[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]
FUTUREGEN AND THE
DEPARTMENT OF ENERGY'S
ADVANCED COAL PROGRAMS
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON ENERGY AND
ENVIRONMENT
COMMITTEE ON SCIENCE AND TECHNOLOGY
HOUSE OF REPRESENTATIVES
ONE HUNDRED ELEVENTH CONGRESS
FIRST SESSION
__________
MARCH 11, 2009
__________
Serial No. 111-9
__________
Printed for the use of the Committee on Science and Technology
Available via the World Wide Web: http://www.science.house.gov
______
U.S. GOVERNMENT PRINTING OFFICE
47-719 WASHINGTON : 2009
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COMMITTEE ON SCIENCE AND TECHNOLOGY
HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas F. JAMES SENSENBRENNER JR.,
LYNN C. WOOLSEY, California Wisconsin
DAVID WU, Oregon LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington DANA ROHRABACHER, California
BRAD MILLER, North Carolina ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York BOB INGLIS, South Carolina
PARKER GRIFFITH, Alabama MICHAEL T. MCCAUL, Texas
STEVEN R. ROTHMAN, New Jersey MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah BRIAN P. BILBRAY, California
LINCOLN DAVIS, Tennessee ADRIAN SMITH, Nebraska
BEN CHANDLER, Kentucky PAUL C. BROUN, Georgia
RUSS CARNAHAN, Missouri PETE OLSON, Texas
BARON P. HILL, Indiana
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
VACANCY
------
Subcommittee on Energy and Environment
HON. BRIAN BAIRD, Washington, Chair
JERRY F. COSTELLO, Illinois BOB INGLIS, South Carolina
EDDIE BERNICE JOHNSON, Texas ROSCOE G. BARTLETT, Maryland
LYNN C. WOOLSEY, California VERNON J. EHLERS, Michigan
DANIEL LIPINSKI, Illinois JUDY BIGGERT, Illinois
GABRIELLE GIFFORDS, Arizona W. TODD AKIN, Missouri
DONNA F. EDWARDS, Maryland RANDY NEUGEBAUER, Texas
BEN R. LUJAN, New Mexico MARIO DIAZ-BALART, Florida
PAUL D. TONKO, New York
JIM MATHESON, Utah
LINCOLN DAVIS, Tennessee
BEN CHANDLER, Kentucky
BART GORDON, Tennessee RALPH M. HALL, Texas
JEAN FRUCI Democratic Staff Director
CHRIS KING Democratic Professional Staff Member
MICHELLE DALLAFIOR Democratic Professional Staff Member
SHIMERE WILLIAMS Democratic Professional Staff Member
ELAINE PAULIONIS PHELEN Democratic Professional Staff Member
ADAM ROSENBERG Democratic Professional Staff Member
ELIZABETH STACK Republican Professional Staff Member
TARA ROTHSCHILD Republican Professional Staff Member
STACEY STEEP Research Assistant
C O N T E N T S
March 11, 2009
Page
Witness List..................................................... 2
Hearing Charter.................................................. 3
Opening Statements
Statement by Representative Brian Baird, Chair, Subcommittee on
Energy and Environment, Committee on Science and Technology,
U.S. House of Representatives.................................. 8
Written Statement............................................ 9
Statement by Representative Bob Inglis, Ranking Minority Member,
Subcommittee on Energy and Environment, Committee on Science
and Technology, U.S. House of Representatives.................. 9
Written Statement............................................ 10
Statement by Representative Jerry F. Costello, Member,
Subcommittee on Energy and Environment, Committee on Science
and Technology, U.S. House of Representatives.................. 10
Written Statement............................................ 12
Witnesses:
Dr. Victor K. Der, Acting Assistant Secretary, Office of Fossil
Energy, U.S. Department of Energy
Oral Statement............................................... 13
Written Statement............................................ 14
Biography.................................................... 18
Mr. Mark Gaffigan, Director, Natural Resources and Environment
Team, U.S. Government Accountability Office
Oral Statement............................................... 19
Written Statement............................................ 20
Biography.................................................... 77
Dr. Robert J. Finley, Director, Energy and Earth Resources
Center, Illinois State Geological Survey
Oral Statement............................................... 77
Written Statement............................................ 79
Biography.................................................... 80
Mr. Larry S. Monroe, Senior Research Consultant; Manager,
Engineering Science and Technology, Southern Company
Oral Statement............................................... 80
Written Statement............................................ 82
Biography.................................................... 87
Ms. Sarah M. Forbes, Senior Associate, Climate and Energy
Program, World Resources Institute
Oral Statement............................................... 87
Written Statement............................................ 89
Discussion
Cost Escalations............................................... 93
Lessons From Small-scale Projects.............................. 95
Justifying Research Funds...................................... 95
International Cooperation...................................... 96
Project Scale.................................................. 97
Public Service Commission Challenges........................... 98
Promoting Sustainability....................................... 99
On the Affordability of Clean Coal............................. 100
Concerns and Skepticism About CCS.............................. 101
Original FutureGen Project Cancellations....................... 103
Infrastructure and Resource Demands............................ 104
Innovative Technologies........................................ 105
Project Siting................................................. 107
International Partnerships..................................... 108
The Viability of CCS as an Investment.......................... 110
Urgency and the CCS Timeframe.................................. 111
Global Participation........................................... 112
Investment Through 2025........................................ 113
Effects on the Consumer........................................ 114
Comparative Cost Benefit Analysis.............................. 115
Joining Entrepreneurs and Inventors............................ 116
Appendix 1: Answers to Post-Hearing Questions
Ms. Sarah M. Forbes, Senior Associate, Climate and Energy
Program, World Resources Institute............................. 122
Appendix 2: Additional Material for the Record
The Passing of FutureGen: How the World's Premier Clean Coal
Technology Project Came to be Abandoned by the Department of
Energy, Report by the Majority Staff of the Subcommittee on
Investigations and Oversight, Committee on Science and
Technology, March 10, 2009..................................... 126
FUTUREGEN AND THE DEPARTMENT OF ENERGY'S ADVANCED COAL PROGRAMS
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WEDNESDAY, MARCH 11, 2009
House of Representatives,
Subcommittee on Energy and Environment,
Committee on Science and Technology,
Washington, DC.
The Subcommittee met, pursuant to call, at 10:00 a.m., in
Room 2318 of the Rayburn House Office Building, Hon. Brian
Baird [Chair of the Subcommittee] presiding.
hearing charter
SUBCOMMITTEE ON ENERGY AND ENVIRONMENT
COMMITTEE ON SCIENCE AND TECHNOLOGY
U.S. HOUSE OF REPRESENTATIVES
FutureGen and the
Department of Energy's
Advanced Coal Programs
wednesday, march 11, 2009
10:00 a.m.-12:00 p.m.
2318 rayburn house office building
Purpose
On Wednesday, March 11th at 10:00 a.m. the House Committee on
Science and Technology, Subcommittee on Energy and Environment will
hold a hearing entitled ``FutureGen and the Department of Energy's
Advanced Coal Programs.'' The purpose of the hearing is to receive
testimony on near-term and long-term strategies to accelerate research,
development and demonstration of advanced technologies to help reduce
greenhouse gas emissions from new and existing coal-fired power plants.
The Subcommittee will hear testimony from five witnesses who will
speak about advanced coal technology projects ongoing in the United
States as well as new initiatives under consideration here and around
the globe. Witnesses will also address the technical challenges and
policy hurdles confronting the wide scale deployment of carbon capture
and storage systems.
Witnesses
1. Dr. Victor Der: Acting Assistant Secretary for the
Department of Energy's Office of Fossil Energy will discuss the
status and goals of the Department's advanced coal programs. He
also will describe the Department's plans for expenditure of
funds allocated under the American Recovery and Reinvestment
Act of 2009 and explain the Department's role to facilitate
international collaboration regarding CCS technologies.
2. Mr. Mark Gaffigan: Director, Natural Resources and
Environment Team at the U.S. Government Accountability Office
(GAO). Mr. Gaffigan will summarize the GAO's report on the
restructured FutureGen program and the conclusions to be drawn
for a path forward on CCS policy decisions.
3. Dr. Robert J. Finley: Director, Energy and Earth Resources
Center for Illinois State Geological Survey with specialization
in fossil energy resources. He is currently heading a regional
carbon sequestration partnership in the Illinois Basin aimed at
addressing concerns with geological carbon management. Dr.
Finley will provide an update on activities at the Midwest
Geological Sequestration Consortium and provide information
about the injection site selection process and strategies for
monitoring the site.
4. Mr. Larry Monroe: Senior Research Consultant at Southern
Company. Mr. Monroe will discuss carbon capture and storage
projects his company has underway and some of the technical
challenges and other barriers to the deployment of CCS systems
on a commercial scale.
5. Ms. Sarah Forbes: Senior Associate, Climate and Energy
Program at the World Resources Institute. Ms. Forbes will
discuss the World Resources Institute's ongoing activities to
establish guidelines and recommendations for the deployment of
carbon capture and storage technologies. She will describe
ongoing activities and new initiatives underway to facilitate
international collaboration on advanced coal technologies and
the benefits and challenges associated with widespread
demonstration and commercial application of CCS programs.
Background
The Department of Energy (DOE) manages a number of different
programs designed to research and develop technologies to meet the goal
of reducing greenhouse gas emissions from our nation's coal-fired power
plants and other industrial sources. The Department's programs include
the Clean Coal Power Initiative, FutureGen, Innovations for Existing
Plants Program, the Advanced Turbines Program, the Advanced Integrated
Gasification Combined Cycle Program, and the Carbon Sequestration
Regional Partnerships to name some of the specific programs that aim to
improve power plant efficiencies, advance the development of carbon
capture and storage technologies and reduce the costs of these
technologies. In addition, the Department leads U.S. Government
participation in the Carbon Sequestration Leadership Forum that was
established in 2003 and is comprised of twenty-one countries and the
European Commission. Its goal is to facilitate the development of cost-
effective technologies and strategies for CO2 separation,
capture and long-term storage and to make these tools broadly available
around the globe.
It is well known that approximately 50 percent of the electricity
generation in the United States comes from coal. On a global scale,
approximately 41 percent of the electricity production is from coal.\1\
It is also well understood that the burning of fossil fuels contributes
significantly to greenhouse gas emissions. The International Energy
Agency (IEA) 2008 report states, ``The CO2 concentration in
the atmosphere is 385 ppm, and is rising by about two ppm per year.''
\2\ The IEA further states that ``[S]tationary CO2 sources
associated with fossil-fuel energy use produce the bulk of the world's
CO2 emissions.'' Specifically, the IEA report finds that
electricity and heat production produced 9.6 Gt of CO2 in
2005 out of a total 26.3 Gt.\3\
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\1\ International Energy Agency, World Energy Outlook 2007: China
and India Insights, p. 593.
\2\ International Energy Agency, Energy Technology Perspectives
2008: Scenarios & Strategies to 2050, p. 52.
\3\ OECD/IEA, CO2 Capture and Storage: A Key Carbon
Abatement Option, 2008, p. 46.
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As we move to adopt policies to reduce greenhouse gas emissions in
the United States, the electricity generating sector of our economy
certainly will be one target to achieve those emissions reductions.
While the details of a national climate change program are unknown at
this time, there is much discussion about the suite of practices we
must adopt and the portfolio of technologies we must deploy to meet the
daunting challenge of climate change. As part of that discussion there
is growing interest in determining how significant a role carbon
capture and storage systems can play in managing greenhouse gas
emissions from coal-fired power plants.
Carbon Capture
There are three main technology options for capturing CO2
from power plants or other industrial facilities: 1) post-combustion
capture, 2) pre-combustion capture, and 3) oxy-fuel combustion capture.
Post-combustion processes captures the CO2 from the
exhaust gas through the use of distillation, membranes, or absorption,
which can be physical or chemical. These technologies may be used to
retrofit existing plants or incorporated into the design of new
industrial facilities and electricity generating plants. There are some
outstanding issues with these technologies that need to be addressed.
One issue is the loss of efficiency. Energy is required to operate
these technologies, thus lowering the overall power plant efficiency
and increasing power generation costs. A second issue is the energy
loss associated with the compression of the CO2 after it is
captured and prepared for pipeline transport. There are commercially
available technologies that perform post-combustion capture, but
generally, they have not been applied to large volumes of flue-gas
streams such as those created by coal-fired power plants.
Pre-combustion capture first reacts the fuel with oxygen in a
gasifier to create a syngas consisting of carbon monoxide and
hydrogen--an Integrated Gasification Combined Cycle (IGCC) plant is
currently a requirement for the pre-combustion capture of CO2
for electricity generation. The syngas is cleaned of conventional
pollutants (SO2, particulates) and sent to a shift reactor
which uses steam and a catalyst to produce CO2 and hydrogen.
Then, a physical solvent can be used to separate out the
CO2. After the capture process, the CO2 can be
compressed for transportation and long-term storage in geologic
formations. The hydrogen is directed through gas and steam cycles to
produce electricity. While construction costs for an IGCC plant are
higher than those for a pulverized coal plant, IGCC's operate at a
higher efficiency and the penalty for the carbon capture technology is
considered to be less. There are currently two commercial IGCC plants
operating in the United States, and despite the potential for improved
environmental performance and greater fuel efficiency of IGCC, higher
costs have held back a major breakthrough in the U.S. market.
The oxy-fuel process feeds pure oxygen into the combustion process
of the conventional air-fired power plant. This type of technology aims
to address CO2 during the combustion stage by increasing the
CO2 concentration of the flue gas exiting the boiler so that
less energy is required to prepare the gas for storage. A main
advantage is that the lower the energy penalty, the lower the cost.
However, the pure oxygen generally would be provided by an air-
separation unit which is energy intensive to operate and a primary
source of reduced efficiency. There is ongoing work targeted at
improving the efficiency of this air-separation process. There are
initiatives in the United States to demonstrate this type of
technology, but it has not yet been tested in a large-scale
facility.\4\
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\4\ Department of Energy, Strategies for the Commercialization and
Deployment of Greenhouse Gas Intensity-Reducing Technologies and
Practices, January 2009.
Carbon Storage
Following the compression and transportation (if needed) of the
captured CO2, it would be injected into suitable geological
formations for long-term storage. Currently, the most promising
reservoirs for storing CO2 are oil and gas fields, deep
saline reservoirs and unmineable coal seams. The geologic formations
best suited to trap large volumes of CO2 and do so without
leakage would have characteristics that include open spaces or
porosity, sufficient interconnectivity between the open spaces so that
CO2 can flow laterally or migrate within the formations
(known as permeability) and a layer of cap rock that is impermeable to
prevent the upward flow of CO2 keeping it underground.
The Department of Energy has made an assessment of the potential
sequestration capacity across the United States and parts of Canada and
determined there exists sufficient volume to store approximately 600
years of CO2 produced from total U.S. fossil fuel emissions
at current rates. The accuracy of this CO2 storage capacity
estimate will be tested and updated as the Department's seven regional
sequestration partnerships continue to conduct injection tests and
carry out large-scale injection experiments. For example, the tests
conducted by the partnerships will help to confirm the efficiency of
the available pore space and evaluate their assumptions about the
properties of the geologic formations.
Characterizing geologic reservoirs for the purposes of CO2
sequestration is an ongoing research effort including the work done by
the Department's sequestration partnerships. Information derived from
ongoing research and demonstration efforts will provide information
that would be used to guide site selection for full-scale CCS
operations in the future. This is particularly important for non-oil
and gas sites, such as deep saline reservoirs, which do not have the
same level of engineering experience.
It is expected that the reservoir characterization process will
rule out geologic formations that are risky because they are too
shallow, inadequate caprock exists, or they are intersected by
permeable faults and fractures and therefore provide pathways for
CO2 to escape. There are also concerns about the potential
impacts of injected CO2 on aquifers used for drinking water
or as supplies for agriculture.
There are no federal regulations governing the injection and
storage of CO2 for the purposes of carbon sequestration.
However, in July 2008, the U.S. Environmental Protection Agency
released a draft rule that would regulate CO2 injection for
sequestration purposes under the authority of the Safe Drinking Water
Act, Underground Injection Control (UIC) program. Final regulations are
anticipated in the 2010/2011 timeframe.
The terms measurement, monitoring and verification (MMV) are
frequently used to describe the plan and tools for characterizing the
subsurface reservoir and for detecting changes throughout the
injection, closure, and long-term oversight of a geologic storage
project. Because the geology varies from site to site, there is no
universal agreement on the specific elements that should be included in
MMV for all large-scale geologic sequestration projects.
FutureGen:
In 2003, President Bush and the Department of Energy announced
their FutureGen initiative. FutureGen was described as the first zero-
emission, coal-fired electricity-generating plant that would also
produce hydrogen. FutureGen was a major technology initiative to
address climate change and to support the Administration's hydrogen
fuel initiative.
Under the FutureGen program, DOE would oversee a consortium of
industrial interests (the FutureGen Alliance) and international
partners that would manage the construction of a $1 billion next-
generation integrated gasification combined cycle (IGCC) power plant to
produce electricity and hydrogen. There were three main components to
the original FutureGen program. It would be a state-of-the-art
demonstration of a 275 megawatt IGCC power plant designed to capture,
compress and store carbon dioxide, emit virtually no conventional air
pollutants, and produce hydrogen fuel. FutureGen was also intended as
the United State's major collaborative effort with international
partners (India, Korea, etc.) to demonstrate an integrated CCS system
using advanced gasification technology. Finally, FutureGen was to serve
as a living laboratory to test advanced coal technologies in order to
achieve operational efficiencies and speed deployment of CCS
technologies. Between FY 2003 and FY 2008, Congress appropriated
approximately $174 million for the FutureGen Initiative.
On January 30, 2008, the Department of Energy announced a major
restructuring of the FutureGen program. Rather than build a 275-
megawatt IGCC power plant to test CCS technologies and provide for the
demonstration of an integrated carbon capture and sequestration system,
the Department would support the private sector's investment in IGCC
power plants by providing the additional funding needed to add CCS
technologies to the construction of multiple commercial power plants
being pursued by industry. Although, initially the restructured
FutureGen focused on IGCC facilities, the final Funding Opportunity
Announcement included other advanced coal power plants. It is important
to note, that the restructured program eliminates the hydrogen
production and the living laboratory components of the original
program.
Since the announcement to restructure FutureGen, DOE issued a
Funding Opportunity Announcement for the restructured program in June
2008. The Department has received a handful of proposals and those
proposals are under review. In addition, the American Recovery and
Reinvestment Act (ARRA) of 2009 includes $3.4 billion for fossil energy
research and development and some of these funds could be used for
FutureGen. Recently, Secretary Chu testified in the Senate Energy and
Natural Resources Committee that he would support the plant with ``some
modifications.'' \5\ In response to the ARRA, DOE is planning to issue
four Funding Opportunity Announcements for improving techniques to
clean or capture and store the emissions from coal-fired electric
generating plants and other industrial sources. It is still unclear if
those funds will be used for FutureGen and what, if any, modifications
will be made to the FutureGen program going forward.
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\5\ Kindy, Kimberly, ``New Life for `Clean Coal' Project: Illinois
Plant was Abandoned by Bush, Now Its Backers are in Power,'' Washington
Post, Friday, March 6, 2009.
International Activities:
China is the world's largest coal user, accounting for 63 percent
of the country's total primary energy supply.\6\ India is the world's
third-largest coal user accounting for 62 percent of the country's
energy supply and its use is expected to grow rapidly.\7\ As stated
above, the United States relies on coal for approximately 50 percent of
its electricity production. Climate change is a global problem and
major world economies see a growing need to work collaboratively to
develop and deploy advanced coal technologies.
---------------------------------------------------------------------------
\6\ OECD/International Energy Agency, CO2 Capture and
Storage: A Key Carbon Abatement Option,'' 2008, p. 154.
\7\ OECD/International Energy Agency, CO2 Capture and
Storage: A Key Carbon Abatement Option,'' 2008, p. 162.
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This past summer at the G-8 Summit in Japan, the G-8 leaders asked
the International Energy Agency (IEA) to develop an energy roadmap for
CCS technologies. The IEA intends to build the roadmap based on
workshops convened in 2006-2007 by the IEA and the Carbon Sequestration
Leadership Forum (CSLF). The roadmap will make recommendations for the
G-8 in policy areas including financial, legal and international
cooperation endeavors to help expand the deployment of CCS strategies.
The G-8 Ministers also issued a joint-statement supporting the IEA and
CSLF's recommendation to launch 20 large-scale CCS projects globally.
Australia has taken steps to create a Global Carbon Capture and Storage
Institute to assess CCS and facilitate international research
collaboration covering a range of technologies and geologies. The
European Technology Platform for Zero Emission Fossil Fuel Power Plants
(ZEP) was founded in 2005 to ensure CCS is commercialized by 2020. In
2004, the China Huaneng Group led the development of the GreenGen
project to build an IGCC plant with CCS. While pieces of an integrated
CCS system are being demonstrated at various scales throughout the
world, no large-scale integrated CCS project has been conducted on a
coal-fired power plant to date. Knowledge transfer of these
technologies and investment cooperation may be critical if
international goals for greenhouse gas emissions reductions are to be
achieved.
Chair Baird. Good morning, everyone and thank you for being
here. Our hearing will now come to order. I want to welcome
everybody to the Energy and Environment Subcommittee's hearing
on ``FutureGen and the Department of Energy's Advanced Coal
Programs.'' I would like to thank our expert panel of witnesses
for being here today, and I look forward to your testimony
about the potential role advanced coal technologies, including
carbon capture and storage, may play in helping to solve the
daunting challenge of climate change and ocean acidification.
We burn a lot of coal in this country and around the world.
The United States is one of the largest consumers of coal, and
this is one of the major reasons we are one of the largest
emitters of ocean acidification and overheated gases. But we
are not the only country with strong dependence on coal. China
and India have both expanded their coal use. I was in China
just a couple of years ago and was told they are putting on
coal-powered plants every couple of weeks, gradually comes on
line. It is astonishing, really. In 2007 China surpassed us to
become the largest contributor to global CO2
emissions. I do not say this to point fingers, but to point out
that overheating and ocean acidification truly are a global
problem, and we must work with other developed nations and
developing economies to find solutions to those staggering
challenges.
I think the United States should take the lead in reducing
energy consumption and particularly consumption of fossil
fuels. We have a variety of tools at our disposal to accomplish
that goal. We can develop and deploy advanced, green
technologies, adopt better conservation practices and energy
efficiency policies, and as individuals, we can behave more
responsibly. Without bold policies and public and personal
commitment, we run the risk of serious damage to our
environment and our society. That outcome is simply
unacceptable.
If 41 percent of our global electricity supply comes from
burning coal, then it is imperative that we curtail the gas
emissions from this major source. We must act now to do so. I
recognize that approximately 50 percent of the power supply in
the United States comes from coal-fired plants, so we can't
expect to tackle this challenge overnight. But it is my sincere
hope and expectation that we can devise a strategy forward that
achieves the remarkable reduction in greenhouse gaseous
emissions in a safe, responsible and sustainable manner.
Today's hearing provides us with an excellent opportunity
to discuss our overall strategy to reduce emissions from large
stationary sources, such as electric generation plants. I think
there are some lessons we can learn from the decisions about
the FutureGen program, and I am hopeful that we can have a very
honest conversation today about the near-term and long-term
objectives and challenges for the Department of Energy's
advanced coal programs.
Finally, I am pleased that this hearing will include an
important dialogue about international collaboration on
strategies for implementing carbon capture and sequestration.
As I said, global overheating and ocean acidification is a
global problem and it requires a global solution.
Again, I thank the panel for being here this morning and I
look forward to your testimony and an interesting discussion.
With that, I recognize Mr. Inglis for an opening statement.
[The prepared statement of Chair Baird follows:]
Prepared Statement of Chair Brian Baird
Good morning. I would like to welcome everybody to the Energy and
Environment Subcommittee's hearing on ``FutureGen and the Department of
Energy's Advanced Coal Programs.'' I would like to thank our expert
panel of witnesses for being here today and I look forward to your
testimony about the potential role advanced coal technologies,
including carbon capture and storage, may play in helping to solve the
daunting challenge of climate change and ocean acidification.
We burn a lot of coal in this country and around the world. The
United States is one of the largest consumers of coal and this is one
of the major reasons we are one of the largest emitters of greenhouse
gases. But we are not the only country with strong dependence on coal.
China and India have both expanded their coal use, and in 2007 China
surpassed us to become the largest contributor to global CO2
emissions. I do not say this to point fingers, but to point out that
climate change truly is a global problem, and we must work with other
developed nations and developing economies to find solutions to this
staggering problem.
I think the United States should take the lead in reducing energy
consumption and particularly consumption of fossil fuels. We have a
variety of tools at our disposal to accomplish that goal. We can
develop and deploy advanced, green technologies, adopt better
conservation practices and energy efficiency policies, and as
individuals, behave more responsibly. Without bold policies and public
and personal commitment, we run the risk of serious damage to our
environment and our society. That outcome is simply unacceptable.
If 41 percent of our global electricity supply comes from burning
coal, then it is imperative that we curtail the greenhouse gas
emissions from this major source. And we must act now to do so. I
recognize that approximately 50 percent of the power supply in the
United States comes from coal-fired power plants, so we can't expect to
tackle this challenge overnight. But, it is my sincere hope and
expectation that we can devise a strategy forward that achieves
remarkable reductions in greenhouse gas emissions in a safe,
responsible and sustainable manner.
Today's hearing provides us with an excellent opportunity to
discuss our overall strategy to reduce emissions from large stationary
sources, such as our electric generation plants. I think there are some
lessons we can learn from the decisions made about the FutureGen
program and I am hopeful that we can have a very honest conversation
today about the near-term and long-term objectives for the Department
of Energy's advanced coal programs.
Finally, I am pleased that this hearing will include an important
dialogue about international collaboration on strategies for
implementing carbon capture and sequestration systems. As I said,
climate change is a global problem and it requires a global solution.
Again, I thank the panel for being here this morning and I look
forward to your testimony and an interesting discussion.
Mr. Inglis. Thank you, Mr. Chairman. Thank you for holding
this hearing. You know, in South Carolina we have a case study
of one of the cases with respect to coal, and that is that Duke
Energy would like to build a nuclear power plant or two but the
question is whether you can do that effectively or whether it
is really just easier and cheaper to build coal plants. We are
not so dependent on the jobs associated with coal. There are
some parts of our country that are, but we are the users, we
are the people that burn coal because it is a pretty cheap way
to make electricity, especially if you have no accountability
for what is coming out of the smokestack. And so the question,
then, is whether something can be done to clean up that coal
to--we have had a number of hearings in this committee about
sequestration, that sort of thing, because we know we can burn
it cleanly, and General Electric has a number of proven models
that show that you can basically separate out the hydrogen and
burn that, and that is pretty exciting. Still, you have still
got the CO2 issue.
So the question is whether we can figure out a way to
really improve that process or have some sort of breakthrough
that would make it possible to continue that employment in some
places in the country that are dependent on coal and somehow
control the CO2 problem.
That is certainly our hope in this FutureGen program, and
so we look forward to hearing from the witnesses about what the
future may be. And it is interesting to note that folks like
Duke Engineering are not alone. We use lots of coal, and
figuring out ways to make it cleaner and to collect up the
CO2 would be an incredible breakthrough.
So we look forward to hearing from the witnesses, Mr.
Chairman, and hope that there is some way to break through to
truly clean coal. Thank you, Mr. Chairman.
[The prepared statement of Mr. Inglis follows:]
Prepared Statement of Representative Bob Inglis
Thank you for holding this hearing, Mr. Chairman.
Duke Energy faces a dilemma in South Carolina. They would like to
produce energy free of CO2 emissions and help bring the
energy solutions of tomorrow to their customers today. The licensing
and cost hurdles of nuclear, wind, and solar power have forced Duke
instead to meet increased energy demand by building coal-powered
plants.
Duke Energy is not alone. We're using lots of coal. We need to
focus on ways to make that consumption cleaner and more efficient.
Perhaps if we had clean coal and carbon capture technologies readily
available and affordable, companies like Duke would be able to meet
growing energy demand with coal and without emissions.
We need these technologies to be affordable and attractive to U.S.
and global industry alike. America can lead the way with technological
innovation that can be easily integrated into existing coal plants
worldwide.
The Department of Energy's decision to restructure the FutureGen
program in 2008 compromised some important components of clean coal
research. We had hoped for the production and capture of hydrogen fuel.
We had hoped for a laboratory to test new technologies. I'm interested
in hearing how DOE plans to reevaluate the role of the FutureGen
program in meeting our clean coal and carbon capture and sequestration
objectives.
But with or without FutureGen, Congress is aggressively seeking an
answer to our carbon emissions problem. I believe the best way to do
this is to attach a straightforward price to carbon emissions and
reduce payroll taxes in an equal and offsetting amount. By forcing the
market to internalize the externals associated with burning fossil
fuels, we can encourage cutting edge innovation in energy technologies
and help America be a leader in finding the energy solutions of
tomorrow.
Thank you again for holding this hearing, Mr. Chairman, and I look
forward to hearing from our witnesses.
Chair Baird. I would like to at this point recognize the
gentleman, Mr. Costello, who has been a very, very influential
and interested party on this issue, and Mr. Costello, we
welcome your remarks.
Mr. Costello. Mr. Chairman, thank you. And I have a
statement that I will enter into the record and make some brief
comments concerning the GAO report and the purpose of this
hearing. But first, let me not only thank you for recognizing
me but also for calling this hearing today, and thank you as
well for joining Chairman Gordon and Mr. Lipinski and I in
requesting this GAO report.
As you noted, I guess it has been over five years now that
I have been involved with this project, and in fact as I think
everyone knows that over one half of our electricity is
generated from coal. Coal is the cheapest form of electricity
generation, and we have coal reserves just in my home State of
Illinois alone that contains more BTU's than oil reserves in
Saudi Arabia and Kuwait.
Like everyone, I want our nation's energy policy to help
reduce carbon emissions and to address the climate change issue
that we are all facing, but in order to meet these goals, our
dependence on coal requires significant investment in clean
technologies to burn coal as efficiently and as cleanly as
possible. The reality is that our dependence on coal as an
energy source is not going away any time soon, and as you noted
in your opening statement, we are not the only nation that is
reliant on coal as an energy source. China, as you said, they
are actually constructing one coal-fired plant every week now
in China. When we develop clean-coal technology here in this
country, countries like China, India and other countries will
in fact hopefully use that technology to achieve our goal.
I want to say that when the President announced in the
State of the Union Address in 2003, President Bush, this was
his initiative, the FutureGen project. I was excited about it
to the extent that after listening to the State of the Union
Address, the next morning I picked up the telephone and called
the Secretary of Energy and said I am a supporter of this
project. I want to move forward. We want to do everything we
can to help move the project forward. So you can imagine how
disappointed I was, not only disappointed but outraged, after
five and a half years of research and spending literally tens
of millions of dollars on this project, that the Department of
Energy and the Administration decided to pull the plug on the
project.
We in this subcommittee heard testimony from the
representatives from the Department of Energy as to why the
decision was made. They said basically that the reason that the
project was going to be pulled and reassessed and realigned was
because of cost, the escalating cost. We questioned that at the
time and, you know, obviously today, with the GAO findings and
we will get into that and there are some quotes that I will put
into the record very shortly, it was not cost. I said here
sitting in this subcommittee room that I believed at the time
that it was based on politics, that we had four sites that were
the finalists, two in Texas and two in the State of Illinois,
and when the alliance, the independent alliance that was
appointed not only for their expertise on this issue but also
to remove politics and to have independence from a political
decision but to base decisions on the science and what was best
for the country, they examined all four sites and came up with
the site in Mattoon, Illinois, and said that the Mattoon site
was the best site, and it was then that the Administration
decided, well, we are going to pull back on the project and
pull the plug. So we know today that the GAO report says that
it was not based upon costs, and of course, they don't go into
what the decision was based on, but I think that through the
process of elimination, we know what it was based on.
My goal is to get the project back on track. My goal is to
not only move FutureGen and sequestration forward but also to
look at other clean-coal technologies so that we in fact can
begin to burn coal as cleanly and efficiently as possible.
So Mr. Chairman, again, I thank you for calling the hearing
today. I look forward to hearing the testimony of our witnesses
and look forward to moving this project forward.
[The prepared statement of Mr. Costello follows:]
Prepared Statement of Representative Jerry F. Costello
Thank you, Mr. Chairman, for calling today's hearing on the
FutureGen project. The FutureGen project has been one that I have
worked on very closely over the past five and a half years and I am
interested in hearing from GAO and our other witnesses on this issue.
Mr. Chairman, we generate over one-half of our electricity from
coal and the coal reserves in my home State of Illinois contain more
Btu's than the oil reserves of Saudi Arabia and Kuwait. Like many, I
want our nation's energy policy to help reduce carbon emissions and
adequately address the real concerns of climate change. In order to
meet these goals, our dependence on coal requires a significant
investment in clean technologies to reliably burn coal as efficiently
and as cleanly as possible. The reality is that our dependence on coal
as an energy source is not going away. We are not alone in our reliance
on this energy source; to satisfy its rapidly growing population and
economy, China is adding one new coal-fired plant to its power grid
each week.
For these reasons, the day after the President announced the
FutureGen Clean Coal Initiative in his 2003 State of the Union address,
I was on the phone with the Department of Energy (DOE), working to get
the project off the ground. After five years of work with DOE, with the
FutureGen Alliance, the State of Illinois and others, I was extremely
disappointed that DOE decided to scrap the project in favor of a ``re-
scoped'' plan. I was pleased to join Chairman Gordon, Chairman Baird,
and Mr. Lipinski in requesting GAO to further examine the reasoning
behind the decision to abandon the original project.
I have stated previously during Science Committee hearings that I
did not find DOE's justifications for canceling FutureGen to be based
on accurate information or factual analysis. GAO's final report affirms
what we thought from the beginning: to quote directly from the report,
``DOE did not base its decision to restructure FutureGen on a
comprehensive analysis of factors, such as the associated costs,
benefits and risks . . . [consequently] DOE has no assurance that the
restructured FutureGen is the best option to advance CCS.''
As a supporter of clean coal technology, I am focused on getting
this project back on track. DOE's decision has already meant wasted
time, and has delayed the project for over a year at a time when the
need for public investment in clean, efficient energy technologies
could not be more evident. Despite DOE's decision to back away from its
agreement with the FutureGen Alliance, an international non-profit
consortium of some of the largest coal producers and users in the
world, the group did not dissolve, but in fact continued its commitment
to the project by purchasing the land for the plant in Mattoon,
Illinois. With the legal and environmental issues surrounding this
project already resolved and its investors still committed, FutureGen
is as shovel-ready as any other clean coal project in the country. It
is my hope that with new leadership and new analysis, the FutureGen
project can realize its full potential to become world's first coal-
fueled, near-zero emissions power plant.
Thank you, Mr. Chairman, and I look forward to hearing from our
distinguished panel of witnesses.
Chair Baird. I thank you, Mr. Costello, and thanks for your
leadership on this very issue for so many years now.
If there are other Members who wish to submit opening
statements, your statement will be added to the record at this
point.
And now I would like to introduce our witnesses. Our first
witness is Dr. Victor Der. Dr. Der is the Acting Assistant
Secretary for the Department of Energy's Office of Fossil
Energy. I want to briefly note, Dr. Der, I appreciate very much
your work with a company in Washington State that has developed
leading-edge technology on compression of gases which will be
absolutely essential to success at some point if we move
forward with this, and it is always nice when you hear from
local constituents who say they have worked well with a
government entity that has been very, very helpful, and thank
you for your work on that.
Mr. Mark Gaffigan is the Director of the Natural Resources
and Environment Team at the U.S. Government Accountability
Office involved in preparing some of the reports that Mr.
Costello alluded to. Dr. Robert Finley is the Director of the
Energy and Earth Resources Center at the Illinois State
Geological Survey. Dr. Finley, thank you for being here. Mr.
Larry Monroe is the Senior Research Consultant at Southern
Company, and Ms. Sarah Forbes is the Senior Associate of the
Climate and Energy Program at the World Resource Institute.
As our witnesses all know, you will have five minutes for
your spoken testimony, then written testimony will be included
in the record for the hearing. When each of you has concluded
your combined testimony, we will have testimony from the panel.
This is a bipartisan, friendly committee that asks tough
questions, but in the way of trying to understand difficult and
challenging issues. And with that, let us start with Dr. Der.
STATEMENT OF DR. VICTOR K. DER, ACTING ASSISTANT SECRETARY,
OFFICE OF FOSSIL ENERGY, U.S. DEPARTMENT OF ENERGY
Dr. Der. Thank you, Mr. Chairman. I appreciate this
opportunity to discuss the Department of Energy's advanced coal
program with the keen focus on safe, effective and affordable
carbon capture and storage.
Coal represents a tremendous and strategic national asset
with enough supply to take us well into the next century based
on the current rates of consumption, and as we explore energy
alternatives, coal used in environmentally sustainable and
responsible ways will continue to play a critical role in the
Nation's energy strategy. Our focus must be, therefore, to
develop deployable advanced technologies necessary to achieve
near-zero emissions from coal use, including carbon capture and
storage, or CCS, not just in the United States, but in
developing economies such as China and India which will
continue to rely on coal. Thus, CCS is an essential component
of the global greenhouse gas mitigation strategy.
DOE remains a leader in the development of advanced
technologies that have helped reduce pollutant emissions and
have increased power plan efficiency. These technological
successes form a solid foundation upon which to build advances
and innovations needed to meet the challenges of CO2
reductions.
The advanced coal program is geared toward developing a
portfolio of revolutionary technologies for CCS. To that end,
and in partnership with the private sector, the program is
focused on three important areas: technologies for affordable
CO2 capture, especially back-end stack capture;
establishing the scientific and technical basis for safe and
effective storage of CO2; and substantially
improving the efficiency and reliability of fossil energy
systems. All three of these areas are important as we work to
make CCS technologies deployable and cost effective.
We have a good start in this direction based on years of
research and demonstration experience that have resulted in new
concepts, including the conversion of coal into cleaner,
versatile gases that can be used to generate power or produce
fuels. Additionally, our research continues to explore emerging
approaches to clean power generation that hold great promise
for integration with coal-based or combined coal and biomass
energy plants with CCS. To this end, we are working on CCS
enabling and transformational technologies, including advanced
integrated gasification combined cycle, advanced hydrogen
turbines, advanced materials for ultra high-efficiency plants,
supersonic compression, and revolutionary concepts for CO2
capture.
The success of our programs will ultimately be judged by
the extent to which emerging and cost-effective technologies
are deployed domestically and internationally. That is why DOE
is implementing large large-scale CCS demonstration efforts
under the sequestration partnerships and the clean coal power
initiative programs. And that is why we have taken a lead role
in global partnerships like the Carbon Sequestration Leadership
Forum, the Asia Pacific Economic Cooperation, the International
Energy Agency, and bilateral collaboration with countries such
as Canada, India, and China and other international
initiatives.
Mr. Chairman, today nearly 75 percent of the coal power
plants in the United States employ technologies with roots in
DOE's program for advanced coal. With continued leadership and
support from the Administration and Congress, we can accelerate
the development of new technologies to meet the requirements of
a safe and secure energy future while reducing our carbon
footprint.
Again, Mr. Chairman, thank you for the opportunity to
testify here today, and with that, I will welcome any questions
that the Committee may have.
[The prepared statement of Dr. Der follows:]
Prepared Statement of Victor K. Der
Thank you, Mr. Chairman and Members of the Committee. I appreciate
this opportunity to provide testimony on the U.S. Department of
Energy's (DOE's) advanced coal research, development, and demonstration
program to develop low-carbon emission coal technologies.
INTRODUCTION
Fossil fuel resources represent a tremendous national asset. An
abundance of fossil fuels in North America has contributed to our
nation's economic prosperity. Based upon current rates of consumption,
the United States probably has sufficient coal to meet its need for the
next century. Making use of this domestic asset in a responsible manner
will help the United States to meet its energy requirements, minimize
detrimental environmental impacts, positively contribute to national
security, and compete in the global marketplace.
Fossil fuels will play a critical role in our nation's future
energy strategy. By developing technologies to mitigate the release of
carbon dioxide (CO2) into the atmosphere, we can continue to
use our extensive domestic coal resource while reducing the impacts on
climate viable energy source for our nation. CCS is the primary pathway
DOE is pursuing to allow continued use of fossil fuels in a carbon-
constrained future.
Through fossil energy provisions in the American Recovery and
Reinvestment Act and annual appropriations, DOE's advanced coal program
is working to accelerate the development of CCS to meet future energy
needs.
The remainder of my testimony will highlight CCS activities that
are underway in the advanced coal program.
NEAR-ZERO EMISSIONS PROGRAM
DOE provides a national leadership role in the development of
advanced coal technologies. DOE's advanced coal program has returned
substantial benefits to consumers and taxpayers across a broad range of
innovative technologies that are now in use throughout the world. For
example, DOE and the private sector responded to the challenge of
dramatically reducing the emissions of particulate, sulfur, nitrogen
oxide, and mercury from coal-based energy systems with the development
of technologies that enable coal-based power plants to meet
environmental controls and limits placed on these pollutants. These
technological innovations have resulted in significant environmental
benefits: reducing pollutant emissions, reducing water use, minimizing
wastewater discharge, and reducing solid wastes. DOE research and
demonstration capabilities are well suited to address new challenges
associated with the reduction of greenhouse gas emissions as a climate
change mitigation strategy.
The advanced coal program--administered by DOE's Office of Fossil
Energy and implemented by the National Energy Technology Laboratory--is
designed to address climate concerns of coal usage by developing a
portfolio of revolutionary advanced carbon capture and efficiency and
performance, while minimizing the costs of these new technologies. In
recent years, the Program has been restructured to focus on CCS. The
Program pursues the following two major strategies:
1) capturing carbon dioxide; and
2) storing it in geologic formations.
Capturing and storing carbon dioxide and improving the fuel-to-
energy efficiency of CCS will help address pollutant emissions
reduction, water usage, and carbon emissions on a per unit of
electricity basis. These plans strive to achieve dramatic reductions in
emissions and ensure that current and future fossil energy plants will
meet all emerging requirements for a safe and secure energy future.
Coal research has resulted in important insights regarding future
innovations. New engineering concepts have been developed to convert
coal into gases that can be cleaned and then used to generate power or
produce fuels. New approaches to clean power generation are emerging
that hold promise for integration with coal-based or combined coal and
biomass energy plants. Technologies for achieving CCS are stretching
beyond basic research, defining pathways in which greenhouse gas
emissions can be permanently diverted from the atmosphere. With these
building blocks, a new breed of coal plant can be created--one that
generates power and produces high-value energy with much less
environmental impact. DOE's work includes a focus on high priority CCS
enabling technologies, such as advanced integrated gasification
combined cycle, advanced hydrogen turbines, carbon capture, and fuel
cells. These research areas provide the supporting technology base for
all CCS development.
As part of our advanced coal program, we are addressing the key
technology challenges that confront the wide-scale deployment of CCS
through research on cost-effective capture technologies; monitoring,
verification, and accounting technologies to ensure permanent storage;
permitting issues; liability issues; public outreach; and
infrastructure needs. As an example, today's commercially available CCS
technologies will add around 80 percent to the cost of electricity for
a new pulverized coal plant, and around 35 percent to the cost of
electricity for a new advanced gasification-based plant.\1\ The program
is aggressively pursuing developments to reduce these costs to less
than a 10 percent increase in the cost of electricity for new
gasification-based energy plants, and less than a 30 percent increase
in the cost of electricity for pulverized coal energy plants.\2\
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\1\ Cost and Performance Baseline for Fossil Energy Plants, Volume
1: Bituminous Coal and Natural Gas to Electricity, U.S. Department of
Energy/National Energy Technology Laboratory, DOE/NETL-2007/1281, Final
Report, May 2007.
\2\ The goal for pulverized coal is under development.
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The existing research program has been performing CCS field tests
for many years, where the Regional Carbon Sequestration Partnerships
are drilling wells in potential storage locations and injecting small
quantities of CO2 to validate the potential of key storage
locations throughout the country. Substantial progress has occurred in
the area of monitoring, verification, and accounting of CO2
storage with the development and refinement of technologies to better
understand storage stability, permanence, and the characteristics of
CO2 migration.
Research is also focused on developing technology options that
dramatically lower the cost of capturing CO2 from fossil
fuel energy plants. This research can be categorized into three
pathways: post-combustion, pre-combustion, and oxy-combustion. Post-
combustion refers to capturing CO2 from the stack gas after
a fuel has been combusted in air. Pre-combustion refers to a process
where a hydrocarbon fuel is gasified to form a synthetic mixture of
hydrogen and carbon dioxide, and CO2 is captured from the
synthesis gas before it is combusted. Oxy-combustion is an approach
where a hydrocarbon fuel is combusted in pure or nearly pure oxygen
rather than air, which produces a mixture of CO2 and water
that can easily be separated to produce pure CO2. This
research is exploring a wide range of approaches: membranes; oxy-
combustion concepts; solid sorbents; CO2 hydrates; and
advanced gas/liquid scrubbing technologies. These efforts cover not
only improvements to state-of-the-art technologies but also development
of several revolutionary concepts, such as metal organic frameworks,
ionic liquids, and enzyme-based systems, in conjunction with basic
research in these areas now being conducted by the DOE's Office of
Science.
A central piece of our CCS research is DOE's field test program,
which is being implemented through the Regional Carbon Sequestration
Partnerships. DOE's field test program reflects the geographic
differences in fossil fuel use and potential storage sites across the
United States and targets the use of regional approaches in addressing
CCS. It encompasses approximately 97 percent of coal-fired and
industrial CO2 emissions, about 96 percent of the total land
mass, and essentially all the geologic storage sites in the country
that can potentially be available for carbon sequestration. The field
tests are conducted through partnerships comprised of State agencies,
universities, and private companies, with the goal of developing the
knowledge base and infrastructure for the wide-scale deployment of CCS
technologies. The seven Regional Partnerships represent more than 350
unique organizations in forty-two States, three Indian Nations, and
four Canadian Provinces. It is important to note that the non-federal
cost share for the field test program is greater than 35 percent, which
is a key indicator of industry and other partner interest the country
with similar characteristics relating to CCS opportunities.
DOE is addressing key infrastructure issues related to permitting,
pore space ownership, site access, liability, public outreach, and
education. DOE works closely with the Environmental Protection Agency
(EPA) and others in developing CCS regulation strategies, which will
provide additional certainty for future CCS deployments.
Over the course of these research initiatives, DOE will jointly
develop Best Practice Manuals on topics such as site characterization,
site construction, operations, monitoring, mitigation, closure, and
long-term stewardship. These Manuals, which will be developed in
conjunction with DOE's Office of Science and the U.S. Geological
Survey, will serve as guidelines for a future geologic sequestration
industry in their regions, and help transfer the lessons to all
regional stakeholders.
LARGE-SCALE DEMONSTRATION AT COMMERCIAL SCALE
The success of our research on CCS and advanced coal technologies
will ultimately be judged by the extent to which emerging technologies
are deployed in domestic and international marketplaces. Both technical
and financial challenges associated with the deployment of new
integrated CCS technologies must be overcome in order to be capable of
achieving success in the marketplace. Commercial-scale demonstrations
help the industry understand and overcome start-up issues, component
integration issues, and gain the early learning commercial experience
necessary to reduce risk and secure private financing and investment
for future plants.
DOE is implementing large-scale programs such as the geologic
storage field tests and the Clean Coal Power Initiative (CCPI). Phase
III of the geologic storage field test program is focused on large-
scale field tests of geologic carbon sequestration on the order of one
million infrastructure needs of these projects. CCPI is primarily
focused on component testing at commercial scale. The CCPI Round 3
Funding Opportunity Announcement (FOA) specifically targets advanced
coal-based systems and subsystems that capture or separate CO2
for sequestration or for beneficial use.
THE AMERICAN RECOVERY AND REINVESTMENT ACT
The American Recovery and Reinvestment Act (Recovery Act)
appropriates $3,400,000,000 for ``Fossil Energy Research and
Development.'' As reflected in the Joint Explanatory Statement of the
Committee of Conference leading to the Act, these Recovery Act funds
will help fund activities targeted at expanding and accelerating the
commercial deployment of CCS technology to provide a key thrust to the
advanced coal program to accelerate, by many years, the advances needed
for future plants with CCS.
The Joint Explanatory Statement of the Recovery Act identifies the
following major initiatives that will complement and accelerate efforts
in the advanced coal program:
Maintain Fossil Energy R&D Program: $1 billion to be used to
conduct fossil energy research and development.
Additional Funds for the CCPI Round 3 FOA: $800 million to be used
to augment funding for the CCPI Round 3 competition.
New CCS Initiative for Industrial Applications: $1.52 billion to be
used for a competitive solicitation for a range of industrial carbon
capture and energy efficiency improvement projects, including a small
allocation for innovative concepts for beneficial CO2 reuse.
Expand Geologic Site Characterization: $50 million to be used for
site characterization activities in geologic formations. DOE expects to
require projects to complement and build upon the existing
characterization base created by the Regional Partnerships, looking at
broadening the range and extent of geologic basins that have been
studied to date.
Initiate a Geologic Sequestration Training and Research Grant
Program: $20 million for geologic sequestration training and research
grants. This program will emphasize advancing educational opportunities
across a broad range of colleges and universities.
INTERNATIONAL COLLABORATIONS
Recognizing that climate change is a global issue that requires a
global response, the DOE plays an active leadership role in an
international initiative known as the Carbon Sequestration Leadership
Forum (CSLF).
The CSLF is a voluntary climate initiative of developed and
developing nations that, collectively, account for 75 percent of all
manmade carbon dioxide emissions. It is currently comprised of 22
members, including 21 countries and the European Commission.
Formed in 2003, the CSLF marshals intellectual, technical, and
financial resources from all parts of the world to support atmospheric
stabilization, the long-term goal of the United Nations Framework
Convention on Climate Change. Members are dedicated to collaboration
and information sharing in developing, demonstrating, and fostering the
worldwide deployment of multiple technologies for the capture and long-
term geologic storage of carbon dioxide at low costs. Additionally, the
CSLF is committed to establishing a companion foundation promoting
legislative, regulatory, administrative, and institutional practices
that will ensure safe, verifiable long-term storage.
numerous countries through bilateral agreements and multilateral
activities to identify areas of collaboration in promoting and
developing clean fossil energy technologies internationally.
These activities include:
The U.S.-China Fossil Energy Protocol, a bilateral agreement on
energy technology cooperation that has the goals of reducing the impact
of China's growing demands on global hydrocarbon markets and improving
environmental performance; providing commercial opportunities for U.S.
business; and acquiring unique information of scientific or technical
interest to DOE.
U.S.-India Energy Dialogue: Coal Working Group: The Office of
Fossil Energy and India's Ministry of Coal jointly chair the Coal
Working Group initiative to exchange information on policies, programs,
and technologies to promote the efficient and environmentally
responsible production and use of coal.
Global Gas Flaring Reduction Partnership: DOE is working with the
World Bank and others to support national governments and the petroleum
industry in their efforts to reduce flaring and venting of gas
associated with the extraction of crude oil. Gas flaring wastes a
valuable clean energy resource and emits carbon dioxide, a greenhouse
gas.
Asia Pacific Economic Cooperation: APEC's Energy Working Group
seeks to maximize the energy sector's contribution to the region's
economic and social well being, while mitigating the environmental
effects of energy supply and use. The Office of Fossil Energy provides
expertise in LNG and methane hydrate technologies to the Energy Working
Group.
The International Energy Agency (IEA): The Office of Fossil Energy
is involved in many aspects of the IEA, including emergency
preparedness and clean coal technology transfer. Increasingly, the IEA
focuses on resolving energy and environmental challenges, particularly
relating to climate change.
The Office of Fossil Energy participates in the IEA Working Party
on Fossil Fuels, a highly effective method to create international
support for Fossil Energy programs and objectives such as IGCC and
carbon sequestration. The primary objective for the next three years
will be to develop and implement activities to promote clean fossil
energy technologies internationally. The Office of Fossil Energy is
currently working on the implementation of the recommendations to the
G-8 on Near-Term Opportunities for Carbon Capture and Storage.
IEA Clean Coal Center: The IEA Clean Coal Centre is a collaborative
project established in 1975 involving member countries of the IEA. The
service is governed by representatives of member countries, the
European Commission, and industrial sponsors. The IEA Clean Coal Centre
program of work contains studies of considerable significance for all
countries involved in the use or supply of coal.
IEA Greenhouse Gas Program (IEAGHG): The IEAGHG is a collaborative
research program founded in 1991. The members include 17 countries, the
European Commission and 17 multinational industrial sponsors. Its aim
is to provide members with definitive information on the role that
technology can play in reducing greenhouse gas emissions. It is
principally focused on CCS; how mitigation options compare; how CCS can
be done safely, legally, and cost-effectively; and what needs to be
done to introduce CCS and be confident it will be successful.
World Energy Council: World Energy Council (WEC) is an organization
of more than 100 countries headquartered in London covering all aspects
of energy including fossil, nuclear, hydro and renewables. DOE
participates through the WEC Committee on Cleaner Fossil Fuel Systems
Committee, chaired by the Fossil Energy's Office of Clean Energy
Collaboration. Committee members include 26 countries and seven
multilateral organizations striving to promote knowledge worldwide on
the research, development, demonstration, and deployment of cleaner
fossil fuels to meet global energy needs; promote the clean and
efficient use of fossil fuels, with a concentration on carbon capture
and storage.
Additionally, numerous international projects are supported through
DOE's core advanced coal program. U.S. technological advances and
expertise in CCS are being shared in initiatives such as the Australian
Otway Basin project; the European Union funded CO2SINK
project in Germany; the Algerian In Salah industrial-scale CO2
storage project; the Ordos Basin Assessment in China; the North Sea
Sleipner Project; and the IEA GHG Weyburn-Midale CO2
Monitoring and Storage Project, Zama Acid Gas Project, and the Fort
Nelson Project, all in Canada.
CONCLUSIONS
Today, nearly three out of every four coal-burning power plants in
this country are equipped with technologies that can trace their roots
back to the Department's advanced coal technology program. These
efforts helped accelerate production of cost-effective compliance
options to address legacy environmental issues associated with coal
use. Advanced CCS technologies will undoubtedly play a key role in
mitigating CO2 emissions under potential future carbon
stabilization scenarios. DOE's Program is helping make the enabling
technologies available. The United States must continue to show
leadership in technology development and future deployment to bring
economic rewards and new business opportunities both here and abroad.
I applaud the efforts of this committee and its Members for taking
a leadership role in addressing these timely and significant issues.
Biography for Victor K. Der
Dr. Der is currently Principal Deputy Assistant Secretary for
Fossil Energy with responsibilities for the office operations, and in
support of the Assistant Secretary, he manages the oversight of Fossil
Energy's Research and Development (encompassing coal, oil, and natural
gas) program and the U.S. Petroleum Reserves. Prior that he was Deputy
Assistant Secretary for Clean Coal within the Fossil Energy Program
Office. In that capacity, he was responsible for directing research and
development of clean coal research, development and demonstration, and
implementation of energy policy initiatives and priorities relating to
clean coal utilization and its role in climate change mitigation
including carbon capture and sequestration.
Prior to that position, he was Director, Office of Clean Energy
Systems for central power systems technologies such as gasification,
advanced combustion and hydrogen turbines; distributed generation
technologies such as fuel cells, fuel cell/turbine hybrids, and novel
heat engines and compressors; emissions controls technologies; advanced
research, and high efficiency, zero-emissions fossil energy
technologies. He was also responsible for directing the large scale
demonstration programs such as the Clean Coal Technology Demonstration
program; the Power Plant Improvement Initiative; Clean Coal Power
Initiative; and FutureGen--a demonstration program for near-zero
emissions coal, including carbon emissions.
Dr. Der has worked at DOE for 35 years in various programs. He
entered government service as a reactor intern in the predecessor
agencies to DOE, starting with Atomic Energy Commission. He worked as a
structural and materials engineer in nuclear reactor plant designs of
the Fast Flux Test Facility and the Clinch River Breeder Reactor
Demonstration during the Energy Research and Development
Administration. Following this period he managed research in the
civilian radioactive waste management program on geologic storage of
high-level nuclear waste; superconductivity in the Office of Science's
(formerly the Office of Energy Research) magnetic fusion energy
program; and Fossil Energy's advanced coal and gas based power systems
program.
His prior work includes NASA's Apollo 15 moon mission project and
the National Oceanic and Atmospheric Administration program on modeling
the upper atmospheric density.
His education includes a Bachelor of Science, Master of Science,
and Ph.D. in Mechanical Engineering from the University of Maryland. He
is married, has two daughters and resides in Gaithersburg, Maryland.
Chair Baird. Thank you Dr. Der. Mr. Gaffigan.
STATEMENT OF MR. MARK GAFFIGAN, DIRECTOR, NATURAL RESOURCES AND
ENVIRONMENT TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE
Mr. Gaffigan. Chairman Baird, Ranking Member Inglis,
Members of the Subcommittee, good morning. I am pleased to be
with you to discuss GAO's recent report on the Department of
Energy's decision to restructure the FutureGen program. In
2003, DOE initiated FutureGen, a program to design, build and
operate a new coal-fired power plant that combined integrated
gasification combined cycle or IGCC technology with carbon
capture and storage.
However, in 2008, DOE announced that it had decided to
restructure FutureGen. GAO's report and the focus of my remarks
address three questions regarding restructured FutureGen. One,
how do the goals of the proposed restructured FutureGen program
compare to the original program? Two, how does restructured
FutureGen compare to DOE's other carbon capture in-storage
programs? And three, to what extent did DOE use sufficient
information in its decision to restructure FutureGen?
First, restructured FutureGen is very different from the
from the original FutureGen program. While Restructured
FutureGen shares a common name and the overall goal of carbon
capture and storage, it is fundamentally different from the
original FutureGen program. Most significantly, the
restructured program does not have an exclusive focus on the
integration of integrated gasification combined cycle
technology with carbon capture and storage. In addition, the
restructured program does not have international partnerships
that, in the original FutureGen program, were designed to
improve the global advancing of carbon capture and storage.
Finally, restructured FutureGen unlike the original
FutureGen is not designed to serve as a living laboratory host
facility for gaining broad industry acceptance of emerging
technologies. It moves from a research and development focus to
a commercial focus.
In comparison to DOE's other carbon capture and storage
programs, restructured FutureGen is most like round three of
the Clean Coal-Powered Initiative. Most notably, both programs
fund the commercial demonstration of carbon capture and storage
at coal-fired power plants and require industry participants to
bear at least 50 percent of the cost. Questions have been
raised about how Restructured FutureGen is different and the
basis for the decision to restructure.
In short, DOE's decision to restructure FutureGen was not
well-explained. DOE based its decision largely on its
conclusion that cost for the original FutureGen had doubled and
would escalate substantially. However, this conclusion is
problematic because it was derived from a comparison of two
cost estimates for the original FutureGen that were not
comparable. It compared an initial estimate of approximately
$950 million that was in constant dollars to a $1.8 billion
that was inflated through the year 2017. The focus on the
difference in these very preliminary cost estimates as the
reason to restructure FutureGen did not provide a sound basis
for the decision.
In contrast, DOE's Office of Fossil Energy had identified
and analyzed other options for incremental cost-saving changes
to the original program such as reducing the CO2
capture requirement. However, we could not identify any
comparable analysis that supported the decision to restructure
FutureGen.
By integrating IGCC and carbon capture and storage
technology, DOE's original FutureGen program was intended to
address significant technological, cost, and regulatory issues
associated with the implementation of carbon capture and
storage at the new plant. Alternatively the restructured
program leaves open the possibility of successfully applying
carbon capture and storage technology to existing conventional
pulverized coal-fired power plants, an important goal in its
own right, since those plants account for almost all the coal-
fired generating capacity in the United States and abroad.
However, these plants will age, and demand for new sources of
electricity will continue throughout the world. If coal is to
be a fuel source of the future and if CO2 emissions
are to be controlled, developing new plants with improvements
over today's conventional technology, such as that offered by
IGCC, might also be an important goal.
In weighing different goals to address the technological
barriers that are associated with clean-coal technology, it is
also important to recognize that technology must be considered
in conjunction with other barriers, most notably legal and
regulatory uncertainties over carbon capture and storage and
the absence of a national strategy to control CO2
emissions. That would provide the incentive for carbon capture
and storage.
As policy-makers consider a path forward for clean-coal
technologies, including the original concept of FutureGen, a
comprehensive analysis of the associated costs, benefits, and
risks in this context is most important.
Mr. Chairman, this completes my remarks. I have submitted a
written statement and a copy of our report for your record.
[The prepared statement of Mr. Gaffigan follows:]
Prepared Statement of Mark Gaffigan
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss our recent report on the
Department of Energy's (DOE) decision to restructure the FutureGen
program.\1\ As requested, my remarks will focus on that report, which
examined (1) the goals of the original and restructured FutureGen
programs, (2) the similarities and differences between the restructured
FutureGen program and other DOE carbon capture and storage programs,
and (3) the extent to which DOE used sufficient information to support
its decision to restructure the FutureGen program.
---------------------------------------------------------------------------
\1\ GAO, Clean Coal: DOE's Decision to Restructure FutureGen Should
Be Based on a Comprehensive Analysis of Costs, Benefits, and Risks,
GAO-09-248 (Washington, D.C.: Feb. 13, 2009).
---------------------------------------------------------------------------
As you know, Mr. Chairman, coal is currently the world's leading
source of electricity. Coal-fired power plants generate about one-half
of the electricity used in the United States, as well as about one-
third of the Nation's carbon dioxide (CO2) emissions, which
contribute to climate change. In 2003, DOE initiated FutureGen--a
program to design, build, and operate a commercial-scale, coal-fired
power plant that incorporated carbon capture and storage (CCS) with
integrated gasification combined cycle (IGCC), an advanced technology
for generating electricity that has been deployed on a commercial scale
at only two coal-fired power plants in the United States.\2\ In IGCC
power plants, coal is gasified to produce a synthesis gas, consisting
primarily of hydrogen, carbon monoxide, and CO2. Then, in a
process called precombustion CCS, the CO2 is removed and
separated from the synthesis gas before the synthesis gas is burned in
a combustion turbine to generate electricity. Through IGCC, electricity
is generated more efficiently than through conventional pulverized
coal-fired technology, the process most widely in use, because IGCC
uses less coal to generate the same amount of electricity.
---------------------------------------------------------------------------
\2\ Currently, only two IGCC plants operate at commercial scale in
the United States. In service since 1997, the Polk Station, near
Mulberry, Florida, can provide 250 megawatts to the electric grid. The
Wabash River Coal Gasification Repowering Project is the first full-
size commercial gasification-combined cycle plant built in the United
States, having begun operations in November 1995. The plant, located
outside West Terre Haute, Indiana, can provide 262 megawatts to the
electric grid.
---------------------------------------------------------------------------
The original FutureGen plant was to capture and store underground
about 90 percent of its CO2 emissions. DOE's cost share was
to be 74 percent, and industry partners agreed to fund the rest.
Concerned about escalating costs, DOE announced in January 2008 that it
had decided to restructure FutureGen. In October 2008, DOE received a
small number of applications for the restructured FutureGen; however,
some of these applications were for proposals outside the restructured
FutureGen's scope. As we reported, DOE is currently assessing proposals
received and stated it expected to announce a selection of projects by
December 2008; however, as of the beginning of March 2009, it had made
no decision. DOE requested supplemental information from restructured
FutureGen applicants, which will be reviewed before any selection
decision.\3\ As you know, the recently enacted American Recovery and
Reinvestment Act of 2009, known as the stimulus law, provides DOE an
additional $3.4 billion for ``Fossil Energy Research and Development.''
\4\ Such a substantial amount of funding could significantly impact
DOE's decisions about how to move forward with programs such as
FutureGen.
---------------------------------------------------------------------------
\3\ DOE has identified certain details regarding the negotiations
for both the original and the restructured FutureGen as sensitive or
proprietary information. Due to the ongoing nature of these
negotiations for the restructured FutureGen and the fact that
disclosure of sensitive/proprietary information could adversely affect
negotiations of these projects and related future projects, our
discussion of some aspects of these negotiations is necessarily
general.
\4\ Pub. L. No. 111-5, tit. IV, 123 Stat. 115, 139 (2009).
---------------------------------------------------------------------------
Our report provides detailed information about our findings. In
summary, we found the following:
The overall goals of the original and restructured FutureGen
programs are largely similar in that both programs seek to produce
electricity from coal with near-zero emissions by using CCS, and to
make that process economically viable for the electric power industry.
However, the programs have different approaches for achieving their
goals, which could have different impacts on the commercial advancement
of CCS and, therefore, result in two largely distinct programs. First,
the original program focused on researching and developing the
integration of IGCC and CCS at a new, commercial-scale, coal-fired
power plant, while the restructured FutureGen aims at demonstrating the
use of CCS technology at one or more new or existing commercial coal-
fired power plants. As a result, the restructured program could provide
opportunities to learn about CCS at different plants, including those
that use IGCC and conventional ones that use pulverized coal generating
technology. However, under the restructured program, learning about the
integration of IGCC and CCS would be possible only if DOE received
applications proposing IGCC and selected one for funding. Second, it is
unclear which of the two programs would advance the broader roll out of
CCS across industry more quickly. In particular, the original program
was to be operated by a nonprofit consortium of some of the largest
coal producers and electric power companies in the world at one plant,
while the restructured program called for CCS projects at multiple
commercial plants. DOE officials told us that the original program
would likely have improved the global advancement of CCS more quickly
than the restructured program because of its various international
partnerships and that DOE is developing an approach to recoup the loss
of international involvement that resulted from restructuring
FutureGen. Finally, the original FutureGen would have served as an
operating laboratory host facility for (1) emerging technologies aimed
at the goal of near-zero emissions (such as hydrogen fuel cells and
advanced gasification) and (2) gaining broad industry acceptance for
these technologies. In contrast, the restructured FutureGen would not
include a facility for testing these technologies, and its ability to
advance them would, therefore, be limited.
DOE manages a portfolio of clean coal programs that research
and develop CCS technology or demonstrate its application. The
restructured FutureGen differs in important ways from most of DOE's
other CCS programs, with the exception of one program--Round III of the
Clean Coal Power Initiative (CCPI). Both the restructured FutureGen and
CCPI (1) fund the commercial demonstration of CCS at new or existing
coal-fired power plants and (2) require industry participants to bear
at least 50 percent of costs. We reported that the restructured
FutureGen targets a higher amount of CO2 to be captured and
stored (at least 1 million metric tons stored annually, per plant) than
CCPI does (300,000 metric tons of CO2 stored or put to use
annually, such as to enhance oil recovery, per plant). However, CCPI's
goals may be more achievable for industry partners than those of the
restructured FutureGen and, therefore, lead to more industry
participation. Regarding the restructured program's differences from
most of the other CCS programs, the restructured FutureGen would
integrate key components of CCS at commercial coal-fired power plants,
such as CO2 capture, compression, transport, storage, and
monitoring of stored CO2. In contrast, most of DOE's other
CCS programs concentrate on developing individual components of CCS,
such as CO2 storage, and/or an individual component and a
related one, such as capture and compression.
Contrary to best practices, DOE did not base its decision to
restructure FutureGen on a comprehensive analysis of factors such as
the associated costs, benefits, and risks. DOE based its decision
largely on its conclusion that costs for the original FutureGen had
doubled and would escalate substantially. However, this conclusion was
problematic because it was derived from a comparison of two cost
estimates for the original FutureGen that were not comparable; DOE's
$950 million estimate was in constant 2004 dollars, while the $1.8
billion estimate of DOE's industry partners was inflated through 2017.
As a result, DOE has no assurance that the restructured FutureGen is
the best option to advance CCS. In contrast, DOE's Office of Fossil
Energy had identified and analyzed 13 other options for incremental,
cost-saving changes to the original program, such as reducing the
CO2 capture requirement. While the Office of Fossil Energy
did not consider all of these options to be viable, it either
recommended or noted several of them for consideration, with potential
savings ranging from $30 million to $55 million each.
Conclusions
According to various energy experts, for the foreseeable future,
because coal is abundant and relatively inexpensive, it will remain a
significant fuel for the generation of electric power in the United
States and the world. However, coal-fired power plants are a
significant source of CO2 and other emissions responsible
for climate change. Hence, for at least the near-term, any government
policies that address climate change will need to have a goal of
significantly reducing CO2 and other emissions from coal-
fired power plants. While CCS is still in its infancy, it may be a
promising technology to achieve these purposes. By integrating IGCC and
CCS technology at an operating laboratory host facility, DOE's original
FutureGen program was intended to address significant technological,
cost, and regulatory issues associated with the implementation of CCS
at a new plant. Alternatively, the restructured FutureGen left open the
possibility of successfully applying CCS technology to existing
conventional, pulverized coal-fired power plants--an important goal in
its own right, since those plants account for almost all of the coal-
fired generating capacity in the United States and abroad. However,
DOE's decision to restructure FutureGen and remove the program's
emphasis on integrating IGCC and CCS technology was not well documented
or explained, in light of the fact that DOE already had existing
programs to address CCS at existing coal-fired power plants.
Given the magnitude of the current fiscal and economic challenges
facing our nation, along with the urgent need to secure an adequate and
sustainable energy supply that does not contribute to climate change,
much rides on the success of clean coal programs, such as FutureGen. To
ensure the best uses of billions of federal dollars, informed and
thoughtful approaches should be taken when making decisions about these
programs, including the restructuring of FutureGen. Such informed
decision-making has become even more critical with the important
opportunity that over $3 billion in additional funding for fossil
energy research and development in the recently enacted stimulus law
provides DOE for promoting cleaner forms of power generation.
Along these lines, to help DOE make more fully informed decisions
on how best to move forward with FutureGen, our February 2009 report
recommended that DOE conduct a comprehensive analysis of different
options. Specifically, to help ensure the widespread commercial
advancement of CCS while protecting taxpayer interests, we recommended
that, before implementing significant changes to FutureGen or
obligating additional funds for such purposes, the Secretary of Energy
direct DOE staff to prepare a comprehensive analysis comparing the
relative costs, benefits, and risks of a range of options, including
the original and restructured FutureGen programs and incremental
options for modifying the original program. We also recommended that
the Secretary consider the results of the comprehensive analysis and
base any decisions that would alter the original FutureGen on the most
advantageous mix of costs, benefits, and risks resulting from the
options evaluated. In reviewing a draft of our report, DOE did not
comment on the report's recommendations.
In performing our work, we reviewed best practices for making
programmatic decisions, FutureGen plans and budgets, and documents on
the restructuring of FutureGen. We also contacted DOE, industry
partners, and experts. We conducted this performance audit from June
2008 to February 2009, in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform
the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit
objectives. We believe that the evidence obtained provides a reasonable
basis for our findings and conclusions based on our audit objectives.
Mr. Chairman, this completes my prepared statement. I would be
happy to respond to any questions you or other Members of the
Subcommittee may have at this time.
Ernie Hazera (Assistant Director), Nancy Crothers, and Chad M.
Gorman made key contributions to this testimony. Harold Brumm, Jr.,
Cindy Gilbert, Angela Miles, Timothy Persons, Karen Richey, Michael
Sagalow, and Jeanette M. Soares also made important contributions.
Biography for Mark Gaffigan
Mark Gaffigan is a Director for the U.S. Government Accountability
Office's (GAO) Natural Resources and Environment team in Washington,
D.C. The GAO is an independent, nonpartisan agency that evaluates and
audits the programs and expenditures of the Federal Government. Mr.
Gaffigan's current responsibilities include leadership of GAO's work on
energy-related issues. Mr. Gaffigan began his career with GAO in 1987
and has worked on a variety of federal program reviews with an emphasis
on budget and program reviews of the U.S. Department of Energy. Mr.
Gaffigan has a BA in Economics and a MA in Public Administration, and
he is also a Certified Public Accountant.
Chair Baird. Mr. Gaffigan, thank you. I want to take this
opportunity to acknowledge we have been joined by Chairman
Gordon, Chairman of the Full Committee. Mr. Chairman, good to
see you. Thanks for being here and for your request for this
hearing as well.
Also, Mr. Lujan, Dr. Lipinski, Ms. Edwards, Mr. Chandler,
and Ms. Johnson are also here as well.
Dr. Finley.
STATEMENT OF DR. ROBERT J. FINLEY, DIRECTOR, ENERGY AND EARTH
RESOURCES CENTER, ILLINOIS STATE GEOLOGICAL SURVEY
Dr. Finley. Mr. Chairman and Members of the Committee, I
appreciate the opportunity to appear before you today and offer
comments on carbon sequestration.
Understanding the capacity to geologically sequester carbon
dioxide produced as a byproduct of fossil fuel and biofuel use
is an essential strategy to mitigate climate change related to
the buildup of greenhouse gases in the atmosphere. In 2007, the
Fourth Assessment Report of the Intergovernmental Panel on
Climate Change stated that ``carbon capture and storage in
underground geological formations is a new technology with the
potential to make an important contribution to mitigation by
2030. Technical, economic and regulatory developments will
affect the actual contribution.'' At the Illinois State
Geological Survey, a unit of the University of Illinois, we
have been investigating carbon sequestration technology since
2003 as part of a U.S. Department of Energy Regional Carbon
Sequestration Partnership. Our Partnership, the Midwest
Geological Sequestration Consortium covers the Illinois Basin,
a 60,000 square-mile area that covers most of Illinois,
southwestern Indiana, and western Kentucky. Our Phase I
Characterization effort, from 2003 to 2005, focused on
compiling existing information. Our Phase II validation effort
currently underway involves multiple small-scale, field pilot
injection projects. Most importantly, we are now engaged in a
critical Phase III deployment effort, the Illinois Basin-
Decatur test site, that will offer significant advances in
carbon sequestration technology.
After two years of site-specific planning and development
and planning at a site in Decatur, Illinois, we began on
February 14 of this year the drilling of a 7,500 feet deep
injection well that will receive 1,000 metric tons per day of
CO2. As of this morning, we were drilling below
3,546 feet. This is the first Phase III deployment well in the
Nation drilled as part of the DOE regional carbon sequestration
partnership program. We will be injecting over three years to
meet an injection goal of one million metric tons. The permit
is held by the Archer Daniels Midland Company, who has provided
a half-square mile site, logistical and engineering support,
and will provide the CO2 as a product of their fuel
ethanol production operations.
We are confident that our work over the preceding five
years and a year-long permitting process has resulted in an
exceptional site for deployment phase testing. We have
evaluated subsurface rock formations to define the capability
of a reservoir to hold carbon dioxide, and we have defined
multiple thick and competent reservoir seals, and we have
demonstrated that there are no detectable faults and fractures
that could serve as leakage pathways back to the surface.
As a climate change mitigation strategy, the CO2
must remain in place and not leak back to the atmosphere, not
contaminate potable ground water, not affect surface biota, and
not present a risk to human health and safety. This implies
that we must do an excellent job of investigating the site. We
have been carrying out environmental site monitoring since mid-
2008. Before CO2 is ever injected, we will have more
than a year of background data on groundwater chemistry, soil
gas composition, plant stress assessed through color infrared
aerial imagery, and atmospheric monitoring. We have 12
groundwater wells over the projected area of the subsurface
plume and beyond. We will conduct more geophysical studies that
will show us in three dimensions where in the reservoir rock
the CO2 is actually located. Most importantly, we
will drill two additional 7,500 feet deep observation wells
within the half-square mile area of the plume to calibrate
these geophysical studies. These same wells will also serve as
early warnings of any failure of our primary reservoir seal, an
outcome with very low probability but one that we nevertheless
must demonstrate is not taking place.
In conclusion, well characterized sites with appropriate
geology and careful monitoring can make a contribution and, in
fact, must be part of a portfolio response to dealing with
carbon dioxide emissions. In our regional partnership, we have
a comprehensive research agenda that we believe will show that
geological sequestration can be scaled up to be a safe and
effective tool to combat climate change. Further, we are
working to ensure that we share our results with research
consortia around the world. A State Department-World Resources
Institute delegation of university researchers and corporate
officials from China visited the Illinois Basin-Decatur drill
site two weeks ago, and we will make a reciprocal visit to
China this coming June. Next week, I will present our
partnership results at a meeting of the CO2Geonet
European Research Network in Italy.
While there is more yet to do in understanding the
contributions that geological carbon sequestration can make at
large scales in combating climate change, and more of these
efforts will indeed take place as a result of the provisions of
the Recovery and Reinvestment Act, I believe we are now moving
at an accelerating pace to develop the technology and to share
it around the world for our common benefit. Thank you.
[The prepared statement of Dr. Finley follows:]
Prepared Statement of Robert J. Finley
Mr. Chairman, Members of the Committee, I appreciate the
opportunity to appear before you today to offer comments on carbon
sequestration. Understanding the capacity to geologically sequester
carbon dioxide (CO2) produced as a byproduct of fossil fuel
use, including the use of advanced coal technologies, is an essential
strategy to mitigate climate change related to the buildup of
greenhouse gases in the atmosphere. In 2007, the Fourth Assessment
Report of the Intergovernmental Panel on Climate Change (IPCC) stated
that ``carbon capture and storage in underground geological formations
is a new technology with the potential to make an important
contribution to mitigation by 2030. Technical, economic and regulatory
developments will affect the actual contribution.'' At the Illinois
State Geological Survey, a unit of the University of Illinois, we have
been investigating sequestration technology since 2003 as part of a
U.S. Department of Energy (DOE) Regional Carbon Sequestration
Partnership. Our Partnership, the Midwest Geological Sequestration
Consortium (MGSC), covers the Illinois Basin, a 60,000 sq. mi.,
geological feature that extends beneath most of Illinois, southwestern
Indiana, and western Kentucky. Our Phase I Characterization effort,
2003-2005 focused on compiling existing information that, when
evaluated, indicated the Illinois Basin has suitable geology for
geological carbon sequestration. Our Phase II Validation effort,
involving multiple small-scale, field pilot injection projects, began
in late 2005 and will continue to be carried out through 2009. Most
importantly, we are now engaged in a critical Phase III Deployment
effort, the Illinois Basin-Decatur test site, that will offer
significant advances in geological carbon sequestration technology.
After two years of site-specific planning and development at a site
in Decatur, Illinois we began, on February 14, 2009, the drilling of a
7,500 feet deep injection well that will receive 1,000 metric tons per
day of CO2, beginning about this time next year. This is the
first Phase III deployment well in the Nation drilled as part of the
DOE regional sequestration partnership program and the first well
permitted for one million metric tons under existing Class I U.S. EPA
Underground Injection Control regulations. We will be injecting over
three years to meet our 1 million metric ton objective. The permit is
held by the Archer Daniels Midland Company, who has provided a half-
square mile site, logistical and engineering support, and will provide
the CO2 from their fuel ethanol production operation. We are
confident that our work over the preceding five years and a year-long
permitting process has resulted in an exceptional site for Deployment
phase testing. We have evaluated subsurface rock formations to define a
reservoir to hold the CO2, defined multiple thick and
competent reservoir seals, and demonstrated that there are no
detectable faults and fractures that could become leakage pathways. We
believe we will be able to show that the sequestration process can be
safe and effective.
As a climate change mitigation strategy, the CO2 must
remain in place and not leak back to the atmosphere, not contaminate
potable ground water, not affect surface biota, and not present a risk
to human health and safety. That implies that we must do an excellent
job of investigating the properties of these rocks and the fluids now
within them and of predicting their performance in the future. At our
Illinois Basin-Decatur site, we have been carrying out environmental
monitoring since mid-2008. Before CO2 is ever injected, we
will have more than a year of background data on groundwater chemistry,
soil gas composition, plant stress assessed through color infrared
imagery, and atmospheric monitoring. We have 12 groundwater wells over
the projected area of the subsurface CO2 plume and beyond.
We will conduct more geophysical studies that will show us in three
dimensions where within the reservoir rock the CO2 is
actually located. Most importantly, we will drill two additional 7,500
feet deep observation wells within the half-square mile area of the
plume to calibrate the geophysical studies and ensure that our
understanding of the fate of the CO2 is as complete as
possible. These same wells will also serve as early warnings of any
failure of our primary reservoir seal, an outcome with very low
probability, but one that we nevertheless must demonstrate is not
taking place. We have a comprehensive risk assessment process in place
that defines our response to equipment failures, accidents, and
geological problems.
Let me conclude with some observations on the process to date. We
sometimes read comments that geological carbon sequestration is an
untested technology and therefore cannot be part of the global climate
change response. I would suggest the opposite: that well characterized
sites with appropriate geology and careful monitoring can make a
contribution, and, in fact, must be part of a portfolio response to
dealing with carbon dioxide emissions. In our regional partnership, the
MGSC, we are addressing every element of a comprehensive research
agenda that we believe will show that geological carbon sequestration
can be scaled up to be a safe and effective tool to combat climate
change. Further, we are working to ensure that we share our results
with research consortia around the world. A State Department-World
Resources Institute delegation of university researchers and corporate
officials from China visited the Illinois Basin-Decatur site two weeks
ago; we will make a reciprocal visit to China in June. Next week, I
will present our partnership results at a meeting of the
CO2Geonet European (research) Network in Italy. While there
is more yet to do in understanding the contributions that geological
carbon sequestration can make at larger scales in combating climate
change, and more of these efforts will take place as a result of the
provisions of the American Recovery and Reinvestment Act, I believe we
are now moving at an accelerating pace to develop this technology and
to share it around the world for our common benefit. Thank you for the
opportunity to be here this morning.
Biography for Robert J. Finley
Robert J. Finley is the Director of the Energy and Earth Resources
Center at the Illinois State Geological Survey, Champaign, Illinois. He
joined the Illinois Survey in February 2000 after serving as Associate
Director at the Bureau of Economic Geology, The University of Texas at
Austin. Rob's area of specialization is fossil energy resources and
geological carbon sequestration. His work has ranged from large-scale
resource assessment, addressing hydrocarbon resources at national and
State scales, to evaluation of specific fields and reservoirs for coal,
oil, natural gas, and carbon dioxide storage. He is currently heading
the Midwest Geological Sequestration Consortium, a U.S. Department of
Energy regional carbon sequestration partnership in the Illinois Basin
aimed at addressing approaches to geological carbon management. Rob has
served on committees of the National Petroleum Council, the American
Association of Petroleum Geologists, the National Research Council, the
Stanford Energy Modeling Forum, and the U.S. Potential Gas Committee.
He has taught aspects of energy resource development since 1986 to
numerous clients domestically and overseas in Venezuela, Brazil, South
Africa, and Australia, among other countries. Rob holds a Ph.D. in
geology from the University of South Carolina. He is currently also an
Adjunct Professor in the Department of Geology, University of Illinois
at Urbana-Champaign.
Chair Baird. Thank you, Dr. Finley. Mr. Monroe.
STATEMENT OF MR. LARRY S. MONROE, SENIOR RESEARCH CONSULTANT;
MANAGER, ENGINEERING SCIENCE AND TECHNOLOGY, SOUTHERN COMPANY,
BIRMINGHAM, ALABAMA
Mr. Monroe. Mr. Chairman, Members of the Subcommittee,
thank you for the opportunity to speak to you today about
Southern Company's activities and plans for advanced coal
technologies.
Southern Company is a vertically integrated utility serving
over four million customers in the southeast. We are one of the
largest electricity generators in the United States, with some
70 percent of our energy coming from coal.
I am a manager of engineering science and technology for
Southern Company. I have been researching emissions control for
coal-powered plants for over 25 years. Southern Company has a
long history of cooperative work for the U.S. Department of
Energy in development of technologies for the utility industry,
including work on selective catalytic reduction for NOX
emissions from gas scrubbers for sulfur oxide emission and
mercury-control technologies.
As we face a future with policies that would limit
emissions of carbon dioxide, we believe that coal must continue
to play a role. Further, we believe that coal can and must play
a role going forward with constraints on carbon emissions. To
achieve this goal, technologies are currently being developed
and adapted from other industries to capture and store
emissions of CO2. However, the technologies are not
yet ready for utilities to use commercially. They are not yet
proven in power plant service, and as of today, they are too
costly. This is the issue going forward. How can these
technologies be proven and the cost reduced to make them
commercially viable in the future?
Southern Company is active in developing and demonstrating
advanced coal technology to meet this large challenge. First I
will talk about our sequestration efforts.
As a charter member of the Southeast Regional Carbon
Sequestration Partnership or SECARB, Southern Company has co-
funded its activities and served as a host for a Phase II
project injecting 3,000 tons of CO2 under one of our
power plants in southeast Mississippi. Working further with
SECARB, we have a goal to scale up to a Phase III sequestration
project of 100,000 tons of CO2 per year in similar
geology at another one of our Gulf Coast power plants. This
proposed project would feature a 25-megawatt scale CO2
capture plant that would be built to supply the CO2
for the sequestration demonstration. We have a further goal of
developing an even larger scale-up of the sequestration project
that would feature injection of one million tons of CO2
per year for five years into the saline reservoirs of the Gulf
Coast Region. This project would include the 170-megawatt
capture plant to supply the CO2. We submitted this
proposed project in response to both the restructured FutureGen
solicitation as well as CCPI Round III.
Now you will notice that both of these two steps in
sequestration scale-up are planned to also demonstrate CO2
capture at increasing scale on conventional coal power plants.
For IGCC, we have asked the Mississippi Public Service
Commission for approval to build a 600-megawatt IGCC power
plant in eastern Mississippi using local lignite coal and
design for 50 percent CO2 capture. The CO2
would be sequestered and enhanced oil recovery operations in
Mississippi oil fields. This new power plant would be partially
funded with DOE funds from CCPI round two and with investment
tax credits authorized by the Energy Policy Act of 2005. Also
in partnership with the DOE, Southern Company operates a
research station in Wilsonville, Alabama, focused on developing
advanced power generating technologies, including fundamental
R&D for coal gasification. It is now moving its focus toward
basic R&D and scale-up of technologies to capture CO2
from both conventional and IGCC coal plants.
You can see the Southern Company is working on four areas
we believe to be important: large-scale sequestration tests,
CO2 capture from conventional coal plants, IGCC
plants with carbon capture, and fundamental R&D for next
generation technologies. The issues to be overcome for
widespread commercial deployment of carbon capture and
sequestration are cost and timing. Both the pilot and
industrial-scale trials of CO2 capture systems are
much more expensive to build and operate than technologies for
NOX, SO2, or mercury. The same high-cost penalties
apply to full-scale power plants. To address high cost, we
strongly think that a robust program of both technology
development and a program of basic R&D are needed. Many of the
Nation's scientists are only now turning their attention to
this field, and breakthroughs are possible. As for timing, the
issue is the need to demonstrate to various stakeholders the
effectiveness and safety of geological sequestration. As MIT
recommends, we think it is necessary for the Nation to have
multiple, large-scale sequestration demonstrations of over one
million tons of CO2 per year for at least five
years. In order to have these results in adequate time, these
demonstrations need to be started as soon as possible.
Working in partnership with the U.S. DOE and others,
Southern Company looks forward to working on the challenge of
capturing CO2 from coal plants and demonstrating
geological sequestration of CO2.
[The prepared statement of Mr. Monroe follows:]
Prepared Statement of Larry S. Monroe
Summary
Southern Company is active in developing and demonstrating advanced
coal technologies. As a charter member of the Southeast Regional Carbon
Sequestration Partnership (SECARB), Southern has co-funded SECARB's
activities, as well as serving as a host site for a Phase II
sequestration project injecting 3,000 tons into a saline reservoir at
one of our power plants in southeast Mississippi. With SECARB, we have
a goal to scale up to a sequestration project of 100,000 to 150,000
tons CO2 per year into similar geology at another of our
Gulf Coast power plants. This project would feature a 25 MWe scale
CO2 capture plant built by Southern Company and research
partners to supply the CO2 for the sequestration project.
Southern Company has a further goal of developing a larger scale up
of this sequestration project that would feature one million tons
CO2 per year for at least five years into the saline
reservoirs of the Gulf Coast region. Building on the results of the
smaller demonstration, this project would include a 170 MWe CO2
capture plant to supply the CO2 for the sequestration
project. This proposed project was submitted by Southern Company in
response to both the Restructured FutureGen solicitation as well as the
CCPI Round 3 solicitation. Southern Company will likely resubmit this
project to CCPI 3 when it is reopened later this year.
Southern Company's Mississippi Power affiliate has asked the
Mississippi Public Service Commission for approval to build a 600 MWe
(net) IGCC power plant using native lignite and designed for 50 percent
CO2 capture from startup. The captured CO2 would
be sequestered in EOR operations in Mississippi oil fields. This new
power plant is partially funded with DOE funds from CCPI Round 2 and
with investment tax credits authorized by the Energy Policy Act of
2005.
In partnership with the DOE, Southern Company operates a research
station in Wilsonville, Alabama, that has focused on advanced power
generating technologies, including fundamental R&D for coal
gasification, and is now moving its focus towards fundamental R&D and
scale up for technologies to capture CO2 from both
conventional combustion coal plants and IGCC plants.
The barriers to widespread commercial deployment for CCS are mostly
cost and timing. Both the pilot and industrial scale trials of CO2
capture systems are much more expensive to build and operate than the
technologies that have been tested and developed for control of other
emissions like NO, SO2, or mercury. The same high cost
penalties apply to current CO2 capture and sequestration
approaches for full scale power plants. Therefore, both a robust
program of technology development and a program of fundamental R&D are
needed. Many of the Nation's scientists are only just now turning their
attention to this field and breakthroughs are possible. New science,
teamed with scale up and demonstration programs will help bring forward
affordable and effective CCS technologies.
A parallel barrier to widespread deployment of CCS is the need to
demonstrate to various stakeholders the effectiveness and safety of
geological sequestration. To get to that point, it is necessary for the
Nation to have multiple concurrent large scale sequestration
demonstrations of over one million tons CO2 per year for at
least five years in duration. In order to have these results in
adequate time, these demonstrations need to be started as soon as
possible.
Working in partnership with the U.S. DOE, vendors, and other
utilities, Southern Company looks forward to the challenge of
developing, demonstrating, and improving technologies to capture
CO2 from coal-based power plants and towards demonstrating
the effectiveness of geological sequestration of CO2.
Introduction
Chairman Baird, Ranking Member Inglis, and Members of the
Subcommittee, thank you for the opportunity to speak with you today
about Southern Company's activities and plans for developing and
demonstrating advanced coal technologies.
Southern Company is a super regional energy company serving
customers in Alabama, Florida, Georgia, and Mississippi. Southern
Company is the one of the largest generators of electricity in the
United States with 42,000 megawatts of generating capacity and over
21,000 megawatts of it is coal-fired. I hold a Ph.D. in Chemical
Engineering from MIT, and have been involved in research on pollution
control for coal-based power plants for over 25 years in university,
not-for-profit research institute, and corporate settings. At Southern
Company, I have two roles: I support our technology research
organization as a senior research consultant and I also support our
gasification and carbon capture research station as the Manager of
Engineering Science and Technology. With these efforts, I am deeply
involved with the development and demonstration of advanced ways of
using coal to generate electricity.
Southern Company has a long history of cooperative work with the
U.S. Department of Energy in development of technologies for the
utility industry, including work on low NO burners and selective
catalytic reduction (SCR) systems for NO emissions reductions, flue
gas de-sulfurization (FGD) systems for sulfur oxides reductions,
mercury control technologies to reduce mercury emissions, and various
others.
As we face a future with possible legislation and/or regulations
that would limit emissions of greenhouse gases, including carbon
dioxide (CO2), we believe that coal must continue to play a
role in the energy future of the country. It currently represents 50
percent of the electricity generated in the Nation today and it's ample
and relatively low cost domestic supply means it must continue to power
our homes, businesses, and industries in the future. We believe however
that coal can and must play a role in a future with constraints on
carbon emissions. Technologies are currently being developed and
adapted from other industries to capture and store emissions of
CO2 from coal power plants to achieve this goal. However,
the technologies are not yet ready for the utility sector to use in a
commercial way - they are not yet proven in utility service and as of
today, they are too costly in both capital and operating expenses. This
is the issue going forward, how can these technologies (or new ones not
yet invented) be proven and the costs reduced to make them commercially
viable in the future for which they will be needed?
1.0 Development of Technology for the Utility Industry for Carbon
Capture and Storage (CCS)
The lack of large scale storage of electricity means that
technologies for generating electricity must be proven and robust in
order to maintain the reliability and stability of the electric grid.
Generation must meet demand and the industry cannot test new
technologies at full scale without assurance that it will not threaten
operations and reliability. For this reason, the utility industry has
learned that new technologies and processes must be developed and
proven in a series of tests that start at small sizes and move to
progressively larger sizes before they can be relied upon at a full
scale generating plant. It is typical for new utility technologies to
take four or five demonstration steps and between seven to fifteen
years of development time to prove that they are adequate, robust,
affordable, and reliable.
The development path of technologies to capture and store carbon
dioxide (CO2) emissions from coal-based power plants will
follow a similar path. Given that regulatory or legislative efforts to
limit CO2 emissions from power plants are active, there is a
pressing need to develop technologies that can be used in coal-based
electricity generation and simultaneously achieve the environmental,
economic, and operational requirements. Carbon capture and
sequestration (CCS) for coal-based power plants is really a series of
four steps: (1) capturing the CO2 from the power plant, (2)
compressing the CO2 to the pressure required for pipeline
transport, (3) transporting the CO2 through a pipeline to
the sequestration field, and (4) injecting the CO2 deep
underground into stable geological structures (sequestration).
CO2 capture is a technology and cost challenge;
processes in the chemical and petroleum industries have been developed
to capture CO2 from similar streams, although not with some
of the particular difficulties nor the scale facing large central
station power plants. Additionally, the costs of these capture
processes at the scale of utility power plants is very high. Current
capture technologies can add 30 to 85 percent to the cost of
electricity from the plant. The main issue is the amount of heat
required to operate the capture plant which can mean a loss of 20 to 25
percent of the electrical output from a plant where this technology is
added. Integrated Gasification Combined Cycle (IGCC) plants, where coal
is gasified and burned in a combustion turbine--steam turbine
combination, offer some promise that the CO2 can be captured
from the synthetic gas (syngas) before combustion. This presents
advantages because the CO2 is at higher concentrations in
the syngas and it is already at pressure and therefore may require less
of the compression energy described next. However, the vast majority of
existing plants are conventional coal combustion units, with only two
operational IGCC plants in the entire U.S.
Compression of the CO2 can be accomplished with
available technologies, although the compression costs can amount to 10
percent of the power plant electrical output. (For the steam
requirements for capture and the energy for compression of the
CO2, this could total some 30-35 percent of the energy
output of the plant to operate with 90 percent CO2 capture.)
For new conventional coal plants with CCS, it is possible to integrate
the compression into the steam cycle of the plant and some efficiency
improvements can be made.
Pipeline transport of CO2 to sequestration sites is a
conventional technology available today--the U.S. has over 3,600 miles
of CO2 pipelines to move the gas from natural and industrial
sources to oil fields for enhanced oil recovery (EOR). CO2
is used to pressurize oil fields and the CO2 dissolves into
the crude oil making it easier to flow out of the underground
reservoir. Pipeline issues for large scale CCS are mainly associated
with the expected difficulty in siting and acquiring property for
pipeline routes. It has been estimated that a pipeline network equal to
one-third of the size of the existing natural gas pipeline network
would be needed to capture CO2 from the existing coal fired
fleet in the U.S. (MIT's ``The Future of Coal'' states that if all of
the coal power plant carbon emissions are captured and transported by
pipeline, the CO2 moved would be equal to three times the
weight of the annual natural gas delivered by the U.S. pipeline system,
but only one-third of its volume.)
The most challenging aspect of developing CCS for the utility
industry is sequestration. The technology for injecting CO2
underground for EOR is well-developed and the history of EOR operations
indicates that sequestration can be accomplished in a safe and secure
manner. However, the scale and potential widespread location of
sequestration sites for utility capture of CO2 will require
that sequestration tests be made at sufficient scale for multi-year
periods to demonstrate to stakeholders including the general public,
regulators, utilities, insurance companies, and financial entities,
that it is safe and effective. MIT, in their ``The Future of Coal''
report, states that ``we believe high priority should be given to a
program that will demonstrate CO2 sequestration at a scale
of one million tons CO2 per year in several geologies.''
They further recommend ``a minimum of three projects . . . of the order
of one million tons CO2/year for a minimum of five years.''
Unfortunately, it is not possible to accelerate the timescales for
sequestration tests, so it is necessary to start these projects as soon
as possible. Because we need to study the movement of CO2 in
the underground structure, there are no good technical ways to make it
move faster without disrupting the test. In other words, the spread of
the CO2 will be predicted with models at the beginning of
injection, and the goal of these sequestration tests is to see if the
spread of injected CO2 matches the model predictions in both
distance and time to get there.
2.0 Accelerated Technology Development for Utility CCS
As described above, the normal technology path for new technology
development in the utility industry is to proceed from an invention or
development in the laboratory, to a small pilot-scale test, to a larger
pilot-scale test for a longer time period, to industrial scale
(normally five to ten percent of large full-scale utility plants), and
finally to the first operational utility plant. Each of these steps
would normally take on the order of one to three years, with the whole
process, assuming success at every step, taking a total time of
anywhere from seven to fifteen years. It is also typical that several
different technology approaches proceed through these steps
simultaneously as competitive solutions to a given problem. For
Southern Company, the time from our initial pilot-scale work on SCR in
a DOE Clean Coal project to our first commercial unit was over six
years, and it took 11 years before our first large scale power plant
SCR retrofit was operational. A similar timeline for Southern Company's
FGD installations, and is holding true for mercury control technology.
Our first test of an activated carbon injection into a baghouse for
mercury control occurred around 1998 at a pilot scale unit of one MW,
followed by a DOE sponsored test at 135 MW starting in 2001, and
finally to our first full scale project (880 MW) which started at the
end of 2008, a period of 10 years.
We believe that the timeline for the development and demonstration
of technologies for the capture of CO2 and the demonstration
of sequestration must be compressed to the maximum extent practicable.
A combination of parallel development steps (as compared to the normal
sequential steps described above) for CO2 capture will have
to be undertaken to accelerate the technology development. Larger
demonstrations will need to be initiated before the smaller scale tests
have been completed.
It is also necessary to start large scale sequestration injection
tests as soon as possible to be able to demonstrate the ability of this
approach to sequester large amounts of CO2 in a safe,
effective, and cost effective manner. Ironically, a current
complication of attempting to perform large sequestration projects is
the relative scarcity of CO2 for these tests. There are
currently no large scale capture plants in the utility industry to
supply the needed CO2, and most natural and industrial
sources are already in use for the food industry and EOR. Therefore, it
becomes necessary to build CO2 capture plants in order to
obtain the gas to start these sequestration tests.
3.0 Southern Company's Activities on CCS Technology
Southern Company is active in all of these areas of technology
development for CCS advancement. We are a charter member of the
Department of Energy's regional partnership for our service territory,
the Southeast Regional Carbon Sequestration Partnership (SECARB). The
SECARB partnership covers an eleven-state region including the States
of Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North
Carolina, South Carolina, Tennessee, Texas, and Virginia. Southern
Company has been a funding member of SECARB, and has participated as a
host site for a Phase II injection project, and a potential host site
for a Phase III injection project. (The seven Regional Partnerships for
carbon sequestration were established with funding by DOE to help
develop and demonstrate the technology, equipment, and regulations to
implement large-scale CO2 sequestration in various regions
and geologies across the U.S.)
Through SECARB, Southern Company's Plant Daniel in southern
Mississippi served as the site for injection of 3,000 tons of CO2
into a saline formation at a depth of about 8,500 feet below ground
level. The purpose of this project was simply to test the deep saline
reservoirs located near the large coal power plants along the Gulf
Coast for geological sequestration of CO2. This very
successful test has led to SECARB being awarded DOE funding for a
larger Phase III project to inject 100,000 to 150,000 tons CO2
per year into similar geological formations at a Southern Company plant
located elsewhere on the Gulf Coast. As mentioned above, a real
difficulty in performing these sequestration tests is the availability
(and cost) of CO2 for the injection. For the smaller
injection of 3,000 tons, the CO2 was contributed by Denbury
Resources who use naturally occurring CO2 for EOR
activities. However, for the larger SECARB Phase III injection program,
that amount of CO2 is not available.
To advance this larger scale sequestration project and to obtain
the needed CO2, Southern Company has established a goal to
design, construct, and operate an industrial scale CO2
capture process at the generating plant site integrated with a
sequestration test. (Southern Company has not determined the actual
plant site for such a test, but it would be on the Gulf Coast). Through
partnerships with EPRI and other utilities, Southern Company's goal is
to work towards retrofitting this capture plant for partial capture
with one of the leading technologies for CO2 capture from
conventional coal plants. The costs of this capture plant would be
borne by these private entities. As indicated above, the estimated
costs of CO2 capture for projected full-scale installations
are high in capital and operating costs, and therefore, it is not
surprising that pilot and industrial scale test plants are expensive as
well. The total project costs for the 25 MWe capture plant to supply
the CO2 for the Phase III sequestration project of 100,000
to 150,000 tons CO2 per year are estimated to be $140M. In
the current economic downturn, it has become a difficult challenge to
raise the capital for such a large scale demonstration project, and its
prospects are currently being evaluated. We are hopeful that these
types of large scale advancement projects can proceed, but economic
challenges stand to threaten our ability to pay for such capture
demonstrations--which would of course limit our ability to test larger
scale sequestration such as the SECARB Phase III project.
If this 25 MW demonstration plant can be constructed, then we have
a further goal to expand upon this capture and sequestration
demonstration with a larger version, designed to reach the MIT goal of
one million tons CO2 per year for at least five years. This
proposal would involve building a CO2 capture plant of about
170 MWe size to capture the needed one million tons per year. Southern
Company has applied for federal assistance on this combined project in
response to both the Restructured FutureGen solicitation and the Clean
Coal Power Initiative Round 3 (CCPI 3). DOE has recently announced the
intent to reopen CCPI 3 with additional funding and Southern Company
will likely resubmit an updated proposal in response. The total
estimated cost of this 170 MW program would be $750M.
Southern Company has also been actively involved in the development
of Integrated Gasification Combined Cycle (IGCC) technology. Southern's
subsidiary, Mississippi Power is developing a full-scale IGCC power
plant of about 600 MWe (net) on native lignite in east central
Mississippi, located in Kemper County. Mississippi Power has submitted
an application to the Mississippi Public Service Commission for
approval and is in the environmental permitting process. This project
has received funding from DOE as an award from CCPI Round 2, as well as
having qualified for investment tax credits from Section 48A of the
Energy Policy Act of 2005. This new IGCC will also feature 50 percent
CO2 capture from the startup of the plant, with the captured
CO2 being supplied to the oil fields of Mississippi for EOR.
(In addition to EOR recovering more oil from the field, EOR is also a
sequestration technology as the CO2 replaces the oil in the
pores of the sandstone, with about half of the CO2 flood of
the oil field remaining underground and therefore being sequestered.
The CO2 remainder is captured and sent underground again for
further EOR operations.) The Kemper County project has a projected
capital cost estimate of approximately $2.2 billion. The project is
expected to utilize DOE CCPI 2 funding of about $270M and investment
tax credits up to $133M. Pending approval by the Mississippi Public
Service Commission, it is scheduled to come online in late 2013.
Finally, Southern Company has been working in partnership with the
U.S. DOE at the Power Systems Development Facility in Wilsonville,
Alabama. Originally dedicated to improving technology to advance the
efficiency of particulate removal from high pressure, high temperature
gases, the facility has been instrumental in developing and proving the
IGCC technology that will be used at Kemper County, one that is well-
suited to low rank coals which are economically important to the U.S.
economy. Continuing this partnership with DOE, the facility will be
exploring fundamental technologies that will improve or completely
replace the current technologies for capturing CO2 from both
conventional combustion coal power plants as well as IGCC plants. The
particular role for the PSDF in carbon capture will be to assist in
transitioning promising technologies from their research laboratory
size to the power plant size and environment. Southern Company believes
strongly that a robust fundamental research and development program and
the associated means to scale up promising technologies is vital to
success in commercial CCS development and commercial deployment--and
the ability to use the U.S. coal reserves as an energy source for the
future.
4.0 Challenges Going Forward for CCS
The challenges for CCS going forward are basically cost and
timeframes. The costs of pilot and larger scale research programs for
CO2 capture are much higher than the similar research
programs for control of other emissions such as nitrogen oxides (NO),
sulfur oxides (SO2 and SO3), and mercury--in fact
they appear to be over 10 times the capital and operating costs of
these previous efforts. Given current economic conditions, the utility
industry has limited ability to self-fund these projects and advance
these technologies to get them ready for commercial use.
Commercial CO2 capture systems using today's technology
are very costly, so much so that the future of coal as a base energy
source in the utility sector is threatened. The capital costs of a new
conventional coal plant with CCS may be as much as 50 percent to 100
percent higher than the same coal power plant without CCS. Operating
costs for the energy required for the capture process and CO2
compression make the plant much less efficient than today's coal
plants. For a CO2 capture plant added to an existing coal
power plant, somewhere between 30 and 35 percent of the plant's
electrical output would be lost to operate a 90 percent CO2
capture system. In other words, a large 900 MWe power plant when
equipped with a CCS system would become a 650 MWe plant. Other
generation--from coal, natural gas, or some other source--would have to
be built to make up for this lost generation.
The timeframe issue is mostly centered on sequestration and the
need to perform large scale sequestration projects for multiple years
to demonstrate the methods, measurements, stability, and safety of this
approach. In order to gain acceptance from multiple stakeholders that
geological sequestration is commercially viable, it is essential that
these large scale sequestration projects be started as soon as
possible. Assuming MIT's recommendation of a minimum of five years of
testing, a start today would mean it would be mid-2013 at the earliest
before long-term decisions on sequestration could be made.
5.0 Next Steps for CCS Technology Development
The steps needed to advance CCS technology and improve its cost and
performance are straightforward: (1) a continuation of the historically
successful public-private partnerships between the U.S. Department of
Energy and the utility industry in demonstrating and improving CCS; (2)
a strong focus on performing large scale capture and sequestration
projects as soon as possible; and (3) continued focus and funding for
fundamental research and development based on cutting-edge science to
develop new technologies and improve the costs and performances of
existing CCS technologies.
Southern Company looks forward to working with the Department of
Energy, vendors, and the domestic and international utility industry to
improve and advance CCS.
Biography for Larry S. Monroe
Larry Monroe is a senior research consultant with Research and
Environmental Affairs for Southern Company, a leading U.S. producer of
electricity. In this position, he is responsible for special projects
related to environmental control technologies, technology assessments,
carbon capture technologies, and wastewater treatment processes.
Monroe was named Senior Research Consultant in 2007. He also serves
as the Manager of the Engineering Science and Technology group at the
Power Systems Development Facility in Wilsonville, Alabama. Previously,
he served as Program Manager for Research of Technologies to control
emissions from Southern's fossil-fired generation fleet. Monroe joined
Southern Company in 1998. Prior to that, he held management positions
in environmental and energy research at Southern Research Institute, a
not-for-profit research organization based in Birmingham, Alabama.
Monroe serves as Co-Chair of the Utility Air Regulatory Group's
Control Technology Committee, and he also serves as a Co-Chair of the
Integrated Emissions Control research program of the Electric Power
Research Institute.
Monroe serves on the Auburn University Chemical Engineering
Advisory Council and on the board of directors of the Western Research
Institute, based in Laramie, WY.
A native of Pennsylvania, Monroe received a Bachelor's degree in
Chemical Engineering from Auburn University and a doctor of philosophy
degree in chemical engineering from the Massachusetts Institute of
Technology.
Monroe owns a 55-acre farm, on which he currently resides in
Blountsville, AL.
Mr. Costello. [Presiding] Does that conclude your
testimony, Mr. Monroe?
Mr. Monroe. Yes, I am sorry. Thank you.
Mr. Costello. Ms. Forbes, you are recognized.
STATEMENT OF MS. SARAH M. FORBES, SENIOR ASSOCIATE, CLIMATE AND
ENERGY PROGRAM, WORLD RESOURCES INSTITUTE
Ms. Forbes. Good morning and thank you for inviting me to
testify today. I am Sarah Forbes, and I lead the CO2
Capture and Storage work at the World Resources Institute. The
World Resources Institute is a non-profit, non-partisan
environmental think tank that goes beyond research to provide
practical solutions to the world's most urgent environment and
development challenges. The World Resources Institute has taken
the lead in exploring the challenges, opportunities and state
of technical knowledge in the field of carbon capture and
storage.
We convened a two year stakeholder process which resulted
in the Guidelines for Carbon Dioxide Capture, Transport, and
Storage. This report can serve as a benchmark for decision-
makers to use in evaluating potential projects.
The key finding of these WRI guidelines was that even
though additional research is needed in some areas, there is
adequate technical understanding to safely conduct large-scale
demonstrations. In fact, many of the remaining questions about
CCS technology can only be answered by additional experience
with the technology or policy interventions.
Last July, the G8 set a goal of 20 demonstrations globally
by 2010. The U.S. Climate Action Partnership, of which WRI is a
member, further recommends building at least five CCS projects
in the United States by 2015. Achieving these goals in the
right time frame is critical to deal with the looming climate
challenge but at the same time will require significant
investment. There is a need for establishing a clear and robust
international financing mechanism to fund these projects
globally. To address this need, Congress should consider
committing funding for public/private partnership
demonstrations in the United States and formally participate in
international demonstration efforts. CCS demonstrations will
require billions in research funding with estimates at about
$1-1.5 billion per project. Funding allocated in the American
Recovery and Reinvestment Act of 2009 is significant but
unfortunately still falls short of what will be needed to
commercialize CCS technology. A robust funding mechanism and
clear plan for collaboration among demonstration projects
internationally is critical. It is time to evaluate existing
programs for international collaboration in the context of this
emerging suite of global demonstration projects and to form
formal partnerships with others pursing demonstrations, the
U.K., the E.U., China, Canada, and Australia. We also must
enhance capacity for CCS demonstrations in China. China's coal-
related carbon dioxide emissions are projected to be 51 percent
of the world's total by 2030. Although China is actively
developing its non-carbon power sources, even rapid growth will
not be enough to replace coal. Deployment of CCS in China may
be the only way to globally make the needed reductions in
carbon dioxide emissions.
China is itself conducting research and quickly moving
towards developing and demonstrating CCS technologies. In fact,
the Chinese government was among the foreign governments who
had pledged to commit funding for the original FutureGen
project. Chinese companies and government institutions are also
undertaking a CCS research. For example GreenGen, sponsored by
China's five largest power companies, will soon build a 200-
megawatt integrated gasification combined cycle power plant
with CCS in nearby depleted oil fields before 2020. Both
PetroChina, China's largest oil company, and Shenhua, its
largest coal company, have pilot CCS programs with planned
injections.
It would be to the benefit of both the U.S. and China if
there were more direct collaboration on CCS demonstrations. To
address this need, Congress can commit funding for public-
private partnership demonstration projects in the United States
and China that would be jointly funded and operated. This will
require a serious funding commitment as well as programs that
facilitate information sharing on regulatory and policy issues
and support for U.S. businesses working internationally.
Examples of programs that would help build increased
capacity for CCS in China or other emerging economies include
research exchange programs to bring students and faculty from
China to see the projects operating in the United States and to
study with leading researchers. An effective near-term approach
would be to establish a research exchange program for visits to
ongoing demonstrations in the United States including the
Department of Energy's Regional Carbon Sequestration
Partnership Phase III projects. Exchange programs for
environmental regulators and policy experts may also prove
useful in resolving the legal, regulatory, and social
challenges of deploying CCS technology. The Department of State
in collaboration with the Department of Energy have implemented
successful exchange programs in the past which could be
replicated with a focus on CCS technology and policy.
Recently, as Dr. Finley mentioned, with support from the
Department of State's Asia Pacific Partnership, Tsinghua
University in China has partnered with WRI on an effort to
draft a set of guidelines for safe and effective CCS in China,
like the report we did for the United States. This work will be
influential in developing Chinese CCS regulation and policy.
In conclusion, globally, CCS has progressed to the point of
demonstration-readiness, and there is a race under way to see
who will build the world's first large-scale integrated
demonstration. Increased coordinated international
collaborations are essential. We need to specifically partner
with emerging economics like China in demonstrating CCS
technology through joint public-private partnerships. In these
international collaborations, we must seek ways to build
capacity and support efforts to develop global policies and
environmental regulations that protect human health and
ecosystems. This will include coordination and collaboration on
demonstration that beings in the planning stages together with
projects that build capacity on regulatory and policy issues.
Thank you.
[The prepared statement of Ms. Forbes follows:]
Prepared Statement of Sarah M. Forbes
Good morning and thank you for inviting me to testify today. I am
Sarah Forbes and I lead the CO2 Capture and Storage (CCS)
work at the World Resources Institute. The World Resources Institute is
a non-profit, non-partisan environmental think tank that goes beyond
research to provide practical solutions to the world's most urgent
environment and development challenges. We work in partnership with
scientists, businesses, governments, and non-governmental organizations
in more than seventy countries to provide information, tools and
analysis to address problems like climate change, and the degradation
of ecosystems and their capacity to provide for human well-being.
The World Resources Institute (WRI) has taken a lead in exploring
the challenges, opportunities and state of technical knowledge in the
field of carbon capture and storage. We convened a two year stakeholder
process which resulted in the Guidelines for Carbon Dioxide Capture,
Transport, and Storage (http://www.wri.org/publication/ccs-guidelines)
published in November 2008 which can serve as a benchmark for decision-
makers to use in evaluating potential projects. In developing the
Guidelines, WRI brought together a diverse group of more than 80
technical experts including government officials, NGOs, academics and
businesses.
Coal use is responsible for over 40 percent of global carbon
dioxide emissions.\1\ Without significant, deliberate action to reduce
these emissions we cannot address climate change. Carbon capture and
storage is one of a number of critical technologies coal-burning
nations will need to consider and deploy in the coming decades.
International collaboration will be essential to moving CCS technology
to scale--reducing costs and securing a global response to the climate
challenge. In the next five years, we must move from demonstration to
deployment.
---------------------------------------------------------------------------
\1\ Energy Information Administration. International Energy
Outlook, 2008. Figure 76. http://www.eia.doe.gov/oiaf/ieo/
emissions.html
---------------------------------------------------------------------------
In this testimony, I will provide an update on some of the key
international collaborations on CCS already underway, and offer some
ideas for future direction. I would like to make three key points, each
of which I will expand on below.
First, I will describe the urgent need for a global network of CCS
demonstrations that includes joint technology development along with
collaboration on resolving investment, regulatory, legal and social
barriers to CCS deployment.
Second, I will talk specifically about collaboration on CCS with
one country--China. I will describe the efforts many countries and
businesses are taking to ensure that at least one of the global CCS
demonstrations is in China.
Third, I will describe a few of the major international CCS
collaborations that are underway and offer suggestions for how these
efforts may best complement each other as the technology is
demonstrated worldwide.
I will conclude by providing some concrete suggestions for near-
term actions that can be taken to enhance collaborations with China and
facilitate global deployment of CCS technology.
1. Develop a Global Network of CCS Demonstrations
In technology development there is a period known as the ``Valley
of Death'' where a technology has been proven in the laboratory and at
a small scale but has yet to move from a research effort to
commercialization. CCS technology has progressed quickly from an idea
to a key part in proposed climate change mitigation plans. This
progression is partly thanks to the early successes seen in the pilot
capture demonstrations and research and commercial projects where
CO2 has been injected at rates up to a million tons per
year. Moving the technology forward into commercialization will require
integrated capture and storage demonstration at power plant scale. A
key finding of the Guidelines for Carbon Dioxide Capture, Transport,
and Storage (http://www.wri.org/publication/ccs-guidelines) was that
even though additional research is needed in some areas, there is
adequate technical understanding to safely conduct large-scale
demonstrations. In fact, many of the remaining questions about CCS
technology can only be answered by additional experience with the
technology or policy interventions.
Most experts agree that we need between 15 and 20 demonstrations of
differing capture and storage configurations globally. Last July, the
G8 set a goal of 20 demonstrations announced by 2010.\2\ The U.S.
Climate Action Partnership, of which WRI is a member, (USCAP)\3\
further recommends building at least five projects of CCS enabled coal
fueled facilities in the United States by 2015 (see www.US-CAP.org).
---------------------------------------------------------------------------
\2\ http://www.enecho.meti.go.jp/topics/g8/g8sta-eng.pdf
\3\ http://www.us-cap.org/blueprint/index.asp
---------------------------------------------------------------------------
Achieving these goals in the right time frame is critical to deal
with the looming climate challenge but at the same time will require
significant investment. There is a need for establishing a clear and
robust international financing mechanism to fund these projects
globally. It will also require substantial (but not insurmountable)
progress on addressing lingering regulatory, investment, legal, and
social issues. The global development of environmental regulatory
frameworks for CCS, is testament to our readiness to demonstrate the
technology. In 2008, regulatory frameworks for CCS were released at the
State and federal level in the U.S.\4\,\5\ and Australia\6\
and a Directive for CCS, which included environmental regulations, was
passed at the European Union\7\ level. Global progression towards a
common understanding of how to safely implement the technology seems
within reach.
---------------------------------------------------------------------------
\4\ Washington State finalized their regulations in June 2008.
http://www.ecy.wa.gov/news/2008news/2008180.html
\5\ U.S. EPA's proposed rule was released in July 2008 http://
www.epa.gov/safewater/uic/pdfs/
prefr-uic-co2rule.pdf
\6\ http://www.environment.gov.au/settlements/industry/ccs/
publications/environmental-guidelines.html and http://
www.environment.gov.au/settlements/industry/ccs/publications/ccs-
propertyrights.html
\7\ http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//
TEXT+TA+P6-TA-20080612+0+DOC+XML+V0//EN&language=EN and http://
europa.eu/rapid/pressReleases Action.do?reference=MEMO/08/
798&format=HTML&aged=0&language=EN&guiLanguage=en
---------------------------------------------------------------------------
This effort of building a global network of CCS demonstrations will
require a significant investment and commitment of resources, along
with coordination and support from senior government representatives.
However, through strong international collaboration each country need
not demonstrate the full suite of capture and storage options. For
example, when the UK first announced their plans to move forward with a
post-combustion CCS demonstration, it was described as being
complimentary to the U.S. FutureGen project which was at that time
planning to demonstrate at-scale capture with an Integrated
Gasification Combined Cycle (IGCC) plant.\8\ The collective group of
global demonstrations should include the full suite of different
capture configurations and test storage in a variety of geologic
settings.
---------------------------------------------------------------------------
\8\ Presentation given at the 2007 Regional Carbon Sequestration
Partnerships Annual Review Meeting http://www.netl.doe.gov/
publications/proceedings/07/rcsp/pdfs/Graves%20UK%20
CCS%20Activity%20December%202007%20-%20IRG.pdf
---------------------------------------------------------------------------
To address this need, Congress can commit funding for public-
private partnership demonstration projects in the U.S. and formally
participate in international demonstration efforts. CCS demonstrations
will require billions in research funding with estimates at about $1-
1.5 billion per project. Funding allocated in the American Recovery and
Reinvestment Act of 2009 is important, but still falls short of what
will be needed to commercialize CCS technology. A robust funding
mechanism and clear plan for collaboration among demonstration projects
is critical. One example of such a plan was recently approved by the
European Union with funding for demonstrations coming from the proceeds
the European Trading Scheme (ETS) and coordination among projects
required.\9\ The global CCS demonstration network should include
collaborative work on not only technology development, but also
information-sharing on legal, social and regulatory issues.
---------------------------------------------------------------------------
\9\ The EU recently adopted a legal framework for CCS and also
provided funding mechanisms through auction allowances and the EU
stimulus recovery package http://www.scotland.gov.uk/Resource/Doc/917/
0077923.ppt#303,8,EU Emission Trading System
2. Enhance Capacity for CCS Demonstration in China
According to the Energy Information Administration, China's coal-
related carbon dioxide emissions may grow to 51 percent of the world's
total by 2030.\10\ With 20 percent of the world's population, China has
14 percent of the world's coal reserves, but less than one percent of
the world's oil and gas reserves. While China is actively developing
its non-carbon power sources--hydropower, nuclear, and newer
alternative energies--rapid growth will still not be enough to replace
coal as a core part of its expanding electricity infrastructure.
Deployment of CCS in China may be the only way to globally make the
needed reductions in carbon dioxide emissions.
---------------------------------------------------------------------------
\10\ Energy Information Administration. International Energy
Outlook 2008. http://www.eia.doe.gov/oiaf/ieo/emissions.html
---------------------------------------------------------------------------
China is conducting research and quickly moving towards developing
and demonstrating CCS technologies. In fact, the Chinese government was
among the foreign governments who had pledged to commit funding for the
original FutureGen project.\11\ Chinese companies and government
institutions are undertaking a CCS research themselves and with a
number of international partners. For example:
---------------------------------------------------------------------------
\11\ China, India, Australia, Japan and South Korea pledged funding
for FutureGen http://www.futuregenalliance.org/costs.stm
The Chinese power industry has several projects
focusing on coal gasification. The largest, GreenGen, sponsored
by China's five largest power companies, will build a 200 MW
integrated gasification combined cycle power plant in the city
of Tianjin. Phases two and three of this project plan for CCS
in nearby depleted oil fields, with injection planned before
2020. U.S. Peabody Energy is the one international equity
---------------------------------------------------------------------------
partner in this effort.
China has two major efforts with European
collaborators, the UK-China Near-Zero Emissions Coal
Project\12\ (NZEC) and the COoperation Action within CCS CHina-
EU\13\ (COACH) Project. Both have done a great deal of
preparatory and conceptual work on CCS.
---------------------------------------------------------------------------
\12\ http://www.nzec.info/en/
\13\ http://www.co2-coach.com/
China's Huaneng group built a small carbon capture
demonstration plant at Gaobeidian in Beijing with assistance
from Australia's Commonwealth Scientific and Industrial
Research Organization (CSIRO). Discussions about a second phase
---------------------------------------------------------------------------
are in process.
Both PetroChina, China's largest oil company, and
Shenhua, its largest coal company, have pilot CCS programs.
There is also a realization in China that robust policies and
regulations will be needed to ensure that CCS projects are done
responsibly. Tsinghua University has partnered with WRI to draft a set
of Guidelines for Safe and Effective CCS in China. The effort is
modeled after the stakeholder process led by WRI in the U.S. where a
diverse set of stakeholders together developed a comprehensive set of
guidelines for CCS projects (http://www.wri.org/publication/ccs-
guidelines). Development of a Guidelines document that is available in
Chinese for potential project operators, financiers, insurers, and
legal experts to as a tool in understanding how to conduct CCS projects
responsibly will facilitate demonstration of the technology in China.
To enable this effort, Tsinghua University and WRI have assembled a
steering committee that includes leading CCS experts from China and the
United States. The Chinese members of the steering committee recently
traveled to the United States and toured some of the leading CCS
research institutions (including the injection well being drilled in
Illinois). This effort is being funded with support from the U.S.
Department of State under the Asia Pacific Partnership.\14\
---------------------------------------------------------------------------
\14\ http://www.asiapacificpartnership.org/
---------------------------------------------------------------------------
It would be to the benefit of both the U.S. and China if there were
more direct collaboration on CCS demonstrations. Not only would working
together solve technical problems faster, but given the rate at which
Chinese companies are moving, the learning would hardly be one way.
Jointly-funded and operated demonstrations, that include government
funding combined with private-sector investment is an essential next
step. This will require a serious funding commitment as well as
programs that facilitate information sharing on regulatory and policy
issues and support for U.S. businesses working internationally.
Examples of programs that would help build increased capacity for
CCS in China or other emerging economies include research exchange
programs to bring students and faculty from China to see projects
operating in the U.S. and study with leading researchers. An effective
near-term approach would be to establish a research exchange program
for visits to ongoing demonstrations in the U.S. including the
Department of Energy's Regional Sequestration Partnership Phase III
projects. Exchange programs for environmental regulators and policy
experts may also prove useful in resolving the legal, regulatory, and
social challenges of deploying CCS technology. The Department of State
in collaboration with the Department of Energy has implemented
successful exchange programs in the past which could be replicated with
a focus on CCS technology and policy.
3. Key International CCS Collaborations Underway
There are several high-level international CCS efforts underway,
along with numerous individual projects like the WRI-Tsinghua
University effort I just described. Each of these efforts can play an
important role in the development of the technology. Key to successful
integration of these efforts will be clarifying the niche each effort
is designed to fill, eliminating redundancies, and designing a path for
collaboration.
I would like to highlight three key CCS-specific initiatives
already underway:
1. The Carbon Sequestration Leadership Forum\15\ (CSLF) is a
Ministerial-level effort initiated by the U.S. Department of
Energy. It has been in place since 2003 and has been
influential in collaborations among governments.
---------------------------------------------------------------------------
\15\ http://www.cslforum.org/
2. Australia has recently initiated a Global CCS
Institute,\16\ for which the Prime Minister has allocated $100M
per year for the next 10 years. This institute is designed to
focus specifically on collaboration surrounding demonstration
projects.
---------------------------------------------------------------------------
\16\ http://www.pm.gov.au/media/Release/2008/
media-release-0484.cfm
3. The International Energy Agency\17\ (IEA) coordinates
international research through the IEA GHG Program. IEA
Secretariat is also developing an international roadmap for CCS
at the request of the G-8. This roadmap is designed to answer
the question of whether and how we can achieve the goal of 20
CCS demonstrations announced globally by 2010 and will provide
recommendations for better coordination among international
collaborations.
---------------------------------------------------------------------------
\17\ http://www.iea.org/Textbase/subjectqueries/cdcs.asp
As the technology progresses from R&D towards demonstration, these
international efforts can provide an avenue for information-sharing at
various levels: the CSLF at the ministerial-level, the IEA among
government energy departments, and the Global Institute among those
running demonstration projects. It is time to evaluate the existing
programs in the context of an emerging suite of global demonstration
projects and to form formal partnerships with others perusing
demonstrations (UK, EU, China, Canada, Australia). Congress might
consider commissioning a formal report on international CCS efforts and
use the results of it along with the IEA's International CCS Roadmap
(expected publication date October 2009)\18\ to clarify and formalize
the role of the various international CCS organizations that have
emerged. Additionally, although the U.S. Department of Energy's
Regional Partnership Program has been acknowledged as the ``world's
most ambitious program'' \19\ the work is largely unknown in the
international community, in part because it is difficult for
researchers to receive approval to travel internationally on their
government grants. A scholarship program for U.S. researchers working
on government-funded projects to attend international CCS meetings and
present the results of their research may be useful in better
communicating the results of leading U.S. research in this area. Such a
merit-based program could be managed through the Department of Energy.
Formal arrangements to partner with other countries on demonstrations
must be established soon.
---------------------------------------------------------------------------
\18\ http://www.iea.org/textbase/subjectqueries/ccs/
ccs-roadmap.asp
\19\ http://www.netl.doe.gov/publications/press/2008/08019-
IEA-Finds-US-CCS-Plans-
Ambitious.html
Conclusions
Unless we act now to aggressively begin to implement a global CCS
demonstration program, we will lock in untold additional quantities of
CO2 emissions from non-CCS, coal-fired power plants around
the world. Globally, CCS R&D has progressed to the point of
demonstration-readiness and there is a race underway to see who will
build the world's first large-scale integrated demonstration of
capture, transport, and storage along with power production. The global
nature of climate change and the urgent need to act now to avoid
locking in a high emissions trajectory for the future necessitates
increased and coordinated international collaborations. We need to
specifically partner with emerging economies on demonstrating CCS
technology, through joint public-private partnerships. In these
international collaborations we must seek ways to build capacity and
support efforts to develop global policies and environmental
regulations that protect human health and ecosystems. This will include
coordination and collaboration on demonstrations that begins in the
planning stages along with projects that build capacity on regulatory
and policy issues (like the WRI-Tsinghua APP project).
In my testimony, I have mentioned five specific actions to consider
that will help facilitate international collaboration on CCS, which are
summarized here:
1. Commit funding for demonstration projects in the U.S. and
in China that are geared towards joint technology development;
such projects should be public-private partnerships. The global
network of demonstrations should include the full suite of
capture technology approaches and test storage in a variety of
geologic settings.
2. Develop a framework and funding for research exchange
programs to bring researchers from other countries to see
projects operating in the U.S. and study with leading
researchers. The Department of State in collaboration with the
Department of Energy has implemented successful exchange
programs in the past which could be replicated with a focus on
CCS technology and policy.
3. Increase bilateral efforts to facilitate capacity building
and information sharing on regulatory and policy issues.
4. Establish formal partnerships with other countries
developing CCS demonstration projects (UK, EU, China, and
Australia) to facilitate information-sharing and avoid
duplication among demonstration efforts. Also, commission a
formal report on international CCS efforts and use the results
of it and the IEA CCS Roadmap to clarify and formalize the role
of the various international CCS organizations that have
emerged.
5. Develop a scholarship program for U.S. researchers working
on government-funded projects to attend international CCS
meetings and present the results of their research. Such a
merit-based program could be managed through the Department of
Energy.
Discussion
Cost Escalations
Mr. Costello. The Chairman thanks you, Ms. Forbes. Let me
begin questioning. I think the Chairman of the Full Committee,
Chairman Gordon, stepped out. When he returns, he has questions
I know, but let me begin, Mr. Gaffigan, with your testimony,
and I think you touched on this but I would like you to
elaborate. In your analysis of the restructured FutureGen, did
you find that the cost escalation used by the Department of
Energy to justify the restructuring and scrapping the initial
FutureGen plan to go with a restructured program valid?
Mr. Gaffigan. We asked over and over for analysis behind
the cost estimate. We found it was pretty much a
straightforward 5.2 percent escalation factor. We pointed out
that there are others that point out that you're not going to
see that sustained growth in escalation factors. And in fact,
EIA had pointed that out, that even at the time we were looking
at a lot of cost escalations, look at us today in terms of the
concerns about whether there is going to be that cost
escalation and whether there was going to be jobs for people
because the economy was slowing down. So that is the point
made. And that in looking at the total number, you know, very
well you could see cost escalation, but we did not see any in-
depth analysis and we didn't see a good explanation for why
they talked about doubling of costs when, in fact, it was
comparing some constant dollars to escalated dollars.
Mr. Costello. And that is a very important point in one of
our Subcommittee hearings concerning this issue and the cost
escalation, the reason used by the Department of Energy to
scrap the project. Without question, the cost did increase, but
when you look at other projects around the country and look at
the cost of building materials, look at the cost of labor, the
increases from the time the project was planned and the
projected costs were arrived at, they were no different than
any other project of that size. Would that be something that
you would agree with?
Mr. Gaffigan. I would agree with that, and the other thing
I would point out is that the Alliance was working on a revised
cost estimate based on a specific site. It is important to
point out these estimates were very preliminary, but they had
targeted to do a cost estimate in June of '08. The question we
raised is what was the cost and sort of not waiting to see what
that cost estimate would have been. A newer estimate would have
reflected the site-specific type activities, and it seemed like
it was never considered.
Mr. Costello. And of course, since the decision was made to
pull the plug on the initial project as planned, the fact that
we have lost time now, that has increased the cost of whatever
project that we move forward with. If it is a scaled-back
version or if we would go back to the original proposal, we
have increased cost because we have lost time and would you
agree with that?
Mr. Gaffigan. Well, you know, we didn't look at a specific
cost estimate relative to that, but I would say there is
definitely an opportunity cost of not going forward. That being
said, I think it is important to recognize that cost escalation
does happen. In the Department of Energy, there is a history of
cost escalation. In fact, if cost escalation was the criteria
for going forward with projects at the Department of Energy,
FutureGen wouldn't be the only one that would have been
canceled.
Mr. Costello. I thank you. Dr. Der, let me ask, at the time
when the Administration back then made the decision to pull the
plug, one of the things that they were attempting to do was to
negotiate with the Alliance on cost share, that they wanted the
private sector in the Alliance to come up with a higher
percentage of the cost of the project than originally proposed.
We were told by the Alliance that that was negotiable, that
they in fact would sit down and discuss with the Department of
Energy a higher cost share. Is that your understanding?
Dr. Der. My understanding was that such discussions were
taking place, and it is my understanding also that the
Department did not feel that at that time that these were
moving forward in a fruitful, sustainable manner as I was told.
Mr. Costello. Just for the record, the Alliance told us
just the opposite, that they in fact were willing to negotiate,
were willing to increase their cost share, but the
Administration and the Department of Energy at the time had
basically made the decision that they were going to scrap, pull
the plug on their initial concept and were not earnest in
trying to negotiate a higher cost share. But the Alliance was
willing to increase their cost share.
Lessons From Small-scale Projects
One other question and then I will ask Chairman Gordon if
he has questions. Dr. Finley, what important lessons have been
learned from the small-scale field project that the injection
project initiated by the consortium and the validation of its
efforts?
Dr. Finley. Well, I believe what we have been able to show
is that the study that was based on existing data from 2003 to
2005 during our Phase I effort, that data were largely
validated in the sense that the thickness of the receiving
reservoir over a wide area of the Illinois basin is over 1,000
feet thick. That both includes our test sites and it includes
the FutureGen site at Decatur, and at the reservoir seal, the
geology of that seal looks competent over a wide area of
literally thousands of square miles. So what we basically have
validated in our efforts is that the geological characteristics
of the area of our regional sequestration partnership and
because that is coincident with the Mattoon FutureGen site,
that geology is very favorable for geological carbon
sequestration.
Mr. Costello. Thank you. The Chairman now recognizes the
Chairman of the Full Committee, Chairman Gordon.
Chair Gordon. Thank you, Mr. Costello. I know this is an
issue that is close to your heart, and this is a very important
issue and a very good panel, and I thank you all for being
here.
Justifying Research Funds
Mr. Gaffigan, your report clearly points out that the DOE
was comparing two cost estimates that were just not comparable.
You know, unfortunately, we have run into this in other types
of R&D projects which makes it difficult to go back to the
public and say we need more money when these things aren't
clear. What should the Department do and what should Congress
require them to do to improve this situation?
Mr. Gaffigan. Well, you know, contracting in the government
and DOE in particular has been an area that we have focused on.
In fact, contracting at DOE is considered a high risk for us
and particularly in the weapons side of the house, and I think
we have identified certain things that are important in terms
of controlling costs and managing projects. And it sort of
starts at the top, a commitment to schedule, having the right
people involved there and contracting the resources, and the
commitment to measure progress along the way for these
projects.
We have found, for example, in the Office of Science that
they have made great progress in this area and overcome some of
these issues associated with the major projects.
Chair Gordon. So you are trying to make me feel better when
we do this again?
Mr. Gaffigan. Well, I mean, look. These things are high
risk. I mean, even FutureGen is a high-risk issue, and that is
why the government is sort of stepping in to try to help in
partnership with the private sector to share that risk.
Chair Gordon. Well, that is the next point I want to get
to. Is this type of project being done anywhere else now?
Mr. Gaffigan. Not that I am aware of.
Chair Gordon. And as we see climate change legislation
looming over us, would this not be an important tool in our box
to move forward if we are going to continue, which I think we
have to, with coal-fired plants?
Mr. Gaffigan. I think absolutely. I think it is one of the
issues addressing the technology barriers. I would also point
out that there are other issues that need to be considered in
concert with that, including the regulatory and legal framework
with carbon capture and storage as well as what are we going to
do about carbon? Are we going to be able to send a signal to
the market? Because ultimately, we could put all the money we
want into these projects, and we testified last year that the
government has spent over $60 billion, or close to $60 billion
over the last 30 years in advanced energy technologies, yet we
are still heavily reliant on conventional fossil fuels. And it
can't just be the government spending money, it has got to
consider the context of the private market.
International Cooperation
Chair Gordon. Ms. Forbes, if I could pontificate a little
bit on a pet project of mine. These are going to be very
expensive programs, carbon capture and sequestration, and these
are times of limited resources. It seems to me that we should
follow up on a proposal that was made at the G-8, I guess it
was last year, to do an international type of cooperation with
this. Particularly in this area and energy in general, I sort
of see it as ``them that have it and them that don't,'' and we
are in the don't category and that particularly with coal,
where we have so much coal in contrast to oil and gas, that we
should look at some type of international cooperation in terms
of sharing both the intellectual part of it as well as the
financial part, maybe take different geological formations that
one country might have, we would take a couple here, someplace
else there. Is that reasonable and could you elaborate on that
some for me, pros and cons?
Ms. Forbes. Yes. I think that we have some existing
frameworks for international collaboration on this subject. One
of the things that is happening right now is that at the
request of the G8, the International Energy Agency is
developing an international roadmap for CCS. I think that
document is set to be released in October. It will be
significant, and it will outline the global suite of
demonstrations that are in various stages of planning, but yes,
I agree with you. We need to work globally.
Chair Gordon. Yes. Will it help lead to any kind of a
contract or treaty where there will be coordination and
cooperation in this effort, or is it just give a new menu of
what is going on now?
Ms. Forbes. The roadmap will be a document. It will outline
how to get to the 20 demonstrations by 2020. I think that
beyond the roadmap, we need to revisit some of the existing
bilateral agreements with individual countries and form new
partnerships where warranted to collaborate specifically on
demonstration.
Chair Gordon. And is G8 the best vehicle for that or is
there any other vehicle that you would recommend?
Ms. Forbes. I am not sure, but I would be happy to get back
to you on that.
Chair Gordon. It seems to me that at the end of the day,
and again this will be expensive, it is going to have to be
head of state to head of state making the agreement and the
commitment because it will have budgetary impacts. Then you are
going to have to have again some vehicle to coordinate that. So
I would appreciate if you would give me any of your thoughts.
Ms. Forbes. Thank you. We will do that analysis.
Chair Gordon. And thank you, Mr. Chairman.
Mr. Costello. Thank you, Chairman Gordon. Just for the
record, let me state that Ms. Forbes has indicated that the
original concept and project that was proposed had a lot of
international interest from China, India, Australia, and a
number of other countries who pledged money and were willing to
cooperate and work with us. When it comes back to my turn for a
second round of questioning, I want to talk a little bit about
that and how the fact that the previous Administration, when
they pulled the plug on this, how our international partners
were notified and if in fact we can bring them back to the
table and have them work with the Alliance.
The Chairman now recognizes the Ranking Member of the
Subcommittee, Mr. Inglis.
Project Scale
Mr. Inglis. Thank you, Mr. Chairman. Mr. Monroe, I think
you had the key word here that I have heard, and that is
scalability. So I am wondering, the projects that Southern
Company is doing which are very exciting, what percentage of
the CO2 emissions are involved there? Do you have
any idea? They are big numbers in terms of sequestration there,
but in terms of the percentage of the outflow, what would it
be? Do you have any idea?
Mr. Monroe. They are fairly modest. With the exception of
the new integrated gasification combined cycle plant I
mentioned in Mississippi which would be 50 percent of 600
megawatts, so that is significant. The other projects are
really taking a stair step approach. In the utility business
and with our cooperation with the Department of Energy, we
found that if we try to take too big of a step, we make too
many mistakes. We tried to sort of step in a factor of 10
almost, so we are talking sequestration or size. So the two
projects I mentioned, the first one a 25-megawatt, the second
one, 170 megawatts are fairly small by power plant standards.
So our largest power plant is 3,600 megawatts. So that roughly
is only about five percent at the largest scale we are talking
there. Some of the actual plants that we would be looking at
would be anywhere from 30 percent to say 10 percent of the
total plant output at the largest scale that I mentioned on the
existing plants.
Mr. Inglis. I am also excited for parochial reasons to hear
that you are interested in the IGCC because General Electric is
in Greenville, South Carolina, and that may help business there
and other places. I am very excited about that, and it is very
exciting technology. And so now I am going to ask a question
against my own interest. Why would Southern Company be
interested in doing that? It is more expensive than sort of a
conventional coal-fired plant, right? Are you just good
citizens?
Mr. Monroe. We really see the future as being one that we
expect limitations on carbon emissions, particularly for our
sector. So to try to sort of smooth that transition, to try to
service our customers as reliably as possible, we are spending
more money for that generation than it would be for the
alternative.
Public Service Commission Challenges
Mr. Inglis. Do you have any trouble with the PSC, Public
Service Commission, getting that approval? I hope not, but
something tells me you might, and this is one of the issues
that Duke is encountering in South Carolina. You know, you deal
with nuclear, it is a great way to make electricity, but
getting it through the PSC can be really difficult because it
sure is cheap to make coal-fired electricity.
Mr. Monroe. Yes. On the project in Mississippi, we have
asked. In mid-January we had submitted the request for their
consideration for their approval of that. We do have a little
bit of help there in the fact that our CO2 will
actually be--we can sell that to oil producers in Mississippi
so that we are not paying to do a geological sequestration test
but actually selling it. It will eventually be sequestered in
those enhanced oil recovery operation, but that is a benefit
there.
Mr. Inglis. It makes economics work a little bit better for
you there.
Mr. Monroe. But still not compelling, so that the Public
Service Commission is still one that is very much up in the air
for that plant.
Mr. Inglis. Got you. Interesting. Of course, those
economics would change, I take it, if there was a price
attached to carbon, either through what I would like to see as
a revenue neutral carbon tax or cap-and-trade. Either one would
cause those economics to change, I suppose, and the Public
Service Commission would be more easily convinced I suppose?
Mr. Monroe. Yes, we do see that changing. Our fear and the
reason we are pushing so strongly now for technology is that we
are afraid of a dash-to-gas so to speak. So if you run the
numbers right now, we need more electricity generation, natural
gas is the one that falls out when you put all the numbers down
on the paper. So we think that we have to do this sort of work
both sort of at scale and go back to universities, national
labs, in cooperation with utility companies, to see if we can
find new technologies to make that cost differential so that
coal becomes one choice that is still valid in the future.
Mr. Inglis. And I am very excited to hear about Southern
Company's commitment to this kind of research. I had an
unfortunate meeting one time with a utility that will go
nameless that told me that they didn't have an R&D department,
and they seemed sort of proud of it that they didn't have one.
And I guess it is because they didn't want to say to the PSC
that we got all this in our cost structure, but hats off to you
all for wanting to pursue the answer and somehow getting the
PSCs in various places to agree that it is okay to pay all
those people.
Mr. Monroe. It is part of our personality, and we take a
lot of pride in the fact that we have a very active, very
aggressive--some of the international cooperation that was
mentioned earlier, on some of these projects we have talked to
people in Sweden, in Denmark, in Germany, Japan, and England
about participating in our project and sharing information
there. So the benefit of having a research staff and active
organization is you can reach out and find these technologies.
Mr. Inglis. Great. Thank you.
Mr. Costello. The Chairman thanks the gentleman and now
recognizes the gentleman from New Mexico, Mr. Lujan.
Promoting Sustainability
Mr. Lujan. Mr. Chairman, thank you very much, and thank you
for putting this hearing together. Doctor, you opened up your
remarks and you made a reference to being responsible and
sustainable. Can you refresh my memory on what you said in that
context?
Dr. Der. I think the context was in the use of coal being
environmentally sustainable and responsible in terms of its
use, and that relates to the emissions and the carbon aspects
of it.
Mr. Lujan. And Dr. Der, would you agree that as we are
talking about the future generation of energy in the United
States as well as around the world, that that is really a
concept that we should adopt and embrace as we are moving
forward with the generation?
Dr. Der. I believe so.
Mr. Lujan. Is there anyone on the panel that doesn't agree
that that is where we need to move energy generation when we
are talking about being responsible and sustainable with the
way we are going to be generating power today and tomorrow?
That is great to hear.
As we are discussing the future of generation and some of
the improvements that are being invested in and made by
utilities across the country and some of the awareness that is
being generated around the world, Mr. Monroe, what is one of
the biggest reasons that your company has moved forward with
commitment in research and development? Is it to be more
responsible the way that we are generating power today, to do
things better than the way we have been doing them in the past,
maybe?
Mr. Monroe. It is sort of a balanced view, is to--we have
always tried to balance sort of the cost of electricity we
supply to our customers with the environmental footprint that
our generating plants have. And so as we become more aware of
how our emissions may effect the climate, we have become much
more worried about that and so have moved forward with research
trying to anticipate. What we don't like is to suddenly have
very steep changes in the way we would generate electricity,
and so we view through research a way to sort of smooth out
that path so that when we see a future transition coming, we
start actively working on it.
Mr. Lujan. So with that being said, would you agree that we
can do things better than the way that we are doing them today
when it comes to the way that we are generating power from the
various resources that we have, renewables included?
Mr. Monroe. Yes, we can, but again, in this concept of
balance between affordability of electricity and what we do,
environmental footprint, that is our main concern, is sort of
doing a good job for our customers to bring them affordable
electricity. In your area of the country, renewables are much
more accessible than they are in the southeast, so we have been
working quite hard to try to find out how to do significant
renewables. We don't have much wind in the southeast. The solar
energy appears to be there, but because of haze and humidity,
it is not that effective in the deep south. So the one area
that we look at the closest is biomass. And so we are in the
process as we speak of converting one of our older coal plants,
taking the fuel away as coal and adding it as wood from the
forests of Georgia. This is in Albany, Georgia, a small plant,
about 100-megawatts. So we are moving in that renewable
direction as well. We are also investigating nuclear power as a
way to minimize that environmental footprint.
But as I mentioned in my testimony, we are still a very
large, coal-based sort of system, so we have started to put
lots of resources into looking at, is there a way to lessen the
footprint of these coal plants?
On the Affordability of Clean Coal
Mr. Lujan. Thank you. Dr. Der, when we are talking about
the future of generation of electricity, the way that it is
moving forward, when you talk about pulverized coal and the way
that it has been generated in the past and the concern about
moving forward and the support, even though the project didn't
move forward under the previous Administration with this whole
concept of clean coal, I noticed that in your testimony that
you talk about advanced coal but the only mention of clean coal
is in the description of some of the agencies that are working
with you. Is there a reason that you chose to use the word
advanced as opposed to clean?
Dr. Der. Yes. I think advanced coal implies that we are
working on technologies that make it clean which would include
the capture, the carbon associated with it. In advanced coal,
we are trying to move that yardstick forward to looking at
technologies that are affordable that allow us to reach those
goals of reducing those emissions including carbon.
Mr. Lujan. And one last question, Mr. Chairman, Dr. Der, as
we are moving forward with the way that we are looking at
generation today, should future proposed coal-generating
facilities be really maybe put on hold or considered to scale
back until we are able to move forward and develop these
important technologies there have been such a serious
investment in?
Dr. Der. I think because of the projections and the
increase in the electricity demand and the needs for this
country and around the world, I think we still have to retain
that option to move forward while we work on the research to
reduce that cost and its performance. We need to move forward
in a parallel approach for the same reasons that Mr. Monroe
advocated, that we need experience in looking at some of these
coal plants that we can put carbon capture and storage onto,
even though they are expensive now, and the experience that we
have from doing that are lessons learned that allow us to do
things a little more efficiently while we bring down those
costs and wait for these new technologies to be put on and
replace these technologies here. So I think the overall future
demand would probably not allow us to maybe put a hold on coal.
We should do it as we say in an advanced, clean manner,
including the carbon capture.
Mr. Lujan. Thank you, Mr. Chairman.
Mr. Costello. The Chairman thanks the gentleman and now
recognizes the gentleman from Florida, Mr. Diaz-Balart. Thank
you. The Chairman now recognizes the gentlelady, Ms. Edwards.
Concerns and Skepticism About CCS
Ms. Edwards. Thank you, Mr. Chairman, and thank you to the
panel. I am just curious. I just want to be really clear about
that. Can you just raise your hand if you are at all skeptical
about CCS as a future technology? Can you please describe your
skepticism, and especially as it relates to reaching peak
greenhouse gas emissions in 2015?
Ms. Forbes. We have to demonstrate it. I think the reach is
really promising, but we haven't done it at scale and I think
one of the things that we learned in developing the guidelines,
we have to balance our confidence about the fact that we think
this technology is going to work and it is an important part of
a portfolio solutions for climate change with the fact that
there are still questions that we don't know, questions that
can't be answered until we move forward with the
demonstrations.
Ms. Edwards. Can I just ask, just in terms of the amount of
the expenditure over the lifetime of this particular
investigatory stage that could be spent not just in renewables
but in existing coal plants and making those more efficient
because they exist? It seems to me a lot of the discussion is
about building new plants, and in this country and around the
globe, we have old plants that are in existence that are
inefficient, that are producing CO2 emissions at
tremendous scale and yet we are investing in a technology that
may or may not work in 20 or 30 years.
Ms. Forbes. Technology for carbon capture and storage must
include approaches that apply to the existing fleet to post-
combustion capture. The original FutureGen was an integrated
gasification combined cycle would be a new plant, but CCS
broadly should explore opportunities to deal with the existing
fleet as well as the plants that they are building in China and
India right now.
Ms. Edwards. And is it your view that the current plan, the
evolved plan from the canceled FutureGen project, focuses on
existing plants?
Ms. Forbes. I would defer that question to Mr. Gaffigan. I
believe it allows for existing plants for post-combustion, and
I think that is one of the pros of the new approach, but I also
think there was a substantial investment in the original
FutureGen that shouldn't be ignored. I think there are
advantages to both approaches.
Ms. Edwards. Mr. Gaffigan.
Mr. Gaffigan. It allowed for both.
Ms. Edwards. Is that what is happening?
Mr. Gaffigan. We don't know. DOE has gotten a small number
of proposals from the restructured FutureGen. They have asked
for more information from some of the proposals--right now it
is in the negotiation phase. I don't know if Dr. Der has an
update, but right now the main difference to think about is,
you know, the original FutureGen was an exclusive focus on
IGCC, and whether that is good or bad, I will allow the policy-
makers to decide. It was an exclusive focus. It was considered
one of the tools going forward. And the difference now, even in
the initial proposal for restructured FutureGen, it talked
about an IGCC focus, but when the actual bid went out for
proposals, they had also allowed for others to include
existing.
Ms. Edwards. And how many existing coal plants do we have
in the country? Anybody know?
Mr. Gaffigan. Somewhere over 600 in this country I guess,
according to Dr. Der. It depends on the size of some of these
plants. Some are very small. We have heard figures of about
1,100 but that might include some really small plants.
Ms. Edwards. Okay. And then Mr. Gaffigan again, in terms of
the cost, I mean, I understand you know, the math error which
is unbelievable. I mean, we should send everybody to second
grade. But I wonder, even in the best circumstances, would a 39
percent overrun have been acceptable over the life of a
project?
Mr. Gaffigan. Potentially again, as these are very
preliminary cost estimates, and you are going to see some cost
escalations, especially with state-of-the-art and new R&D type
things. Whether 39 percent is tolerable or not, that depends on
how it is managed throughout. What I would point out again is
that there was a new cost estimate being prepared that probably
would have given better information and was more site specific.
Ms. Edwards. But I mean, in fact though, if GAO were
evaluating a project, whether it is in this department or
another department with a 39 percent cost overrun, you would
have raised some questions about that, wouldn't you have?
Mr. Gaffigan. Well, we have, sure, depending on how it was
handled. I mean, they could have decided that they wanted to
pursue a different scope, and it was agreed upon that that
would cause the cost increase. It is whether it is managed or
not that I think is key. I mean, there are some projects in DOE
we just recently tested more on the weapons side. I think we
looked at eight out of ten projects, and combined, there was
over $14 billion in cost overruns.
Ms. Edwards. Yes, I know, and I think a lot of us have some
concerns about that. And then just out of curiosity, Dr. Der, I
wonder if you could talk to me about the ability to rely on a
projected operation or commercialization say in 20 years with
investments, even in the revamped FutureGen and how that
relates to what we might take that same money and spend on
other kinds of technology that would serve to reduce carbon
emissions in the 20 to 30 years?
Dr. Der. I think given the magnitude and the reliance that
not only the United States has on coal for power generation but
the rest of the world, I think it is important for us to work
on solving that problem. You are right in saying that we have
an existing fleet and Mr. Gaffigan was talking about the fact
that the FutureGen project looked at new construction. Our
program is more comprehensive than just looking at the
gasification. It addresses the capture, the stack capture of
carbon emissions from existing fleet. It is a challenging and
daunting task. The Secretary is committed to focusing on that
as an additional area of emphasis as well. So I think the
problems should be worked on now.
Ms. Edwards. Thank you, Mr. Chairman.
Mr. Costello. The Chairman thanks the gentlelady and now
recognizes the gentlelady from Texas, Ms. Johnson.
Original FutureGen Project Cancellations
Ms. Johnson. Thank you very much. I know that this was a
different Administration, but why was the project canceled last
year or in the last two years?
Mr. Gaffigan. We were asked that question, and we asked
over and over again, and we were told that it was because of
the cost doubling. And we were pointed to the Secretary. It was
his decision, and we were pointed to his testimony on the
matter. So the bottom line for the most part the answer was
because the cost had doubled.
Ms. Johnson. And you are ready now to look at it again for
less cost?
Mr. Gaffigan. Well, I guess that would be up to the current
Administration, whether they want to look at it. Our point was
that there were very preliminary cost estimates, and to throw
out this doubling was really not accurate in terms of the
potential cost increase. I don't know if Dr. Der wants to add
to that.
Dr. Der. It is my understanding that the Secretary is
planning to meet with the FutureGen Alliance to restart
discussions on this particular project.
Mr. Costello. If the gentlelady will yield to the Chairman?
Ms. Johnson. Yes.
Mr. Costello. The reason as you will recall given by the
Administration for canceling the project was the escalating
cost, and the Administration indicated they didn't anticipate
the increase in costs. They were using, as Mr. Gaffigan--I
won't put words in your mouth. If you will explain the numbers
that they were using in terms of real dollars versus----
Ms. Johnson. Imaginary.
Mr. Gaffigan. Well, roughly, and this is ballpark, they
were talking originally about a billion dollar project. They
compared that to an escalated cost through 2017 of $1.8
billion. If you took those dollars and took them back to the
same year's dollars, you would be talking about roughly $1.3
billion. So the actual increase that the Alliance brought
forward was about $300 million. And I also point out that that
was discussed in March of '07 when they signed the latest
cooperative agreement or the next part of it, the continuation.
It was only after that then that we started questioning this
cost and then the concerns about the doubling of costs started
to be talked about.
Mr. Costello. And I would point out to the gentlelady that
Chairman Gordon, Chairman Baird and myself and Mr. Lipinski
asked the GAO to do a report and to look at the reason. You
know, was it in fact cost, and I think the GAO report which is
being released today will indicate that it was not cost and was
not justified stopping the project because of cost. And they
looked and analyzed the numbers and said that the
Administration was not using accurate figures.
I pointed out earlier, too, in an earlier Subcommittee
hearing as you will recall, if you look at other projects in
the same timeframe that increased in cost, it was as a result
of the increase in cost of building materials, concrete, other
materials, as well as labor. So I thank the gentlelady for
yielding.
Ms. Johnson. Thank you very much. That is the end of my
question.
Mr. Costello. The Chairman now recognizes Mr. Tonko.
Infrastructure and Resource Demands
Mr. Tonko. Thank you, Chairman. Thank you for this
important hearing, and I thank the panel also. Dr. Der, the
issue of infrastructure for carbon capture and storage is one
that comes up often, and I am wondering where the Department
might be in terms of analyses that are done or any efforts
being done on a process to address pipelines that might be
required to deal with the point of emission onto the storage
area and if there is a plan to do that in a national framework.
Dr. Der. The pipeline infrastructure that would be
associated with carbon cap and storage, depending on how far
the transport of the CO2 goes, could be
considerable. The jurisdiction as I understand it relative to
pipeline infrastructure and regulations does not rest with the
Department of Energy; it rests, I believe, with the Federal
Energy Regulatory Commission and to a large degree with the
states.
Mr. Tonko. Is anyone else on the panel able to offer any
thoughts on that as to how that infrastructure may be addressed
in your particular cases?
Mr. Gaffigan. I would just offer one thought, and I think
it goes to Ms. Edwards' earlier comment about, you know, are
you skeptical about CCS? I don't know if I am skeptical. What I
would say is there are a great deal of uncertainties, and this
is definitely one of them, the infrastructure to move the
CO2 around at the scale that Ms. Forbes is referring
to. I mean, I think we know we can do carbon capture and
storage. Can we do it at this huge scale and put all this
stuff, move it around, put it in the ground and hope that it
stays there?
Mr. Tonko. And in terms of another bit of infrastructure,
with water demands that may be increased and enhanced, are
there efforts being made to review just what the water issue
might be for some of these facilities?
Dr. Der. Yes, I think there was a panel yesterday that
talked about water and energy nexus and the discussion that
centered around carbon capture and storage did indicate that
there would be an increase in water usage given the current
capture technology that exists today, and one of the things
that the Department of Energy is looking at are advanced
capture systems that would reduce the consumption of the water
as well as the energy penalties associated with it as well as
the cost of the components.
Mr. Tonko. Thank you very much. Now, as in my last station
before coming here, I was at NYCERTA in New York with the
Energy, Research and Development Authority. I know there are
those who are looking for sequestration facilities, and there
are a lot of concerns about the price obviously and a number of
the dynamics that need to be addressed in order to provide for
a safe and effective outcome. But I thank you all for your
input.
Mr. Costello. The Chairman thanks the gentleman and now
recognizes the Ranking Member for another round of questioning.
Mr. Inglis. Thank you, Mr. Chairman. You mentioned
breakthroughs earlier and the hope for breakthroughs. Help me
figure out where is it likely to come from. Anybody want to
take a shot at what kind of technologies, what kind of
processes might give us these breakthroughs?
Mr. Monroe. I will start. The technologies we would use
today, and it really doesn't matter whether it is IGCC or a
conventional coal plant really, are adapted from chemical and
petroleum industries. They use a water-based chemical, a basic
chemical to capture the acidic CO2. Part of the
energy penalty is, and you mentioned the water usage, that is
part of the water usage. So we capture the CO2 with
this water mixture, we have to take it somewhere else to get
the CO2 to turn loose, we reuse the chemical and it
is really the heat to make that CO2 turn loose that
makes it so expensive on the capture side. It is the energy to
do that. That is the biggest piece we looked at for benefits
there. We still have to compress the CO2, so there
is still a significant sort of energy to make it a high enough
pressure to put down a pipeline or even push underground. So we
are really looking at how to take CO2 out of the
stream.
So I will mention some that are interesting to us. Some are
solid chemicals that could capture the CO2. Then we
wouldn't have to heat up this 70 percent water and waste all of
that heat. Membranes to sort of on a molecular level filter the
CO2 and get the CO2 to come through this
filter, but the rest of the gas not come through, are some of
the most promising ones right now.
Mr. Inglis. Anybody else want to----
Innovative Technologies
Mr. Gaffigan. I just want to weigh one thing in terms of
the technology. Obviously, GAO doesn't bring the technology to
the table. We were really impressed with the wide range of
expertise that is out there, both in the private sector and at
DOE. But what I would say is going to sort of bring the
breakthroughs is the incentive to do so and to let that private
sector get out there and do those things. And I think one of
the signals could be some regulatory certainty about what we
are going to do about carbon. That would bring that private
sector to achieve some of these breakthroughs.
Mr. Inglis. Interesting.
Dr. Der. The Department of Energy and its national
laboratories and universities are actually working very hard on
this particular issue about the energy penalty and the costs
associated with these revolutionary ideas, and as the Secretary
mentioned, these transformational, game-changing technologies.
Some of the ideas out there right now include the clafate
capture of the CO2, which basically is, it locks it
into a structure and you can re-release it. There are ideas
know as ionic liquids where it is basically a filter where the
CO2 goes into these spaces and again, with just a
very small amount of energy and pressure differentials, you can
re-release that as well. So the key here is capital costs,
energy penalty reduction, and making sure those technologies
integrate well with the power plant or any other type of
industrial source.
Dr. Finley. I would like to add one more comment. I think
it is very important if we look at some of the soft ideas,
though not hard technologies, we need to relate to. We need to
understand who owns the pour space. We need to understand a
regulatory framework in which this will take place. We need to
understand, how do we go about leasing the subsurface rights in
the land areas for large-scale demonstrations? And not only
that, we need to look beyond--we are now at the deployment
phase for testing. What happens for example in a given
geological region if, for example, you have 20 of these
projects putting away five million tons a year per project in
the subsurface? What does that do on a large regional scale to
aquifers, the subsurface environment, and so forth because
ultimately the scale of this to be totally effective could
become quite large, and the issue of public acceptance and the
framework in which this takes place legally and from a
regulatory framework must also be looked at.
Mr. Inglis. Any idea whether China has favorable geological
formations for sequestration? Anybody know that?
Ms. Forbes. There have been some preliminary studies. It
looks like there are some willing gas fields in China that are
promising that would be potential opportunities and also some
of the U.S. geologists have been going over to China and
working with the Chinese, specifically with Shenhua to look and
see--that is the biggest coal company in China--to see,
associated with one of their big coal-to-liquid plants. They
are doing a test injection, and they have been doing real
characterization of the geology to determine how it is going to
work. It is potentially promising.
Mr. Inglis. Very helpful. Mr. Gaffigan I think has a key
thing there that is so exciting to hear, the concept of the
private sector having an incentive to do this because you know,
what Microsoft and Apple did for the PC and the Internet, the
private sector properly incentivized by a price signal being
attached to this negative externality and have that attached to
the product would drive innovation faster than anything we
could do from this Science Committee or anything we could do in
Congress.
Mr. Gaffigan. Absolutely. It goes to your point about your
PSC's. They are not going to approve things until they see it
is in their best interest. Most of the folks out there are in a
wait-and-see.
Mr. Inglis. Right.
Mr. Gaffigan. They are wait and see.
Mr. Inglis. Thank you. Thank you, Mr. Chairman.
Project Siting
Mr. Costello. The Chairman thanks you. Dr. Finley, in your
testimony you talk about the importance of characterization,
and I wonder if you would talk about how long it takes to
conduct robust site characterization and also the cost
associated as well?
Dr. Finley. I think if you were to start at ground zero,
let us say in a region where you know such a project currently
existed, you would probably need at least a year to put
together a full-scale geologic framework based on existing
data. At that point in time, I think you would be ready to run
geophysics and to perhaps drill a preliminary well, a
stratigraphic test. Carrying that out and aligning that data
would take you at least another year or so I would think, a
two-year process at a minimum from the get-go to at least to
have an understanding of whether a site would be suitable. I
think the cost of doing that at a minimal framework could be in
the range of let us say $15 to $20 million.
Mr. Costello. And do you know how much the State of
Illinois spent on looking at the sites in the State of Illinois
in order to make their case to the alliance?
Dr. Finley. I believe State funds, certainly several
million. I don't know the exact number, but I know that almost
$1 million was spent in the State of Illinois funds since the
project was canceled alone to demonstrate the continued
suitability of the site and the contribution that the State
made to the Alliance purchase of the 400-plus acres for the
site.
Mr. Costello. And I think that is one of the points that I
made earlier about being outraged in pulling the plug. This was
a competitive process, and the State of Illinois and other
states as well spent millions of dollars in the competition. So
I wanted to point that out. If you start from ground zero, you
are talking about a minimum of a two-year process and at least
in Illinois, my knowledge of the site that the Alliance
selected, the State of Illinois spent well over $10 million and
probably closer to $20 million in this competition.
Dr. Der, let me ask you, and I don't know if you are in a
position to tell us, but to your knowledge, how is the
Department planning on spending the funds available under the
Recovery and Reinvestment Act?
Dr. Der. The guidelines that were put into the legislation
put monies into certain pots of that $3.4 billion. There is
$800 million that is going to go to augmenting the CCPI round
three which includes carbon capture. There was another $1.52
billion in there for looking at industrial carbon capture and
storage projects, $50 million associated with the
characterizing additional sites, $20 million for some research
and training on the geological sequestration. The remaining $1
billion is something that the Secretary and the Department is
still making decisions on and will probably come to that
shortly.
Mr. Costello. Would you in your opinion being involved in
the FutureGen program in the Department for the last five-plus
years, would you classify the FutureGen project as a shovel-
ready or near shovel-ready project as far as sequestration is
concerned?
Dr. Der. I would probably characterize it as something that
would be near shovel-ready. We have to probably finish up some
work that was not finished up in the preliminary design phase
that was specific to that particular site, do some more of the
characterization that Dr. Finley talked about specific to that
and finish up the design. And after doing something like that,
it would be pretty much ready to go forward.
Mr. Costello. Is there any sequestration project that you
are aware of that is more advanced or ready more so than
FutureGen?
Dr. Der. Not to my knowledge at the current time, sir.
Mr. Costello. Last question, Dr. Der, can you share with us
some of your thoughts or concerns about the restructured
FutureGen program?
Dr. Der. I think when you look at it on balance, the
restructured FutureGen program sort of addresses a different
issue than the original FutureGen. The original FutureGen as an
advanced platform for testing these new technologies was to
push the stick forward, if you will, on the technology for
gasification. In the restructured FutureGen, it focuses on
putting technologies that we have today onto existing
commercial platforms and to gain that kind of experience early
on, and that in itself also has value. So it is a judgment call
as to, you know, which way do we go on something like that.
International Partnerships
Mr. Costello. My final question of you, Dr. Der, and I
would ask Ms. Forbes or any of the other witnesses to comment,
we talked about international partners that were very
interested and committed actually to participating in the
FutureGen project, China, India, a number of other countries.
One, my understanding is the way that some of these countries
found out that we were pulling the plug is they read it in
media reports. They were not given advanced notice. Two, do you
feel that the interest will still be there that we can still
bring these other countries and international interest into
this project?
Dr. Der. I think the Secretary Chu has indicated that it
makes sense for countries to collaborate and coordinate its
portfolio projects, and I know that he has been taking a very
proactive position in contacting his counterparts around the
world. And I have all the confidence in the world that he will
be successful in doing that.
Mr. Costello. Ms. Forbes, would you want to comment?
Ms. Forbes. Yeah. Based on our experience in working with
some of China's leading CCS experts, I would say there is
definitely interest in collaboration on demonstrations and also
on issues that are associated with policy and regulatory and
really building capacity. They like to work together.
Mr. Costello. Any other comments from----
Mr. Gaffigan. Just a quick note, you know, I think the
international partners were putting out money toward this, up
to eight percent, and one of the considerations in looking at
options for cost escalation was to look for whether they were
going to contribute more. And as I understand it, we still have
the money from India, so we need to make a decision there one
way or the other.
Mr. Costello. Dr. Finley.
Dr. Finley. I think your point is very well taken. It is
all one atmosphere, and I think to the extent that we provide
technology in a collaborative manner with international
partners around the world, I think it is absolutely essential.
I think in some cases these partners for example are not even
totally aware of the level of effort that the United States is
making, and I think in part the case when the Chinese
delegation visited our site in Decatur, they were very excited
to see an actual well going down into which we would put a
million tons of CO2.
Mr. Costello. The Chairman thanks you and now recognizes
the gentleman from Florida, Mr. Diaz-Balart.
Mr. Diaz-Balart. Thank you, Mr. Chairman. I will be brief.
GAO had said that incentives would really come from regulatory
certainty and that a price on carbon would spur technological
innovation in effect. Are we seeing those technological
innovations coming from Europe as far as CCS is concerned? How
much and how dramatic and how aggressive?
Mr. Gaffigan. The international expertise is not my
bailiwick, but I will say from what we have seen, you know,
they are struggling with their system to figure out, is it
working? And I think we will probably go through some of the
same things.
My point in general is that in this country, folks are
looking for that regular certainty. Some folks like Mr.
Monroe's company are trying to hedge a little bit and
anticipate what might happen. I am not as familiar with the
international activities in Europe. I don't know if Ms. Forbes
might be.
Ms. Forbes. Three things that I would like to mention going
on in Europe. First, the European Union has finalized a
directive for geologic sequestration which includes the
environmental regulatory structure for how to do CCS
responsibly. There has also been an effort, and this is in my
written testimony as well, to commit funding for CCS
demonstrations, a network of 10 to 12 throughout Europe through
proceeds from the European trading scheme. Additionally, some
of the European utilities have been really proactive. It is my
understanding that one of the European utilities actually has
pilot-scale tests of each of the commercial capture options
that are out there today, and they are currently operating and
basically testing all of them to see which one operates the
best.
Mr. Diaz-Balart. Again, we are not--I am sorry. Yes, sir?
Mr. Monroe. We see lots of ideas coming to the table now,
so people are engaged in the subject. We see the beginning of
sort of basic R&D sort of really kicking off now. We do worry
about too much regulation too quick and that sort of we would
be forced into building gas generation, then, to meet that. So
we see the sort of ingenuity of the American people in the
university system and national labs already engaged on this
issue. They are not waiting for anything further.
Mr. Diaz-Balart. I am not saying that you should know
obviously, but do any of you have any real idea as to what we
have seen with these technological breakthroughs coming from
Europe? Because they do seem to have some I guess certainty.
Has Europe become the bastion of CCS technological innovation?
Ms. Forbes. I think U.S. R&D program for CCS is among the
best in the world. The Europeans are also doing a lot of work.
They have gone further on the policy and regulatory side than
we have here in the States. But our research program is--the
IEA did a study, and it called the Regional Partnership Program
specifically the world's most ambitious program. Unfortunately,
that program is not very well known internationally, and I
think we could do some programs to offer exchanges to get more
experts like Dr. Finley in the international community and get
some exchange happening.
Mr. Diaz-Balart. Thank you. Thank you, Mr. Chairman.
The Viability of CCS as an Investment
Chair Baird. Thank you. I'm sorry I had to step away. We
had action on the Floor and a bill I had worked on, ironically
on ocean acidification, so maybe appropriately so. As I look at
this capture and sequestration, I have a couple of questions
that come to mind. I will put those out there, and maybe you
can address them. One has to do with just estimated net
capacity. In other words, what is the width of likely amount of
carbon that we can capture, and timeframe. The best climate
change/acidification scientists I know of say that we should
shoot for nothing higher than 350 parts per million as a goal,
and we already exceed that in terms of atmospheric loading of
CO2. We already exceed that, and so my question is,
how long is it going to take us to get some meaningful
reduction in CO2 output, and what is the likely
capacity we can. And my hunch is it is going to take a long
time and we are not going to be able to ultimately get that
much out. And then the question for me is should we not then
focus on other modalities as a priority for our financial
investment? I will just put that out there, and whoever wants
to take a swing at it I am happy to hear from.
Dr. Der. You are all looking at me. From what I have read
in the literature, including the IEA reports, if we are going
to come down to some kind of a stabilization in the atmospheric
concentrations or whatever level that is key, it shows that
carbon capture and storage, along with the other mitigation
measures, constitutes somewhere around 20 percent. Other
reports say a little bit higher. That tells me that it needs to
be an essential part of the portfolio of mitigation measures,
along with efficiency, in-use efficiencies, nuclear, wind,
solar, and natural gas. So it is very difficult to get to
stabilization without looking at carbon capture and storage
because of the existing inventory that we have out there that
relies on fossil fuels.
The other thing is that the storage capacity at least in
the United States. Dr. Finley could probably answer the
question better than I. We have done a national atlas of the
storage capacity in North America, primarily Canada and the
United States, and it shows that we have considerable storage
capacity, several hundred years' worth. And looking at the
point sources where the power plants are and where the
potential storage sites might be, and what are the reasons for
looking at saline reservoirs is because that type of formation
in the wet sands represents the majority of that storage
capacity. And I defer to Dr. Finley to augment my statement on
that.
Dr. Finley. Yeah, I can quote you the numbers from memory
for the Illinois basin, just to give you a representative
example. That region of Illinois, Indiana, and western Kentucky
emits about 304 million metric tons of CO2 per year
from stationary sources. 90 percent of those sources are coal-
fired power plants. So we have got say a third of a billion
tons. The storage capacity in the saline reservoir as Dr. Der
mentioned is roughly between 27 and 109 billion metric tons. So
we have at least probably in the order of at least 100 years of
storage, possibly 400 years of storage in saline reservoirs in
this region.
The second version of the second edition of the atlas that
DOE has put forth has refined some of those earlier estimated
numbers. The reality is that certainly 200 years' worth of
storage, if we could capture virtually all of the emissions
from the known current stationary sources.
Chair Baird. What about the timeframe? When do we think we
will be able to do this?
Ms. Forbes. I will be happy to take that question. I think
that the question of the timeframe is really about what--we
haven't demonstrated it yet. We don't know if can play. Right
out analyses, as Dr. Der mentioned, of how we are going to get
to global goals for climate change rely heavily on CCS. The IEA
study says to cut 50 percent of the projected emission
projections that we need to cut by 2050, CCS is for 20 percent.
So unless we demonstrate the technology, it is not going to
play. So ultimately, I think the urgency is on demonstrating it
and how those demonstrations are going to go will depend on
when we decide to do it.
Mr. Monroe. And I would agree with that. I work with the
Coal Utilization Research Council, and they are probably the
most active at looking at least for coal plants what is the
ramp to get from where we are now to what we would call
commercially ready carbon capture and sequestration. So it is
different than commercial availability. Commercial availability
is when someone will sell you something. Commercially available
to us means when do the banks accept it for financing, the
regulations are set. We can build a strong business case with
Public Service Commissions' signing on for that for it to be
ready. So in answer to your question specifically, we are
looking at a timeframe of 2020 to 2025 if we are doing this
demonstration sort of up-ramp between then and now so that we
think at that point the utility industry would be ready to sort
of start installing those as a normal matter of course. So when
we look at that, between now and then, we are looking at maybe
15 gigawatts which might be as many as 30 plants sort of as
part of this demonstration and development and sort of
different options. So in this route, we like a lot of
duplication. That is not great to hear, but we like different
technologies. We think we need sequestration in different
regions of the country for public acceptance regulatory sort of
thing. So in this case, it sounds like a lot, but we do need
those parallel paths to get there.
Urgency and the CCS Timeframe
Chair Baird. I appreciate that. I will close with just this
concern, 2025 sounds like a long time away to me given the
urgency of the situation. Already off our coast in the
northwest we are seeing acidification rates that are presumably
harming shellfish and other creatures, and 2025 is a long way
away, and that is to start the installation of this and that is
at substantial additional cost per ton of coal burned. So the
question for me becomes economics, environmental impact, and
practicality. It feels a little bit like having followed the
debates on fusion energy for 20, 30 years now myself, it is
always 20 or 30 years away. It feels a little bit like that,
but the urgency is greater and maybe your technology is more
promising. I would hope it is. But I just want to put that
concern, and I would hope we would not see capture and
sequestration as the deus ex machina that saves us. I think
there may be other machinas if not other deuses. I am not sure.
Dr. Ehlers?
Mr. Ehlers. Thank you, Mr. Chairman. As far as fusion is
concerned, it used to be 20 to 30 years away. Now it is 30 to
40, so we are making progress. Just call me the Bernie Madoff
of physics.
Global Participation
I am sorry I missed most of the hearing. I had four
committee meetings going on simultaneously this morning, but
just a quick question. In the brief time I have been here, I
heard a lot of different nations mentioned, but I haven't heard
Russia mentioned, which I believe has tremendous coal reserves,
and are they an active player here? The second is along the
lines of the Chairman's question about when this is going to
happen. I worry less about the science. We can do the science
if we are willing to put the money in. I worry much more about
getting acceptance throughout the international community, that
this is something that is fiscally and environmentally worth
doing. And is there any indication that all the other nations
are willing to join in doing this if we do? Because otherwise,
we are, given the use of coal throughout the world, even if we
do a marvelous job in this country, it doesn't really solve the
problem. So I would appreciate comments on those two questions.
Ms. Forbes. With respect to Russia, in the international
CCS meetings that I have attended, I haven't seen Russia
participating. I don't know that they have a demonstration
planned, but there are a number of other countries worldwide
who have plans for demonstrations similar to the FutureGen
project. Australia has a project, China has a project, Europe
is planning 12, Canada has a project. So we do have quite a
global commitment towards demonstrations of technology.
Mr. Ehlers. And do we have the commitment toward
implementation? That is the real key.
Ms. Forbes. I don't think we have commitment toward
implementation yet. I think we have commitment toward
demonstrating the technology. I think we are moving toward a
global sweep of demonstration projects. I think implementation
is the next step, and in some ways we have to talk about
implementation now because of urgency of the climate challenge.
But in other ways you can't talk about it until you have at
least one demonstration in the ground.
Mr. Ehlers. I agree, but that is the part that I am very
nervous about and that was, as far as I was concerned, the
failure of Kyoto from the start. I thought the general idea of
Kyoto was good, but I had trouble supporting it because it was
made universal and it doesn't make sense that we spend billions
of dollars in this country and many other countries to try to
stop something when other countries are not going to do it.
What we gain through our efforts, we lose through their
efforts. So I think it is absolutely essential that there be
strong international agreements if we are actually going to
proceed with this. Thank you. I yield back.
Chair Baird. Ms. Edwards.
Investment Through 2025
Ms. Edwards. Thank you, Mr. Chairman, and just an
observation that again, 2015 peak emissions if we are right
about our models, 2025, a demonstration project at some point
of commercialization that may or may not be successful. And so
we are actually relying at this time knowing that we are
approaching peak CO2 emissions on a technology that
may or may not deliver in 2025. I mean, so we are banking on
success here, and I want to ask you actually, I want you to
think about failure because the cost for failure is really
tremendous.
Dr. Der, I wonder if you could talk to me for a moment
about, you know, if you think about the investment between now
and 2025, what that investment would be? Does the Department
have any projections for that and how much of a burden do
taxpayers have to meet and what is the relative risk then for
private entities and other international partners?
Dr. Der. That is a difficult question to answer at the
moment. I think we have plans in terms of the projections of
the research work and the demonstrations that are necessary. We
engage with the private sector to get their views on what is
necessary to move things forward in terms of demonstrations and
incentives for deployment. It is very important that we do the
science correctly in the sequestration area. I am not an expert
in it, but I do have a higher degree of confidence that it will
work based on the work that is going on around the world and
the experts that are being put to this particular topic, people
like Dr. Finley, people from the regional partnerships. The
Secretary is also committed to working on the back-end capture
costs and the energy penalties associated with that, as well as
the science in terms of simulations and looking at the risk
assessments associated with that. All these things need to be
done as part of the research and development and demonstration
program. Relative to how these things get deployed and what the
private sector investment is going to be is something that I
don't have an answer to at the moment.
Ms. Edwards. And just out of curiosity, are you confident
about your model for projecting the cost?
Dr. Der. We have a research program that sets targets in
terms of bringing down those costs from where they are now. We
look at the research and the options that we have been
pursuing, taking a look at what is its potential. And with
those potentials we have to change that and convert that into
reality as we scale things up. And those are one of the
challenges that one of the Committee Members had also
identified.
But we really have to be able to engage the science and
technology to bring down the cost and also to do the modeling
and the field work and all those things associated with field
demonstrations, drawing on experiences that we have had in the
past from the oil and gas industry and looking at the natural
analogs of CO2 that have been in the ground for
millions and millions of years so that we can make these models
and risk assessment in going forward in time.
Ms. Edwards. Okay. And then finally, just one question
going back to Mr. Tonka's earlier question about water and the
amount of water that you project that it will take to operate
these plants, I am curious about electricity and the amount of
heat that is required and electricity required to operate the
plants and to function and their estimates. I think Mr. Monroe,
in your testimony estimates that 20 to 25 percent of the
electrical output is required for operation. There are some
estimates I have seen that are as high as 40 percent. And so if
that is true, it is just really getting difficult to see where
the bargain is.
Mr. Monroe. Well, your earlier question talked about
existing plants and why so much conversation about new plants,
and your current question has something to do with that also.
So if I go to an existing power plant today, let us say a
medium-sized plant of 500 megawatts, I may lose a third of that
generating capacity to add 90 percent CO2 capture to
that. So there is two large pieces of that. One is the heat
required in the capture process. That is about 20 percent in
round numbers. The question of the CO2 is around 10
percent. Right now we would buy a large electric motor to
compress the CO2 to get rid of it. We would actually
take steam away from the process for this heat.
We think in a new plant, again, talking conventional coal,
that we may be able to integrate that and drop those numbers
down. Right now we are looking at numbers possibly as only 20
percent. So the new plant would be built that way. IGCC is
actually much less than that, and that is why it is a favorite
technology for new plants. We are building a new plant with
that. The FutureGen is proposed for that. Duke is building one
that may or may not have CO2 capture with it, and
those are all sort of pioneer plants to try to develop that
technology, just because we think the energy and therefore the
costs for CO2 capture with that technology, as we
sit here looking today, is superior.
Effects on the Consumer
Ms. Edwards. Of course, we have a lot of old plants, and
just lastly, Mr. Chairman, do we have any idea what that will
do to the consumer? Like how much is my electric bill going to
go up because we have made the choice to make an investment in
something that is sucking out a lot of energy to produce, you
know, the carbon capture?
Mr. Monroe. There is a lot of people estimating that, so I
will talk about a specific, let us build a new plant. How much
would the cost of electricity from that plant increase with
carbon capture and sequestration? Based on some of the good
work that the Department of Energy has done, that ranges from a
35 percent increase to as much as an 80 percent increase,
depending on the technology, the high end or conventional coal
plants like we are using today, the lower end is with the
gasification plants. So it is significant, and that is really
the reason for demonstrations but also for the basic R&D is to
really attack that.
Ms. Edwards. Thank you, Mr. Chairman.
Chair Baird. Thank you, Ms. Edwards. We are going to have a
vote in just a couple of minutes. I want to follow up with this
line of questions of Ms. Edwards and a bit on the line that I
was asking before.
Comparative Cost Benefit Analysis
If we look at the net expense of carbon capture
sequestration over some timeframe, and that would include the
additional cost passed on to consumers, et cetera, the total
net cost, and we considered how that money--you know, it is an
opportunity cost kind of question. If we consider how that
money might be spent elsewhere, for example, instead of a
concentrated power network going out across the grid, a
distributed power network kind of thing Amory Lovins and his
folks have talked about, how does that pencil out? Has anybody
thought about this? Pencil out not only in terms of net
economic cost benefit but also in terms of timeframe and carbon
reduction. If we were to spend X amount of dollars today, we
could start reducing carbon today versus waiting this long and
presumably that investment today would stimulate alternative
investments in that technology be it solar, small-scale wind,
geothermal, et cetera. How does that pencil out? I mean, the
people at the end of the day, they don't care whether the
lights turn on because somewhere down the road there is a coal
plant, a nuclear plant, on the roof a solar plant, they want
the lights to turn on and their house to be warm.
Mr. Gaffigan. I am holding a pencil, so I will try to
answer that. I think you are going to hear on this committee
over and over again, don't pick a winner, don't pick a winner
as far as technologies. In our view, there is a winner. It is
fossil fuels, and it ended up being picked for a reason because
it is relatively cheap and gives the most power, whether you
are talking about powering your automobile or through
electricity. And I think there is so much uncertainty
associated with alternatives or making a change. But the bottom
line is, it is going to cost more to do so. And I think the
Federal Government has to consider what its role is going to be
in all that, and we have talked about the private marketplace.
But some would argue that, you know, let us send some signals
to the market saying there is a rule about carbon, it is
constrained or it is priced, and let the market try to sort
that out, so we can move from a pencil to maybe some more ink.
And I do think there is so much uncertainty and there are so
many tradeoffs with all these alternatives, whether you go with
coal in the future or you look for wind or solar. Folks in
Germany, for example, made a commitment to solar but they are
paying more because of it. They have guaranteed a price for it,
but that is a choice they have made. And you are right, I don't
know if this will be acceptable to people. If the PSC today
says, you know, we are going to approve a rate increase for
carbon capture and storage, how is that going to go over with
the rate-payers?
Chair Baird. I want to just follow up, Mr. Gaffigan. You
said in our view. Does that mean GAO has an official position
that--I want to ask two questions.
Mr. Gaffigan. Sure.
Chair Baird. I am not really trying to put you on the spot,
I am just curious about this. When you talk about it relatively
cheap, my colleague, Mr. Inglis, talked about the externalized
cost.
Mr. Gaffigan. Right. Right.
Chair Baird. It is relatively cheap if you externalize the
cost. If you factor in the total cost of ocean acidification
and lethal overheating of the planet, it is not so relatively
cheap.
Mr. Gaffigan. No, it is what we are actually charging for
it, and that is the question whether we want to try to put a
cost on some of those externalities. If we do so, then the
rate-payers or somebody is going to have to pay for it.
Chair Baird. Right. Somebody has to pay for it one way or
the other. You don't get to not pay for an acidified ocean. You
don't get to not pay for a two or three degree Centigrade
climate change. You don't get to not pay for that. That is
going to happen. The question is who is paying for it and who
is responsible for it, and that is not something we can pretend
we don't pay for.
Mr. Gaffigan. And we can spend all the money we want on
technologies, but that is not going to make the difference.
Chair Baird. Well, I am not sure of that. Doctor?
Dr. Der. I just wanted to follow up on the statement here.
The climate change and greenhouse gas and CO2
emissions is a global issue, and price signals that happen in
the United States or Europe probably put certain technology out
there at a certain cost. But in the developing economies who
may not have certain price signals but continue to use coal,
such as in China and India, they may not do that. They may, but
at these additional costs today it is very expensive for us. It
is overwhelmingly expensive for them. Therefore, I think the
solution out of the box, if you will, really is these game-
changing technologies that we need to work on to bring that
cost down so that it is affordable not only by us, whether we
have certain levels of the carbon valuation or not, but also in
the developing countries and economies that are going to be
growing and looking for a better standard of living.
Chair Baird. Mr. Inglis.
Joining Entrepreneurs and Inventors
Mr. Inglis. Thank you, Mr. Chairman. This has been very
helpful hearing particularly this last exchange about how do
you get from here to there because, you know, what I think we
should be aware of is until we do what we have just been
talking about, which is attach a price, there would be no
reason to go forward. We have great science projects, and we on
the Science Committee love science projects. But until
entrepreneurs and inventors are marrying each other because a
price signal has been sent that now something is going to
happen and you can make money doing it, you can make money
solving this problem. Until that happens, nothing happens and
we have hope but hope is not a strategy. And so what I
particularly offer to Dr. Der to take back to the
Administration is let us come up with something that works. As
a conservative, I can tell you that there is very little chance
that conservatives are going to vote for a cap-and-trade
system. It is a massive tax increase, by itself is a massive
tax increase. Also, in the aftermath of this financial
downturn, do we really want to hand over to Wall Street traders
some credits that they can trade? Maybe they can turn them into
derivatives, and maybe we can do a bubble out of the
derivatives and maybe we can see what a wild ride we get out of
that.
So, not going to happen. There were 48 votes for cloture in
the Senate this summer when it got tagged as a tax increase. In
the midst of a downturn and with Wall Street looking like it
looks, what is the chance of that number going north of 48?
Answer? Not very much. So even if the House decides to run it
through the House just on a cap-and-trade system, it is dead on
arrival in the Senate. So if you really want to take action,
you have got to find something better, and the collaborative
opportunity that I think we have got is a revenue-neutral
carbon tax if I may be so bold to suggest it, where you reduce
payroll taxes and you apply a tax to carbon, a transparent,
very clear price signal, very definitive price signal. You know
exactly where we are going. Entrepreneurs and inventors know
when to get married and when their technology can take out the
incumbent technology, and it is an exciting opportunity,
really, to bring the best of Republican thought, conservative
thought, which is how markets work when they are properly
adjusted. In other words, you have externalities recognized and
attached to products, and the best of Democratic thought which
has for a long time been, ``we have got to do something.''
So we put those two together and we got a solution that
works, that actually can get through the House and maybe even
through the Senate and it could get by and then we could get
this energy revolution to happen like it happened, as I
mentioned earlier, with the PC and the Internet.
So I am excited about the opportunity available to us if we
would be able to collaborate. If we try to run this thing up
the middle, up the middle punt series of plays, that is what we
will end up with, a punt.
Chair Baird. That is called the Seattle Seahawks.
Mr. Inglis. I went to Duke for college, and when we got
frustrated in the stands, that is what we would cheer about the
football team, up the middle, up the middle, up the middle,
punt. And so you know, that is what we are facing if we try it
just that sort of way. But if we think outside the box and we
hear something that we can actually come together on and find a
solution, I have been talking to the new Secretary about that.
I think there is a real opportunity here, and I hope that this
hearing helps speed it on. I went to making a speech there, Mr.
Chairman, rather than asking a question.
Chair Baird. Let us ask the question. Can we ask our
witnesses if they have some comments on Mr. Inglis' thoughts
here?
Mr. Gaffigan. I would just wrap up and say that I think
they are both important. I mean, I think technology plays a
role, I think whatever signal we are going to send about carbon
is important, and GAO recently did a study on the whole issue
of climate change and talked to a lot of experts. They both
agreed that both play a role, the R&D role and the sending the
right signals or a signal of some kind that gives some
certainty to folks. And they can't exist without each other.
Dr. Finley. I would just add one comment. I think the
portfolio approach is important. Every aspect of efficiency,
renewables, and carbon sequestration is necessary to get where
we want to go, and I would note that Congress has passed some
very significant mandates with respect to alternative fuels,
biofuels, ethanol, and so forth. And from that fermentation
process, you get a 99 percent pure stream of CO2 and
you avoid some of the costs that Mr. Monroe referred to. So let
us do it incrementally. We can take pure CO2 from a
biofuel facility, and we can put it in the ground now and let
us do that sooner rather than later while we reduce the cost of
the parasitic load and the energy load on the power plants that
Mr. Monroe referred to.
Mr. Inglis. You know, it is very important, Dr. Finley, you
just mentioned the mandates. That is one way to go. The
challenge with that is it is not as elegant and efficient as a
pure price signal because then competing technologies are out
there in the private sector, and some of them will win and some
of them will lose. If we from up here do a mandate, and I have
voted for mandates, higher CAFE standards for example, but you
don't get the innovation, the rapid innovation that you could
get if you did it more elegantly by price signaling.
Dr. Finley. I would certainly agree with your point on
that. The mandates are there and particularly as we move
forward with, say, cellulosic or waste product ethanol type
fuels rather than corn-to-ethanol or food-to-ethanol and avoid
that fuel versus food debate, I think there is something to be
gained there and given that those mandates were in place and
presumably there are people out there making an effort to meet
them.
Mr. Monroe. We would agree. We like flexibility there, so
on one end is sort of the mandate to cap-and-trade somewhere in
the middle. We get some flexibility under the cap, but where to
do that? We like a pure price signal so that new innovations
can come in. We don't have to go back to the regulatory sort of
arena to sort of incorporate those and sort of like the way
that spurs it so the company has a large research staff, and so
we like really thinking out of the box, and that encourages it.
Chair Baird. Dr. Ehlers.
Mr. Ehlers. Thank you, Mr. Chairman. First of all, let me
say I will be happy to match our zero to 16 Detroit Lions
against the Seattle Seahawks any day. We don't even go up the
middle, we just throw interceptions. It is much more efficient.
Chair Baird. Let us hope our energy policy can exceed both
of those records.
Mr. Ehlers. Absolutely. I also want to thank Mr. Inglis'
comments. He is always very thoughtful on these issues, and he
has thought deeply about them and what he says makes a lot of
sense. I would say that part of the problem with the proposed
cap-and-trade program, it is not even a cap-and-trade program,
it is a simple tax, it is an energy tax, and that is why it is
never going to fly. Cap-and-trade in a pure form might work
once you get the markets going, but it is not going to be easy,
but if you started out as a straight tax, I agree with you, it
is destined to failure. But I think much of what you said is
valid. I think, you know, the energy situation overall, over a
20-year period is so desperate that we really have to try every
option possible and develop the best approach we can. And I
think the marketplace is a good place to try many of the
experiments. It gives you a fairly direct, fairly quick answer.
So with that, I will yield back. Thank you.
Chair Baird. I will just observe that I think one of the
ironies of the cap-and-trade debate has been that I think the
cap-and-trade model was put forward as a way of trying to use
conservative capitalistic values to justify investment in
environmental protection and CO2 reduction. So the
incentive was there, and yet I think opponents of it are coming
from the same side that it was designed to appeal to. And my
own leaning is much more toward the line of Mr. Inglis. The
only thing I would observe on that is it is easy to denigrate
any form of tax because the indirect form, externalized form of
tax government doesn't impose, nature imposes on it, and nature
may actually impose a much higher rate of taxation in the form
of consequences if we don't tax ourselves to try to reduce
CO2 and other gas emissions.
This has been a very, very informative discussion. We are
very grateful for all of your time, and I thank very much my
colleagues for their thoughtful input as well. And with that
then, with the buzzing going off, the hearing will stand
adjourned again with the gratitude of the Committee. Thank you
very much.
[Whereupon, at 12:08 p.m., the Subcommittee was adjourned.]
Appendix 1:
----------
Answers to Post-Hearing Questions
Answers to Post-Hearing Questions
Responses by Ms. Sarah M. Forbes, Senior Associate, Climate and Energy
Program, World Resources Institute
Questions submitted by Chair Bart Gordon
Q1. Building a network of carbon capture and storage (CCS)
demonstrations will require international collaboration. This makes
sense to ensure that CCS demonstrations around the globe are diverse
and demonstrate the full suite of capture and storage options. In your
view, how do we best accomplish this? Is there a specific federal
agency best equipped to take the lead on international collaboration on
CCS demonstrations?
A1. The U.S. Department of Energy's Carbon Sequestration Leadership
Forum (CSLF) includes the right structure for a global network of
carbon dioxide capture and storage (CCS) demonstrations. It benefits
from ministerial-level support and includes key coal-consuming
countries; however, global interest and action on CCS has quickly
advanced and the existing framework must be updated and formally
endorsed by Congress. The following actions are needed to leverage the
past activities of the CSLF and move toward new mechanisms that
facilitate successful international collaboration:
Establish a CCS demonstration technology alliance for
countries working on demonstrations, whereby a formal network
is established to share information among projects and ensure
that information is publicly available. This should be a new
initiative, led by the Energy Department, building on the
success of CSLF activities and including the CSLF member
countries. It should be launched in collaboration with the
Australian-led Global Carbon Capture and Storage Institute and
possibly the International Energy Agency.
Increase the number of full time technical staff
devoted to international CCS collaboration within the
Department of Energy's Office of Fossil Energy. This allocation
can ensure that existing bilateral agreements result in
concrete actions and that activities are scientifically and
technically robust. This technical group should be adequately
funded and given a high priority.
Establish a multi-agency task force to steer
international CCS collaborations and advise the CCS Technology
Demonstration Alliance. The task force should be led by the
Energy Department, but also include participation from the
Department of State, the Environmental Protection Agency, and
Treasury Department. The task force should meet quarterly.
Q2. In your testimony, you mention that moving forward with CCS
worldwide will require significant investment. What actions would you
recommend the Federal Government should take to ensure that a clear and
robust international financing mechanism exists for large-scale CCS
demonstration projects?
A2. Governments worldwide are moving toward CCS demonstration by
committing funding to demonstrations. Within the past month, requests
for proposals for CCS demonstrations have been made by the European
Commission\1\ and the U.S. Department of Energy\2\ as part of the
recently passed stimulus packages at EUR 1.05B and USD 2.4B,
respectively. Australia's budget discussions\3\ have also included
discussion of allocating AUD 2B toward 2-4 CCS demonstrations, and the
UK's Energy Secretary announced a plan to subsidize four
demonstrations.\4\ Although this funding is significant, there is (1) a
lack of funding dedicated to demonstrations of CCS at commercial scales
in the U.S., (2) insufficient funding globally to achieve the goal of
20 demonstrations worldwide, and (3) barriers to obtaining public and
private sector investment in the technology that must be overcome to
achieve demonstrations and supplement government subsidies.
---------------------------------------------------------------------------
\1\ http://ec.europa.eu/energy/grants/
2009-07-15-en.htm
\2\ http://www.energy.gov/news2009/7405.htm
\3\ http://www.news.com.au/business/story/0,23636,25470205-
31037,00.html?from=public-rss
\4\ http://www.cnplus.co.uk/sectors/energy/miliband-no-new-coal-
power-stations-without-carboncapture/5200978.article
---------------------------------------------------------------------------
Specific actions this committee could take to provide clarity
toward public and private sector investment and international
collaboration on demonstrations include:
Develop a multi-agency task force to study and
formally recommend international CCS financing mechanisms. The
task force should include participation from the State
Department, Department of Energy, the Environmental Protection
Agency, and Treasury Department.
Request that this task force prepare (within 120
days) a report to Congress on international financing
mechanisms for CCS that provide clear recommendations on
international government funding (consider pairing/twinning or
co-funding demonstration projects with other countries),
outlines the role of multilateral banks, and presents solutions
to the obstacles to private-sector investment in CCS.
Appendix 2:
----------
Additional Material for the Record
The Passing of FutureGen:
How the World's Premier Clean Coal
Technology Project Came to be Abandoned
by the Department of Energy
Report by the Majority Staff of the
Subcommittee on Investigations and Oversight
of the Committee on Science and Technology to
Chairman Bart Gordon and
Subcommittee Chairman Brad Miller
March 10, 2009
Executive Summary
When President George W. Bush announced the FutureGen initiative in
February of 2003, he described it as a 10-year, $1 billion, government/
private partnership to build a coal-based, zero-emissions electricity
and hydrogen producing power plant. It would provide the American
people and the world with advanced technologies that would help meet
the world's energy needs, and would improve the global environment for
future generations. Spencer Abraham, then-Secretary of the Department
of Energy (DOE), went even further. This ``bold step'' would turn coal
from an ``environmentally challenging energy resource into an
environmentally benign one'' and demonstrate the best technologies the
world had to offer.
The plant would not use traditional coal technology, but would be
an integrated gasification combined cycle/carbon capture and storage
(IGCC/CCS) facility built at the commercial scale of 275 megawatts. It
would sequester one million metric tons of carbon dioxide per year,
produce both electricity and hydrogen as energy sources and demonstrate
the integration of commercial and untested technologies. Its results
would be shared with all participants, including international parties,
industry, the environmental community and the public. International
participation was a core component of the project as acceptance of the
project's results were deemed necessary by the Administration for
building an international consensus on the role of coal and carbon
sequestration in addressing global climate change and energy security.
But in December of 2007, after a site in Illinois was selected by
FutureGen's private industrial partners, the environmental impact
statement required by the National Environmental Policy Act was
completed, and the State of Illinois had accepted liability for the
sequestration aspect of the project, then-DOE Secretary Samuel Bodman
announced that he intended to restructure FutureGen. He would
``maximize'' the private sector role and prevent further cost
escalation. The restructured FutureGen was rolled out at the end of
January of 2008, but it was widely viewed as the death of the Bush
initiative. Subsequent events have verified that view, as the four
applications--two of which have been deemed ineligible--responding to
the new competition bear no resemblance to the original FutureGen and
have no capability to meet the original goals.
How did such a highly publicized Presidential initiative fail, and
what were its consequences? Committee staff review of thousands of
documents produced by the Department of Energy over the past several
months\1\ has resulted in the following conclusions:
---------------------------------------------------------------------------
\1\ DOE was extremely reluctant to produce documents to the
Committee so that it could determine exactly how decisions were made
concerning FutureGen. Despite numerous requests from the Committee
since April 2, 2008, and the threat of a subpoena, the Department has
still not yet provided a full response. Many of the withheld documents
involve communications with the White House and this situation has
required repeated meetings to examine those materials. We should add
that Undersecretary Albright routinely destroyed his e-mail records,
further complicating the ability of the staff to reconstruct the full
history on decision-making regarding FutureGen.
1. Based on how easily the Department of Energy abandoned the
FutureGen project, it appears that President Bush, Secretary Bodman and
the Office of Management and Budget were never fully committed to the
FutureGen project or its goal of developing technology to allow the use
of coal without massive emissions of carbon dioxide and other
greenhouse gases and pollutants. In retrospect, FutureGen appears to
have been nothing more than a public relations ploy for Bush
Administration officials to make it appear to the public and the world
that the United States was doing something to address global warming
despite its refusal to ratify the Kyoto Protocol.\2\ When worldwide
construction costs went up across the board, neither the White House
nor DOE was willing to make the additional financial commitment
necessary to keep the project going. Secretary Bodman, in particular,
strongly disliked FutureGen, and neither President Bush nor any of his
White House staff did anything to stop Bodman from killing the original
project or restructuring it in a way that was guaranteed to fail. As an
assistant to Under Secretary Bud Albright put it during a discussion of
restructuring FutureGen:
---------------------------------------------------------------------------
\2\ FutureGen was touted as a key climate change inspired action to
the Committee on Science in a hearing on September 20, 2006,
``Department of Energy's Plan for Climate Change Technology Programs.''
The Departmental witness stated that ``CCTP's portfolio includes
realigned activities as well as new initiatives, such as the
President's Advanced Energy and Hydrogen Fuel Initiatives, carbon
sequestration, and FutureGen,'' p. 21.
``[E]veryone is conveniently forgetting that we're here b/c
[because] S-1 [Secretary Bodman] wants to kill FG as its [sic]
currently contemplated with or without a Plan B.'' \3\
---------------------------------------------------------------------------
\3\ E-mail from Doug Schwartz to Julie Ruggiero, December 10, 2007.
2. Bodman's primary stated reason for killing the original
FutureGen plan was that the cost had doubled to $1.8 billion. That was
false, and an inexcusable error for the head of a federal agency.
Bodman and his staff obtained that number by comparing the cost
estimate of $952 million in constant FY 2004 dollars with the ``as
spent'' dollars--which is always higher because it includes normal
inflation and other cost increases--that all federal agencies use when
estimating the actual cost of multi-year projects such as FutureGen.
The Office of Fossil Energy attempted numerous times to explain to
DOE's policy staff the difference between these two numbers, but as
Under Secretary Bud Albright's Chief of Staff cavalierly explained
while preparing talking points for Bodman, ``this is not a legal
document, it is a communications document. As for whether the
escalation costs after 2004 were expected or not, why does that even
matter?'' \4\
---------------------------------------------------------------------------
\4\ E-mail entitled ``Fw: Updated FuturrGen Talking Points'' from
Doug Schwartz to Andrew Patterson, Dec. 15, 2007.
---------------------------------------------------------------------------
It is difficult to believe that anyone working at the top levels of
DOE or the White House, both of which deal with many multi-year clean-
up, research and defense projects--particularly someone with Bodman's
business background--did not know the difference between ``constant''
and ``as spent'' dollars or even ask how the $1.8 billion figure was
obtained. But there is no evidence that anyone asked that basic
question.
3. Secretary Bodman should have known that his claims that the
restructured FutureGen would accomplish all of the goals of the
original plan and would speed the use of CCS technology were false
Bodman and his senior deputies--Deputy Secretary Clay Sell and Under
Secretary Albright--demanded that DOE staff create documents for the
White House saying the new plan would cost less taxpayer money and do
more to validate new carbon capture and sequestration technologies in a
shorter time frame than the original FutureGen. This work was largely
overseen by political appointees working under Sell and Albright. These
claims were concocted without consulting the industry that was expected
to take up the FutureGen mantle and despite the repeated warnings of
career DOE staff to the political leadership of the Department that the
project would fail to meet the original goals. Career staff produced a
summary analysis by December 2007 that was entitled, ``What ``Plan B''
would NOT accomplish'' (emphasis in original). The concluding
paragraphs are so compelling that they are worth quoting at length:
Given the above delays [following analysis of how Plan B would
slow technology development and deployment], it is reasonable
to assume that proceeding with ``Plan B'' and without
FutureGen, the availability of affordable coal fueled CCS
plants would be delayed at least 10 years and will not allow
widespread deployment of CCS until near 2040. Affordable CCS
technologies will not be available in time to meet the expected
turnover of the existing fleet of coal power plants in the
U.S., nor for incorporation into the development of the world's
massive coal resources in countries such as China and India.
Based on the DOE Climate Change Task Force analysis, which was
the basis for the FY09 DOE budget request, a delay of ten years
in the deployment of fossil technology with CCS would result in
a cumulative loss of emission reductions of about 22 billion
tons CO2 through 2100 in the U.S. To put this into
perspective, current U.S. total annual CO2 emissions
are six billion tons; U.S. annual CO2 emissions from
coal are two billion tons. The DOE Task Force further estimated
that CCS benefits from the proposed initiative for the rest of
the world were about six times the U.S. benefits, or on the
order of 150 billion tons CO2 through 2100 worldwide
that would not be avoided if ``Plan B'' were chosen.\5\
---------------------------------------------------------------------------
\5\ Analysis from a one page document drawn from e-mails
circulating in the Department dated December 11, 2007. These findings
were also quoted by Victor Der in an e-mail that went to James Slutz
and others in this same time frame, but similar points had been raised
by DOE staff throughout the discussion of whether there was a viable
option to the President's FutureGen program.
4. The anemic response by industry to the competition to
participate in the new FutureGen proved in a real world demonstration
how wrong Bodman and his deputies were. There were four responses of
which two were ineligible and two were incomplete. None proposed to
construct the IGCC/CCS, coal-based, zero-emission electricity and
hydrogen producing power plant that had been promised by Secretary
Bodman in January of 2008. The industry response to a Request for
Information and the draft FOA had reduced the restructured program to a
competition for technology that would attempt to sequester a smaller
amount of carbon dioxide, either as part of a newly constructed plant
or as a ``bolt on'' to an existing plant.
But by the time the career staff were proven right, Bodman and
President Bush were at the end of their tenure, the scheduled project
selection date had passed, and the United States had lost a year, at
minimum, in developing and deploying carbon capture and sequestration
technologies.
5. The Bush Administration's abrupt cancellation of the original
FutureGen without bothering to consult or even warn the four countries
(India, Australia, South Korea, and China) which had signed on as
project partners severely damaged the United States' reputation as an
international science partner. The South Korean Minister for Commerce,
Industry and Energy wrote on February 4, 2008 (three days after
receiving a cancellation notice from Secretary Bodman):
``I am really surprised that I had no prior explanation of
that restructuring intention from DOE . . .. If you have
recognized all Korea's endeavor regarding the project, it is
not the appropriate way to deliver U.S. DOE's intention to
restructure FutureGen by sending me an e-mail.'' \6\
---------------------------------------------------------------------------
\6\ E-mail entitled ``Re: DOE Announces Restructured FutureGen''
from Kijune Kim to James Slutz, Feb. 4, 2008.
Foreign partners weren't the only ones surprised by DOE's change of
direction. Cancellation of the project, and the abandonment of the
growing coalition of countries supporting the project, also allowed the
technology lead in this important endeavor to move to other countries.
Carbon capture and sequestration projects are now going forward in
Australia, China (former partners) and Europe. Other countries no
longer look to the United States for leadership in this area, and, as
senior DOE officials acknowledged to one another, the restructured
program had no international component built into it.\7\
---------------------------------------------------------------------------
\7\ E-mail entitled ``RE: Int'l aspect of the new futuregen
construct'' from James Slutz to Karen Harbert, Dec. 12, 2007.
6. Creating ``clean coal'' is an extremely complex task involving
not only the development of reliable and economical technology to
capture carbon dioxide and other pollutants, and integrating it into
electricity-producing coal plants, but also the acceptance of higher
electricity prices and unknown liability for carbon dioxide
sequestration sites by the public and their elected officials
worldwide. Without a carbon regulation structure in place, it is almost
impossible to expect power generators and utilities to take on this
``public benefit'' task without expecting a return on investment,
something that the Bush Administration refused to acknowledge, much
less address. This guaranteed that Secretary Bodman's efforts during
the summer and autumn of 2007 to convince industry to sign up for more
risk in the original FutureGen project would be a non-starter.
FutureGen was a high-risk effort to develop and demonstrate innovative
technologies for carbon capture and sequestration. Without a regulatory
environment requiring firms to use such technologies, there was little
reason--beyond calculations of public relations--for private companies
to commit any more than they already had on FutureGen.
When the Department of Energy's top managers were attempting to
restructure FutureGen, a senior career official from the Office of
Fossil Energy described the new project as a Frankenstein.\8\ The
analogy to the creation of a monster which could not be controlled by
its creator was not quite accurate. But the idea that ``Plan B'' was a
cobbled together mess of left-over parts was not far off the mark.
However, what DOE really created was more of a Humpty Dumpty. Just like
Humpty Dumpty, when FutureGen fell off the wall in its ``restructured''
form, it broke apart, and all of DOE's press releases and PowerPoint
presentations couldn't put it back together again.\9\
---------------------------------------------------------------------------
\8\ E-mail from Victor Der to Jay Hoffman and Jarad Daniels,
January 2, 2008 forwarding the Plan B Program Plan. Der writes in full:
``Here's the Frankenstein. I'll be calling NETL [National Energy
Technology Laboratory] to see where they are in the electrodes
development to make it walk.''
\9\ Humpty Dumpty's ability to create new meanings for words in
Lewis Carroll's Through the Looking Glass also bears some relationship
to Secretary Bodman's attempt to create something new while still
calling it ``FutureGen'' so that, technically, he could say the
President's initiative was alive. ``When I use a word,'' Humpty Dumpty
said in a rather a scornful tone, ``it means just what I choose it to
mean--neither more nor less.'' ``The question is,'' said Alice,
``whether you can make words mean different things.'' ``The question
is,'' replied Humpty Dumpty, ``which is to be master--that's all.''a
The Origins of FutureGen
In his State of the Union address in January of 2003, President
George W. Bush unveiled his ``Hydrogen Fuels Initiative,'' otherwise
known as a hydrogen-powered, noxious emissions-free car called the
``Freedom Car.'' He committed $1.7 billion over the next 10 years for
research on car technology and fuel distribution. But where would the
hydrogen fuel come from? In the volume required by the transportation
sector, it could only come from coal or natural gas.\10\ And thus was
born FutureGen.
---------------------------------------------------------------------------
\10\ ``A Car for the Distant Future,'' The Washington Post, March
9, 2003, B2.
---------------------------------------------------------------------------
A month later, on February 27, 2003, the President announced with
great fanfare the Integrated Sequestration and Hydrogen Research
Initiative, a 10-year, $1 billion, government/private partnership to
build a coal-based, zero-emissions electricity and hydrogen producing
power plant. ``This demonstration project and the Carbon Sequestration
Leadership Forum will build on these initiatives to provide the
American people and the world with advanced technologies to meet the
world's energy needs, while improving our global environment for future
generations,'' he promised.\11\ ``It will be the cleanest fossil fuel-
fired power plant in the world,'' a contemporaneous Department of
Energy (DOE) publication claimed and was a ``direct response to the
President's Climate Change and Hydrogen Fuels Initiatives.'' \12\
According to then-DOE Secretary Spencer Abraham, the project would
``help turn coal from an environmentally challenging energy resource
into an environmentally benign one.'' \13\ It would be ``one of the
boldest steps our nation has taken toward a pollution-free energy
future . . .. The prototype power plant will serve as the test bed for
demonstrating the best technologies the world has to offer,'' Abraham
promised.\14\
---------------------------------------------------------------------------
\11\ ``Bush Administration Announces $1 Billion Coal Plant
Project,'' Platts Coal Outlook, March 3, 2003, p. 1.
\12\ ``A Vision for Tomorrow's Clean Energy,'' U.S. Department of
Energy, Office of Fossil Energy, February 2003, p. 1.
\13\ ``U.S. Seeking Cleaner Model of Coal Plant,'' New York Times,
Feb. 28, 2003, A22.
\14\ ``DOE Aims for `pollution-free' Plant,'' Inside Energy/Federal
Lands, March 3, 2003, p. 1.
---------------------------------------------------------------------------
The announcement was made jointly by the Department of Energy (DOE)
and the Department of State to emphasize the core objective of
international cooperation. At the same time, the two agencies announced
the creation of the Carbon Sequestration Leadership Forum (CSLF), an
international panel which would focus on carbon capture and
sequestration.\15\ All these initiatives were in large part a response
to President Bush's desire to show that the United States was engaged
in efforts to reduce global warming even though it had refused to
ratify the Kyoto Protocol because of the generous greenhouse gas
emission limits for developing countries. They were hailed by the
business press as a ``viable alternative to Kyoto.'' \16\
---------------------------------------------------------------------------
\15\ DOE, ``Concept Paper on International Participation in
FutureGen,'' June 2008.
\16\ ``The Post-Kyoto Initiatives,'' http://www.allbusiness.com/
mining/oil-gas-extraction-crude-petroleum-natural/718535-1.html, Dec.
22, 2003.
---------------------------------------------------------------------------
The 275-megawatt, prototype zero emissions plant subsequently known
as ``FutureGen'' would be a ``living laboratory'' to test new clean
power, carbon capture and coal-to-hydrogen technologies. The DOE
release went on to say that President Bush had already emphasized the
importance of technology in stabilizing greenhouse gas concentrations
in the atmosphere with two major previous policy announcements: the
National Climate Change Technology Initiative on June 11, 2001, and the
Global Climate Change Initiative on February 13, 2002. ``Carbon capture
and sequestration technologies likely will be essential to meeting the
President's goals. Without them, it will be virtually impossible to
limit global carbon emissions,'' DOE stated.
Moreover, the President's Hydrogen Fuels Initiative envisioned
``the ultimate transformation of the Nation's transportation fleet from
a reliance on petroleum to the use of clean-burning hydrogen,'' DOE
said. Although most hydrogen in the United States and about half of the
world's hydrogen supply were currently produced from natural gas, ``The
new technologies to be integrated into the prototype plant will expand
the options for producing hydrogen from coal, providing a more
diversified and secure source of feedstocks for the President's
initiative'' (emphasis added).\17\
---------------------------------------------------------------------------
\17\ All discussion of ``DOE Release'' is from ``A Vision for
Tomorrow's Clean Energy,'' U.S. Department of Energy, supra. p 1.
President Bush reiterated his support for FutureGen in fact sheets and
statements related to his administration's environmental and energy
accomplishments in October 2003, April 2004, March and June 2005,
February and March of 2006, and January, April, May and September of
2007. New foreign partners were welcomed at the White House.
``Statements about FutureGEN,'' undated DOE document.
---------------------------------------------------------------------------
Virtually every aspect of the prototype plant would employ cutting-
edge technology. It would not use ``traditional coal technology,'' but
be based on a coal gasification system to produce hydrogen and carbon
dioxide. The hydrogen would be used for electric power generation or as
a feedstock for refineries. ``In the future, as hydrogen-power
automobiles and trucks are developed as part of President Bush's
Hydrogen Fuels Initiative, the plant could be a source of
transportation-grade hydrogen fuel.'' New technologies would be used to
capture the carbon dioxide, and it would be sequestered in a geologic
formation that would be intensively monitored to verify the permanence
of the storage.\18\
---------------------------------------------------------------------------
\18\ Ibid.
---------------------------------------------------------------------------
The goals of the project were extremely ambitious. DOE and its
partners were to:
1. Design, construct and operate a 275-megawatt prototype plant
that produced electricity and hydrogen with near-zero emissions. The
size of the plant was driven by a need to provide commercially relevant
data and produce one million tons of carbon dioxide (CO2)
necessary to validate the ``integrated operation of the gasification
plant and the receiving geologic formation.''
2. Sequester at least 90 percent of the CO2 emissions,
prove the effectiveness, safety and permanence of the sequestration and
establish standardized technologies and protocols for CO2
measuring, monitoring and verification.
3. Validate the engineering, economic and environmental viability
of ``advanced coal-based, near-zero emission technologies'' that by
2020 would produce electricity with less than a 10 percent increase in
cost; and produce hydrogen at $4 per million Btus or less than the
wholesale price of gasoline.\19\
---------------------------------------------------------------------------
\19\ ``A Vision for Tomorrow's Clean Energy,'' supra, p. 2.
---------------------------------------------------------------------------
The industry and the environmental community expressed skepticism
from the outset. Coal gasification to produce electricity is ``still an
edgy technology,'' one expert said, and extracting hydrogen from coal
wasted 30 percent of the fuel's latent energy. The budget and schedule
were viewed as tight ``even for a conventional coal-fired power
plant.'' One environmentalist said until the administration supported a
``binding program'' to limit carbon emissions, the private sector would
not commit ``real money'' to solving the problem.\20\ But if the
project reduced the cost of carbon dioxide sequestration from $100 to
$300 per ton to $10 or less, it would save the U.S. ``trillions of
dollars'' to meet the inevitable carbon regulations.\21\
---------------------------------------------------------------------------
\20\ Ibid.
\21\ ``A Pollution-free Coal Plant?'' Power Magazine, May 2003.
---------------------------------------------------------------------------
By the end of 2003, DOE's Office of Fossil Energy (FE), which had
the lead on the project, had prepared the mission need statement
required for the acquisition of a capital asset. It focused on the
necessity to integrate the operation of a coal-based hydrogen/power
facility with carbon dioxide sequestration, something that the existing
clean coal research program--which addressed the development of
components and subsystems--did not do. To sufficiently consider the
feasibility of the zero-emissions concept, DOE had to address the
integration gap ``to prove technical operational viability to the
conservative coal and utility industry.'' \22\ The expectation was that
FutureGen would be sufficiently successful that when the aging fleet of
coal plants was retired in the 2020-2040 time frame, there would be a
viable zero emissions coal option.\23\
---------------------------------------------------------------------------
\22\ ``Mission Need Statement: FutureGen Sequestration and Hydrogen
Research Plant,'' DOE Office of Fossil Energy, Nov. 6, 2003, pp. 1-2.
\23\ Ibid., p. 4.
---------------------------------------------------------------------------
In the need statement, FE evaluated and rejected six alternative
approaches to achieve President Bush's goal. In particular, it rejected
the option of a large-scale demonstration of commercial technology by
the power industry. ``This alternative would require the immediate
integration of a number of complex commercial-scale power plant
component technologies, and operation and integration will be
technically challenging and risky from an industry perspective.''
Moreover, the sequestration had not yet been demonstrated. Such an
approach would not be cost-effective and without legislated carbon
constraints, ``the industry has no incentive to invest its limited
capital in this demonstration and pursue this high-risk course of
action.'' \24\
---------------------------------------------------------------------------
\24\ Ibid., pp. 12-13.
---------------------------------------------------------------------------
The acquisition strategy for a research and development project was
conditionally approved by DOE's deputy and undersecretaries in November
of 2003 and fully approved in April of 2004. Congress provided $9
million to initiate FutureGen, but also asked for a report on funding
and cost sharing.\25\ The goals and the Administration's plans for
achieving them were more fully outlined in the program plan submitted
to Congress in March of 2004 as required in the Department of Interior
and Related Agencies Appropriation Act of 2004 (P.L. 108-108). The cost
share would be 74 percent government and 26 percent private--well above
the 20 percent commitment from the private sector normally required for
research and development projects.\26\
---------------------------------------------------------------------------
\25\ E-mail entitled ``RE: FW: FutureGen Acq Strategy'' from Keith
Miles to Patrick Ferraro, Feb. 27, 2007.
\26\ DOE, Office of Fossil Energy, ``FutureGen: Integrated
Hydrogen, Electric Power Production and Carbon Sequestration Research
Initiative: Energy Independence through Carbon Sequestration and
Hydrogen from Coal,'' March 2004; Conf. Rep. 108-330, 149 Cong. Rec.
9898, 9936, Oct. 28, 2003.
---------------------------------------------------------------------------
In the plan, DOE told Congress that FutureGen ``directly''
addresses one of the four strategic goals in its 2003 Strategic Plan:
to protect national and economic security by ``promoting a diverse
supply and delivery of reliable, affordable, and environmentally sound
energy.'' Through use of efficient generation technologies and carbon
sequestration, FutureGen would eliminate environmental barriers and
enable the continued use of domestic coal. It would also produce
hydrogen for transportation to support President Bush's hydrogen fuel
initiative and provide a ``unique real-world opportunity to prove the
feasibility of large-scale carbon sequestration, a key potential
strategy to reduce the risks of climate change.'' Absent this ``zero-
emission option . . ., coal's contribution to the Nation's energy mix
could be severely curtailed, thus limiting the fuel diversity of our
electricity supply portfolio, and increasing our dependence on more
expensive and less secure sources of energy.'' \27\
---------------------------------------------------------------------------
\27\ DOE, ``FutureGen: Integrated Hydrogen, Electric Power Product
ion and Carbon Sequestration Research Initiative,'' supra, p. 2.
---------------------------------------------------------------------------
Defined as a ``public benefits-driven'' investment in ``high-risk,
high-return technology that private companies alone cannot undertake''
FutureGen's integration of concepts and components would be the
key to proving technical and operational viability to the
generally conservative, risk-adverse coal and utility
industries. Integration issues such as the dynamics between
upstream and downstream subsystems . . . can only be addressed
by a large-scale integrated facility operation. Unless the
production of hydrogen and electricity from coal integrated
with sequestering carbon dioxide can be shown to be feasible
and cost competitive, the coal industry will not make the
investments necessary to fully realize the potential energy
security and economic benefits of this plentiful, domestic
energy resource (emphasis added).
FutureGen would combine high-risk research activities, advanced
generation coal gasification technology integrated with combined cycle
electricity generation, hydrogen production, and carbon capture and
sequestration. It would take at least 10 years to accomplish its goals,
and the results would be shared with participants, industry, the
environmental community, international partners and the public. ``Broad
engagement of stakeholders early on in FutureGen is critical to
achieving an understanding and acceptance of sequestration and zero-
emission coal utilization,'' DOE stated.\28\
---------------------------------------------------------------------------
\28\ Ibid., p. 3
---------------------------------------------------------------------------
While its goals and schedule were recognized as aggressive and
high-risk, they were judged achievable and would prove ``the basis for
a potentially huge long-term public benefit.'' And DOE determined that
it was not possible ``to reach FutureGen's stretch goals using off-the-
shelf commercial technology.'' Critical components needed to be
designed, and their efficiencies, environmental performance reliability
and economics needed to be advanced and tested. More importantly, ``[a]
key piece of FutureGen is proving the viability of sequestration and
its integration with a power facility.'' \29\ Full-scale operation with
continuous power generation was projected by FY 2012.\30\
---------------------------------------------------------------------------
\29\ Ibid., p. 6.
\30\ Ibid., p. 13.
---------------------------------------------------------------------------
Furthermore, according to White House officials, the hydrogen
transportation initiative and FutureGen were investments that would
achieve ``both goals of addressing climate change and protecting our
economy.'' \31\
---------------------------------------------------------------------------
\31\ Statement of James Connaughton at Oct. 22, 2004, ``Ask the
White House,'' http://georgewbush-whitehouse.archives.gov/ask/
20041022.html
---------------------------------------------------------------------------
In 2005, after The New York Times alleged that industry would not
spend money to reduce emissions under a voluntary system that gave a
competitive advantage to those companies that did nothing, Samuel
Bodman, the new DOE Secretary, reiterated the Department's support for
FutureGen.\32\ President Bush also featured it prominently in a 2005
``fact sheet'' concerning how he was addressing climate change. In
December of 2005, Bodman announced an agreement with an industry
consortium called the FutureGen Industrial Alliance, to build
FutureGen, ``a prototype of the fossil-fueled power plant of the
future.'' He described it as a direct response to President Bush's
directive to develop a hydrogen economy by ``drawing on the best
scientific research to address the issue of global climate change.''
Bodman lavishly praised the Alliance members, who would contribute $250
million to the project, as among ``the world's most responsible and
forward thinking coal and energy companies.'' At the heart of the
project--described as a ``stepping-stone toward future coal-fired power
plants''--would be coal-gasification technologies that could eliminate
air pollutants and mercury. Carbon sequestration would be a key feature
with the goal of capturing 90 percent of the plant's carbon dioxide
emissions. The ``ultimate goal for the FutureGen plant is to show how
new technology can eliminate environmental concerns over the future use
of coal and allow the Nation to tape the full potential of its coal
reserves,'' Bodman said.\33\
---------------------------------------------------------------------------
\32\ ``Climate Change and the President,'' letter from Secretary
Bodman, The New York Times, May 26, 2005, responding to ``Dirty Secret:
Coal Plants Could Be Much Cleaner,'' May 22, 2005. That article
referred to the recommendation of the National Commission on Energy
Policy, an independent, bipartisan advisory body that the government
spend an additional $4 billion on IGCC technology over 10 years to
speed up the industry's acceptance of the technology.
\33\ ``FutureGen Project Launched: Government, Industry Agree to
Build Zero-Emissions Power Plant of the Future,'' DOE press release,
Dec. 6, 2005. There were ultimately 13 industrial partners of which
four were foreign-based: American Electric Power Service Corp., Anglo
American Services Ltd., BHP Billiton Energy Coal, Inc., China Huaneng
Group, Consol Energy, Inc., E.ON U.S. LLC, Foundation Coal Corp.,
Luminant, Peabody Energy Corp., PPL Energy Services Group, Rio Tinto
Energy America Services, Southern Company Services, Inc., and Xstrata
Coal Pty Ltd.
---------------------------------------------------------------------------
By January of 2006, the project now known as FutureGen was no
longer being promoted as a source of transportation-grade fuels,
perhaps because the Administration had realized that commercially
viable hydrogen-powered cars were some decades away.\34\ FutureGen was
now to integrate advanced coal gasification technology, hydrogen from
coal, power generation, and carbon dioxide (CO2) capture and
geologic storage. ``The success of FutureGen will assure that coal, a
low-cost, abundant, and geographically diverse energy resource,
continues to globally supply exceptionally clean energy.'' \35\
---------------------------------------------------------------------------
\34\ ``When Presidents Talk Fuel, the Nation Listens, Sort Of,''
Detroit Free Press, Feb. 13, 2006, B2.
\35\ DOE, ``FutureGen--A Sequestration and Hydrogen Research
Initiative,'' Project Update: January 2006.''
---------------------------------------------------------------------------
The project appeared to be going well in this time frame--at least
publicly. A preliminary agreement with the Alliance was signed on
December 2, 2005.\36\ President Bush referred to it in his 2006 State
of the Union address as part of his Advanced Energy Initiative.\37\
Participation by foreign governments was expected.\38\ Its cost in FY
2005 constant dollars was $952 million.\39\ According to DOE's
Assistant Secretary for fossil energy, ``the FutureGen project is being
pursued aggressively and is on schedule.'' \40\ It was a ``high
priority,'' James Connaughton, Chairman of the White House Council on
Environmental Quality and the President's senior environmental and
natural resources adviser, stated in late 2006.\41\ By April of 2007, a
first phase cooperative agreement had been signed which would include
work on siting, scoping, conceptual design and National Environmental
Policy Act (NEPA) compliance. The Alliance had selected four sites as
finalists, and the winning site was expected to be announced in mid- to
late 2007.\42\
---------------------------------------------------------------------------
\36\ DOE, ``FutureGen Status,'' PowerPoint presentation for 7th
annual SECA Workshop and Peer Review, Sept. 12-14, 2006.
\37\ In a press release providing a more detailed description of
the initiative, the Administration noted that the 2007 budget included
$54 million for FutureGen as part of the clean coal technology program.
The White House, ``State of the Union: The Advanced Energy
Initiative,'' Jan. 31, 2006, p. 1.
\38\ British, Australian and Chinese companies were already
Alliance members. http://www.futuregenalliance.org/alliance/members.stm
Four countries (India, Korea, Japan and China) also joined.
\39\ Constant dollars are not an accurate reflection of the actual
cost of a 10-year, lifetime project over the life of the project
because they do not include cost increases that result from inflation
and changes in construction, materials and other costs during the out-
years. In its 2004 report to Congress, DOE did not point out that it
was using constant year dollars when projecting the total cost of the
project. DOE, ``FutureGen: Integrated Hydrogen, Electric Power
Production and Carbon Sequestration Research Initiative, supra, p. 9,
Figure 3.
\40\ ``Clean Energy Project,'' letter from Jeffrey Jarrett, The New
York Times, June 5, 2006.
\41\ ``Budgets Falling in Race to Fight Global Warming,'' The New
York Times, Oct. 30, 2006, A1.
\42\ Ibid., p. 2.
---------------------------------------------------------------------------
The significance of the FutureGen project on the international
stage could not be underestimated. After his refusal to submit the
Kyoto Protocol to the Senate for ratification, President Bush and his
advisers touted the highly visible project as a way to attack the
problem of global warming in the voluntary, cooperative international
manner that was a hallmark of the Bush approach to environmental
problems. CEQ Chairman Connaughton, who had the task of defending the
Bush Administration, did so by promoting international partnerships for
sustainable growth, of which FutureGen was one.\43\ It was particularly
important in U.S. relationships with India and China, both of which
signed on as partners in the FutureGen project even before the
cooperative agreement with the Alliance was completed. A ``U.S.-India
Energy Dialogue'' was established by Secretary Bodman and Montek Singh
Ahluwalia, Deputy Chairman of India's Planning Commission, in 2005. By
May of 2006, India had become the first foreign country to sign on as a
FutureGen partner. According to Senate testimony in 2007 by David
Pumphrey, then DOE Deputy Assistant Secretary for international energy
cooperation, ``successfully demonstrating and adopting this technology
will allow India to reduce the intensity of future greenhouse gas
emissions from the burning of their abundant coal resources.'' \44\
---------------------------------------------------------------------------
\43\ ``Bush Aide Says Myths about U.S.' Green Policy Remain,'' The
Economic Times, Aug. 30, 2006.
\44\ Statement of David Pumphrey before the U.S. Senate Committee
on Energy and Natural Resources, July 18, 2006, p. 4.
---------------------------------------------------------------------------
In September of 2006, President Bush and President Hu Jintao of
China agreed to create a ``Strategic Economic Dialogue'' (SED) between
the two countries which would be convened semi-annually. Treasury
Secretary Henry Paulson would lead the U.S. side of the dialogue, and
the Energy Department would dialogue with China's National Development
and Reform Commission on energy policy.\45\ In December of 2006,
China--the second largest producer of CO2 after the U.S.--
became the third foreign country (South Korea was the second) to join
the FutureGen Government Steering Committee. China Huaneng Group, the
country's largest coal-fueled power generator, had already joined the
Alliance. According to Pumphrey, the U.S. ``assigned a high priority to
maintaining long-term technical cooperation with China on fossil energy
issues,'' including FutureGen. The FutureGen concept could demonstrate
technologies that would reduce carbon emissions worldwide.\46\
---------------------------------------------------------------------------
\45\ ``Fact Sheet Creation of the U.S.-China Strategic Economic
Dialogue,'' Treasury Department press release, Sept. 20, 2006.
\46\ ``U.S.-China Relationship: Economics and Security in
Perspective,'' Statement by David L. Pumphrey before the U.S.-China
Economic and Security Review Commission, Feb. 1, 2007, p. 7.
The Cost Issue
By early 2007, however, DOE management internally was raising
questions about the cost of FutureGen. Even before the Full Scope
Cooperative Agreement was signed, DOE headquarters was expressing its
discontent to the Alliance. FutureGen's as-spent cost projection, which
included inflation and the increasing cost of construction and
materials, was $1.8 billion and global construction costs were rising.
In light of those anticipated cost increases, DOE was balking at paying
74 percent of any additional costs even though an increase in as-spent
costs would normally be expected. Michael Mudd, the Alliance's Chief
Executive Officer, expressed his concern about DOE's delay in signing
the cooperative agreement, saying it would cause schedule and
engineering delays and a loss of credibility. ``We do not understand
why issues, such as the cost-share fraction, continue to be revisited.
This specific issue was settled nearly two years ago during discussions
between the White House, OMB, DOE, and the Alliance.'' The Alliance
would like to report ``positive progress'' on all fronts to Congress
``rather than concerns that the Administration is having second
thoughts about supporting the FutureGen project.'' \47\
---------------------------------------------------------------------------
\47\ E-mail entitled ``FutureGen delays,'' from Michael Mudd to
George Rudins (cc: Carl Bauer, Keith Miles, Thomas Russial, Thomas
Sarkus) March 20, 2007.
---------------------------------------------------------------------------
In a discussion over a draft press release announcing the
agreement, Victor Der, then-Director of DOE's Office of Clean Coal
Systems,\48\ complained to George Rudins, former Deputy Assistant
Secretary for coal and power systems, that the release emphasized a
cost increase, not the fact that ``notwithstanding rising inflation in
the heavy construction sector, both the Alliance and DOE believe that
FutureGen is vitally important to coal and climate change, and have
committed to continuing as cost shared partners in this initiative.''
\49\ FE also reminded the Department that it was a ``key Presidential
Initiative and a major Government/Industry Partnership'' for producing
electricity and hydrogen from coal while eliminating emissions and
sequestering carbon dioxide at a low cost.\50\ The final press release
did, however, refer specifically to the cost increases, but said a
review of ``progress and expenses'' would not be concluded until the
end of the first phase of the project in June of 2008.\51\
---------------------------------------------------------------------------
\48\ Dr. Der has held various positions at DOE related to fossil
energy and clean coal. He is currently Acting Assistant Secretary for
fossil energy.
\49\ E-mail entitled ``Fw: FutureGen release: FE first draft'' from
Victor Der to George Rudins, March 25, 2007.
\50\ E-mail entitled ``RE: FG @ Revised Congressional'' from Thomas
Shope to Dirk Bartlett, William Purvis and Raj Luhar, March 23, 2007.
\51\ ``DOE Signs FutureGen Cooperative Agreement,'' States News
Services, April 10, 2007; ``Rising Costs of FutureGen Plant Heighten
Concerns among Legislators,'' Platts Coal Outlook, April 16, 2007.
---------------------------------------------------------------------------
The Alliance was so upset by DOE's concerns as expressed in a call
from Deputy Secretary Clay Sell on the day the press release was issued
that Mudd said it was ``putting the project on hold until we have the
chance to meet with Clay and Secretary Bodman to address issues and
concerns raised by Clay during his call.'' \52\ When asked later in a
press call why DOE signed the agreement if it already had these
concerns, Sell said it was the signing of the agreement that brought
the financial issues to his and Secretary Bodman's attention.\53\
---------------------------------------------------------------------------
\52\ E-mail entitled ``Re: FutureGen Agreement'' from Michael Mudd
to John Grasser, April 11, 2007.
\53\ Transcript of Department of Energy conference call, Jan. 30,
2008. The speakers were Sell and Secretary Bodman.
---------------------------------------------------------------------------
Sell and Bodman did not waste any time bringing their hesitation to
the White House. In April, Sell briefed staff of the National Economic
Council, OMB, the National Security Council and the Office of the Vice
President on their cost concerns, and it was agreed that the costs had
to be capped.\54\ Thomas Shope, DOE's principal Deputy Assistant
Secretary for fossil energy, communicated to the Alliance that ``the
project will not move forward as currently structured.'' Within days,
DOE's lawyers were asked to determine if the agreement made clear that
DOE could ``just decide not to fund it if it got too expensive'' or how
to cap its contribution.\55\
---------------------------------------------------------------------------
\54\ E-mail entitled ``Re: Futuregen . . . problems'' from Jeff
Kupfer to Clay Sell, Sept. 9, 2007.
\55\ E-mail from Thomas Shope to Clay Sell and Dennis Spurgeon,
April 19, 2007; e-mail from Mary Egger to Gene Cadieux, April 16, 2007.
---------------------------------------------------------------------------
At a May 11, 2007, meeting with NEC and OMB staff, Shope recorded
the following:
DECISIONS: The significance of the project in the
Administration's global climate change strategy was recognized.
However, additional cost containment measures must be part of
the project going forward and must be negotiated before the
commencement of BP-2. The principal cost containment measure
employed will be a cap on DOE's expenditures.\56\
---------------------------------------------------------------------------
\56\ ``Meeting Notes `To Discuss The Revised Cost Estimates For The
Futuregen Project,' '' attached to e-mail entitled ``FutureGen Meeting
Followup'' from Thomas Shope to Jeffrey Kupfer, Dennis Spurgeon, Karen
Harbert, Eric Nicoll and David Hill, May 11, 2007.
The $1.8 billion as-spent figure had been obtained by adding a
straight-line 5.2 percent annual escalation factor during the
construction of the contract to the FY 2004 estimate of $950 million, a
normal process for all large projects built over a number of years. The
Alliance then subtracted $301 million in estimated income from the sale
of electricity to come up with a net cost of $1.46 billion. FE staff
accepted that as a reasonable escalation, but construction costs in
early 2007 were growing at a much higher rate because of worldwide
demand for construction services and materials.\57\
---------------------------------------------------------------------------
\57\ E-mail entitled ``Table of RTC Escalated Outlays,'' from
Thomas Sarkus to Victor Der and Jeffrey Hoffman, April 2, 2007.
---------------------------------------------------------------------------
In an April presentation on the project's status to DOE, Mudd and
his team pointedly noted that they ``trusted'' that DOE still shared
the vision the administration had put forward ``and planned to provide
the political, technical and financial support required.'' He reminded
DOE that the FutureGen Alliance was formed in ``direct response'' to
President Bush's initiative, and that the industry was contributing
nearly $400 million with ``no expectation of financial return,'' but
believed that FutureGen was central to reducing the cost of addressing
climate change by ``trillions of dollars.'' FutureGen was unique as no
other fully integrated power plant combined gasification and carbon
capture and sequestration in a deep geologic formation. It provided ``a
clear mechanism to assess the cost, performance, and public acceptance
of integrated near-zero emissions power plant, which is an essential
precursor to commercial deployment.'' Mudd also pointed to the global
significance of such a project as a catalyst for new projects in other
countries and its ability to position the U.S. as a leader on climate
change solutions.\58\
---------------------------------------------------------------------------
\58\ FutureGen Alliance, ``FutureGen: Project Status,'' April 18,
2007, pp. 3-5 and 15.
---------------------------------------------------------------------------
Mudd reminded DOE that the Alliance members ``came to the table''
with certain understandings: the government would pay 74 percent of the
cost; it would maintain its support of FutureGen; and that the $950
million cost was in FY 2004 dollars and subject to adjustment for
inflation which would be shared. For their contribution, Alliance
members would get no financial return or intellectual property rights.
At that time, every milestone had been met. Construction would begin in
2009, but Mudd pointed out that heavy construction costs were up by 30
percent and well drilling costs by 250 percent.\59\ Work continued
through the summer on the design and the environmental impact
statement, and DOE continued to solicit foreign partners.\60\
---------------------------------------------------------------------------
\59\ Ibid., pp. 8, 10, and 14.
\60\ See, e.g., e-mail entitled ``FW: Revised TOC'' from Joseph
Giove to Carol Loman attaching IEA Ministerial 2007 Briefing Book
Tasks, April 17, 2007.
---------------------------------------------------------------------------
These exchanges marked the beginning of a dual track on FutureGen.
The administration continued to unequivocally support FutureGen in
public. For example, at the end of the April 2007 U.S.--EU summit on
energy security, efficiency and climate change, the White House issued
a joint statement pledging its support for FutureGen without
reservation. ``The United States, in partnership with its government
steering group member countries and the private sector, will build
FutureGen, the United States' first near-zero emissions fossil fuel
plant, by 2012,'' the statement read. The first priority was deploying
``near zero emissions coal technologies'' which were critical in
tackling global CO2 emissions because of coal's importance
in meeting energy needs.\61\ FE pushed the general counsel's office to
``move out on the EIS [Environmental Impact Statement]'' so that final
site selection could be completed by the end of 2007 because the states
had purchase options on sites that expired at the end of the year.\62\
---------------------------------------------------------------------------
\61\ ``2007 U.S.-EU Summit Statement: Energy Security, Efficiency,
and Climate Change,'' The White House Press Office, April 30, 2007, pp.
1-2.
\62\ E-mail entitled ``Fw: FutureGen Meeting Followup'' from Thomas
Shope to David Hill, May 13, 2007.
---------------------------------------------------------------------------
But inside the DOE leadership, it was a different story. In
addition to meeting with White House staff, Deputy Secretary Sell was
beginning to discuss the ``path forward'' with senior DOE officials,
specifically on how to deal with the project's cost escalation. At the
same time, the agency was preparing its FY 2009 budget. Funds for
FutureGen--which did not have a specific line item in the budget--had
to compete annually with other coal research projects such as the Clean
Coal Power Initiative (CCPI) and regional carbon sequestration
partnerships.
The Alliance did not want to negotiate a new cost agreement until
it had completed more reliable cost estimates at the end of the first
phase of the project in June 2008--as anticipated in the cooperative
agreement--when it would have a more definitive design.\63\ It
responded to the pressure from DOE by appealing directly to President
Bush in a letter on June 18, 2007. Describing FutureGen as a ``premiere
global project'' with international partners, Mudd wrote that the
Alliance members.
---------------------------------------------------------------------------
\63\ E-mail entitled ``Re: FutureGen Mtg,'' from Victor Der to Raj
Luhar, Mr. Giove, George Rudins and Jarad Daniels, May 7, 2007; e-mail
entitled ``FutureGen Path Forward,'' from Thomas Shope to Clay Sell,
May 7, 2007.
have dedicated to FutureGen staff with global expertise in
major design and construction projects, and the venture is
operated with the clear objectives and management discipline of
any major commercials endeavor. Costs are up for every major
energy infrastructure project, but the FutureGen Alliance is
---------------------------------------------------------------------------
watching costs closely as we share in the cost increases.
Mudd reminded the President that ``To date, your Administration has
supported this important global effort'' and referred to Bush's May 31,
2007, call for ``expanding global cooperation on research and
development to bring to market technology based solutions to climate
change concerns.'' Continued government support of FutureGen was
critical as staff had to be hired, land agreements made and major plant
components with long manufacturing lead times needed to be ordered.\64\
---------------------------------------------------------------------------
\64\ Letter to President Bush from Michael J. Mudd, June 18, 2007.
No response to this letter was found in the DOE files provided to the
Committee.
---------------------------------------------------------------------------
DOE management was not deterred. By July of 2007, Shope had sent a
memo to Secretary Bodman asking for the Secretary's approval of an
immediate renegotiation of the final cost structure instead of waiting
until June 2008.\65\ The Alliance's initial response was that the cost
increases were not the fault of anything the Alliance had done or
failed to do, and reiterated the commitments the members had made
through a non-profit consortium. According to the Alliance, there were
already rumors from the foreign Alliance members that the U.S. might
not be that committed to FutureGen. Nonetheless, Secretary Bodman
approved Shope's proposal on July 27 without addressing the commitment
issue.\66\
---------------------------------------------------------------------------
\65\ ``Memorandum for the Secretary'' from Thomas D. Shope, July
27, 2007.
\66\ ``Memorandum for the Deputy Secretary'' from Thomas D. Shope,
Attachment A to ``Memorandum for the Secretary, supra, July 27, 2007.
---------------------------------------------------------------------------
In an accompanying memo to Sell listing various options, however,
Shope said that FutureGen was configured to ``precisely'' achieve the
cost and performance goals for the zero emissions coal program and to
gain industry acceptance and commercial deployment of the technology on
a domestic and global scale. It also had strong international support
as the ``premier international, collaborative project'' addressing
greenhouse gases and climate change. Shope noted that the Alliance had
been generally willing to work with the Department on cost overruns
attributable to design errors, mismanagement, delays from accidents,
etc. But the increases projected did not fall into any of those
categories, and Shope was very skeptical that the industry would take
on additional risk because there was no direct or immediate return on
its investment, and it was risk-averse.\67\
---------------------------------------------------------------------------
\67\ Ibid.
---------------------------------------------------------------------------
Despite the recognition by DOE of these significant factors
pointing to FutureGen as the only way to obtain the cooperation of the
coal and power industry , DOE had already determined that it was not
``financially sustainable.'' In an August memorandum to Bud Albright,
DOE's undersecretary, Shope also said that the Administration was
expressing concerns about the cost, although no documents have been
provided to the Committee to verify that statement. However, it was
clear that the Secretary's single goal was to limit the Federal
Government's cost.\68\
---------------------------------------------------------------------------
\68\ ``Memorandum for the Deputy Secretary'' from Thomas D. Shope,
Aug. 31, 2007.
---------------------------------------------------------------------------
DOE's plan to renegotiate was discussed with the Alliance staff,
who told Sell they would work to resolve the issue before the final
site selection at the end of the year, but whose nervousness about
DOE's commitment to the project was evident. ``The talk on the street
that the project is in trouble is affecting [the Alliance's] ability to
secure good vendors and competitive bids . . .. The Alliance has been
told that some vendors are not interested in chasing after the
FutureGen project if it just going to fall apart [sic].'' \69\ But in
late August DOE told the Alliance board that a negotiation team needed
to be formed.\70\ According to talking points prepared for the meeting,
Shope told the Alliance that ``an `open checkbook' approach is
unsustainable and sets an unrealistic expectation which needs to be
addressed. Simply put, we cannot commit to funding the project
regardless of cost.'' For the Department to continue in the
partnership, ``the FutureGen financial plan must properly incentivize
all parties to control costs and to account for those costs that are
not directly controllable.'' \71\
---------------------------------------------------------------------------
\69\ Undated memo to Clay Sell. Because of the size of the
components for an IGCC plant, the Alliance needed to order parts long
before they were actually needed.
\70\ ``Appendix 2: DOE and FutureGen Alliance Communication
Timeline,'' attached to undated FutureGen strategic plan.
\71\ ``Talking Points--Meeting with Futuregen Alliance Board of
Directors,'' Aug. 29, 2007.
---------------------------------------------------------------------------
It was a strange message to the partners that DOE had solicited to
join in its risky project--and which everyone at DOE knew did not have
much of an incentive to join. DOE was now threatening to pull out of
its own project and appeared to be shifting the burden of the project
momentum to the Alliance. It was now up to the Alliance to keep
FutureGen alive.
In early September, staff at DOE's National Energy Technology
Laboratory (NETL)--the managers of the FutureGen project--were told
that ``SE-1 [Secretary Samuel Bodman] and SE-2 [Deputy Secretary Sell]
are directing DOE to `renegotiate' the FG award, based upon their
assessment that it is a `bad deal.''' NETL was to identify areas for
cost reduction.\72\ In a preliminary meeting that Sell had with the
Alliance, he was told that the Alliance was ``potentially interested''
in reducing its scope so that option was now on the table.\73\ NETL
quickly responded. ``Anything but minor scope changes now could really
screw things up.'' It could mean another site ``best and final offer''
process, a supplemental draft environment impact statement and perhaps
the loss of some foreign contributors. NETL's counsel added, ``I would
be willing to bet the Alliance wants to reduce the CO2
capture level and eliminate the co-sequestration test. The latter might
not be such a big deal. The former could open a pandora's box.'' \74\
---------------------------------------------------------------------------
\72\ E-mail entitled ``Fwd: Pre-Meeting Tuesday morning on
FutureGen negotiations'' from Keith Miles to Edward Simpson and
Ferraro, Sept. 4, 2007. Miles asked the recipients not to ``shoot the
messenger'' and said he was being ``asked to identify a `soldier' from
your shop to participate.''
\73\ E-mail entitled ``FG'' from Adam Ingols to Thomas Shope and
Andrew Patterson, Sept. 6, 2007.
\74\ E-mail entitled ``Re: Fw: FG'' from Thomas Russial to Jarad
Daniels, Victor Der and Thomas Sarkus, Sept. 7, 2007.
---------------------------------------------------------------------------
Sell also wrote to CEQ Chairman Connaughton, Barry Jackson, who had
replaced Karl Rove, and Keith Hennessey, President Bush's chief
economic adviser, at the White House, and Stephen McMillin, the Office
of Management and Budget's (OMB) Deputy Director in charge of the
federal budget, telling them that FutureGen was heading in a ``bad
direction.'' It was experiencing significant cost increases, and DOE
might be forced to cancel. Sell said that neither the Secretary nor the
OMB had contemplated these expenditures and expressed his belief that
FutureGen was becoming a bad deal for the government and politically
unsustainable in Congress. Sell said other priorities in coal research
were being threatened by FutureGen.\75\
---------------------------------------------------------------------------
\75\ E-mail entitled ``Futuregen . . . problems'' from Clay Sell to
James Connaughton et al., Sept. 7, 2007.
---------------------------------------------------------------------------
Connaughton, who was the Administration's representative at
international meetings on climate change, asked that a ``tiger team''
be put together on the problem. Pointing out that FutureGen was an
important part of the administration's climate change response,
Connaughton emphasized, ``This project is very important . . .. If
there is a rational option, it should be considered.'' \76\ There is no
indication that this was done.
---------------------------------------------------------------------------
\76\ E-mail from James Connaughton to Clay Sell, Barry Jackson,
Keith Hennessey and Stephen McMillin.
Options: Strip Down the Project or Change the Cost Share
As requested, FE had put together the pros and cons for various
options. It did not favor any major change in the project scope because
that would change the basic goals of the project, reduce international
involvement and delay clean coal technology development. Specifically,
it found scaling down the plant size from 275 MW to 120 MW, a 60
percent reduction which would reduce the cost by only 33 percent, would
not meet industry's needs. It would be inefficient, delay the NEPA
process, not meet the goal of sequestering one million tons of
CO2, and still require a subsequent demonstration in a
larger plant. FutureGen's goals would be delayed by five years, and the
total cost of the program would increase.\77\
---------------------------------------------------------------------------
\77\ DOE, ``FutureGen Options & Recommendations by DOE FE,''
October 2007, p. 4.
---------------------------------------------------------------------------
Later in the negotiations, a NETL staffer worried: ``It occurred to
me that we are beating the process `integration' drum pretty hard in
our justification for FutureGen, but I don't think Jim Slutz and most
of DOE top management (or anyone at OMB) have an intuitive feel for
what these integration issues are and why dealing with them at large
scale is so important . . .. The goal is to drive home the point that
these integration issues are real and challenging, and are not going to
be solved at smaller-scale.'' \78\ Adding CCS to the back end of the
system and making certain that all the pieces work in tandem would be a
significant challenge.\79\
---------------------------------------------------------------------------
\78\ E-mail entitled ``Re: IGCC/CCS Process Integration Made
Simple'' from Jay Braitsch to Thomas Sarkus, Nov. 7, 2007.
\79\ E-mail entitled ``Re: IGCC/CCS Process Integration Made
Simple'' from Thomas Sarkus to Jay Braitsch, Nov. 7, 2007.
---------------------------------------------------------------------------
Another option was to break the project into three separate
projects for 1) sequestration, 2) the turbine, and 3) the gasifier. FE
described its previous negative experience with such a system and said
it would be difficult to find companies to do the individual pieces
because there was no economic reason to do so. For example, no one
would take over the sequestration piece because there was no revenue
resulting from sequestering, burying and monitoring CO2.\80\
---------------------------------------------------------------------------
\80\ Ibid., pp. 5-6.
---------------------------------------------------------------------------
Reducing the research and development components of FutureGen,
which had been sold as a ``living laboratory'' to test out new
technologies was also rejected. The research was needed to prove that
there would be no more than a 10 percent increase in the cost of
electricity by adding CCS. Without testing in FutureGen, ``advanced R&D
components would first need to be proven independently and then proven
in an integrated fashion at a commercially relevant scale'' which
``would significantly delay the availability of the technology for
commercial deployment and would increase overall cost to the program.''
\81\
---------------------------------------------------------------------------
\81\ Ibid., p. 7.
---------------------------------------------------------------------------
FE also rejected reducing the carbon capture system efficiency from
90 to 50 percent, reducing fuel flexibility or removing the coal-to-
hydrogen component. The only viable option for a successful FutureGen
was to renegotiate the cost share and have a firm DOE cap as Secretary
Bodman had made it clear that he would not sign on to a $3-$4 billion
deal.\82\
---------------------------------------------------------------------------
\82\ E-mail entitled ``Fw: FG'' from Victor Der to Thomas Russial,
Thomas Sarkus and Keith Miles, Sept. 10, 2007; e-mail entitled
``FutureGen'' from Bradley Poston to Thomas Brown, Oct. 30, 2007.
---------------------------------------------------------------------------
In September of 2007, FE made its presentation to DOE Deputy
Secretary Sell. Citing once again the benefits of FutureGen in proving
advances in power generation in an integrated fashion with a variety of
coal types, furthering international cooperation with coal giants China
and India and proving the viability of widespread CCS, FE recommended
that the project scope remain the same, but that further cost increases
be shared 50/50 with the Alliance and title to the plant be given to
the Alliance to be used for loan collateral.\83\ DOE Under Secretary
Albright, the agency's lead on the negotiating team, apparently agreed
with FE's analysis.\84\
---------------------------------------------------------------------------
\83\ DOE, ``FutureGen Renegotiation Issues and Recommendations,''
Sept. 14, 2007. FE's guidance for that meeting was to concentrate on
scope reduction costs and benefits, not a change in cost sharing. E-
mail entitled ``FG Guidance'' from Andrew Patterson to Jarad Daniels,
Sept. 12, 2007.
\84\ E-mail entitled ``RE: FG Update & Data Call'' from Jarad
Daniels to Samuel Biondo, Victor Der and Joseph Giove, Sept. 21, 2007.
---------------------------------------------------------------------------
President Bush seemed unaware of the concerns of DOE management. He
continued to tout the original program. On September 4, 2007, he issued
a joint statement with then-prime minister John Howard of Australia
welcoming Australia to the FutureGen International Partnership, which
President Bush described as
a major United States-led international project aimed at
building a prototype plant that integrates coal gasification
and carbon capture and storage to produce electricity with
near-zero emissions. This demonstrates and underscores the
commitment of both countries to the development and deployment
of clean coal technologies.\85\
---------------------------------------------------------------------------
\85\ ``Statements about FutureGEN,'' undated document from DOE, p.
1. President Bush also told foreign media in late May of 2007 that he
believed FutureGen would be developed as a coal-fired plant with zero
emissions. ``And when that technology comes to fruition, if you can get
yourself some coal, you've got your ability to diversify away from
sole-source supplier of energy.'' Remarks by President Bush in
Roundtable Interview with Foreign Media, http://fpc.state.gov/fpc/
85918.htm, May 31, 2007. International participation was not that easy
to obtain. Prospective contributors weren't sure what they were getting
for their $10 million. Because of proprietary concerns, visiting
researchers would not be able to fully view certain project areas. If
too much information was shared, vendors might not be attracted to the
project, DOE worried. Some kind of licensing arrangements might be
possible, but they were never worked out. E-mail entitled ``Re:
FutureGen Renegotiation process update'' from Thomas Russial to Jarad
Daniels, Sept. 19, 2007.
Negotiations
The initial negotiation session was held in the first week of
October. In that meeting, the Alliance agreed to a 50/50 cost split
after the first $1.8 billion, but said it had ``cost flow
constraints.'' It was considering financing options to help ``smooth''
the costs to its members during the construction phase. The Alliance
proposed that it receive 100 percent of the program income, and that
DOE vest title to the plant in the Alliance at the beginning of the
project, instead of the end. DOE found this unacceptable, but said
internally that the next round of negotiations would focus on ``ways to
adjust revenue and cost share with the hope of finding a `win-win'
position.'' \86\
---------------------------------------------------------------------------
\86\ DOE, ``Brief Summary: First Round of Negotiation between
FutureGen Alliance & DOE,'' Oct. 4, 2007, pp. 1-2.
---------------------------------------------------------------------------
The financing issue continued, however, to be the critical sticking
point. The Alliance wanted to fund the project through a leveraging
plan; DOE refused.\87\ By the end of October, DOE proposed that the
individual Alliance members each give a guarantee ``for a significant
portion of the financing. If the Alliance defaults or withdraws, the
members must pay over the guaranteed amount to the lender to reduce the
outstanding debt thereby making it more economically practical for DOE
to take over and complete the project.'' \88\
---------------------------------------------------------------------------
\87\ Attachment to e-mail entitled ``FutureGen Timeline.doc'' from
Doug Schwartz to Kasdin Miller, Jan. 24, 2008.
\88\ E-mail entitled ``FutureGen Renegotiation'' from Thomas Rusial
to David Hill and Mary Egger, Oct. 19, 2007.
---------------------------------------------------------------------------
By early November, DOE told the White House that it had begun work
on a ``parallel strategy'' if no agreement could be reached. It would
seek to maintain the goals and objectives of FutureGen by ``(a)
adopting a different partnership construct that makes more sense for
the Federal Government, or (b) separating the project's core
technologies and accelerating our ongoing R&D efforts in these areas,
testing at smaller scale with limited integration, and expediting
deployment to the marketplace.'' \89\ It was the beginning of what
would be known as Plan B, an idea first mentioned by Bradley Poston in
DOE's Office of Contract Management. Poston had asked if costs could be
reduced by using an existing power plant to test out the carbon capture
and sequestration products still in the research and development stage.
Poston concluded that without carbon sequestration, there was no reason
to proceed ``so either the costs are reduced significantly or we revise
our goals and focus on getting most of the technologies developed now
so that in the future we can design and build with greater knowledge
and confidence in our success and cost control.'' \90\
---------------------------------------------------------------------------
\89\ E-mail entitled ``New final paragraph for futuregen'' from
Adam Ingols to Sarah Magruder, Nov. 1, 2007.
\90\ E-mail entitled ``FutureGen'' from Bradley Poston to Thomas
Brown, Oct. 30, 2007.
Plan B
Top DOE officials soon proposed a new FutureGen structure under
which private companies would fund the IGCC plant, and DOE would pay
only for the CCS component. In an e-mail exchange with a White House
staffer, Albright described FutureGen's current structure as not only
fostering cost overruns but actually threatening the ``success of the
underlying goals of FutureGen.'' \91\ DOE's clean coal research team
did not agree. According to FE, the national and global costs of not
going forward with the original plan would be enormous. Private
industry would not take on this challenge without significant
incentives and the passage of carbon reduction legislation that gave a
value to carbon. ``Given the above delays, and assuming a reluctance to
pursue high-cost alternative pathways, it is reasonable to assume that
without FutureGen, the availability of moderate-cost, coal fueled CCS
plants would be delayed by 10-15 years.'' (Emphasis in the
original)\92\
---------------------------------------------------------------------------
\91\ E-mail entitled ``Re: FutureGen Funding'' from Bud Albright to
Charles Blahous and Clay Sell, Nov. 6, 2007.
\92\ ``Discussion of Alternative FE Clean Coal Program without
FutureGen,'' p. 2, attached to an e-mail entitled ``Re: Alternative
FutureGen Plan C'' from Thomas Sarkus to Doug Schwartz and Victor Der,
Nov. 9, 2007. It appears that DOE briefly considering eliminating
FutureGen altogether, but discarded that option.
---------------------------------------------------------------------------
The 10-year delay would result in a loss of U.S. emission
reductions of about 22 billion tons of CO2; a 15-year delay
would result in a loss of 33 billion tons. For the rest of the world,
however, the loss of this technological research would be six times the
U.S. losses, or about 150 billion tons. Having a stream of commercially
available, increasingly cost-effective coal/CCS technology options
beginning in 2020 would also reduce electricity and natural gas costs.
``Integration of concepts and components in a full scale test facility
like FutureGen is the key to proving the technical and operational
viability as well as gaining acceptance of the near-zero emission coal
concept,'' staff wrote.\93\ In undated notes of an internal discussion,
Karen Harbert, the Assistant Secretary for policy and international
affairs, also reminded the group that DOE had gotten a ``plus up'' in
the FE budget by claiming that it would significantly accelerate CCS
development by 2030, and that there would be a ``big problem'' if there
was a delay.\94\
---------------------------------------------------------------------------
\93\ Ibid., pp. 2-3. DOE, ``What `Plan B' would NOT accomplish,''
undated.
\94\ Undated notes of meeting on Plan B. Participants: Karen
Harbert, Victor Der, Scott Klara and Jim Slutz.
---------------------------------------------------------------------------
These warnings were pushed aside as Albright, Sell and the DOE
policy staff moved forward with Plan B. This structure would scrap the
cooperative agreement, the Alliance and the international partners for
a new competitive procurement under which individual U.S. companies
would take on the responsibility of building IGCC plants, and DOE would
pay only the additional cost of the CCS component. At the same time,
however, DOE continued to negotiate with the Alliance on the cost share
and financial component and continued working on the EIS for the four
sites which were the finalists.\95\ FE raised again the problems with
IGCC plants. Only two had been built, and both ran on natural gas, not
synthetic gas or hydrogen from coal. ``Some of us tekkies worry that
hydrogen will pose an even greater challenge than syngas did. Add-in a
water-gas shift reactor, which no IGCC plant now has. Then tack CCS
onto the back end and make certain that all of the pieces work in
tandem. You get the drift,'' a NETL engineer wrote.\96\
---------------------------------------------------------------------------
\95\ E-mail entitled ``New final paragraph for futuregen'' from
Adam Ingols to Sarah Magruder, Nov. 1, 2007.
\96\ E-mail entitled ``Re: OGCC/CCS Process Integration Made
Simple'' from Thomas Sarkus to Jay Braitsch, Nov. 7, 2007.
---------------------------------------------------------------------------
Other people started to raise questions, and the scramble was on to
justify Plan B. A debate between Doug Schwartz, Albright's Chief of
Staff, and Poston revealed the difficulties of making the new plan
viable--even on paper. Poston said a new competition would delay the
schedule, and he could see no industry self-interest. ``We may give a
party no one comes to,'' he wrote. Schwartz answered that DOE would
just have to create more self-interest.
[T]here may be a new model(s) we come up--in theory--that may
alter our prior determination there is no return on investment
for partners, whether resulting from changing the IP approach,
permitting vendors to participate, an impending prospect of
carbon regulation that did not exist so acutely in 2003, or
other variables. In other words, there may be compelling
reasons beyond corporate philanthropy for outside parties that
would encourage their interest. Perhaps that is hopelessly
naive on my part, but this is what we must fully explore and
hopefully unlock.
Poston responded that he hadn't seen those compelling reasons.
Although the potential return on investment was great in social terms,
it was ``non-existent in economic terms.'' Schwartz agreed with that
conclusion, but argued that to come up with a viable Plan B, they
needed to
fundamentally alter our assumptions as we strive to come up
with a new approach. So if we start the process with the goal
of creating more self interest from the private sector (by
granting more IP exclusivity, allowing vendors to compete,
etc.), would that not change our thinking on how we might
structure things? In other words, do veheicles [sic] like TIAs,
loan guarantees, etc. become more viable tools if, at the
outset, we seek to avoid a construct which is as
``philanthropically'' focused as the current deal seems to be?
Poston responded, ``I am not certain how we can fundamentally alter
the economics.'' He continued:
The economics of our power production require other sources of
revenue to offset the additional costs associated with carbon
sequestration . . .. I have not heard of other revenue streams
being identified except looking for participation from
philanthropic organizations . . . but how would that play in
the press? ``DOE unable to support its own priorities; competes
with the needy for funding?''
Schwartz admitted that ``absent a basic change in some of the
underlying assumptions, this is a circular exercise in which we will
always arrive at the rightful conclusion that the current arrangement
is the best mechanism for achieving our goals'' (emphasis added).\97\
---------------------------------------------------------------------------
\97\ Series of e-mails entitled ``RE: FutureGen Plan B'' between
Bradley Poston and Doug Schwartz, Nov. 6-9 and 15-19, 2007; undated
memorandum entitled ``Subject: FutureGen Option B'' from Poston's
files. Exactly what this change would be was unclear. In March of 2007,
Thomas Shope testified before the House Energy and Commerce Committee
that CCS technology would not be reliably available for commercial
deployment until 2045 at the current level of funding for CCS and
advanced power generation technology. George Rudins, then-Deputy
Assistant Secretary for coal power systems, stated that the schedule
could be accelerated by 20 years, but required annual federal funding
of $1 billion plus deployment incentives. ``It assumes a greatly
expanded CCPI program and R and D. It also assumes a greatly expanded
FutureGen program.'' E-mail entitled ``Re: Date for CCS
commercialization'' from George Rudins to Frank Burke, March 7, 2007.
---------------------------------------------------------------------------
While this discussion was going on, Poston also wrote of his strong
misgivings to Thomas Brown, the Director of the Office of Contract
Management.
Yesterday's meeting on what to do if an agreement on a revised
Cooperative Agreement could not be reached included new
participants but not new insights or conclusions.
A very optimistic perspective was being offered on the
possibilities of what we could do differently. I did try an
[sic] add . . . an element of reality in that we took our best
approach with the initial award and that unless we have changed
our program needs (which we have not), have reduced our cost
drivers (which we have not), or can introduce new money (which
we might be able to but on a such a small scale that it is
immaterial) I could not see much choice except to step back and
focus the Department's efforts on R&D . . ..
There are NO differences from 2003 so my response will sound
like a broken record--if the current deal can not be
satisfactorily restructured take our money and focus on
R&D.\98\
---------------------------------------------------------------------------
\98\ E-mail entitled ``FutureGen'' from Bradley Poston to Thomas
Brown, Nov. 7, 2007.
But as Der told his staff: ``Doug [Schwartz] wants new ideas . . ..
Doug is driving this with other hot shot project finance guys . . ..
Have fun in this dump.''\99\ (Emphasis added)
---------------------------------------------------------------------------
\99\ E-mail entitled ``This Coming Week'' from Victor Der to Jarad
Daniels, Nov. 9, 2007.
Operating on Dual Tracks
By the end of November, Sell was making daily requests for a
detailed Plan B draft.\100\ There is no indication that this option was
ever shared with the Alliance until DOE made the announcement on
December 18 that it was going to restructure FutureGen.
---------------------------------------------------------------------------
\100\ E-mail entitled ``RE: Fg'' from Doug Schwartz to Andrew
Patterson, Nov. 30, 2007.
---------------------------------------------------------------------------
DOE's work on the Environmental Impact Statement required under the
National Environmental Policy Act (NEPA) for the four finalist
FutureGen sites was going forward as scheduled. DOE's October fact
sheet on FutureGen mentioned that there were cost increases, but that
they were ``consistent with the increases seen in similar power plant
projects and construction projects.'' \101\ On October 30, a DOE
employee said DOE was ``diligently working'' to complete the NEPA
process and issue a Record of Decision (ROD) by the end of 2007.\102\
The final EIS was issued on November 9.\103\ On November 15, Albright
and Slutz recommended that Secretary Bodman sign a letter to the
Illinois Congressional delegation responding to an October 25 letter
expressing concern about meeting the year-end deadline for a site
selection. In that letter--which he later said was a mistake--Secretary
Bodman repeated the commitment to complete the NEPA process and issue
the ROD in a timeframe that supported FutureGen site selection by the
end of December. Albright and Slutz also reminded the Secretary that
the Texas legislature had passed incentives for a site in its state
which would expire at the end of the year.\104\ In late November, NETL
staff was discussing a ``big event'' with DOE participation when the
Alliance announced its final site selection.\105\ By mid-December,
sign-offs were being obtained on the ROD. The ``potential'' ROD signing
was set for December 17 or 18, and a letter was drafted to the Alliance
to that effect for Secretary Bodman.\106\
---------------------------------------------------------------------------
\101\ DOE, ``FutureGen, FC26-06NT42073, October 2007, p. 3.
\102\ E-mail entitled ``Re: latest version'' from Joseph Giove to
Jarad Daniels, Oct. 30, 2007. A Record of Decision accepting the EIS
must be signed by the agency before any federal funds can be expended.
\103\ The final EIS was published in the Federal Register on Nov.
16. EIS No. 20070489, 72 Fed. Reg. 64619, Nov. 16, 2007.
\104\ Letter from Michael Mudd to Secretary Bodman, Oct. 25, 2007;
memorandum for the Secretary entitled ``ACTION; RESPONSE TO LETTER FROM
Illinois Congressional Delegation.'' At least two of the letters were
signed, but not until Nov. 30. In a hearing before the Energy and
Commerce Committee on Feb. 7, 2008, Secretary Bodman said it was a
mistake. Letter dated Feb. 12, 2008, from Sen. Dick Durbin and Rep. Tim
Johnson to Secretary Bodman.
\105\ E-mail entitled ``RE: SENSITIVE: FG Site Selection
coordination????'' from Thomas Sarkus to Victor Der, Carl Bauer and
Miles Keith, Nov. 20, 2007.
\106\ E-mail entitled ``Cover Memo for FutureGen ROD,'' from Mark
Matarrese to James Slutz, Victor Der, Jarad Daniels, Andrew Patterson,
Kevin Graney, Raj Luhar, John Grasser and Robert Tuttle, Dec. 12, 2007;
e-mail entitled ``FG Draft Bodman Reply 11-15-07.doc'' from Thomas
Sarkus to Joseph Giove and Thomas Russial, Nov. 15, 2007.
---------------------------------------------------------------------------
At the same time, the Alliance also was pushing forward. In early
December, it issued Secretary Bodman an invitation to the site
selection announcement on December 17.
But the negotiations were not going well. On December 6, the
Alliance sent a letter to Albright stating that it wanted to proceed
under the existing cooperative agreement until ``costs and risks can be
properly assessed with input from the upcoming preliminary design
report and cost estimate.'' The Alliance members did not want to accept
considerably more financial risk without this information which ``both
parties previously agreed would be a precursor to these discussions.''
The Alliance also accused DOE of taking away the legal and financial
options that would help it manage risk even though they had been
available under other cooperative agreements, but assured DOE that its
members would honor their obligations. The Alliance said both parties
should ``convey positive messages about the project'' and not suggest
that the current agreement was ``anything less than a `good deal.' ''
Assuming release by DOE of the ROD by December 17, the Alliance would
make the site announcement on December 18.\107\
---------------------------------------------------------------------------
\107\ Letter from Michael Mudd to Bud Albright, Dec. 6, 2007.
---------------------------------------------------------------------------
In a detailed attachment, Alliance CEO Mudd laid out the basis upon
which the Alliance was originally formed:
1. 20 percent cost-sharing;
2. no repayment requirement from industry partner;
3. ability to vest ownership of plant with industry partners;
4. potential for program income to be shared among project
participants;
5. 100 percent of post-project revenues to industry partners;
and
6. advanced appropriation of $300 million by DOE.
But the Alliance members had given up many benefits by forming as a
501(3)(c) non-profit corporation, which meant that no income or
proceeds could go back to the original members, but must be reinvested
in public benefit research and development. They got no intellectual
property rights. The cost share increased to 26 percent. There was an
agreement to negotiate limits to the federal investment subject to
escalation after there was a more detailed site-specific design and
cost estimate. Mudd also pointed to the offers made by the Alliance to
share revenues and to share proceeds from the sale with DOE.\108\
---------------------------------------------------------------------------
\108\ Ibid.
---------------------------------------------------------------------------
Slutz responded in a short letter stating that DOE was evaluating
its ``next actions'' with respect to the Alliance and the FutureGen
project. He further said that the Alliance had scheduled its final site
selection announcement without consulting with DOE--although DOE had
been aware for months of the plan to make the announcement by the end
of the year--and that DOE would consider it ``inadvisable'' for the
Alliance to do so because DOE did not anticipate issuing the ROD.\109\
---------------------------------------------------------------------------
\109\ Letter from James Slutz to Michael Mudd, Dec. 11, 2007.
``Sanity Check''
In early December, Brad Poston was asked for a last ``sanity
check'' on Plan B. In a meeting with Andrew Patterson, a senior policy
adviser, Poston said that the most critical question was whether
industry would want to participate and reminded Patterson that four
years ago, industry had shown little interest in FutureGen. ``[W]e
would be asking a utility stereotyped as risk averse [sic]
organization, to use our unproven design on their $2.5B investment.''
\110\
---------------------------------------------------------------------------
\110\ E-mail entitled ``RE: FutureGen'' from Bradley Poston to
Thomas Brown, Dec. 5, 2007.
---------------------------------------------------------------------------
DOE top officials weren't having any of it. On December 7, Albright
told Jeff Kupfer, Secretary Bodman's Chief of Staff, that further
negotiations with the Alliance were ``at best fruitless and likely
counter-productive.'' Albright had a new overall plan, but needed the
approval of Sell, the Secretary and the White House.\111\
---------------------------------------------------------------------------
\111\ E-mail entitled ``RE: FutureGen'' from Bud Albright to
Jeffrey Kupfer, Dec. 7, 2007.
---------------------------------------------------------------------------
On December 11, DOE briefed the National Economic Council deputies
on the new plan. Secretary Bodman briefed the NEC ``principals'' on
December 14 on DOE's intent to restructure.\112\ The ``new strategy''
was laid out in a briefing memorandum. He would cap the government's
financial exposure and pointed to developments, such as tax credits and
loan guarantees for clean coal projects, that had occurred since
FutureGen was conceived in 2003. DOE would issue a competitive
solicitation ``aimed at accelerating near-term commercial deployment of
integrated IGCC commercial power plants with cutting-edge CCS
technology.'' DOE would fund only the CCS component of multiple IGCC
plants, which it estimated would cost $350-$500 million per plant.
DOE's unnamed ``experts'' believed there would be ``significant''
private sector interest, although it had not discussed this with the
private sector.\113\
---------------------------------------------------------------------------
\112\ Attachment to e-mail entitled ``FutureGen Timeline.doc: from
Doug Schwartz to Kasdin Miller, Jan. 24, 2008.
\113\ Ibid.
Good Faith?
Whether DOE was operating in good faith during these negotiations
with the Alliance is highly questionable. Secretary Bodman's intense
dislike for the project was well-known by his staff. Undated notes
recording a meeting about the legal obligations of the Department
related to FutureGen read as follows: ``S-1 [Bodman] aggravated by this
project. Bob Card [former DOE Under Secretary] deal. Trying to do
everything in one project get smart on alternative options. Can we turn
this off/redirect?'' \114\ At the end of September, Albright told FE
``to work under the assumption that a threshold at the 1.8B figure with
a 50/50 split afterwards, with some adjustment for increasing Alliance
membership, would be sufficient.'' \115\ But on October 25, an FE
employee walked into a meeting with several high-level DOE officials,
including Albright, Alexander (Andy) Karsner, the Assistant Secretary
for energy efficiency and renewable energy, and Karen Harbert, the
Assistant Secretary for policy and international affairs.
---------------------------------------------------------------------------
\114\ Undated, handwritten notes from the Department of Energy.
Author not identified.
\115\ E-mail entitled ``FG--update'' from Jarad Daniels to Thomas
Russial, Sept. 26, 2007.
The topic of discussion seemed to be how best to kill
FutureGen. It was great fun, with Karsner leading the charge by
suggesting that we just compete FutureGen under the loan
guarantee program and let industry fight over who gets the
federal cost share, and touting how they make industry eat all
the cost escalation in their biomass contracts.\116\
---------------------------------------------------------------------------
\116\ Untitled e-mail from Jarad Daniels to Victor Der, Oct. 25,
2007.
Interestingly, earlier in the year, Albright had been quoted as
saying that any action on climate change had to involve the rest of the
world. ``Unless China and India are acting with us, it's pointless.
They emit more carbon dioxide than we do.'' \117\ Even though DOE and
the Alliance had accomplished that goal and had both China and India as
FutureGen partners, Albright was now in the lead to dismantle it.
---------------------------------------------------------------------------
\117\ Biography of C.H. Albright Jr., The Almanac of the Unelected,
2007, Bernan Press, Lanham, MD, p. 140.
---------------------------------------------------------------------------
Secretary Bodman appears to have made it clear to DOE staff that he
did not care about the overarching goals of FutureGen, but only its
cost. As Bradley Poston wrote in the midst of his efforts to contribute
to a new plan, ``I have an imperfect . . . understanding of the
program; the current market conditions; and the changes in operating
parameters from four years ago when the original acquisition strategy
was developed. I see the true issue to be money and our ability to cap
our financial exposure.'' \118\
---------------------------------------------------------------------------
\118\ E-mail entitled ``RE: FutureGen Plan B'' from Bradley Poston
to Doug Schwartz, Nov. 9, 2007.
---------------------------------------------------------------------------
Bodman's letter to Alliance CEO Mudd at the end of October stating
that the ROD would be completed in time for a site announcement at the
end of December appeared to be a commitment to the original FutureGen.
But in December, Doug Schwartz, Albright's Chief of Staff, said
everyone was ``conveniently forgetting'' one thing: ``[W]e're here b/c
S-1 [Bodman] wants to kill FG as its [sic] currently contemplated, with
or without a Plan B.'' \119\ It was also clear that everyone knew that
Plan B had a very good chance of failing to meet the original goals. It
would be cheaper, but it might not work, and carbon capture would then
be delayed. ``We discussed the additional risk to the company building
the plant and if they would actually be willing to take on this risk. I
don't think we will know that until we put out a RFI and see what
industry says,'' Sarah Magruder Lyle, DOE's White House liaison, wrote.
The ``message'' focus would be on fiscal responsibility. There would be
no fully funded advance appropriations for Plan B. Research would
continue under the Clean Coal R&D program as in the past.\120\
---------------------------------------------------------------------------
\119\ Untitled e-mail from Doug Schwartz to Julie Ruggiero, Dec.
10, 2007.
\120\ E-mail entitled ``Future Gen B Dec 12 2007 Final.doc'' from
Sarah Magruder to Karen Harbert, Dec. 12, 2007.
---------------------------------------------------------------------------
It is also clear that the Alliance did not know the details of Plan
B during the negotiations, although Albright may have discussed it
generally with some of the member companies.\121\
---------------------------------------------------------------------------
\121\ E-mail entitled ``RE: FutureGen Timeline.doc'' from Mary
Egger to David Hill, Jan. 24, 2009.
The Decision
White House staff was expressing ``much angst'' over what Plan B
would mean for commercial deployment of CCS technology.\122\ DOE
officials asked for a clear deployment timeline of ``educated guesses
and assumptions.'' The response was lukewarm at best even from the
policy shop.
---------------------------------------------------------------------------
\122\ E-mail entitled ``timeline'' from Jeffrey Kupfer to Bud
Albright, Doug Schwartz and James Slutz, Dec. 13, 2007.
Schedule for plan B is commercial scale operation of two or
three plants by 2015 with the demo lasting until 2018. One
could argue that you would have commercially deployed plants in
2015 and at a minimum you can argue that you would have them at
2018 assuming that they are still doing CCS after the demo
---------------------------------------------------------------------------
(emphasis added).
On the other hand, FutureGen would operate from 2012-15. But if one
``aggressively'' assumed it would take three to five years before a
commercial plant was built, you could claim the 2018-20 timeframe for
the first commercial deployment--not exactly an acceleration from the
original FutureGen.\123\
---------------------------------------------------------------------------
\123\ E-mail entitled ``timeline'' from Jeffrey Kupfer to Bud
Albright, Doug Schwartz and Jim Slutz, Dec. 13, 2007; e-mail entitled
``RE: timeline'' from Andrew Patterson to Mr. Schwartz and Mr. Slutz,
Dec. 13, 2007.
---------------------------------------------------------------------------
Nonetheless, the DOE higher ups had made their decision: Plan B
would be rolled out with the promise that it would be better, faster
and cheaper than the original FutureGen, regardless of the economics,
industry interest, and the predictions of their own staff. Secretary
Bodman communicated that to Senator Durbin in a phone call that
apparently occurred on December 13.\124\ On that same day, the NEC
principals met and approved a restructuring of FutureGen if the
Alliance didn't agree with all of DOE's demands.\125\
---------------------------------------------------------------------------
\124\ ``Meeting Memorandum'' to Secretary Bodman from Lisa Epifani
regarding phone call to Senator Richard Durbin scheduled for December
13, 2007. Other reports put the call on December 14 and we know that it
was postponed at least once from December 12. However, the call did
occur.
\125\ Attachment entitled ``Purpose of Meeting'' to e-mail entitled
``FG principals mtg statement.doc: from Mary Egger to Mary Egger, Jan.
24, 2008.
---------------------------------------------------------------------------
Victor Der, DOE's Deputy Assistant Secretary for clean coal, was
blunt in his opposition. Plan B was only a demonstration which ``will
likely use more conservative, more costly and substantially less
efficient IGCC-CCS technologies rather than the more aggressive
technologies being developed in our R&D program aimed at potential cost
and energy penalty reductions . . .. Under Plan B we would still have
to follow up with sequential CCPI type demos which would incrementally
add one or two advanced technologies at a time. This serial approach
costs us time to fully deploy CCS globally.'' Der went on to say that
his group's estimate that Plan B could delay by at least 10 years full
commercial deployment of low-cost, low energy advanced CCS technology
that could be transferred to developing countries wasn't included in
the final analysis. A follow-up e-mail stated that affordable CCS
technologies also would not be available in time for the expected
turnover of the existing fleet of coal power plants in the U.S.\126\
DOE officials responded by saying they were continuing to work ``on a
scenario that allows us to reduce/eliminate the 10 year deployment
delay.'' \127\
---------------------------------------------------------------------------
\126\ E-mail entitled ``Re: timeline'' from Vic Der to Mr. Slutz,
Carl Bauer and Scott Klara, Dec. 13, 2007; ``What `Plan B' would NOT
accomplish,'' attachment to e-mail entitled ``FW'' FG Plan B'' from
Jarad Daniels to James Slutz, Dec. 13, 2007.
\127\ E-mail entitled ``FW: FutureGen/CCPI funding (With brackets)
from Darren Mollot to Jay Hoffman, Dec, 17, 2007.
Impact of OMB Budget Cuts
Secretary Bodman wasn't the only high-level government official not
on board with the President's initiative. In September, DOE's budget
shop told FE that the President's budget had additional funding that
enabled FutureGen to stay on track and supported the baseline schedule.
It reflected the ramp-up of activities as the program moved toward
full-scale operation in 2012. FY 2009 activities included the complete
detailed design of a prototype plant, money to initiate construction
and the continued procurement of long-lead equipment.\128\ But in
November, the Office of Management and Budget (OMB), which was well
aware of Bodman's opposition, eliminated all of the climate change
funds from FE's budget.\129\
---------------------------------------------------------------------------
\128\ E-mail entitled ``Proposed Change for FutureGen'' from Karen
Brown to Patty Graham, Robert Pafe, Jarad Daniels and Jordan Kislear,
Sept. 28, 2007.
\129\ E-mail entitled ``Re'' FY 2009 Budget intelligence'' from
Jeffrey Kupfer to Steve Isakowitz and Clay Sell, Nov. 15, 2007.
---------------------------------------------------------------------------
In early December, James Connaughton, the Chairmanaman of the
President's Council on Environmental Quality (CEQ), met with
representatives from Fossil Energy to discuss clean coal research in
preparation for his attendance at the United Nations Framework
Convention on Climate Change in Bali. Connaughton--who may not have
been fully aware of the unrelenting drive toward Plan B--said that the
U.S. had two options: either invest billions of dollars to develop the
technologies to address climate change; or face a new regulatory
environment that would not advance the technology. He also said that
the U.S. needed to elicit more parallel activity in China and
India.\130\
---------------------------------------------------------------------------
\130\ E-mail entitled ``Recap of CEQ meeting on FY09 Passback''
from Jarad Daniels to Victor Der, Nov. 30, 2007. CEQ did host a meeting
on FutureGen in early October to which representatives from the White
House, the Office of Science and Technology Policy and DOE were
invited. E-mail entitled ``CES mtg. re. FutureGen'' from Doug Schwartz
to Nell Kinsey, Oct. 2, 2007.
---------------------------------------------------------------------------
Connaughton's concerns were to no avail. On December 11, while he
was in Bali, he received an e-mail from Karen Harbert at DOE. ``I know
how busy you are in Bali, but without significant interest by WH
offices, we will not have a serious effort in climate,'' she wrote--and
there was no such interest. Harbert went on to says that in the FY08
budget request, DOE had shifted over $500 million toward high-priority
programs, including Futuregen, in clean coal and nuclear research and
development, but OMB had eliminated all of the additions. Harbert
acknowledged that the heavy emphasis on CCS would also help reduce
emissions in China and India, but that OMB had eliminated ``all funded
increase for clean coal, greatly undermining plans for critical
demonstrations as well as FutureGen.'' \131\ In a related e-mail,
Connaughton was portrayed as being
---------------------------------------------------------------------------
\131\ E-mail from Karen Harbert to John Herrmann, NSC, Dec. 11,
2007, enclosing e-mail entitled ``DOE Appeal Status'' from Ms. Harbert
to James Connaughton, Dec. 11, 2007. Harbert said DOE had appealed $380
million but recovered only $24 million.
very apprehensive about the international piece--and how we
deal. What happens to other countries, etc. Bottom line is that
he likes his international talking point and wants to keep it.
CEQ is going to try to set up a call for you [Harbert] and him
sometime later today--so that you can convince him that this is
meangeale [sic]. Hopefully you can do that.\132\
---------------------------------------------------------------------------
\132\ E-mail from Jeff Kupfer to Karen Harbert, undated.
These budget cuts made it extremely difficult, if not impossible,
to build the original FutureGen under any circumstances, as the DOE
expenditures were front-loaded in the project schedule, even with a 50/
---------------------------------------------------------------------------
50 cost share after the initial $1.8 billion was spent.
Announcement by Alliance of Final Site Selection
The Alliance's time line established the end of 2007 for the
announcement of the final site decision. As DOE had completed the final
EIS, the Alliance scheduled the announcement for December 18. The
winner was the State of Illinois with a site near the city of Mattoon.
But within hours, DOE, in a statement made by James Slutz, said that
``the public interest mandates that FutureGen deliver the greatest
possible technological benefits in the most cost-efficient manner. This
will require restructuring FutureGen to maximize the role of private
sector innovation, facilitate the most productive public-private
partnership, and prevent further cost escalation.'' \133\ DOE also
stated that it would not sign the Record of Decision on the EIS which
was required before any federal project construction funds could be
expended.\134\
---------------------------------------------------------------------------
\133\ ``Statement from U.S. Department of Energy Acting Principal
Deputy Assistant Secretary for Fossil Energy,'' Dec. 18, 2007.
\134\ AP, ``Mattoon, Ill. picked for FutureGen pollution-free coal
plant,'' Dec. 18, 2007; e-mail entitled ``Backlash draft'' from Julie
Ruggiero to Megan Barnett, Dec. 18, 2007.
Plan B Goes Forward
During January, there were some continued negotiations with the
Alliance as the White House had not yet officially signed off on Plan
B. On January 10, the Alliance sent a letter proposing a ``new approach
to financing FutureGen.'' It would increase its cost share if overall
costs went up, make post-project repayments and do partial bank
construction financing. Under this approach, the Alliance claimed the
final taxpayer investment would be no greater than it was on the day
President Bush announced the project.\135\ But DOE internally remained
focused on Plan B. Albright told DOE and White House staff that
``[r]egardless of the value of their proposal, we need to continue to
move expeditiously with the new direction rollout.'' The Alliance, for
its part, refused to share the details of its proposal unless there was
an ``in person'' meeting.\136\ DOE's clean coal staff had one job left:
make the fantasy that was Plan B look good on paper.
---------------------------------------------------------------------------
\135\ Letter dated Jan. 10, 2008, from Michael Mudd to C.H.
Albright, p. 1.
\136\ E-mail entitled ``RE: FutureGen'' from Bud Albright to
Cynthia Bergman, Charles Blahous, Jeffrey Kupfer, Andrew Beck and Lisa
Epifani, Jan 16, 2008.
---------------------------------------------------------------------------
Putting together a seemingly logical story around Plan B to sell to
the White House, Congress, the press and the public was not an easy
job. After reviewing a rough outline of the program plan, Victor Der
forwarded it to Jay Hoffman, DOE's Director of program analysis and
evaluation with this message: ``Here's the Frankenstein. I'll be
calling NETL to see where they are in the electrodes development to
make it walk.'' \137\ Hoffman responded with a new ``FutureGen Plan B
Storyline.'' The main rationale, according to Hoffman, was ``a more
appropriate public/private cost allocation between DOE and industry.
Secondary benefits may include accelerated commercial demonstration and
more carbon-free power, but these are not driving reasons for why Plan
B is being developed'' (emphasis added), Hoffman wrote. IGCC technology
was ``a largely commercially proven technology'' and didn't need
government assistance. CCS, on the other hand, was ``largely
unproven,'' and DOE would pay for the resulting research and
development, operating and maintenance and parasitic energy losses that
the private company would incur.\138\
---------------------------------------------------------------------------
\137\ E-mail entitled ``Plan B Program Plan
12-20-2007.doc'' from Victor Der to Jay Hoffman,
Jan. 2, 2008.
\138\ E-mail entitled ``FY09 FutureGen Program Plan Storyline''
from Jay Hoffman to Victor Der, Jan. 4, 2008.
---------------------------------------------------------------------------
After looking at the ``story line,'' Der wasn't convinced. ``[T]he
FrankenGen document, I mean, New FutureGen, needs to be taught to walk
first, before it can hop on a Harley.'' \139\
---------------------------------------------------------------------------
\139\ E-mail entitled ``FW: A Program Plan for Demonstration of
Integrated Electric Power Production and Carbon Sequestration'' from
Victor Der to Jay Hoffman, Jan. 2, 2008; e-mail entitled ``RE: FY09
FutureGen Program Plan Storyline'' from Victor Der to Jay Hoffman, Jan.
4, 2008.
---------------------------------------------------------------------------
A few days later, Secretary Bodman was briefed by Albright on DOE's
``new focus.'' The possible ``secondary benefits'' became real benefits
in this presentation. Because of construction costs, ``growing near-
term interest in carbon dioxide regulations and states beginning to
require CCS or the flexibility to add CCS for siting/permitting of coal
plants,'' DOE was now going to focus on ``first-of-a kind full utility-
scale demonstrations and developing data on commercial cost, integrated
IGCC-CCS performance and reliability to reduce risk, confirm economics
and facilitate industry-wide private capital offerings.'' This would
allow for early deployment of ``nearer-term IGCC-CCS technologies'' at
commercial plants and would also address the ``very critical technical
feasibility question'' of a near-zero emission coal plant. There would
be a minimum of two 600 MW plants, each of which would capture and
store at least one million metric tons of CO2 per year.
Staff did note, however, that cost reductions and competitive
technology were still needed for full deployment, and that those
technologies would still have to be demonstrated later. There was no
explanation about why industry would test technology that was not yet
cost-effective.\140\
---------------------------------------------------------------------------
\140\ ``New FutureGen: Briefing to Secretary of Energy.'' Jan. 9,
2008, pp. 2-3.
---------------------------------------------------------------------------
The Department also struggled to put together an internal
``strategic plan'' for the White House that would incorporate--with
some facial credibility--the new FutureGen structure while claiming to
maintain the original goals of an IGCC, near-zero emission plant. DOE
postulated that because of the challenges of getting coal-fired plants
licensed, this ``change in the market landscape'' had ``catalyzed the
need'' to demonstrate the commercial viability of an IGCC/CCS plant.
However, because of the uncertainty about the cost and performance of
such plants, plans for them were being abandoned or postponed. ``Unless
the production of electricity from coal integrated with sequestering
carbon dioxide can be shown to be commercially feasible and cost
competitive, the coal industry will not make the investments necessary
to fully realize the potential energy security and economic benefits of
this plentiful, domestic energy.'' \141\ Reducing that uncertainty of
course, was exactly what the original FutureGen was supposed to
demonstrate. But in an inexplicable shift in reasoning, DOE then said
that it would achieve its goals more quickly if it could attach a CCS
technology to a commercially built IGCC plant. It would speed up
commercialization, help drive the regulatory framework and address the
``very critical technical feasibility question of advanced technology
clean coal plants.'' \142\
---------------------------------------------------------------------------
\141\ ``Draft Strategic Planning Document for Revised FutureGen:
Demonstration of Integrated Electric Power Production and Carbon
Capture and Sequestration,'' December 2007, p. 4.
\142\ Ibid., p. 2.
---------------------------------------------------------------------------
FE did not go down without a fight. On January 10, Jay Hoffman,
Director of the Office of Program Analysis and Evaluation, who was
working on the FY 2009 budget, laid down the law to Victor Der and
Jarad Daniels.
Let me get right to the point. As written, the CFO's [Chief
Financial Officer] office will not concur on the project plan.
It is sorely lacking in detail and analysis, and provides
little defense or answer to the difficult questions we will
field from the WH, the alliance, and ultimately the public/
Congress . . .. My expectation was for your office to develop a
solid, analytically supported plan that at a minimum included
the suggested analysis, with the caveat that you could
determine how best to frame the story around that analysis.
Hoffman said he expected a revised project plan for the decision
makers that would be ``bullet proof and ready for the WH.'' It needed
to describe what went wrong with the original FutureGen and why Plan B
would be successful, including why industry would buy into it.\143\
---------------------------------------------------------------------------
\143\ E-mail entitled ``FW: FY09 FutureGen Program Plan Storyline''
from Jay Hoffman to Victor Der and Jarad Daniels, Jan. 10, 2008.
---------------------------------------------------------------------------
The goals listed in the new FutureGen in the final drafts read like
DOE's ultimate coal dream: it would validate CCS at multiple sites, it
would inject and monitor CO2 at multiple geologic
formations, integrate CCS with multiple gasification-based power
production technologies; develop a regulatory and permitting system;
provide the possibility of international participation at more than one
project; produce a more comprehensive and reliable set of operating
data, and promote early widespread deployment of IGCC-CCS technology.
In addition, it would capture at least 90 percent of CO2 and
mercury, 99 percent of sulfur, and reduce NOX and particulate
emissions. And all this came with a lower federal price tag.\144\
---------------------------------------------------------------------------
\144\ ``Draft Strategic Planning Document, December 2007, supra,
pp. 3-4.
---------------------------------------------------------------------------
There, of course, was one big problem: Plan B would cost the power
generator a great deal of money in capital, operating and maintenance
and parasitic energy loss costs. DOE's program and budget people
struggled for a month to put together a cost estimate that would be
lower than the original FutureGen. Initially, DOE was going to pay for
the parasitic energy loss, but that became too expensive so it was
deleted. The government would only pay capital costs for the CCS
addition to an IGCC plant. Questions raised about the readiness and
costs of the CCS technology were ignored. ``Biggest area of concern
remain `new technology' and the insertion of this new technology into a
`generic' plant; not sure of the true impact and cost implications,''
the Director of the Office of Engineering and Construction Management
wrote.\145\ ``Taking these concerns in totality, and looking at it from
industry's perspective, how does this uncertainty impact the profit
potential of the project? At the end of the day, this will determine
participation by industry,'' other DOE officials warned.\146\
---------------------------------------------------------------------------
\145\ E-mail entitled ``RE: Cost estimates for FutureGen Plan B''
from Paul Bosco to Jay Hoffman and Melvin Frank, Dec. 19, 2007.
\146\ Attachment to e-mail entitled ``plan b observations.doc''
from Jay Hoffman to Andrew Patterson and James Slutz, Dec. 13, 2007.
Also, the Director of DOE's Office of NEPA Policy and Compliance didn't
think that DOE had a credible NEPA strategy for Plan B since only one
of two units at a site would capture 90 percent of the CO2,
and there were other pollutants. FutureGen was a ``major source'' under
the Clean Air Act, she reminded the general counsel's office. E-mail
entitled ``re:: fg DOCUMENTS'' FROM Carol Borgstrom to Mary Egger, Jan.
16, 2008.
---------------------------------------------------------------------------
There was another concern: the White House hadn't yet signed off on
DOE's plan.\147\ The final White House meeting was on January 25. DOE
presented a strategic plan, complete with proposed press release and
request for information (RFI), for Plan B to go out on January 31. DOE
would contact the Alliance and make a final offer: the Alliance had
until January 29 to accept the terms, which had a ``50/50 cost share
after the 1.8, and stating that the Alliance contribution may not
include project financed debt.'' If the Alliance did not accept those
terms, DOE would announce its new approach and put out the RFI on Jan
31.\148\
---------------------------------------------------------------------------
\147\ E-mail entitled ``draft talking points for S-2 tomorrow with
Texas Railroad Commission'' from Jarad Daniels to Kevin Graney, Jan.
17, 2008; e-mail entitled ``Re: FutureGen--Ltr to Alliance (jan
18).doc'' from Adam Ingols to Doug Schwartz, Mary Egger, James Slutz
and Eric Nicoll, Jan. 18, 2008.
\148\ E-mail entitled ``Re: FutureGen issues and actions'' from
Scott Klara to Jarad Daniels, Jan. 24, 2008.
---------------------------------------------------------------------------
The White House meeting was to be hosted by Keith Hennessey, NEC's
Director and economic adviser to President Bush. Invited participants
included OMB Director Jim Nussle; David Addington, Vice President
Cheney's counsel; Press Secretary Dana Perino; Joel Kaplan, White House
Deputy Chief of Staff; CEQ Chairman Connaughton; Presidential Counselor
Ed Gillespie; Charles Blahous, NEC Deputy Director; and Dr. John
Marburger, Director of the Office of Science and Technology
Policy.\149\ Sell and Albright were to ``tell WH details of going
forward and get blessing.'' \150\
---------------------------------------------------------------------------
\149\ E-mail entitled ``1/24 FutureGen Principals Meeting--TIME
CHANGE'' from Kristin Marshall to Ann Merchant et al., Jan. 23, 2008.
\150\ E-mail entitled ``Re: FutureGen issues and action'' from
Scott Klara to Jarad Daniels, Jan. 24, 2008.
---------------------------------------------------------------------------
Albright and Sell told the NEC principals everything they needed to
hear to believe that the Bush initiative would remain intact. The
restructured FutureGen would achieve all of the primary technical goals
of the original project which was ``no longer optimal to achieve the
goal of accelerating the commercial demonstration and deployment of
advanced, integrated coal-based power systems including CCS.'' But the
government's financial exposure would be limited to mitigating the
``incremental risk of the addition of CCS'' while its investment would
be leveraged ``across a wider range of nearer-term coal based IGCC-CCS
projects.'' \151\ Not only would it accelerate deployment of CCS
technology, restructured FutureGen would establish the technical
feasibility and economic viability of producing electricity and
hydrogen from coal with near-zero emissions. It would verify the
sustained, integrated operation and effectiveness, safety and
permanence of a coal conversion system with carbon sequestration, it
would establish standardized technologies and protocols for CO2
monitoring, mitigation and verification, it would sequester at least
one million tons of CO2 in saline formations; it would
capture at least 90 percent of the CO2 emitted; 90 percent
of the mercury emitted; 99 percent of the sulfur and high levels of NOX
and particulate emissions. There would be a more rapid investment by
industry in multiple demonstrations of ``near-commercially available
technologies'' for CCS.\152\
---------------------------------------------------------------------------
\151\ ``Draft Strategic Planning Document for Revised FutureGen:
Demonstration of Integrated Electric Power Production and Carbon
Capture and Sequestration,'' Jan. 30, 2008, pp. 2-3 and 8.
\152\ Ibid., p. 3.
---------------------------------------------------------------------------
Additionally, because of the loss of the ``living laboratory''
element of FutureGen, there would be a ``fresh look at the
commercialization profile of key FE technologies.'' This was a
particularly puzzling statement because the table of technologies that
followed made it clear that most of them were still at the bench or
laboratory stage of development, and FE would have to find alternative
host sites. There were other confusing statements. While admitting that
Plan B would delay the cost-reduction improvements that were ultimately
needed for coal/CCS plants to be an attractive commercial option in
both the U.S. and internationally,\153\ Sell and Albright claimed that
it would demonstrate ``commercial feasibility.'' Private companies
apparently were now expected to quantify the technical and economic
risk associated with near-zero emissions coal plants, thus ``enabling
private financing decisions of future plants of this type'' and
facilitating ``industry-wide private capital offerings.'' \154\
---------------------------------------------------------------------------
\153\ ``Under Revised FutureGen commercial deployment of cost-
reduction improvements could be delayed unless other test approaches
are found, such as designing limited test capability . . . into Revised
FutureGen and CCPI demonstrations.'' Ibid., p. 7.
\154\ Ibid., pp. 3 and 7-8.
---------------------------------------------------------------------------
But deep in the strategic plan was the recognition that
incorporating CCS on a commercial-scale IGCC plant added capital and
operating costs and ``is still perceived by the electricity generation
industry as an emerging technology. Concerns remain over the
integration and scale-up risks associated with IGCC, and a cost gap
still remains when compared to conventional coal power plants.''
Industry's reaction to the new program would depend on the ``magnitude
of the government's commitment to the project'' and its ability to
``reasonably satisfy'' those concerns and allow the plants to function
competitively. And, of course, there was that troubling issue of
liability for the sequestration of CO2.\155\
---------------------------------------------------------------------------
\155\ Ibid., pp. 16-17.
---------------------------------------------------------------------------
DOE also claimed that its international partners would favorably
respond, even though they no longer could share in the technology
development or work at the new sites. Inexplicably, DOE found that the
new approach would actually ``raise the efficiency of information
sharing.'' \156\
---------------------------------------------------------------------------
\156\ Ibid., p. 17.
---------------------------------------------------------------------------
Albright and Sell were successful. By January 28, everyone in the
White House was ``on board'' with the announcement for a restructured
FutureGen.\157\
---------------------------------------------------------------------------
\157\ E-mail entitled ``FutureGen'' from Cynthia Bergman to Megan
Barnett, Jan. 28, 2008.
---------------------------------------------------------------------------
In the final strategic plan, DOE ignored every concern of its own
staff. ``Today, more than ever, the concept of FutureGen is a
centerpiece for the future of coal utilization,'' the plan trumpeted.
FutureGen directly addresses a primary goal of the Department of
Energy's (DOE) 2006 Strategic Plan under the Theme for Energy Security
to promote America's energy security through reliable, clean, and
affordable energy: Environmental Impact of Energy: ``Improve the
quality of the environment by reducing greenhouse gas emissions and
environmental impacts to land, water and air from energy production and
use.''\158\
---------------------------------------------------------------------------
\158\ DOE, ``Draft Strategic Planning Document for Revised
FutureGen: Demonstration of Integrated Electric Power Production and
Carbon Capture and Sequestration,'' Jan. 31, 2008.
January 30, 2008 announcement
Secretary Bodman met with the Illinois delegation on January 29 to
forewarn them of the announcement. His plan was very poorly received by
both Republicans and Democrats, who called it ``unfair,'' ``cruel'' and
``incompetent management.'' They asked how DOE could throw away
Illinois' five years of work.\159\ Just before the announcement,
Illinois Republican Congressmen Tim Johnson and John Shimkus made an
appeal directly to President Bush to save the project. The President
said he stood by Bodman's decision.\160\
---------------------------------------------------------------------------
\159\ E-mail entitled ``re: FG REDLIGHT--S-1 agreed to wait one
day'' from Jeffrey Kupfer to Eric Nicoll et al., Jan. 29, 2008.
\160\ ``Durbin sees `uphill struggle' to save FutureGen; Energy
Dept. confirms it is pulling its back for the coal-fueled experimental
power plant in Mattoon, Ill.,'' St. Louis Post-Dispatch, Jan. 31, 2008,
D2.
---------------------------------------------------------------------------
DOE then announced that it would ``join industry'' in its efforts
to build IGCC plants by providing funding for the addition of CCS
technology to multiple plants that would be operational by 2015.
According to DOE, this would double the amount of CO2
sequestered compared to the original FutureGen.\161\ The restructured
approach allowed DOE to ``maximize the role of private sector
innovation, provide a ceiling on federal contributions, and accelerate
the Administration's goal of increasing the use of clean energy
technology to help meet the steadily growing demand for energy while
also mitigating greenhouse gas emissions.'' \162\ Secretary Bodman also
claimed that engagement with the international community would remain
``an integral part'' of DOE's efforts, although he had already been
told that private companies would not be interested in freely sharing
their technology with other parties, foreign or domestic.\163\
---------------------------------------------------------------------------
\161\ FE staff had told the policy and press staff that if they
were going to maintain the 90 percent carbon capture goal, IGCC was the
only credible approach. E-mail entitled ``RE: FOR YOUR REVIEW--updated
fact sheet and press release'' from Jarad Daniels to Megan Barnett,
Jan. 22, 2008.
\162\ ``DOE Announces Restructured FutureGen Approach to
Demonstrate CCS Technology at Multiple Clean Coal Plants,'' press
release, Jan. 30, 2008.
\163\ Ibid.
---------------------------------------------------------------------------
The mysterious ``technology advance'' that Secretary Bodman and
others kept referring to was that, unlike in 2003, there were now over
33 IGCC plants that have been proposed, even though a number of them
had already been cancelled. In a follow-up conference call with
reporters, Sell claimed that ``[t]his fact, this changing underlying
market dynamic, underpins why we believe our new approach is
fundamentally better to advance the state of carbon capture and
sequestration.'' He expressed his confidence that restructured
FutureGen was a better way to go. ``We are making this project better
and we are increasing substantially the likelihood of success.'' \164\
Sell even claimed that the National Energy and Technology Lab's (NETL)
work gave him that confidence, despite the fact that NETL, FE and
others had been protesting for months that the new approach would not
work.\165\
---------------------------------------------------------------------------
\164\ Transcript of Department of Energy conference call,'' Jan.
30, 2008. The speakers were Clay Sell and Secretary Bodman.
\165\ Ibid.
---------------------------------------------------------------------------
There was no discussion of who would take on the liability for
sequestration or who was going to pay for the energy loss associated
with CCS or how the technology had suddenly advanced to viable
commercialization. DOE would issue a Request for Information to the
industry to determine its views (which had not been sought before the
announcement). It would be followed by a competitive Funding
Opportunity Announcement.\166\ Any loss of the research and development
aspects of FutureGen would be made up in a significant increase in the
FY 2009 clean coal budget.\167\
---------------------------------------------------------------------------
\166\ DOE press release, ``DOE Announces Restructure FutureGen
Aproach to Demonstrate CCS Technology at Multiple Clean Coal Plants,''
Jan. 30, 2008.
\167\ ``FutureGen Talking Points,'' undated.
---------------------------------------------------------------------------
The RFI asked for input and public comment on the restructured
FutureGen and expressions of interest from power producers who would
consider participating in the revised initiative. These responses would
help shape a competitive funding opportunity announcement expected to
be released in June of 2008. DOE stated it was interested in funding
multiple demonstrations of CCS technology at a commercial scale of at
least 300 gross MW per unit plant power train per demonstration. It
would contribute no more than the incremental cost of the CCS for one
train. At least 1 million metric tons of CO2 would be stored
in a saline storage formation, and all emissions levels for other
pollutants would meet the original FutureGen goals. Commercial
operations were expected to begin in 2015.\168\
---------------------------------------------------------------------------
\168\ DOE, ``Request for Information (RFI) on the Department of
Energy's Plan to Restructure FutureGen,'' Jan. 31, 2008.
Response to Restructured FutureGen and Request for Information
The response was quick and skeptical with most of the media viewing
FutureGen as dead. ``The Administration has long trumpeted technology,
not regulation, as the answer [to global warming]. There was no
trumpeting last week when it unexpectedly canceled FutureGen--its much-
touted, $1.8 billion attempt to develop a cutting edge coal plant that
would turn coal to gas, strip out and store underground the carbon
dioxide that contributes to climate change, and then burn the remaining
gas to produce hydrogen and electricity,'' The New York Times wrote.
``And what of Mr. Bush's hydrogen-powered Freedom Car? That, too, has
receded from view.'' The newspaper described the decision as ending a
four-year-old program that had been described as ``one of the boldest
steps our nation has taken toward a pollution-free energy future.''
\169\ The St. Louis Post-Dispatch opined that Secretary Bodman
apparently missed the part of Bush's 2008 State of the Union address on
the previous day where the President urged Congress to ``fund new
technologies that can generate coal power while capturing carbon
emissions.'' IEEE Spectrum described the decision as bringing FutureGen
to a ``screeching end.'' \170\
---------------------------------------------------------------------------
\169\ ``Higher Costs Cited as U.S. Shuts Down Coal Project,'' The
New York Times, Jan. 31, 2008, C5; ``Late and Lame on Warming,'' The
New York Times, editorial, Feb. 4, 2008.
\170\ ``Back to the FutureGen,'' St. Louis Post-Dispatch, Jan. 31,
2008, C8; ``U.S. Government Terminates Its Major Clean Coal Project,''
IEEE Spectrum OnLine, http://blogs.spectrum.ieee.org/tech--talk/2008/
02/us-govt-terminates-its-m.
html
---------------------------------------------------------------------------
The responses received in March from industry to the Request for
Information were more damning. There were 49 responses, almost all of
which took major ``exceptions to the RFI specifications and near zero
emissions objectives,'' a DOE summary document reported. Industry
wanted the solicitation expanded to non-IGCC technology; a
``substantial relaxation'' of the 90 percent carbon capture
requirement; government liability protection of the CCS aspects of the
projects; elimination of the mandate to sequester one million tons of
CO2 in a saline aquifer and permission to sell CO2
for enhanced oil recovery; guaranteed funding up front; an expedited
NEPA process; a sharing of the additional operating and parasitic
energy costs; and reductions in the performance targets of sulfur,
nitrogen oxide, particulate matter and mercury. The comments also
suggested that the schedule was unrealistic.\171\
---------------------------------------------------------------------------
\171\ DOE, ``Expanded Summary of Comments Received Under DOE's
Request for Information (RFI) on Plan to Restructure FutureGen,'' March
20, 2008.
---------------------------------------------------------------------------
The comments from the Coal Utilization Research Council (CURC), an
industry advocacy group that focuses on the technology development
steps necessary to achieve near zero emissions from coal power
generation (and which opposed the termination of FutureGen), were
particularly negative. There wasn't enough money for ``multiple'' CCS
projects (CURC estimated at least $600 million needed for each
project), nor was there any assurance that Congress would provide
funding; 90 percent CO2 capture was not realistic for a
commercial project; and non-IGCC projects should be considered.
Given the immature state of experience in using capture
technology integrated with an IGCC, for example, CURC believes
it is much more prudent to simply encourage the installation of
CCS technology on a unit that will be commercially-operated
rather than dictate the level of capture. Industry should be
free to determine what level of capture of CO2 makes
the greatest sense from both a cost and acceptable risk
exposure perspective.
CURC also estimated that installing CCS systems on to commercial
projects would cost hundreds of millions, if not billions, of dollars,
and the owners ``should not be restricted to the 90 percent capture
requirement that is otherwise germane to a technology demonstration
project (i.e., FutureGen).'' Additionally, a much larger initiative was
necessary to continue a large-scale, industry-supported CCS
implementation partnership.\172\
---------------------------------------------------------------------------
\172\ ``Comments Submitted to the Department of Energy by the Coal
Utilization Research Council (CURC) in Response to a Request for
Information (RFI) Issued by the DOE,'' March 3, 2008, pp. 1-3 and 4.
---------------------------------------------------------------------------
These were the same points DOE staff had raised earlier. In an
issues document based on the comments, DOE staff wrote: ``In the
current environment, utilities planning new base load power capacity
have compelling incentives to adopt a `wait and see' approach while
issues related to retail competition and carbon management are
resolved. Moving forward with CCS at this time, absent legislation or
other incentives, would be imprudent.'' Industry also was expressing
skepticism about government support for the new program because of the
change in direction and the change in administrations.\173\
---------------------------------------------------------------------------
\173\ DOE, ``Revised FutureGen Project--Outstanding Legal,
Contractual and Policy Issues,'' March 25, 2008, Rev. 1, p. 1. DOE also
expressed the fear that if the CCS technology failed, because of the
numerous plant modifications necessary in an IGCC plant to capture and
sequester CO2, ``the entire plant could be considered a
stranded asset.'' Therefore, the entire cost of the plant could be
included in the base for cost-sharing, as it had been in other projects
were novel technology is being tested. Ibid.
---------------------------------------------------------------------------
DOE plowed forward, reiterating once again to Illinois
Congressional members that its approach would help permit new
commercial coal plants.\174\ However, it hid the supposedly ``public''
comments from the public and the press by refusing all requests to
release them.\175\
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\174\ Letter to Rep. Tim Johnson et al. from Secretary Bodman,
attached to ``Memorandum for the Secretary'' from C.H. Albright, Jr.,
to James Slutz, April 9, 2008.
\175\ Despite requests under the Freedom of Information Act, DOE
refused to release these comments or those submitted on the draft
Funding Opportunity Announcement until this committee requested them.
It provided no legitimate reason for withholding the comments beyond a
claim that there was proprietary information in some of the responses.
See, e.g., e-mail entitled ``FG docs'' from Andrew Patterson to Scott
Shiller, Victor Der and James Slutz, March 31, 2008.
---------------------------------------------------------------------------
But there were other public forums which clearly exposed the
problem DOE was going to have in getting responsive proposals. In May
of 2008, the greenhouse gas research and development program and the
clean coal center of the International Energy Agency held a workshop on
financing CCS. The workshop participants' view was that private
investment in CCS in North America was an ``unattractive financial
option without Government incentives and a legal framework in place.''
As a representative of JP Morgan Chase said, CCS has no positive
purpose. It only has a negative purpose to avoid the cost of putting
CO2 into the atmosphere, and that has no cost in the United
States. The investment banks wanted a ``secure return on their
investment, such as loan guarantees or tax credits.'' Legal and
environmental liability was an issue, and insurance companies were not
ready to take on this risk. Until there was greater regulatory and cost
recovery certainty, the private sector would not invest. And,
``ultimately, the willingness of ratepayers to pay higher electricity
bills to pay for CCS, as reflected in decisions by local public
utilities, will be critical to the financing of such projects,'' the
participants agreed. ``It is clear that CCS is not economic and
subsidies will be needed for the first plants . . .. [F]inancing is the
key and ultimately without financing there will be no CCS deployment.''
\176\
---------------------------------------------------------------------------
\176\ IEA Greenhouse Gas R&D Programme, World Coal Institute and
IEA Clean Coal Centre, ``Summary Report on Expert Workshop on Financing
Carbon Capture and Storage (CCS): Barriers and Solutions,'' May 28-29,
2008, pp. 2-3 and 8.
Funding Opportunity Announcement (FOA)
The Draft Funding Opportunity Announcement was issued on May 7,
2008. Despite the RFI comments, it remained focused on a gasifier
technology. As CURC stated in its comments, the FOA described a
commercial-scale project which included the goals and objectives of the
original FutureGen, which was a publicly co-funded demonstration-scale
project, and that was not viable.
Included among our suggested modifications are changes to FOA
requirements related to emission controls of criteria
pollutants, beyond that which is required for permitting plants
today, a level of CO2 capture percentage that has
not been previously achieved in power plants at a commercial
scale, dates for operation that may be difficult to achieve and
other criteria that also may not be realistic or prudent when
measured against the business requirements of a facility, or
facilities, planned and constructed to operate successfully in
commerce.
CURC reminded DOE of its earlier comment that there was not enough
money for multiple projects, and, since future funding was not
guaranteed, ``there are not clear reasons why an owner or operator can
have confidence that the bulk of the funding for a selected project
will be forthcoming at a later date.'' CURC recommended a reduction
below the 81 percent CO2 capture level, which it described
as ``not a reasonable approach'' at this stage of technology
development or integration. ``Industry needs to obtain baseline data,
demonstrated reliability and widespread confidence in CCS systems and
these goals can be achieved more cost-effectively by requiring less
aggressive percentages of capture.'' \177\
---------------------------------------------------------------------------
\177\ CURC, ``Comments related to the Department of Energy draft
announcement #DE-PS26-08T00496 related to ``RESTRUCTURED FUTUREGEN,''
May 21, 2008, pp. 2-3.
---------------------------------------------------------------------------
CURC also wanted more flexibility in the CO2 storage
site, a regulatory structure for CO2 transport, a resolution
of long-term liability issues, more favorable cost-sharing
arrangements, including recognizing the parasitic energy loss as a
cost, and modifications that made it clear that non-IGCC plants were
eligible.\178\ In a summary of the unreleased ``public'' FOA comments,
DOE indicated that they were similar to those submitted by CURC.\179\
---------------------------------------------------------------------------
\178\ Ibid., pp. 6-7
\179\ ``DIFFERENCES BETWEEN RESTRUCTURED FUTUREGEN ``DRAFT'' AND
``FINAL'' FUNDING OPPORTUNITY ANNOUNCEMENT (FOA),'' attached to e-mail
entitled ``FG Q&As for Final FOA.6-23-08.v4.doc'' from Jarad Daniels to
Keith Miles and Thomas Sarkus, June 23, 3008.
---------------------------------------------------------------------------
The final FOA made some of those changes. A non-gasification
project did not have to produce at least 250 MW net electricity output
but could be at a ``commercially viable size.'' There was no mandatory
ceiling on the project cost. The applicants must ``propose'' start-up
by Dec. 31, 2015, but apparently had no obligation to meet that date.
The demonstrations were ``expected'' to operate for three to five years
and capture one million metric tons of CO2 per year that
would be put in a saline ``formation,'' not an aquifer as originally
required. There was no obligation to operate after the demonstration
period, and monitoring of the sequestration site would continue for
only two years after the demonstration was completed. DOE would
contribute the lesser of (1) the incremental cost of implementing CCS
on the demonstration unit; or (2) 50 percent of the total allowable
project cost. DOE's maximum cost would be negotiated prior to the
award. Applications were due on October 8, 2008, with selections made
by the end of the year.\180\
---------------------------------------------------------------------------
\180\ DOE, ``Funding Assistance Funding Opportunity Announcement,''
June 24, 2008.
---------------------------------------------------------------------------
In the final FOA, DOE bragged again that ``[t]oday, more than ever,
the FutureGen concept holds great promise for sustaining near-term coal
utilization.'' \181\ Internally, staff saw it quite differently. The
goals that Secretary Bodman had promised when he rolled out the
restructured FutureGen were no longer mandatory. ``The reality of
Financial Assistance awards is that they should be viewed as ``best
effort,'' Keith Miles wrote.
---------------------------------------------------------------------------
\181\ Ibid., p. 6.
DOE asks for the Applicant to address all of the requirements
(goals and objectives), provide a Statement of Project
Objectives (SOPO) as well as the evaluation criteria in the
FOA, which will ultimately be reviewed by DOE with selections
made. Unfortunately there are no ``consequences'' if they don't
achieve the goals and objectives contained in their SOPO. DOE's
only recourse is when an issue of ``noncompliance'' arises, or
research misconduct.\182\
---------------------------------------------------------------------------
\182\ E-mail entitled ``RE: Restructured FutureGen @ REMINDER
COMMENTS DUE BY 10:30 AM'' from Keith Miles to Jay Hoffman and David
Pepson. June 23, 2008.
No one--except those who may have drunk the Kool-Aid at DOE--was
surprised at the anemic response to the FOA. In the end, almost no one
came to DOE's party, and it wasn't the party that had been advertised
in the invitation. There were four applications, two of which did not
come close to meeting the criteria. Neither of the survivors proposed
an IGCC/CCS plant, but hoped to test out experimental carbon capture
technology on existing facilities. It was reported that even those
applications were incomplete.\183\ In January of 2009, Secretary Bodman
and his deputies slipped out of town minus viable projects or even
press releases claiming success.
---------------------------------------------------------------------------
\183\ ``New Life for Clean Coal Project,'' The Washington Post,
March 6, 2009, A1.
Relationship with International Partners
Despite the years-long push to get other countries involved in
FutureGen and the emphasis by high-level Bush officials on
international participation in FutureGen, DOE did not discuss its
change in plans with its international partners. Nor did it take any
steps to inform the State Department's and its own international staff,
which were continuing to solicit foreign partners. In a presentation to
Brazil in October, FutureGen was described as a ``unique opportunity to
prove carbon sequestration . . . [and] to advance IGCC technology.''
International participation would facilitate implementation of CCS in
emerging economies.\184\ In November, Secretary Bodman, who had met
previously with Polish officials, sent a letter encouraging Poland to
join the initiative.\185\
---------------------------------------------------------------------------
\184\ DOE, ``FutureGen: A Path to Success: The Right Project at the
Right Time,'' Oct. 17, 2007.
\185\ Letter from Samuel Bodman to Piotr Naimski.
---------------------------------------------------------------------------
In December, Treasury Secretary Paulson in a speech before the Asia
Society prior to another SED meeting with China stated that the
FutureGen clean coal development partnership with China represented one
``of the best areas of on-going cooperation.'' \186\
---------------------------------------------------------------------------
\186\ Remarks by Secretary Henry M. Paulson, Jr. on ``Maintaining
Forward Momentum in U.S.-China Economic Relations,'' Treasury
Department press release, Dec. 5, 2007, p. 2.
---------------------------------------------------------------------------
When Karen Harbert, DOE's Assistant Secretary for policy and
international affairs, asked how international partners could be
incorporated into the new FutureGen, she was bluntly told that it had
no international component.\187\ But when Japanese officials sent a
draft of a ``framework'' for a FutureGen agreement between the U.S. and
Japan and a $10 million contribution on January 18, Harbert told them
to ``hold tight.'' Japan had hoped to have it signed in the next week
at the World Economic Forum and had already put $700,000 in its budget
for the project.\188\ In the final draft of the supporting
documentation for the restructured FutureGen, DOE removed all
references to foreign governments' having access to test demonstration
results because ``they wouldn't have access to any of the `good'
proprietary information, but rather only the non-proprietary
information which DOE always makes publicly available for any of
projects anyhow.'' \189\
---------------------------------------------------------------------------
\187\ E-mail entitled ``RE: Int'l aspects of new futuregen
construct'' from James Slutz to Karen Harbert, Dec. 12, 2007.
\188\ E-mail entitled ``FW: Signature for the Framework on FG
Project between DOE and METI etc.'' from Jarad Daniels to Joseph Giove,
Jan. 18, 2008; e-mail entitled ``Re: FutureGen Framework Agreement''
from Talashi Naruse to Joseph Giove, Jan. 21, 2008.
\189\ E-mail entitled ``RE: restructured futuregen international
draft--comments requested'' from Jarad Daniels to Bud Albright, James
Slutz, Doug Schwartz, Adams Ingols, Kathy Fredriksen, Diana Clark and
Raj Luhar, Jan. 25, 2008. At this point, India had contributed $4
million and South Korea had contributed $2 million. China and Australia
had made formal commitments; Norway was ready to contribute funds; and
Italy and Poland had stated interest. Ibid.
---------------------------------------------------------------------------
In a draft memo prepared for James Slutz to issue after the January
30 announcement, the partners were to be told, ``The commercial market
place will be the mechanism to deploy new technology such as Integrated
Gasification Combined Cycle (IGCC) with CCS.'' DOE was, however,
``committed to an international outreach component'' which was
``critical to garnering broad acceptance of the new technology and
fostering the replication of the near zero-emissions on a broad
scale.'' In other words, ``thanks, but no thanks.'' \190\
---------------------------------------------------------------------------
\190\ ``Draft Email from Jim Slutz to Staff Contacts in seven FG
partner countries,'' undated.
---------------------------------------------------------------------------
On Feb. 1, 2008, Secretary Bodman sent out letters to all the
current and potential foreign partners telling them that FutureGen was
being restructured to emphasize commercial demonstration of CCS with
IGCC plants, and that he looked forward to ``continued outreach'' to
the interested countries.\191\ The first--and most angry--response came
from Korea. Kijune Kim of the Ministry of Commerce, Industry and
Energy, wrote,
---------------------------------------------------------------------------
\191\ Letter from Secretary Bodman to the Honorable Akira Amari,
Feb. 1, 2008.
I am really surprised that I had no prior explanation of that
restructuring intention from DOE before . . . Korea really
tried our best to cooperate with US to develop FutureGen
project since early 2006 . . .. We contributed $2 million in
March 2007 . . .. actively participated in four meetings . . .
even hosted the third negotiating meeting for the FutureGen
project agreement last October in Seoul to make the project
move on. If you have recognized all Korea's endeavor regarding
the project, it is not the appropriate way to deliver U.S.
DOE's intention to restructure FutureGen project by sending me
an e-mail . . . without any prior consultation or explanation
---------------------------------------------------------------------------
to Korea.
Mr. Kim concluded by pointedly noting ``that there were better ways
(both procedure and timing) to inform Korea US DOE's intention to
restructure FutureGen project.'' \192\
---------------------------------------------------------------------------
\192\ E-mail entitled ``Re: DOE Announces Restructured FutureGen''
from Kijune Kim to James Slutz, Feb. 4, 2008.
---------------------------------------------------------------------------
After the announcement, the State Department asked if DOE had
talking points to use with foreign audiences. Norway and Russia had
expressed interest in FutureGen; other embassies had pro-FutureGen
points in their standard talks on energy and climate.\193\ On February
1, 2008, David Mulford, the U.S. ambassador to India, wrote Secretary
Bodman expressing concern about the FutureGen project based on his
reading of media reports. ``Since I will have to address the issue soon
with the Government of India (GOI) and the Indian media, I would
appreciate some clarification . . .. This would include the specific
issue of the status of India's pledged monetary commitment.'' The
ambassador reiterated India's ambitious plans to expand its all coal-
fired thermal capacity and asked the Secretary for his views ``on how
to continue cooperation with India in clean-coal power generation
technology and mitigation of related carbon emissions.'' \194\
Australia also wondered what was up. ``The restructuring of FutureGen
has been a hot topic for our media,'' Australia's clean coal manager in
the Department of Resources Energy and Tourism wrote. We have also been
fielding representations from our own industry including companies
involved in the FutureGen Alliance . . .. [W]e need to get a better
understanding of what this means in terms of the International
Partnership and the associated agreement being negotiated with other
Governments.'' \195\
---------------------------------------------------------------------------
\193\ E-mail entitled ``FutureGen Talking Points'' from Peter
Haymond to Giulia Bisconti, Jan. 31, 2008.
\194\ Letter from Mr. Mulford to Secretary Bodman, Feb. 1, 2008.
\195\ E-mail entitled ``Re: FutureGen [SEC=UNCLASSIFIED]'' from
John Karas to Victor Der, Feb. 8, 2008.
---------------------------------------------------------------------------
In February, Secretary Bodman received a letter from the Australian
minister for resources, energy and tourism, who--based on the September
4, 2007, joint statement by Prime Minister Howard and President Bush--
was looking forward to ``a program of consultation at both the
government and industry level including the means by which information
on technological advances will be shared.'' \196\ Secretary Bodman
responded with a letter stating that DOE ``will continue to keep you
informed of significant developments in the FutureGen program and look
forward to future collaborations with Australia.'' \197\ That appears
to have been the end of any real effort for international cooperation
on FutureGen, once a ``core objective'' of the project, although FE
attempted through the spring to gin up interest. Its staff made
presentations to various embassies claiming that the international
component was a ``key priority'' in the restructured FutureGen with a
focus on a ``non-proprietary information exchange.'' \198\ Their
objective was to convey ``the clear message that the U.S. commitment to
clean coal remains stronger than ever under the restructured
FutureGen.'' \199\
---------------------------------------------------------------------------
\196\ Letter from Martin Ferguson to Secretary Bodman, Feb. 22,
2008.
\197\ Letter from Secretary Bodman to Mr. Ferguson, March 26, 2008.
\198\ ``FutureGen--International Component,'' attached to e-mail
entitled ``FW: FutureGen: International'' from Victor Der to Jarad
Daniels, Joseph Giove and Samuel Biondo, May 20, 2008.
\199\ Ibid.
---------------------------------------------------------------------------
By the end of June, 2008 DOE claimed that it was still ``exploring
ways to engage governments in deploying Near-Zero Emission Coal plants
with CCS for deployment around the world.'' It proposed workshops and
symposia to share non-proprietary information and the development of
global outreach strategies for acceptance of the technology and gamely
claimed that all of the previously interested countries would ``likely
have continued interest'' in the outcome of FutureGen.\200\ Jim
Connaughton, CEQ Chief and loyal Bush soldier, was quoted in the Indian
press as saying that there would be three to four zero emission coal-
fired power plants and even greater international participation in the
restructured FutureGen, although there was no evidence that either one
of those statements was accurate.\201\
---------------------------------------------------------------------------
\200\ DOE Office of Fossil Energy, ``U.S. Carbon Capture and
Storage Program: Where We Are and Where We're Going: Clean Coal,
FutureGen, and CCS'' and attachments, June 2008. This presentation was
created by FE as part of a FutureGen ``outreach and communications''
strategy after a New York Times article said the entire clean coal
effort was stalled. ``Mounting Costs Slow the Push for Clean Coal,''
The New York Times, May 30, 2008, A1. ``We will tout our investment and
accomplishments as Connaughton has delineated and work them into the FE
Clean Coal Exhibit,'' FE staff wrote. They would also visit the science
attaches at the embassies in Washington and tell them about the
restructured FutureGen. E-mail from Samuel Biondo to Joseph Giove, May
30, 2008.
\201\ ``Commercial viability of FutureGen to be known only in
2020,'' The Hindu Business Line, http://www.thehindubusinessline.com/
2008/06/18/stories/2008061851582100.htm June 18, 2008.
---------------------------------------------------------------------------
Australia, however, went ahead on its own. After the fall of the
Howard government, it ratified the Kyoto Protocol and established its
own fund to pursue CCS demonstration projects in Australia.\202\
---------------------------------------------------------------------------
\202\ ``Remember FutureGen?'' Columbia Journalism Review, April 4,
2008; ``Investment in Victoria's Clean Coal Industry,'' http://
www.investvictoria.com/300408VicCleanCoalIndustry, April 30, 2008.
---------------------------------------------------------------------------
Peabody Energy, one of the FutureGen partners which already had a
presence in China, signed an agreement in December of 2007 with China
Huaneng Group to invest in an integrated gasification combined cycle
power plant near Tianjin, southeast of Beijing called GreenGen,
although there will be no CCS until its ``later phases.''
Abu Dhabi is designing an IGCC plant with BP and Rio Tinto that is
supposed to produce hydrogen for energy and CO2 to be
sequestered.\203\
---------------------------------------------------------------------------
\203\ ``BP Says Abu Dhabi Hydrogen-Fueled Plant to Start 2013,''
Bloomberg.com, Jan 19, 2009. http://www.bloomberg.com/apps/
news?pid=20601130&sid=azs2rxpX-Sk&refer=environment
Conclusion
FutureGen began life as the centerpiece of the Bush
Administration's climate change technologies. This initiative held out
the promise of reducing greenhouse gas emissions without the pain of
signing up to the Kyoto Protocols. In abandoning the original concept,
the Department of Energy left the country with no coherent strategy for
carbon capture and sequestration-despite having fingers in many pots.
Whether the new Administration and Congress should revive the original
program, which was ready to begin work when the Department of Energy
killed it, or move to some other initiative, is an open question. It is
absolutely clear that the ``Plan B'' initiative sold to the public and
the Congress by Secretary Bodman will not provide the kind of long-term
benefits to the United States and the world needed to deal with global
climate change. The end result of this trail of mismanagement? Progress
on the great challenges to harness technology to build a greener energy
future was stalled, and the United States abandoned its global
leadership role.
This is a disappointing legacy for the Department of Energy.