayh-Dole to ensure that some of the
IP leads to American manufacturing here in the United States. But
if you are looking at manufacturing, which as I said, I am very passionate about, there is other things as well. Financing is very important.
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So, and this goes beyond ARPAE now. Because ARPAEs job
is to look at the breakthrough, to demonstrate that something can
actually work. But we have created, and this is right in the DNA
of ARPAE, a tech-to-market team within ARPAE. Their job is to
look at the innovations that are coming out, and once they are successful, to create the connective tissue for the rest of the world
which includes large business, which includes financing, so that
they can succeed in going beyond ARPAE and leads to manufacturing, and leads to jobs out here. Some of that is showing success.
I just heard yesterday there is a team that we funded called
Phononic Devices in North Carolina, and our funding was to demonstrate that you have a new kind of solid-state refrigerator, and
they have been successful. Now, that is leading to a pilot plant in
North Carolina to develop these devices right there.
But if you really want to look at manufacturing as a whole, there
are other aspects. There is a human capital aspect, which I think
is very important and you and I had a discussion on that. There
is a market demand that needs to be created, but that is, frankly,
I would say a little bit beyond ARPAE. We are doing everything
we can.
Mr. FRELINGHUYSEN. Well, some of our best human capital, and
it is disturbing, but we live in a global economy, have moved to
China. I mean, there have been some remarkable people that we
have trained and educated who are now, shall we say, setting up
shop in China. And just for the record, do the Chinese have multiple ARPAEs? How would you describe what they are doing?
Dr. MAJUMDAR. I have not heard of an ARPAE in China, frankly. Maybe they are doing something that I dont know of. They
havent announced it, but what I could say is what we are doing
out here. I think we are doing everything we can to transition some
of the technology breakthroughs into manufacturing out here.
Mr. FRELINGHUYSEN. I say that because both Mr. Visclosky and
I serve on Defense Appropriations Committee, and from one of the
military installations I represent, this individual was followed
around when he went to China, and he asked many of the students
who were gathered around him what they were majoring in, and
they said they were majoring in warhead development. There were
about like 150 of them. And I just wondered whether what we, obviouslywe dont have that type of, shall we say, college or university major, but at the installations we have people who focus on
that in research and development. I was just wondering whether
you are taking a look over your shoulder.
Dr. MAJUMDAR. We are. All I can say is I strongly believe in the
science and engineering infrastructure out here, which is the best
in the world. I also believe in the capacity for the United States
to manufacture. I strongly believe in that, which is why I am so
passionate about it, and that is why I wrote the article. But I really
think that we have to align multiple things and I think we have
to align the financing. We have to align the market demand created out here. We have to align the human capital so that people
get retrained and get into the workforce, and we have to align that
with the technology innovations and the IP protection. We are looking at whatever we can in our capacity in ARPAE to do that.
Mr. FRELINGHUYSEN. Mr. Visclosky, anything further?
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Mr. VISCLOSKY. If I could, Mr. Chairman. Mr. Frantz, on the
USEC program, it does not lack controversy in your office or on
this subcommittee, and I view it as multifaceted as far as your consideration. One, is the technology, and the Department obviously
has looked at developing a $300 million research and development
program
Mr. FRANTZ. Uh-huh.
Mr. VISCLOSKY [continuing]. As well as the financial standing of
the company itself. Could you bring the subcommittee up-to-date as
to your impression from a loan guarantee perspective as to
Mr. FRANTZ. Well, sure. This project is no longer ongoing. It has
beenit is being managed separately within the Department of
Energy under a separate program. As you are perhaps well aware,
it was an applicant for the front end uranium enrichment in the
Loan Guarantee Program. We never have been able to reach a conclusion that the technology was ready for full commercial application, nor have we been able to ascertain that the corporation was
financially enough sound to execute the overall project. So based on
that determination within my staff, the Secretary has chosen to establish a separate program for that project within the Department.
Mr. VISCLOSKY. On the auto program, markets have obviously
changed since the inception of that program, and I believe you have
about $4 billion left in the program.
Mr. VISCLOSKY. What is your forecast, if you would, for assumptions going forward? Will it be demand from the industry, and will
it be from the manufacturers? Will it be from the component side,
and do you draw a distinction between the two?
Mr. FRANTZ. Yes. We do draw a distinction. I will work backwards. You have asked me two or three questions. First of all,
given our experience in the sector, and particularly with the OEMs,
which the original equipment manufacturers, the major auto companies, it is a known fact, and we hear it in the marketplace all
the time that they prefer to control all of the integral parts within
their organization from a quality-control point of view, as well as
the economics of vertical integration.
So it is very, very difficult for an independent individual component manufacturer who is not underwritten, or subscribed to by the
major automobile companies to actually penetrate and become ultimate suppliers to them. So that is the impediment in the first instance.
Yes, there has been a dramatic change, a very positive one, wonderful news for the American economy for sure, that there has been
a dramatic turnaround in this industry. For that reason, what I
would want to assure the committee, is that we have a very
proactive initiative in the automotive industry through Webinars,
outreach to all the companiesnot only the major automotive makers, but as well as smaller individual companies that we are still
in business. We are open for business. We would very much welcome their applications. So I cant comment specifically, but we are
doing a full proactive outreach to this industry to make sure that
everybody is aware we are here.
We are still open for business, and we are still very interested
in helping them, in assisting them to bring new technologies, par-
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ticularly as they pertain to the CAFE standards, and the efficiencies of motor gasoline.
Mr. VISCLOSKY. The chairman made a comment, because I have
been on the subcommittee for some number of years and have been
through the iterations of the 2005 program, the auto program, and
the stimulus bill. And while, as far as the dollar amount and the
exact configuration of programs, it would be different than if I was
writing it individually, this is obviously a collective effort, and I
have supported all of them.
It would be easy, because there have been some problemsI
wish there had been no problemsto castigate you and the Department for them. I wish they had not happened.
Mr. FRANTZ. Uh-huh.
Mr. VISCLOSKY. I would encourage you as we go forward to continue, from my impression of your testimony today, to exercise that
great care. My sense is you have had over 600 applicants. Some
you probably threw away the first day. We talked about USEC, it
is in a different department now. I urge you to continue to be very
careful. I mean, we wouldnt have a Loan Guarantee Program if
there wasnt a risk.
Mr. VISCLOSKY. Whether it is technological, or whether it is financial.
Mr. VISCLOSKY. Nuclear, I have had interchanges with some of
my colleagues who do not share my opinion, and said well, there
is not a technical risk. I said, but you and I are having a political
conversation. There is other types of risk. There is other types of
risk here.
Mr. VISCLOSKY. I would encourage you to be as attentive as you
can on this program. And Doctor, I do appreciate your good work.
Dr. MAJUMDAR. Thank you.
Mr. FRANTZ. Thank you.
Mr. FRELINGHUYSEN. I associate myself with those comments.
Mr. Fattah.
Mr. FATTAH. If you are going back around, I will ask some more
questions.
Mr. FRELINGHUYSEN. Go right ahead. Mr. Olver is going to be the
last one to question. I am sure he will keep his remarks short.
Mr. FATTAH. Question, the CAFE standards, at one point you
had the automakers protesting, at and another point or a year or
so later after they were finally announced they were standing with
the President in agreement that we could get above 50 miles an
hour. In terms of the remaining $4 billion in loan guarantees and
I am just following up on the ranking members question about
this. What expected deal flow exists going forward to help those
auto manufacturers who are on board?
Mr. FRANTZ. Yes, the simplistic answer. That is the
Mr. FATTAH. We like simplistic answers, thank you.
Mr. FRELINGHUYSEN. Simplistic answers, Mr. Olver. You are the
last out of the box here.
Mr. OLVER. Mr. Secretary, early on in your conversation, you
said you terminated some projects on your major ARPAE projects.
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You had only been going for 3 years. I think you got your first
major money in within fiscal year 2009, but it was actually through
the passage of the American Competes Act, or something, I think
that may be where it came.
Dr. MAJUMDAR. From the Recovery Act. That is where we got the
first dollars.
Mr. OLVER. Was that authorized for $100 million?
Dr. MAJUMDAR. In the Recovery Act, that is right.
Mr. OLVER. In the Recovery Act? All right, okay. So that is the
only money that you have actually had up for as much as 3 years,
because you got another $180 million in each of the following, or
thereabouts in each of fiscal year 2010 and 2011.
Dr. MAJUMDAR. Right, so we had to obligate all of the Recovery
Act money by September of 2010, which we did. Then we had fiscal
year 2011 as the first budget that you appropriated for us, and now
we have the fiscal year 2012 appropriated budget.
Mr. OLVER. Have you terminated any of the projects that you
gave out with 2011 money?
Dr. MAJUMDAR. Congressman, it is too early towe have to give
them a chance.
Mr. OLVER. So it would be among the $400 million that you had
originally.
Dr. MAJUMDAR. Right, that is right.
Mr. OLVER. And how many of those did you have
Dr. MAJUMDAR. We have terminated now nine projects, and that
money went back to Treasury.
Mr. OLVER. But werent those all by 3-year contracts?
Dr. MAJUMDAR. The maximum was 3 years. It is anywhere from
2 to 3 years.
Mr. OLVER. So did you terminate before the end of a contract?
Mr. OLVER. You actually terminate before you got to the end of
a contract?
Dr. MAJUMDAR. That is right. Because they did not meet their
milestones.
Mr. OLVER. And you are actually following milestones.
Dr. MAJUMDAR. That is right. There are go/no-go annual milestones and if they dont meet the milestones we terminate the
project. We discontinue the project before the end of the project and
we put that money back in Treasury. That is what we did with the
Recovery Act.
Mr. OLVER. Okay, but these were fairly large projects. If we were
trying to do that sort of thing with SBIR, I am commending you
for the innovation that you were able to do. But some of that
money, even of the $400 million, had to go out by the SBIR project,
2 or 3 percent of it had to go out by that, so that was under constrained arrangements. You had not yet gotten so innovative that
you were trying to do this under entirely different sorts of procedures.
Dr. MAJUMDAR. Well, let me just say that so far, the SBIR program in the Department of Energy has been centralized. This is
the first time in fiscal year 2012 that we are going to launch an
SBIR effort within ARPAE. So we dont have a history of doing
SBIR before because it is all centralized and went through one of-
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fice. This time in fiscal year 2012 we are trying for the first time
in the SBIR effort within
Mr. OLVER. So then I guess you would change the answer to
I asked, did you have to put out 2 or 3 percent of the $400 million
into SBIR?
Mr. OLVER. So it was taxed into the central department program?
Dr. MAJUMDAR. That is right. It was a centralized effort.
Mr. OLVER. That percent was taken out and put into the central
program
Mr. OLVER [continuing]. Which was very bureaucratic in nature.
I mean, I say it was very bureaucratic. It is very difficult to get
it from the first one to the second one and the timing as we talked
about it earlier. My State did very, very well. I was in the State
Senate at the time that it was created in the middle 1980s, and it
immediately got the small businesses in my area into it. And some
of them eventually began to get into the swing and others never
could get anything out of it. And yet as you said before, it took a
long time to get from the first one to the second one.
Mr. OLVER. And a whole new application process, where you are
operating in a much more flexible way. It is interesting.
Dr. MAJUMDAR. We are starting that SBIR now, and as I said,
I had the same experience, and we are going to take the time gap
between Phase I and Phase II and make it zero, and thereby enable small businesses not to have this cash-flow problem.
Mr. OLVER. It was a horrible gap.
Mr. OLVER. Okay.
Mr. VISCLOSKY. The gentleman, would you yield? When you were
in theyou on the Finance Committee, right?
Mr. OLVER. Yes.
Mr. VISCLOSKY. That is why they all ended up in your district.
Mr. OLVER. No, actually, my district, in generalin Massachusetts my district was in the western part of the State, so we got
a few of them anyway.
Mr. FRELINGHUYSEN. We are going to send out an electric car
from Washington to Pittsfield. Anything else for the Good of the
Order? Gentlemen, thank you very much. We stand adjourned.
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WITNESSES
Page
Brinkman, W.F ........................................................................................................

Frantz, David ...........................................................................................................
Hoffman, Patricia ....................................................................................................
Huizenga, Dave ........................................................................................................
Kelly, Henry .............................................................................................................
Majumdar, Dr. Arun ................................................................................................
McConnell, Charles .................................................................................................
Podonsky, Glenn ......................................................................................................
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House Hearing, 112TH Congress - Energy and Water Development Appropriations For 2013

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House Hearing, 112TH Congress - Energy and Water Development Appropriations For 2013

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ENERGY AND WATER DEVELOPMENT

APPROPRIATIONS FOR 2013

PETER J. VISCLOSKY, Indiana

ROB BLAIR, JOSEPH LEVIN, ANGIE GIANCARLO,

Environmental Management, Legacy Management, FY

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Printed for the use of the Committee on Appropriations

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09:30 May 24, 2013

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PART 6ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 2013

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ENERGY AND WATER DEVELOPMENT

PETER J. VISCLOSKY, Indiana

ROB BLAIR, JOSEPH LEVIN, ANGIE GIANCARLO,

Environmental Management, Legacy Management, FY

Printed for the use of the Committee on Appropriations

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U.S. GOVERNMENT PRINTING OFFICE

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NORMAN D. DICKS, Washington

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ENERGY AND WATER DEVELOPMENT

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taking a review of the departments safety and security model. I

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