SPEAKERS CONTENTS INSERTS Tables
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ENERGY AND WATER DEVELOPMENT APPROPRIATIONS FOR 1999
Tuesday, March 10, 1998.
DEPARTMENT OF ENERGY
WITNESS
HON. FEDERICO F. PEÑA, SECRETARY OF ENERGY
Mr. MCDADE. The committee will come to order.
We are very pleased this morning to begin the hearings on the FY 1999 appropriations for the Department of Energy. We are delighted to have the Secretary here with us, a distinguished public servant.
Mr. Secretary, you proceed in your own way, either filing your statement or informally, whatever suits you. We are glad to have you here, Mr. Secretary.
Secretary PEñA. Thank you very much, Mr. Chairman.
ROLL CALL
Mr. MCDADE. Let me interrupt one second. We have a business and housekeeping thing to take care of. The Chair recognizes the gentleman from California.
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Mr. FAZIO. Thank you, Mr. Chairman.
Because the Subcommittee on Energy and Water Development will be dealing with national security and other sensitive matters at its hearings on atomic energy defense activities, I move that the hearings on the 17th and 18th of March be held in executive session.
Mr. MCDADE. The Chair will put the question. The clerk will call the roll.
The CLERK. Mr. McDade?
Mr. MCDADE. Aye.
The CLERK. Mr. Rogers?
Mr. ROGERS. Aye.
The CLERK. Mr. Knollenberg?
[No response.]
The CLERK. Mr. Knollenberg?
Mr. KNOLLENBERG. Aye.
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The CLERK. Mr. Frelinghuysen?
Mr. FRELINGHUYSEN. Aye.
The CLERK. Mr. Parker?
[No response.]
The CLERK. Mr. Callahan?
Mr. CALLAHAN. Aye.
The CLERK. Mr. Dickey?
[No response.]
The CLERK. Mr. Livingston?
[No response.]
The CLERK. Mr. Fazio?
Mr. FAZIO. Aye.
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The CLERK. Mr. Visclosky?
Mr. VISCLOSKY. Aye.
The CLERK. Mr. Edwards?
Mr. EDWARDS. Aye.
The CLERK. Mr. Pastor?
Mr. PASTOR. Aye.
The CLERK. Mr. Obey.
[No response.]
Mr. MCDADE. The vote is 9 to zero, and the hearings will be held in exceutive session in accordance with the motion.
Mr. Secretary, you are recognized.
Statement of Secretary Peña
Secretary PEñA. Thank you very much, Mr. Chairman and members of the committee.
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Let me first offer my formal testimony for the record, and I have, I hope, a much briefer opening comment to help us start the hearing.
Mr. Chairman, it has been almost a year since I last appeared before you as the newly sworn in Secretary of Energy. I remember right after I was sworn in, I had six hearings within a period of, I think, a week or two.
Let me first thank you and members of the subcommittee who have actively helped us to address the many challenges facing the Department of Energy.
MANAGEMENT IMPROVEMENTS
This morning, let me talk about three particular areas. First, I want to report on several major management improvements and changes that we have made because we had much dialogue about that a year ago. Secondly, let me briefly summarize some of the programmatic accomplishments that we have made this past year, and then, third, let me get into some of the specifics in a very broad way of the highlights of the budget request that we have before you.
Let me first address management improvements, and I want to start with this subject, Mr. Chairman and members, because I remember we had an extensive conversation about your concerns and, frankly, my concerns about some of the past management issues in the Department.
Since 1995, we have reduced our Federal work force by nearly 3,000 people, approximately 22 percent. Contractor employment has declined 29 percent from an all-time high of 148,000 people in 1992 to just over 100,000 this past year. Since I have become the Secretary, the Department has met both its 1998 and its 1999 target, which was outlined in the strategic alignment initiative. In other words, we are over a year ahead of schedule in reducing the work force of the Department.
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CONTRACT COMPETITION
Since 1994, we have completed competitions for eight management and operating contracts worth more than $24 billion, and since I have been Secretary, I have directed competitive procurements for every management contract requiring my decision.
I recall we were all concerned about the lack of competition, particularly for the large management and operation contracts. I think we are doing a much better job in that regard.
Mr. MCDADE. Mr. Secretary, let me interrupt you because that is one of the issues that we are going to discuss with you. This committee passed Section 301 last year, which required the Department to be competitive on the M&O contracts and others unless there are special circumstances.
Can you flesh that out for us? How many contracts have come up, and how may have been let competitively? If any have been let non-competitively, tell us what they are.
CONTRACT COMPETITION
Secretary PEñA. There are two ways I can discuss this, Mr. Chairman. One is on dollar value, and one is on number of contracts. Let me at least give you the dollar value.
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Mr. MCDADE. Please.
Secretary PEñA. In 1985, the Department was competing approximately 50 percent on a dollar value on its total contracts. We are now competing 85 percent on a dollar value of our contracts. So we have made a significant improvement over that period of years.
CONTRACT COMPETITION
Secretary PEñA. As respects my tenure as Secretary, on the M&O contracts where I think there has been most of the concern, on the non-M&O contracts, I think the record is we are almost at 90-percent competition on the non-M&O contracts, but on the big M&O contracts, as you know, I took action to replace the Brookhaven operation, which had been in place for 50 years. I believe I am the first Secretary to have done that. We re-competed that one in 6 months, which was a record.
Mr. MCDADE. And we congratulate you, and supported you in that decision.
Secretary PEñA. I appreciate that, Mr. Chairman.
Secondly, I have made the decision to compete the National Renewable Energy Laboratory in my home State of Colorado. We have also decided to compete the contract on Bettis Atomic Power Laboratory in Pennsylvania. There were some questions about that, but we think that is the right thing to do. So, those three major contracts will be subject to competitive procurements.
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There were some that had already been, in a sense, decided prior to the time that I came on board. For example, the previous Secretary decided not to compete the Los Alamos contract with the University of California, with some changes in the contract. I followed through with that, made those changes, the off-ramp provision, et cetera, and that was done. But, essentially, we have competitively bid the ones that I had an opportunity to take on firsthand.
Mr. MCDADE. You mentioned three specifically.
Secretary PEñA. Yes.
Mr. MCDADE. If we looked at it from the total number of contracts, with emphasis on M&O contracts that were issued by the Department the last fiscal year or up to today, could you tell us how many were let and how many of those were competitive?
Secretary PEñA. In the past 12 months or——
Mr. MCDADE. Yes. From the time we had you here last year until today, do you have a total number?
Secretary PEñA. I could get that for you, Mr. Chairman. Again, I am doing this by memory. The big one, obviously, was the University of California, but that was already in play when I became the Secretary.
[The information follows:]
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CONTRACT COMPETITION
Section 301 of the Energy and Water Development Appropriations Act, 1998 (Public Law 105–62) precludes the use of funds appropriated by that Act or a prior Act to noncompetitively award a management and operating contract absent a Secretarial ''waiver.'' Section 301(b) requires that notice of any such waiver be provided to Congress 60 days prior to a noncompetitive award. I have provided such notice to the Committee for those conditional extension decisions made by the former Secretary of Energy prior to enactment of this provision, but where award had not yet been effected prior to the date of enactment. They include extensions for the Stanford Linear Accelerator Center, the Pacific Northwest National Laboratory, the Oak Ridge National Laboratory and the Oak Ridge Y–12/K–25 Site. With respect to the latter two cases, the former Secretary authorized two year extensions to facilitate the recently competitively awarded Oak Ridge Environmental Management and Integration contract and directed competition at the completion of their terms.
Since enactment of the Act, I have directed, or concurred in, competition for the National Renewable Energy Laboratory, the Bettis Atomic Power Laboratory, Paramilitary Security Services for the Savannah River Site, and Security Services for the Nevada Test Site. The latter two contracts are being competed as other than management and operating contracts.
I also provided the Committee notice of the competitively awarded follow-on contract for the Brookhaven National Laboratory after termination of the incumbent contractor. Because the competition was limited to nonprofit organizations, I provided ''waiver'' notice to the Committee although we have been advised that such notice was not necessary. In the future, I will be providing the Committee with notification that I have authorized short-term extensions for the aforementioned on-going competitive actions in the event that additional time is needed beyond the contract expiration date to complete the competitions. I am taking such action to ensure that we do not run into timing problems with respect to the 60 day advance notification requirements. A number of additional decisions on management and operating competitions may be made in Fiscal Year 1998. In the event that any such decision results in a ''waiver'' of competition I will provide the Committee with the required notification.
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CONTRACT COMPETITION
Mr. MCDADE. What is the value of that one? I forget.
Secretary PEñA. I think it is three different labs. It is a very substantial contract.
Mr. MCDADE. If you can, put it into the record.
Secretary PEñA. I would be happy to do that, Mr. Chairman.
[The information follows:]
CONTRACT COMPETITION
In fiscal year 1998, the Department awarded a full term contract for the management and operation of the Brookhaven National Laboratory. This contract was awarded competitively, albeit with competition limited to nonprofit organizations. The Department also awarded a competitive full term contract for the management and integration of the environmental aspects of the Oak Ridge site. This work was broken out of the management and operating contract for Oak Ridge and competed as a non-management and operating contract. During this period, the Department also entered into short term extensions for the Stanford Linear Accelerator Center and the Pacific Northwest National Laboratory. I have also authorized the Naval Reactors program to exercise a 2-year contract option under its management and operating contract for the Knolls Atomic Power Laboratory. The Department is also engaged in, but has not yet awarded, competitive procurement for the management and operation of the National Renewable Energy Laboratory and the Bettis Atomic Power Laboratory. Additionally, former management and operating contracts for paramilitary services at the Savannah River Site and the Nevada Test Site are being competed as other than management and operating contracts.
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In fiscal year 1997, the Department awarded full term noncompetitive extensions of the management and operating contracts for the Lawrence Livermore, Lawrence Berkeley, and Los Alamos National Laboratories. Additionally, shorter term extensions were effected for the Oak Ridge National Laboratory, the Oak Ridge Y–12/K–25 sites, the Oak Ridge Institute of Science and Education (ORISE), the Stanford Linear Accelerator Center, and the Pacific Northwest National Laboratory. The first two Oak Ridge contracts were identified for competition following their short term extensions. The ORISE contract was extended to permit completion of a study regarding the future of the Department's smaller research laboratories.
Mr. MCDADE. And do it numerically and by dollar value, Mr. Secretary.
Secretary PEñA. I would be happy to do that. Thank you.
[The information follows:]
UNIVERSITY OF CALIFORNIA CONTRACT
The University of California currently manages 3 national laboratories for the Department of Energy—the Lawrence Livermore and the Lawrence Berkeley National Laboratories located in California, and the Los Alamos National Laboratory in New Mexico. The current contracts were awarded in September of 1997 as a result of the former Secretary of Energy's decision to noncompetitively extend the predecessor contracts for 5 additional years. These contracts now expire on September 30, 2002. The Lawrence Livermore contract is valued at $1.02 billion for fiscal year 1998 funding. Fiscal year 1998 funding for the Lawrence Berkeley contract is approximately $389.3 million. The Los Alamos contract is valued at approximately $1.3 billion for Fiscal Year 1998.
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MAJOR ACCOMPLISHMENTS
Secretary PEñA. I have covered the ones that I have been able to do since I have been Secretary. The other major accomplishment was the very successful sale of the Elk Hills Petroleum Reserve, which brought in $3.6 billion, about two billion dollars over the Congressional Budget Office estimate.
We have made substantial improvements in our environmental privatization programs from a procurement, legal, and safety and health review perspective. We have taken steps to begin to train our personnel, do a better job of pricing competitively-bid contracts, and, more importantly, we have brought in a new person to head an Office of Contracting Reform and Privatization, which I committed to you to do a year ago. This person comes from the private sector. I will send you his resume so you can see his background, but we are very pleased about his private sector background to help us take control of the privatization efforts in environmental management, in particular.
[The information follows:]
OFFICE OF CONTRACT REFORM AND PRIVATIZATION
Mr. Walter S. Howes is serving as a consultant for this office as of March 16, 1998. A copy of his resume is provided for the record.
[The information follows:]
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"The Official Committee record contains additional material here."
ADDITIONAL MANAGEMENT IMPROVEMENTS
Secretary PEñA. We have dramatically decreased the amount of money spent on support service contracts. In 1994, we spent $700 million. We have reduced that by $247 million, a 35-percent reduction.
However, Mr. Chairman and members, I realize we still have a ways to go. We are making some improvements, but we have much more work to do.
One thing we have to do a better job in is ensuring that our contractors who have work with subcontractors are willing to hold people's feet to the fire. For example, I think I sent a message when I took the action on the Brookhaven National Laboratory contract, and I think it was heard.
Our major contractor at Hanford has recently issued a cure notice to the subcontractor managing the K-Basin. In past years, that probably would not have occurred.
The same has occurred with the Pit 9 subcontractor, where the contractor there has issued a cure notice to the subcontractor in that very controversial case. So we are trying to change the way in which we relate to our contractors to ensure that they perform and that they meet our expectations and that they are meeting our guidelines.
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We are also trying, Mr. Chairman, to do a better job of project management, integrating our facilities, matching our work force to our evolving missions, increasing the responsibility for environment, safety, and health, resolving critical safeguard and security issues, and assuring top-level integration of key cross-cutting functions.
We were very impressed with the need to improve our project management. We have just received the report making a number of recommendations on project management. We are going to support those and move on those recommendations.
I have asked the Under Secretary to increase the integration of our Department's research and development programs so that they are more focused.
In addition, the Department will be intensifying its evaluation of grant award processes. These were questions raised, for example, in energy efficiency. The Office of Energy Efficiency and Renewable Energy decided to issue two comprehensive, competitive solicitations to attract top technologies in buildings, renewables, and the industries sector. That was a main concern that a number of you had raised last year about lack of competition in energy efficiency. I believe we are now doing that.
Mr. Chairman, let me very quickly just summarize key accomplishments in energy security. We have now published our comprehensive national energy strategy. We are receiving comments. We hope to finalize that in April.
In environmental cleanup, we shut down our Nation's largest plutonium processing plant, the PUREX plant at Hanford. We did that a year ahead of schedule and $78 million under budget. We have completed the cleanup of a major defense facility in Florida, the Pinellas plant, and that has now been turned over to the community for its use. In stockpile stewardship, we are now, with the new super computers we have on board, able to certify to the President that our stockpile is safe, secure, and reliable, without underground testing. We have done that two years in a row.
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We are making progress on the National Ignition Facility, which is on time and on budget. And for the first time in terms of our work overseas, we are at every one of the 53 known sites in Russia and in the newly independent countries to secure material in facilities which previously had not had adequate safeguards. These are major accomplishments.
In science and technology, we have made a number of breakthroughs. I will not list all of those.
FY 1999 BUDGET REQUEST
Let me just focus on the budget. Our budget request is $17 billion for programs within your jurisdiction. That is a 7-percent increase over 1998. Let me simply remind us all that when you compare previous years and adjust it for inflation, we are 30-percent below our appropriation in 1981 and 20-percent below what we were in 1993.
With the $1 billion increase that we are requesting, the increases are primarily in, number one, $156 million to emphasize research and development in renewable energy and nuclear energy. You will recall that the President's Committee of Advisors on Science and Technology recommended that we, as a Government, invest more in R&D in these areas. We are trying to do that.
We are proposing a $246 million increase for investments in basic science programs and facilities, the Spallation Neutron Source, the Large Hadron Collider, the Next Generation Internet, and some others.
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We are also asking for a $421 million increase to fully support our stockpile stewardship program under the Comprehensive Test Ban Treaty as well as on nonproliferation and materials disposition programs, and beyond that, we are asking for a $317 million increase to continue our environmental cleanup privatization initiative.
Mr. Chairman and members, let me end with these very brief comments. I wanted to give you a broad overview of the management improvements we have made, the new ways of doing business, also highlight some of the challenges we still have before us because they are very real, and then summarize the main points of the budget request we have before you.
I am very happy to be here, and, again, I want to thank you for the strong support this committee has provided us, and I look forward to working with you in the future.
[The prepared statement of Secretary Peña follows:]
"The Official Committee record contains additional material here."
GENERAL PROVISIONS
Mr. MCDADE. Mr. Secretary, thank you. We appreciate very much your summation, which was interesting and detailed. We are pleased to see that you are trying to point the Department in a new direction. All of us concluded the first day you came in that that was essential. A lot of people think it is impossible, but we will keep trying together.
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In that connection, let me just run down some actions the committee took last year and just get a little report from you.
We have already discussed Section 301 which required competition in contracting by law, and you have alluded to that in your opening statement. So we will not go back to that.
Section 302 required the Department to follow the Federal Acquisition Regulations. We discovered and informed the Department, and we talked about it, that because of the history of the Department, you are exempt from following those procurement regulations. Are you now following those procurement regulations?
Secretary PEñA. Mr. Chairman, I believe we are doing our very best to follow those regulations. Again, I would be happy to give you a more detailed answer in terms of particular projects, but we are doing our best to make sure that we are complying with that directive.
Mr. MCDADE. We put a waiver section in, you will recall, so that if you had to go out in circumstances that were appropriate, let us say, to the history of the Department, you did not have to comply with the Federal Acquisition Regulations.
When you send some information to the committee, tell us how many times you have used that waiver provision, and make a justification for each one of them, please.
Secretary PEñA. I would be happy to do that, Mr. Chairman.
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[The information follows:]
SECTION 302, PUBLIC LAW 105–62
The Department has issued formal policy direction to all Department of Energy contracting elements to implement the Secretarial and Congressional notification requirements of Section 302. The policy directive, which applies to both management and operating (M&O) contracts and to non-M&O contracts, specifically addresses these requirements by establishing strict standards for deviating from provisions and clauses prescribed in the Federal Acquisition Regulation (FAR). These standards are consistent with the requirements contained in the FAR governing deviations. Specifically, the directive requires that all requests for deviations from the FAR be justified in writing and, following Headquarters review, be submitted to the Secretary for decision and, as appropriate, Congressional notification. It should be noted that, while the FAR recognizes M&O contracts, it does not prescribe provisions or clauses for use in such contracts. The prescription of provisions and clauses for management and operating contracts is left to agency implementation. The Department has supplemented the FAR by prescribing provisions and clauses for use in its M&O in Department of Energy Acquisition Regulation (DEAR) Part 970. Thus, as a stand-alone supplemental regulation, DEAR Part 970 does not constitute a deviation from the FAR. It should be further noted that the Department's authority to supplement the FAR in this manner was recognized by the conferees who directed that the Department be cognizant of and utilize those provisions of the FAR that permit exceptions to the FAR, and those provisions intended to address the special circumstances entailed by management and operating contracts.
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To date, I have not authorized any deviations.
Mr. MCDADE. Mr. Secretary, Section 303 prohibited the use of funds to provide enhanced severance payments and other benefits to certain Federal employees. Was that prohibition followed?
Secretary PEÑA. To the best of my knowledge, it was, Mr. Chairman, but I will double check and get you a more specific answer.
[The information follows:]
ENHANCED SEVERANCE PAYMENTS FOR FEDERAL EMPLOYEES
The Fiscal Year 1998 Supplemental budget request includes a technical amendment that would revise section 303 to allow payment of post-separation career retraining benefits of up to eight employees who agreed to remain at the Pinellas plant until the site's formal closure, consistent with treatment of federal workers at this site who utilized this benefit prior to Fiscal Year 1998.
Mr. MCDADE. Please. We want to be specific about it.
Section 304 limited to $61 million in funds that can be used to pay enhanced severance payments and other benefits to contractor employees and provide community assistance grants. Has Section 304 been followed?
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Secretary PEÑA. Mr. Chairman, I will give you a very specific answer on that, also.
[The information follows:]
ENHANCED SEVERANCE PAYMENTS
The Office of Workers and Community Transition (WT), in consultation with the Chief Financial Officer and the Office of General Counsel, has provided the following guidance to field offices for implementing section 304. The Director of WT discussed the proposed implementation guidance with Subcommittee staff prior to it being issued to the field to assure that it was consistent with Congressional intent.
IMPLEMENTATION GUIDANCE
Consistent with this new policy direction from the Congress, the Department may fund ''enhanced severance payments and other benefits under the provision of section 3161'' during FY 1998 only from the funds the Congress has appropriated for this purpose. This includes any payments that are not associated with contract provisions, or existing company policy, but are directly related to initiatives included in work force restructuring plans.
This includes the incremental cost of voluntary separation incentive payments, construction worker benefits, post-separation education benefits, relocation and outplacement assistance at defense nuclear sites, that are not required by contract, or part of company policy, and that are developed specifically as part of this work force restructuring plan. Costs incurred after October 1, 1997, associated with education, relocation, and outplacement benefits for prior year separations should also be included as an ''enhanced benefit'' payable only out of the $61,159,000.
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Costs that are not included in the $61,159,000 include: regular severance costs (including the portion of voluntary incentive payments equal to regular severance if the voluntary separation avoids an involuntary separation); displaced worker medical costs (which preceded section 3161 and are governed under DOE Order and Acquisition Letter); pre-separation education or training that is associated with an agreement to leave employment voluntarily through attrition and thus results in a savings to the government compared to severance costs; outplacement assistance or other benefits provided under contract or as part of contractor human resources policy or practice that predates section 3161 or is otherwise independent of section 3161.
For the current fiscal year, the Office of Worker and Community Transition will strive to manage the transition to this new funding mechanism to maintain prior funding commitments. If sufficient funds are available, the Worker and Community Transition appropriation may be used to pay for restructuring costs associated with contract requirements or company policy in order to alleviate funding problems at individual sites. However, program budgets will have primary responsibility to cover these costs.
This new policy will require priority determinations for allocating limited resources. Prior to implementing any program including enhanced benefits, Field Offices shall submit to the Office of Workers and Community Transition a request for funding. Requests shall include an estimate of the number of participants and costs associated with a proposed benefit offering. Field Offices are encouraged to provide this information as early as possible so that the Office of Worker and Community Transition can make informed decisions on priority for allocating funds. Preliminary estimates for the following fiscal year should be provided within one month of the submissions of the President's budget request for that fiscal year. Formal requests should be submitted as soon after the enactment of appropriations as possible. Requests will be evaluated based on the following criteria:
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EVALUATION CRITERIA FOR REVIEW OF ENHANCED BENEFIT REQUESTS
A. The scope of immediate and cumulative restructuring at the site.
B. Previously-offered enhanced benefits, including voluntary separation programs, that were available to impacted employees.
C. Level of contract-related benefits provided.
D. Local economic conditions.
E. Past performance in demonstrating use of enhanced benefits to provide new career opportunities.
F. Coordination of programs with community transition activities.
G. Average cost estimate of enhanced benefits per recipient.
H. The extent that benefits will mitigate the impact to workers at current and former defense nuclear facilities who were hired prior to September 27, 1991.
Mr. MCDADE. Okay. Let us go to Section 305, which prohibited the Department from initiating RFPs for a program, if the program was not yet even funded. Has the Department followed that prohibition?
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Secretary PEñA. I believe we have, Mr. Chairman.
[The information follows:]
SECTION 305, PUBLIC LAW 105–62
The Department has issued formal Department-wide policy direction implementing the notification requirements of Section 305 of the Energy and Water Development Appropriations Act, 1998 (Public Law 105–62). This policy directive was disseminated through the Department's formal distribution process to all contracting offices and affected program offices. Consistent with the Law, this policy prohibits departmental program and project managers and budget officials from initiating and certifying procurement requests for goods and services that are in support of a program for which funding has been specifically denied. In addition, the policy directive prohibits contracting officers from preparing or issuing RFPs for which funds have not been properly certified by a designated authority. We have no evidence to date that would indicate that RFPs have been issued contrary to the restrictions of Section 305.
INDEPENDENT ASSESSMENTS
Mr. MCDADE. We have alluded to this, Mr. Secretary. I want to get a little more detail from you. As you know and as you have referred to, we have provided additional funding for the Department for an independent assessment of the construction project management system and independent cost validations for individual projects.
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You have obviously complied with that section of the Act, and you have used the money, we hope, wisely. I would like you to tell us a little bit about what you have done in terms of cost validation and making us comfortable about the management system, to the extent that you can.
Secretary PEñA. Mr. Chairman, first of all, let me thank you for that support and that guidance. We fully agree with the notion that we needed to improve in both those areas.
We have conducted the report. The National Academy of Sciences has made that report to us. We will, first of all, have 32 of the top projects identified, which will begin at least initial independent assessments by April of this year. We will follow up on the others, but this whole notion of having additional reviews of these cost estimates by outside experts is one that we fully embrace.
Beyond that, we also believe it is very important that we do a much better job of estimating, pricing in particular, for competitive contracts, which means we must do a better job of getting design estimates of a larger proportion of a project before we proceed.
Let me be more specific. We realize that in past projects, only perhaps 5 or 10 percent of design was done, and then we made an estimate of what the project would cost, and we subsequently learned we were off by a large factor. So we are now changing that and doing a much more intense design review to get a better handle on long-term costs before we commit ourselves to a longer-term project.
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Thirdly, I have tasked the leadership in headquarters to personally review performance-based contracts because, in the past, it was my view that much of this work was being done in the field without much guidance. We have now issued guidance to our field managers. We are improving our training, but, more importantly, we are reviewing those estimates in that work in headquarters.
We have also reconstituted the Secretary's board, which had been in existence for many years, but for some reason had been discontinued. Now we bring together all of our top people, and we review major projects like the National Ignition Facility, the Spallation Neutron Source, and others to make sure that all the top managers in the Department are focused on these very large projects to ensure that the Department is using its best expertise and judgment.
Of course, I have talked already about what will be done in the area of privatization with the new position we have created.
Mr. MCDADE. We are glad to hear that because the history, not on your watch, but the history of the lack of coordination of those major projects and the cost explosion was very disturbing to us. We are glad to see that you are taking it on, head on.
GENERAL PROVISIONS
Mr. Secretary, Section 501, you can answer for the record. That is the prohibition against using any dollars appropriated to lobby the Congress, and I am sure you are complying with that.
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Secretary PEñA. Yes, sir.
[The information follows:]
LOBBYING PROHIBITIONS
The Department has taken action to ensure that appropriated funds are not being used to lobby Congress. The Department has issued two notices to apprise Federal and contractor employees of the requirements of section 501 of the Energy and Water Development Appropriations Act for Fiscal Year 1998. On December 8, 1997, the Department issued a ''Joint Acquisition/Financial Assistance Letter'' which provides guidance applicable to acquisition and financial assistance instruments. The Letter was issued to Departmental contracting offices, and directs that a clause on the lobbying restrictions of section 501 be incorporated into applicable solicitations and awards of Departmental contracts and financial assistance instruments when the instruments are to be awarded using funds made available under the Energy and Water Development Appropriations Act. Further, on January 9, 1998, the Department issued an electronic message to approximately 114,000 Department and contractor employees, which set forth the lobbying restrictions of section 501. The restrictions also were referenced in a ''Lobbying . . . What you Need to Know'' brochure prepared for distribution to Federal employees, contractors, cooperative agreement participants, and grantees. This has resulted in heightened sensitivity throughout the Department of the concerns associated with improper lobbying activities.
USE OF SUPPORT SERVICE CONTRACTORS
Mr. MCDADE. We are very glad to hear that.
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Mr. Secretary, let us go back now to support services, an area that is of great interest to the committee, and you indicated that after we directed the Department through the conferees to be careful about those contracts, pay more attention to them, and focus on what ought to be inherently governmental functions and not contracted out. We would like to hear how that is proceeding because there is a lot of money on the table, you will remember——
Secretary PEñA. That is right.
Mr. MCDADE [continuing]. And the Department had been in the past engaging in contracting out what are clearly inherent governmental functions.
Would you comment on that, again, please, Mr. Secretary?
Secretary PEñA. I will, Mr. Chairman.
First of all, let me say that I personally verified the truth of the statement and your observations. Let me tell the members about how I do that.
I do not use my private elevator. I use the elevator in the building. So I walk in with everybody else, and when I walk in the building, I introduce myself, and I ask them who they are and what they do.
From the very first day that I got there, I got to meet a lot of contractors who were working in the building, and I was surprised that every day I would meet someone who was a contractor. Very quickly, I understood we had a problem. So we agree that we have too many contractors working in our building.
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So we take this very seriously, Mr. Chairman. I have talked to you about the 35-percent reduction in support services and that kind of contracting, which ought to be done in-house, or if we are not going to do it in-house, we are not going to do it at all.
So we are going to continue to work on this. We are going to reduce those costs even more. I am very concerned about what appeared to be a practice that had been in the Department for some time.
Mr. MCDADE. We are very grateful for your direction in that end, Mr. Secretary. We believed in this committee that that was a glaring error, and we are glad to hear that you are complying with it. I am thrilled to hear you use your own elevator, the public elevator.
Secretary PEñA. The public elevator.
Mr. MCDADE. It is a great way to find out what is going on.
Secretary PEñA. It is amazing what you learn.
Mr. MCDADE. You bet.
I beg your pardon?
Mr. FAZIO. It is energy conservation.
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DEPARTMENTAL PRIORITIES—CLEANUP
Mr. MCDADE. Mr. Chairman, you in your statement detailed the changes that you are attempting to effect within the Department and guiding it to serve the national interest.
As you look ahead, would you spend a few minutes and detail for the committee what you believe are the major priorities that you have as you look downstream to try to make the Department more effective as a national instrument?
Secretary PEñA. Mr. Chairman, let me share with you what I believe to be our biggest challenge, and it has to do with the work that we do in cleanup at our sites around the country. I can spend time talking about others, but this is the big one.
It is my view that for reasons that are historical and I am sure had a very legitimate basis, the Department entered into commitments with a number of States to reach certain cleanup standards within a certain time frame and in a certain way.
Many of those agreements were reached almost 10 years ago in some cases. The Department is still having problems meeting those milestones for a number of reasons.
Number one, the work that we are doing in many cases is not being done anywhere else in the world. When we go into tanks, for example, at Hanford, and we discover a concrete block in a tank that 9 years ago no one would have anticipated we would have found, that is the kind of unexpected problem that no one can anticipate.
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When in doing work at one of our other facilities, we discovered that there are toxic gases, which are being developed in the work there, no one could have contemplated that.
So we have a very serious challenge in trying to clean up these properties using, in many cases, new technologies which had never been used before, trying to meet time tables that were committed to a long time ago, and as we look into the out years, a declining budget.
So, for example, when we completed the accelerated closure plan, and we have now had that out for comment, the goal is to try to clean up as many sites by 2006 or 2010, et cetera, and we projected over the long term what the costs were going to be.
We have a very significant budget shortfall to do that. It is my view, after having spent time with a number of Governors who are concerned about this, some of whom are now, to be very candid, arguing that if we do not meet those milestones, they will close their borders and not allow us to move material into their sites. This, in my view, will shut down the entire system nationwide, where we are trying to ship materials across the country. It is my view that what we have to have is a national consensus on how we are going to deal with this cleanup in the long term, and that means bringing in the key Governors and the key States, having an understanding with the Congress about what are going to be the long-term funding commitments.
Obviously, the Department has to be committed to better management to ensure that we are using those dollars wisely, and we do not make the mistakes we have made in the past. We must also try and reach a consensus on how we are going to proceed, and that will mean, in my view, agreements by States to work with us to, in some cases, accept certain waste streams so that we can reduce the overall national cost to the entire complex.
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Mr. Chairman, I see this as a national priority because the work that was done at these sites was on behalf of our national security, and, therefore, I think it is our national responsibility as Americans to respond to the cleanup problems of those Americans who are now concerned about these wastes in their home States. That, I think, is the most significant management and budgetary challenge we have in the future, and I look forward to working with you to try to find an answer to that problem.
Mr. MCDADE. Mr. Secretary, let me ask you, how many Governors are directly involved that you have to negotiate?
Secretary PEñA. I think we have at least six.
Mr. MCDADE. Six of them?
Secretary PEñA. There could be others that have other roles.
Mr. MCDADE. I know last year, for example, when some of our colleagues appeared from the State of Washington talking about the problem there, we told them just what you said, that the Nation has a commitment to those people and that we are going to see it through. It is a very difficult problem, as you know better than anybody.
If you had it to do over again, you might not have accepted the job as Secretary of Energy, but we are glad you are there.
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At this time, I am pleased to yield to my distinguished friend from California, Mr. Fazio.
Mr. FAZIO. Thank you, Mr. Chairman.
Mr. Secretary, welcome. You are one of very few Americans who has had the privilege of being a Cabinet Secretary with two different agencies, and it is obvious your management skills are being sharpened up to the moment. Obviously, you have been very responsive to the concerns the chairman and the committee have had, and I appreciate that.
I would like to get into some substantive issues immediately, and let me begin with FUSRAP. As you know, in the FY 1998 energy and water development appropriations bill, we transferred authority to the Corps of Engineers. Could you tell me what the Department has done to help the transfer?
FUSRAP
Secretary PEñA. I would be happy to, Congressman.
First, I think within a couple of weeks of the Bill's enactment, I sent a letter to Secretary Cohen stating that we were transferring the program fully to the Department of Defense. Immediately thereafter, my staff had extensive meetings with the Corps of Engineers to fully explain the program and outline all of the issues that we have pending before us to make sure that we had a smooth handoff. We did not want to see any of the work slowed down in any way, and I believe the work has essentially kept on pace.
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I must say, Congressman Fazio, that there is one issue that has not yet been resolved. It may require additional action on the part of the Congress, and that is the question of who provides regulatory oversight over these matters.
As you know, in the past, when FUSRAP was the responsibility of the Department of Energy, we were the self-regulator, and today, there is still a legal question, at least according to our lawyers, about who has the responsibility in terms of providing regulatory oversight, and that may need some additional attention.
Mr. FAZIO. So you are currently providing that regulatory oversight?
Secretary PEñA. Congressman, at this point, we have transferred the program over to the Department of Defense.
Mr. FAZIO. OK.
Secretary PEñA. If you were to ask the Corps of Engineers who was providing regulatory oversight, I am not sure they can answer that question today. There is a little bit of a gap here in terms of deciding who has regulatory authority, and there are some very complex legal and policy questions about who should have that responsibility, but, again, we are happy to work with you and others to see how we can correct that.
Mr. FAZIO. It is your lawyer's opinion then a simple memorandum of understanding would not suffice to transfer the regulatory authority, and that is where you think we need to give you additional legal authority and statute?
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Secretary PEñA. Congressman, my understanding from our lawyers is as follows. Under current law, the Department of Energy can only, in a sense, transfer its regulatory authority to a contractor. It cannot transfer that regulatory authority to another Government agency or department, and so we need to address that.
Secondly, there is the question of a longstanding policy in the Government that these sorts of matters dealing with these kinds of materials would remain in a ''civilian agency.'' So these are the policy questions which I think have to be addressed.
I do not have answers to these questions right now, but, again, we are happy to work with you and others to see how we can correct them. I think they should be corrected.
STOCKPILE STEWARDSHIP
Mr. FAZIO. Well, I appreciate your putting them on our agenda. I think it is something we have got to work together on to see if we can complete the circle here and make sure that we do not leave a gap, a hiatus, in obviously a very important area.
Let me ask about the stockpile stewardship program. The committee is being asked to include $4.5 billion for that program. I think it is imperative that we support it, but I do think there are problems both in the general public and on Capitol Hill in fully understanding the importance of it.
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It is obviously the precondition of the Comprehensive Test Ban Treaty, but it also gives us the scientific capability we need to do everything from doing an adequate job of inspecting weapons in Iraq to perhaps dealing with the problem of rogue nations like North Korea.
It seems to me that we could do more, the administration could, to make the public aware of why we are making this kind of expenditure for members who have been traditional supporters of testing. We need to build their confidence, and for those who oppose testing, we need to build theirs.
Is there going to be something, frankly, that will help educate the Congress and the public and make this committee's task easier to accomplish?
Secretary PEñA. Congressman Fazio, the answer is yes, and we have started that process, but more needs to be done.
When the President submitted the Comprehensive Test Ban Treaty to the Senate for ratification, we then started participating in some hearings—Senator Domenici had one hearing, and I believe others are planned—and some public outreach to begin to educate the Congress and the American people about our stockpile stewardship program.
If I might, let me just briefly say that when we first made the estimate of the cost for stockpile stewardship, it was about $4 billion. That was done in 1995.
Today, our estimate is that it will cost $4.5 billion. Why? We are committed, since it has been 5 years since we have conducted nuclear tests in our country, not to have any more underground testing under the Comprehensive Test Ban Treaty.
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In order to do that, the three laboratory directors have advised us that they need additional tools and technologies to allow them to make the same judgment about our weapons as we used to do.
Secretary Cohen and I just one month ago certified to the Congress—and this was the second year in a row we have done this—that our nuclear stockpile is, in fact, safe, secure, and reliable without underground testing.
Our scientists, however, have told us that in future years as the weapons age, we will need the National Ignition Facility. We will need computers that do 100 trillion operations per second by the year 2004. We will need some additional capabilities as our engineers begin to retire in part of the next decade and to use that computer simulation to take the data from the past 1000 tests we have conducted, simulate that, and then use that information with the new engineers we are bringing on board to continue to maintain our stockpile safely and securely without testing.
That is the message that you are asking that we need to communicate to the American people and others about why this program is so important, and we need to do a better job in communicating that message.
Mr. FAZIO. I appreciate that. I think Vic Reis has the confidence of many on this committee, if not all, but I think as you have indicated, this is a job for you and Secretary Cohen. And we look forward to having that effort made because I do think we have got to build far more public support than exists.
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CLIMATE CHANGE TECHNOLOGY INITIATIVE
Let me go to the global climate technology initiative. There is $2.7 billion in new technology funding requested and $3.6 billion in tax increases—pardon me—in incentives. They are not increases. That is over the next 5 years.
I am sure even within this committee there remains a good deal of skepticism about the scientific basis upon which the global warming debate has thus been carried, but I understand that you believe that for purposes of industrial competitiveness, for general reasons of quality air, and even national security and electric restructuring, there are reasons to proceed on these initiatives, even if you put aside the continuing debate about global warming.
Would you speak to why you believe this committee should bear its burden, its share of the total, and why you think this is important to do on more than simply grounds of scientific evidence about global warming?
Secretary PEñA. I would be happy to, Congressman.
Setting aside global climate change, if one reviews the recommendations of the President's Committee of Advisors on Science and Technology who are a relatively distinguished group of Americans who have looked at our research and development investments as a country and compared them to other countries, they have strongly recommended that in energy research and development, we invest more. In fact, they recommended dollar amounts that are fairly similar to those the President has proposed, and they had recommended this to accomplish more energy security so that we are less reliant on imported oil. They have recommended this to reduce energy costs to consumers. They have recommended these investments in order to deal with environmental challenges in addition to the other two matters I have described.
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So you will see that, with respect to the Department of Energy, the dollars that we are asking for, for 1999, build on programs that we have already had, in renewable energy, in energy efficiency, and in breakthrough technologies that are so important, like fuel cells which are going to be key to the development of new cars.
I think the only area—and it is a relatively small amount of money—that we have requested in 1999 that is, in a sense, a new type of program is in carbon sequestration, which frankly will help U.S. companies today that are concerned about their carbon emissions.
So, for all those reasons, even if we did not have a Kyoto Protocol to deal with—and as you know, we have not submitted that to the Senate for ratification yet because we do not have meaningful participation on the part of developing countries—I believe these are things we ought to be doing, anyway.
We ought to be using our energy more efficiently. We ought to be driving down costs for the American consumer. We ought to be finding a way to be less dependent on foreign oil, and for all those reasons, I think these investments supported by the scientists of our country are very wise for the future of our economy and for the future of our well-being as Americans.
MILLION SOLAR ROOFS
Mr. FAZIO. In this regard, could you give the committee your reasons for asking for the million solar roofs initiative to be adopted, and how is that going to operate?
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Secretary PEñA. Frankly, Congressman, it is operating surprisingly well.
The President issued a challenge when he spoke to the United Nations last year that by the year 2010 to have a million solar roofs and a million solar facilities installed throughout the country.
We then started reaching out to utilities and others, and we have essentially received feedback from a number of these, such as, for example, the Sacramento Municipal Utility District in California who I think has committed to do 20,000 themselves, and already are close to the 500,000 mark. So we are about halfway there.
So I feel very confident that we are probably going to surpass the one million mark, but we are asking for additional funds here to help in certain areas, bring down the costs of certain technologies, and in particular help us do some breakthrough technologies that we think will be more market-oriented so that we can, generally speaking, see a much greater infusion of solar and wind and other technologies throughout the economy. I think we are doing fairly well, and I feel very confident we are going to meet that goal.
FUSION
Mr. FAZIO. I heard the word ''fusion'' as part of a word you used there. I will take that as a segue to my last question, Mr. Chairman, and that is the fusion program.
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The Department's proposed increases in FY 1999 for energy research are premised in part at least on the PCAST report, but, in fact, the PCAST report and the Department's own fusion energy advisory committee have recommended a $250 million or $20 million increase, for fusion energy sciences for FY 1999.
Could you reconcile the decision that was made, obviously, a budgetary decision, to not support the recommendations of those two agencies?
Secretary PEñA. Congressman, I think perhaps we need to explain what we have done in fusion a little better.
As I understand it, in the past fiscal year, we had a significant contribution to the ITER program. This year, we have significantly reduced that contribution, and so we are taking that base money that was used for ITER and transferring it over to the fusion program. That, perhaps, we did not clarify in the budget.
So, in that sense, we have, I think, solidified our work in fusion, given the transfer we have made away from the ITER program, but I can give you much more information about that.
Mr. FAZIO. If you would for the record, I am sure it would be of interest to the community that is very concerned about this funding level.
Secretary PEñA. I would be happy to.
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[The information follows:]
FUSION
The distribution of the requested funding within fusion is generally consistent with the guidance of the reports of the President's Committee of Advisors on Science and Technology and the Department's Fusion Energy Sciences Advisory Committee. Areas such as facility operations and alternate concepts have been emphasized as well as efforts to achieve low-cost International Thermonuclear Experimental Reactor (ITER) design options. The magnitude of the fusion request, however, is based on budgetary considerations and the priority for fusion research.
FY 1998 funding for ITER of $52,579,000 is accounted for in FY 1999 by a $1,496,000 reduction in the total fusion funding, and by a reallocation of the remaining $51,083,000 as follows:
A large portion of the reallocated ITER funds has been allocated to the operation of DIII–D and C–MOD in order to ensure that the U.S. continues to have significant technical influence with the international fusion program in future years. Both Europe and Japan have strong tokamak programs in support of ITER. In concert with our international partners, the U.S. intends to contribute to the tokamak database and pursue tokamak improvements through increased operation of DIII–D and C–MOD. Similarly, the theory funding is increased to pursue increased understanding of fusion science. At the same time, the funding shifted to alternate concepts will assure that the U.S. continues to play an important role in the evolution of fusion concept development over the longer term. The plasma and fusion technologies funding is increased to meet the needs of the U.S. domestic fusion program, thereby, enabling existing and planned U.S. plasma physics experiments to fully exploit their performance capabilities. Some of this technology work will also benefit ITER and will be considered dual-purpose. The advanced design funding is increased to support ITER joint baseline design ($12 million) as well as to begin identifying an attractive path toward fusion energy including investigation of potential non-electric applications of fusion as well as a broad range of low cost design options to supplement the ITER design ($3.2 million).
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Mr. FAZIO. Thank you, Mr. Chairman.
Mr. MCDADE. The Chair recognizes the distinguished gentleman from Kentucky.
STOCKPILE STEWARDSHIP
Mr. ROGERS. Thank you, Mr. Chairman.
Mr. Secretary, it is certainly good to see you here.
I want to take you back to the stockpile stewardship program because you are asking for this year, for 1999, $2.188 billion. That is an increase of $330 million, almost 18 percent above the current appropriations. So, obviously, it is a big expenditure and expensive.
I am looking for some assurance that the computer simulations will work. As are you, I am sure. There is a recent story in the National Journal where many nuclear scientists say that it is very complex, highly complex, very expensive, as we are seeing, and no one can say with confidence whether the goals of the program can actually be attained.
So, one, I am looking for assurance from you and from, pardon me, some nuclear scientists——
Secretary PEñA. Absolutely.
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Mr. ROGERS. That can give us some assurance that this will work because we have a lot riding on this, not just money, obviously. Money is the least of the things that can happen if it does not work.
So can you help me out?
Secretary PEñA. I will try my very best, Congressman, and you are absolutely right. I think it is always very helpful to hear directly from the scientists and from the laboratory directors. I spend a lot of time with them because I ask the very same questions, and the reason I ask those questions is because I have to sign my name on the annual certification to the Congress and to the American people, together with the Secretary of Defense, that our nuclear stockpile is, in fact, safe, secure, and reliable without doing underground testing, and we have to do that on an annual basis. So I have spent a lot of time with our scientists and our laboratories understanding the processes they use.
Let me try to answer your question. With respect to the super computing capabilities that our scientists need, we are making remarkable progress.
In December of 1996, the Department announced for the first time in the history of the world a 1 trillion operation-per-second super computer. By the end of this year, we will take that up to 4 trillion operations per second.
We have issued a contract to take that then to 10 trillion operations per second, then 30 trillion operations per second, and then to 100 trillion operations per second.
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Now, to a layman like myself, when people tell me that we are going to make these leapfrog advances in computers, I pause. Obviously, those are gargantuan increases in super computing capability.
The response that I hear from our scientists is that we are meeting our goals. No one thought that we would be at 3 trillion operations per second this year. It was originally estimated we would not be there until the next century.
So far, they have been very optimistic about the super computer capabilities and our ability to meet those targets, and let me emphasize one point because I think this is very important. Please remember that your Department of Energy is the world super power in super computers. No other country in the world is close to us, and we need to continue to keep that lead in my judgment, not just for our stockpile stewardship capabilities, but because it has enormous applications to the private sector and to the work we do in other aspects of society.
So, thus far, the laboratory directors and those who work on super computers feel very good about the super computing program.
As you stated, there are other aspects to the stockpile stewardship program, including the National Ignition Facility, and some other tools. The questions that I ask our scientists are, do we have a high degree of confidence that when those facilities are built—and, thus far, the National Ignition Facility is on budget and on time—we will have the kind of capability we need to be able to certify to the President and to you that our nuclear stockpile is safe, secure, and reliable. Thus far, they are saying the answer is yes, but this will be an annual certification, and any time that I or any future Secretary of Energy or Secretary of Defense, based on the certifications we get from our laboratory directors, have any information that somehow we cannot continue this program because we need to revert back to underground testing, we would not sign the certifications to the American people and to the Congress.
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Mr. ROGERS. Well, in the National Journal article that I mentioned, there is a quote in there, and I am quoting, ''There is not a man or a woman involved in stockpile stewardship willing to say with certainty whether the goal of the program is attainable.'' Is that a fair statement?
Secretary PEñA. Well, if the question is, can anyone sit here today and say that in the year 2010, the stockpile stewardship program will be a success without underground testing, I do not think anyone is going to come up here and give you that kind of a definitive answer.
I think what they will tell you is that the program, thus far, is on track. We are now in our second year of certification. We are on track with the technologies that we need to develop, and with the safeguard—I think it is Safeguard F—in the Comprehensive Test Ban Treaty, is that if in any future year, any future scientist, laboratory directors, or the Secretaries of Energy or Defense have information that does not allow us to make that certification; the certification will not be made.
Mr. ROGERS. Let me try to clarify this. As I understand it, Mr. Secretary, the Presidential directive, which established the stockpile stewardship program, provided for the Commander in Chief to issue a ''supreme national interest'' waiver to nuclear testing if the Secretaries of Defense and Energy and the Joint Chiefs and the U.S. Strategic Command certify that the stockpile is not safe and reliable, and, yet, the administration is urging the Senate to ratify the Comprehensive Nuclear Test Ban Treaty.
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So the question arises. Suppose the Senate ratified the treaty. Could that supreme national interest clause of the Presidential directive still be invoked with the treaty in force to allow nuclear testing?
Secretary PEñA. Yes, and the way it would be invoked is under, I believe it is, Safeguard F, which is part of the treaty submitted to the Senate. In the future if this annual certification could not be made, then the President would have the authority to exercise, in effect, the waiver of national security and argue that the country should go back and resume underground testing.
Mr. ROGERS. Under the program now in place, when will we get to the point where we can be assured that the stockpile can be certified as not only safe, but armed and effective without nuclear testing?
Secretary PEñA. We are there today, Congressman. We had made that certification last year. We have made that certification this year. Based on the information that I have before me, we expect to make it next year.
So, thus far, we are 2 years into this annual certification, and if I might, let me just spend a minute to explain how I do it, and I can give you a little sense of how the Secretary of Defense does it.
First of all, the laboratory directors, each one of them, evaluate the work of their own scientists, and what we are doing with our weapons is, in effect, inspecting them with more precision than we used to do, and that means taking apart, on a sampling basis, each of the components of a weapon, and in the event we find a problem, we then can correct it. Thus far, we have been able to do that.
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After they have done that and after they have made their own certifications, they then send their certifications to me. The Nuclear Weapons Council then meets and reviews those certifications from the laboratory directors. They then make a recommendation to me, and then I make my own independent certification.
Parallel to my work is the work done by the Secretary of Defense. He has his own parallel process where he uses STRATCOM, headed by General Habiger. General Habiger has his own separate advisors of either former lab directors and other scientists who give him advice. They make their determination, and then they send their separate certification. Then he and I literally sign the same document indicating that our own independent views here allow us to certify to the Congress that our nuclear weapons complex is safe, secure, and reliable without underground testing.
So, in a sense, we check each other, and anywhere along the line, if either one of us are not able to make that certification, then the provision of the Comprehensive Test Ban Treaty, Safeguard F, would be triggered.
Mr. ROGERS. I am a little bit confused. I think you earlier said that there is no way you can 1,000 percent certify based on present knowledge that the stockpile is safe and reliable.
Secretary PEñA. No, Congressman. You were asking me a question about the future, and I answered the question, can I today make that prediction about the year 2010. This is an annual certification process. We do it every year. So we had annually certified, last year and this year, that, in fact, our nuclear stockpile is safe, secure, and reliable without testing.
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Mr. ROGERS. How can you say that? How can you say it is safe and reliable without testing when the super computing operation is not quite yet wrapped up to racetrack speed?
Secretary PEñA. Because we do not need them today. We will need that super computing capability in approximately the year 2004, 2005, 2006, because at that time the weapons material will be aging, and we will need that new technology to make predictions about materials in the weapons in that time frame with this new technology, but we do not need that technology today to make the certifications.
Mr. ROGERS. Why not?
Secretary PEñA. Because, number one, we have weapons which are not as old. We have the information from about 1,000 nuclear tests that were done before. We have better information based on our physical inspection and surveillance of the weapons which is now done much more thoroughly and much more robustly than in the past, and we have the capability to make adjustments to those materials as we find them.
So, based on all these techniques that we use today, on a system of weapons that is not ''aged'' compared to where they might be 10 or 15 or 20 years from now, all of our scientists and engineers and the laboratories are able to certify to me and others that our stockpile is safe, secure, and reliable without underground testing. This is an annual certification process, and we have to do it and repeat it every year and reach the same level of certainty. Otherwise, we will not make the certification.
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Mr. ROGERS. Thank you.
Mr. MCDADE. The Chair now recognizes the gentleman from Texas.
NONPROLIFERATION OF WEAPONS OF MASS DESTRUCTION
Mr. EDWARDS. Thank you, Mr. Chairman.
I am going to ask a couple of questions, Mr. Secretary, as long as my voice holds out, but I will follow up with written questions if necessary.
I would like to focus on the issue of nonproliferation of weapons of mass destruction. I first want to commend you for your efforts in dealing with getting our arms around the nuclear situation in the former Soviet states.
Having said that, though, I am bothered by the disconnect between the President saying that the issue of nonproliferation of weapons of mass destruction is a national emergency, and then looking at page 56 of your budget report, which in the area of nonproliferation and national security has a freeze in three different areas: nonproliferation and verification R&D, intelligence, and security investigations.
When we can up the highway budget by $10 or $20 or $30 billion, when we decide to, if we can provide hundreds of millions of dollars of increases and requests for renewable energy resources, all of which are important programs, it seems to me that when literally the lives of American civilians living in the United States are at risk to a terrorist today, especially from chemical and biological weapons, why has administration been so tepid in its response to what it is calling a national emergency?
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Secretary PEñA. Congressman, it is my judgment that we have not been tepid, if I might respond to your question directly.
In Russia and in the newly independent states—in the sites where we are doing work, it is going well. It is a relatively new program. We are now in 53 sites. I asked the question, how many more sites can we be in? The answer is these are all the known sites that have been made publicly available to us, or at least that we know about where we have this challenge of securing those sites. We are in every one of those sites.
So, until we learn that there are more sites—and it could be that in 2 or 3 years, we learn that there is another site someplace—the money that we have for that program is what is needed to get that work done.
In the arms control part of our budget, there are some additional funds for nonproliferation and verification, which I think we need to bring to your attention, Congressman. So I think when you look at all aspects of our budget, you will see that I think we have got a fairly healthy commitment to this whole area of nonproliferation and verification, but let me get that in a more precise way so I have a fuller understanding of what our total budget looks like.
[The information follows:]
INCREASED SUPPORT FOR CRITICAL NONPROLIFERATION EFFORTS
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We are rapidly expanding the Department's efforts to secure the hundreds of tons of material in Russia, the Newly Independent States and the Baltics in order to implement systematic and rapid MPC&A upgrades. We are very pleased with recent progress in the naval and transportation sectors with the Russian Federation which will accelerate our efforts in these areas.
In support of the Helsinki Summit Statement to meet specified lower levels for strategic warheads as well as transparency of strategic nuclear warhead inventories and the prescribed reductions and destruction of the weapons components and fissile materials, we are requesting additional funding to support the increased workload.
The FY 1999 request provides additional funding to assist Kazakhstan to meet urgent security and storage requirements for plutonium-bearing spent fuel located at the Aktau Reactor in Kazakhstan. This additional funding will assist Kazakhstan to meet the long-term security and storage requirements for the fuel.
Increases in the International Safeguards area reflect enhanced support and technical assistance to the International Atomic Energy Agency (IAEA) for the development of new strengthened international safeguards policies and methods; additional work toward the development and implementation of the U.S., IAEA and Russian Trilateral verification program to apply IAEA safeguards measures on U.S. and Russian excess nuclear material; and support for continued IAEA inspections on U.S. nuclear material under IAEA safeguards and the submission of additional U.S. excess material from the 200 metric tons to IAEA safeguards.
EMERGENCY RESPONSE
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Mr. EDWARDS. Mr. Secretary, as I said in prefacing my questions, I think you have done a good job with your resources in regard to nuclear proliferation, but I think we are probably less than tepid in responding to the national emergency of potential threats to not only our forces abroad, but civilians right here at home, to biological and chemical weapons. A freeze in three accounts does not seem to me to be a national emergency response.
Let me ask you this specific question. If a terrorist from abroad were to get enough anthrax that would fill this water jug and this afternoon, either via truck or with aerosol spray or in a Cessna 172 fly over Washington, D.C., and release this amount of anthrax, again applied with aerosol in Washington, D.C., what would happen, and what would be our response? And do we have the antidotes to in any way save the lives of, I assume, millions of people who could die?
Secretary PEñA. The results would be catastrophic, Congressman.
We have recently had discussions not only in my Department, but throughout the administration about how we can, with all the Departments involved, utilize our intelligence-gathering operations, which are the best offense in trying to anticipate and identify potential individuals who might be engaged in that——
Mr. EDWARDS. And you have a freeze in your intelligence budget request.
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Secretary PEñA. There are other Departments, Congressman, who are responsible for that aspect of this entire program; the Department of Defense, which also has responses in this area; FEMA, which has jurisdiction in terms of coordinating responses if there were a problem; and the technology that we are developing in the Department of Energy where, for example, in Iraq we provided to our armed forces technologies that can predict the plume of a biological release so that we can warn our troops that in 50 minutes a plume will be coming your way, which is our responsibility.
We have made better efforts to coordinate all the work in the administration in the area of biological and chemical weapons which, you are right, the President has declared 3 years in a row as a national priority.
So I think, compared to where we were 3 years ago, we are both in terms of budgetary response and overall Government coordination, focused intensely on this issue because it is a very high priority.
Let me, if I might, give you additional information in writing about other budget categories we have in our overall Department, which will respond to the questions you have raised.
[The information follows:]
CHEMICAL AND BIOLOGICAL WEAPONS DETECTION R&D BUDGET
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While the Nonproliferation and Verification Research and Development budget is flat, the chemical and biological nonproliferation program is funded at $19 million for FY 1998 and FY 1999 and is focused on the problems related to countering a terrorist action. The program will provide technologies or technical capability which will assist first responders in planning for, responding to, and detecting/identifying terrorist acts using chemical or biological agents. The goal of the Department's chemical and biological nonproliferation research and development program is to develop and field advanced technologies that will dramatically improve the nation's capabilities to prepare for, detect, and respond to terrorist use of chemical or biological weapons. The DOE program will advance the state of technology in four key areas: chemical and biological agent detection; modeling and prediction of agent dispersal in complex, urban terrain; decontamination and restoration; and biological agent forensics and attribution.
In addition, the Initiatives for Proliferation Prevention (IPP) program has instituted projects which facilitate broad access to NIS chemical and biological facilities in order to achieve close working relationships of DOE laboratory scientists and engineers and their NIS colleagues to promote openness and transparency. Of its total budget to date of $114.2 million, IPP has funded $4.9 million in chemical weapons (CW) and biological weapons (BW)-related projects: $1.4 million of projects involving former CW or CW-related institutes (all in Russia); $2.1 million of projects involving former Russian BW or BW-related institutes; and $1.4 million of projects involving former Kazakhstani BW or BW-related institutes. This represents approximately 6% of the total IPP funding through FY 1997. As a goal, IPP seeks to expand its cooperation in this area to 20 percent of its funds on CW and BW-related projects. (The remainder focused directly to nuclear-related projects.) There are currently ten IPP CW and BW-related projects in the final approval process.
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Mr. EDWARDS. Could you specifically respond to the question of what would we do if this amount of anthrax were spread throughout any major city in the United States? I will finish, Mr. Secretary, with a comment.
Secretary PEñA. I will provide that information.
[The information follows:]
WHAT WOULD WE DO IF ANTHRAX WERE SPREAD THROUGHOUT ANY MAJOR CITY
The Department historically has focused on the nuclear threat because that falls within our core mission area. However, in recent years in our research and development program we have been leveraging our vast knowledge in the nuclear arena to provide technologies to deal with the chemical and biological concerns.
In the event of a chemical or biological attack in the United States, the Department of Energy would provide support and assistance to federal agencies and state and local governments by ensuring that our emergency management capabilities and response assets that can be utilized to protect the health and safety of the American public are fully mobilized to provide all assistance possible. These emergency management capabilities are primarily located at our facilities and are focused on response to industrial chemical and radiological hazards. Our assets are deployable and both our assets and our fixed capabilities would be offered to assist in response, mitigation, and/or recovery from attack. I would like to point out that we would not provide a direct, on-the-ground response to a chemical agent or biological release in the United States. We do not have the specialized, trained capabilities required. Immediate response would be provided by local agencies with supporting expertise from other federal agencies such as the Departments of Defense, Health and Human Services, Justice, and the Federal Emergency Management Agency.
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Mr. EDWARDS. I am not just being critical of the administration. I think Congress has had its attention focused on the nuclear issue from the day I was in grade school and the Cuban missile crisis. So Congress and the administrations of the past responded to this generation of fear of nuclear fallout, but I think we are missing the boat.
I think the answer to my question is there is not a heck of a lot we would be able to do today if this amount of anthrax were spread over Washington, D.C., given that I understand intelligence is one way to prevent that.
I look forward to working with you some more on this and, hopefully, assist in this team effort. We in Congress have to make a priority of this as well.
Mr. Chairman, thank you for your time.
Secretary PEñA. Mr. Chairman, if I could, just on that note, invite the members to a display of technology that we will have—it was with the House side yesterday, and I believe it will be on the Senate side tomorrow, which has a number of the technologies that DOE is now using, experimenting, for example, with New York City on some LIDAR equipment, et cetera. So you can get a sense of some of the technologies that we are developing, particularly to deal with chemical and biological releases in our country and how we can detect them.
Mr. MCDADE. The Chair now recognizes the gentleman from Michigan.
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Mr. KNOLLENBERG. Mr. Secretary, how are you?
Secretary PEñA. Fine.
Mr. KNOLLENBERG. Speaking of elevators, we rode up on one just the other day, as I remember. It was a general, generic elevator.
Secretary PEñA. That is right.
MANAGEMENT OF THE ENVIRONMENTAL MANAGEMENT PROGRAM
Mr. KNOLLENBERG. Sometimes it does not work.
I want to very quickly ask you—and I do appreciate your coming and your testimony. I want to focus on a concern that I had with respect to the vacancy of the Assistant Secretary of Environmental Management. That position has not been filled. It has been vacated since the fall.
Secretary PEñA. January. No, January, sir.
Mr. KNOLLENBERG. I recall it was back in November when I got the call. Did he not remove himself, or was he not removed before the beginning of the year?
Secretary PEñA. I will go back and look at my records.
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[The information follows:]
DATE OF FORMER ASSISTANT SECRETARY ALVIN ALM'S RESIGNATION
Al Alm resigned from his position as Assistant Secretary for the Office of Environmental Management on January 30, 1998. He announced his intention to resign around November 1, 1997, and members of the Subcommittee were notified of Mr. Alm's pending departure in November.
ENVIRONMENTAL MANAGEMENT VACANCY
Mr. KNOLLENBERG. I am just concerned, more significantly, about who is in the wings, who are you considering?
I know you have an interim individual. Interim suggests that that is exactly what they are. They are interim. They are not positioned permanantly. Do you have someone in mind, or is that expected shortly?
Secretary PEñA. Congressman, let me assure you that we have a number of issues we are dealing with in terms of personnel in the Department. This is right at the top.
I think this is perhaps one of the most difficult jobs in the Government today, and the fact is that in the many interviews I have had with a number of individuals—and we are in particular trying to find someone who has private sector experience who understands how to deal with complex projects, who understands how to work with the private sector, who knows how to get these kinds of things done, which is a unique experience——
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Mr. KNOLLENBERG. So you do intend to make the appointment as soon as possible?
Secretary PEñA. Absolutely, Congressman. We are working on interviewing lots of people.
ACCELERATED CLEANUP
Mr. KNOLLENBERG. Let me go to a point that is very important to me. You and I have talked about this, both last year and during this year. It has to do with bringing to closure some of these individual sites, and, in particular, I want to focus on Rocky Flats.
As you and I have discussed, we have a lot to gain by bringing to closure these locations because, frankly, in the long run, we save a great deal of money. That is obviously an advantage for you and for us and for the country.
I am stacking some books up in front of me. When I first became a member of this subcommittee, we got the 1995 BEMR. I think that is what we called this guy right here. And there were three volumes, and that kind of disturbed me, but I thought, well, okay, three volumes.
Then we had the 1996 BEMR, and that is this guy. It is, in terms of weight, it is more than double.
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Then I have the 1998. There was nothing in 1997. The 1998, now we have some 12 volumes that are packaged inside this band here. I am beginning to wonder if this thing is getting more difficult or simpler. Apparently, it is getting more difficult.
I looked also at some of the reports within each of these, 1995, 1996, 1998. We are talking about a 75 year projection for bringing these things to closure. Incidently, in 1996, that was one volume more than 1995, and they reduced the cost projection from $230 billion to $227 billion.
We just received a DOE draft report. That is this right here, which evolved from the 10 year plan, and this report is made up of about a dozen volumes. I would say that we will spend about $189 billion over a 75 year period. That is a $38 billion reduction.
If I were to make an observation from all of this, for every volume that we had to the EM cleanup plan, we save about $3 billion.
So one of the things I might suggest, and I do this humorously, is go back, bring forth 100 volumes of this kind, and we will be done with the whole thing. It will be over.
I know that is not possible, but now we can move the books. Thank you.
We are still concerned about this whole draft program. That is just for illustrative purposes, but you see what we have to decipher, and, yet, we still have not brought to an end anything but a 75 year projection.
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You were going to let us know when we might expect the completed report on accelerating the cleanup, and, also, what your analysis of the entire EM program was.
I am concerned about this, and I just mention it to you because I know, a year ago, you mentioned to me in this meeting, the same meeting, that with respect to Rocky Flats, you expect to see that come to closure by the year 2006. That is in the record.
I know that the ''Paths to Closure'', the closure plans, assume a funding baseline of $6 billion for 1999, but the administration only requested $5.78 billion. I have to wonder, did the DOE find some additional savings somewhere in order to come in with that figure that is under $6 billion, and would you respond?
I think that is valid. $6 billion for 1999 was what the closure plan projected, but you have come in at $5.78 billion. I have a reason for asking this because there is a follow-up question to that. Why is the DOE amount less than the level of funding that was anticipated?
Secretary PEñA. Congressman, I know that when we did ''Paths to Closure'' in that multi-year analysis, we had assumed for estimating purposes that we would have $5.75 billion every year, I believe, for the next 10 years.
If we look at the current outlay numbers, we are not going to have $5.75 billion per year. Of course, outlay numbers are outlay numbers, and we know that every year is a different budget.
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The point we were trying to make in that document is that overall we are going to have a funding shortfall over a period of years if we want to meet the targets that we have outlined in this new strategy. It was illustrative, but I think the good thing about this work is that we now have a closure strategy for each one of the projects in the country, and I think that is a first. So, hopefully, that will give us some guidance about how to proceed, but let me get back to you and answer this.
[The information follows:]
ENVIRONMENAL MANAGEMENT FY 1999 BUDGET REQUEST
The budget request for Environmental Management (EM) for FY 1999 totals $6.1 billion. This request includes $5.6 billion in traditional budget authority, and an additional $517 million in budget authority for privatization projects.
The draft strategy, Accelerating Cleanup: Paths to Closure uses an assumed funding level of $5.75 billion (in current year dollars) to establish baselines and to demonstrate what can be accomplished with a constant funding level over time. EM established the assumed funding level last October prior to receiving final FY 1999 and out-year budget targets from OMB. It was essential to establish an assumption at that time in order to produce a draft report by February 1998 when the President's budget was submitted to Congress.
It is important to understand that Paths to Closure is not a budget or decision document. Rather, it provides a useful planning tool for assisting in annual budget formulation and site and project planning.
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Given the constant funding levels assumed in Paths to Closure and the underlying requirement used to establish the site baselines in Paths to Closure, differences between site baselines and the budget are inevitable. The Environmental Management program recognizes that there will also be differences in future iterations of Paths to Closure between assumed funding levels, budget requests and appropriations due to the dynamic nature of the budget process.
The FY 1999 Congressional budget request was designed to provide a funding level sufficient for EM to conduct operations in a safe manner; achieve regulatory compliance goals; achieve completion and closure goals; and provide essential landlord services and activities (i.e., security, site infrastructures, etc.).
ROCKY FLATS CLOSURE
Mr. KNOLLENBERG. Let me share some information with you that I received in a meeting last week with some of the contractors at Rocky Flats.
They gave us a pretty compelling chart. I am going to ask that that chart be circulated. That suggested how many projects they anticipate they will not be able to complete due to the reduced level of funding.
Does everybody have that chart? It is a three-column affair, and it has three columns of the various projects. The first column demonstrates how much will be completed if we had and continue to fully fund Rocky Flats to the so-called paths to closure draft for fiscal years 1998, 1999, and 2000.
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Even under this funding scenario, Rocky Flats would not be closed until 2010. The second column, which is a shorter list of projects, demonstrates again how many will be completed if we increase the funding level to, again, the paths to closure draft levels.
The scenario places closure by 2010 in jeopardy, and, yet, the DOE request, as I have said, is below this amount. The third column demonstrates how many projects will be completed if we only fund Rocky Flats at the reduced DOE request level of those fiscal years 1998, 1999, and 2000, and it virtually guarantees, if it is valid, that we will not be able to close the Rocky Flats site by 2010.
You can see how many fewer projects will be completed under the reduced funding scenario, and, again, I want to stress, even if we had fully funded Rocky Flats at the paths to closure level, the contractors stated they would be able to close by 2010. They are not even discussing the year 2006.
So I would like you to respond. Do you still believe that we will be able to complete the cleanup of Rocky Flats by the year 2006?
Secretary PENAE6a. Congressman, that is certainly our goal, and let me be very specific about Rocky Flats, since I have spent some time on this subject.
There are legitimate differences of opinion, and I respect those, between the views of the contractor, between the views of our field operation, and headquarters, and I have asked my team to come to final closure about those legitimate differences of opinion.
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We all are on the same page in the sense that we want to hit the 2006 goal. That has not changed. I have not changed my view about that. No one in EM has changed their view about that, but, as I said, I think there are some legitimate questions.
For example, how do you quantify the value of the vault that is not going to be built at Rocky, but is going to be built at Savannah River? It is for the benefit of Rocky, but we do not carry the value of that vault in the Rocky budget. So, if you look at the Rocky budget, it looks like it is less, and that was a concern about last year's budget compared to this year's budget, and someone argued we had $7 million less last year.
Well, we did not count the vault for the budget this year, but building that vault in Savannah will allow us to move the material out of Rocky to Savannah, significantly bringing down the costs to Rocky, but that is an example of the kind of question about how you count that number, and that is all I am saying. There are some legitimate differences of opinion, but I want to answer your question.
Our goal is to clean up Rocky by 2006. We are going to bring these parties together where there are some differences and finally come to closure on what we agree on and then come back to you with a fuller answer.
Mr. KNOLLENBERG. It just seems to me that if, in this year, if we are that short of the amount that has been projected to be needed to bring it about to closure in 2006, it would be somewhat scary, I think, and it suggests why wouldn't we fully fund that closure?
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I think on that sheet, it indicates the three different levels of funding for the three different areas of projects that would be covered, and I think this committee has some concerns about completing cleanup. I know that I do. And I think if we could just for once bring one of those, one of those huge locations to closure—I mean, this is your home State. It's Rocky Flats. It is Boulder. It is Denver, and I have traveled there, as you know, and been there to look the situation over. It seems that everybody is together.
Secretary PENAE6a. That is right.
Mr. KNOLLENBERG. The city, the community, the State, the environmentalists, almost everyone feels, as far as I know, let's do it. It would seem to me if we could just concentrate on doing that, we could show the country, the world, that we are done, and I am just concerned about some of these numbers that do not add up. I know that it is difficult to maybe make some projections, but I think what we have to do is get some answers on this. If there are problems, maybe we can intercede in some fashion to help you.
I know you want to bring this about.
Secretary PENAE6a. Yes.
Mr. KNOLLENBERG. And we have talked about that. So I would just urge you, and I guess I am over my time, to put some heavy emphasis on that, to bring in somebody, to take that position, as soon as possible, and we can get on this together.
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Thank you.
Secretary PENAE6a. Thank you, Congressman. I agree, and thank you for your support. We will get back to you with a more specific answer on Rocky. I could not agree with you more about the overall agreement in Colorado and in our Department about bringing this to closure in 2006.
Thank you.
[The information follows:]
ROCKY FLATS CLOSURE
The Department's Rocky Flats Closure Team, consisting of the Field Office, Department of Energy Headquarters (DOE) staff and the contractor Kaiser-Hill are committed to fully support 2006 closure of Rocky Flats Environmental Technology Site as an aggressive but achievable goal. There are a number of conditions that must occur to accelerate closure from 2010 to 2006. These include: policy initiatives largely in the hands of DOE Headquarters, funding assumptions and work efficiencies largely in the hands of the site, and funding provided by Congress. To facilitate accelerated closure, DOE is committed to pursuing the following:
Accelerated removal of plutonium residues as waste to WIPP by 2002;
Accelerated shipment of plutonium metals and oxides offsite by 2002;
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Shipment of plutonium pits to Pantex by 12/98;
Shipment of highly enriched uranium to Oak Ridge by 9/99;
Removal of all remaining transuranic, mixed low level and low level waste off-site;
Maximizing opportunities for dispositioning excess property; and
WIPP opening on schedule to begin receiving Rocky Flats wastes before the end of this fiscal year.
These activities are on the critical path for Rocky Flats closure and must be completed in order to reach our site closure goal by 2006.
In addition, DOE will review and validate the Life Cycle Baseline for Rocky Flats closure in order to identify opportunities for redirecting funds to accelerate work scope. DOE is working to establish the scope and schedule for the validation. The validation will be independent and will include reviewers from other DOE elements, field organizations and outside expertise. We expect to complete the initial validation in June 1998.
As you can see, there are many activities that must be completed, along with funding efficiencies identified, in order for DOE to meet the aggressive goal of Rocky Flats closure by 2006, but we are committed to pursuing this goal.
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SOLAR AND RENEWABLE ENERGY BUDGET
Mr. MCDADE. The Chair now recognizes the gentleman from Arizona.
Mr. PASTOR. Thank you, Mr. Chairman.
Good morning, Mr. Secretary. First of all, let me apologize for going back and forth. As you know, we have two committee meetings going on, and so we apologize, at least I apologize, for not being here for the entire hearing.
I have two questions, Mr. Secretary. The first one, I see in your testimony that there is an increase for solar and renewable resources technology, and I am very happy to see that your budget includes $78.8 million for photovoltaics, which is an increase of $13.3 million from the last year.
Last year, as I recall, most of the money was going into application and development. The development, you pretty much have done, but the application of the solar shingles technology, I wanted to know how that is coming. Secondly, where do you think we are going to go into further research in the Department in that area?
Secretary PENAE6a. Congressman Pastor, let me say you are absolutely right. We had a high priority on the solar shingles, and they are basically out. You can now purchase them. So people can find them at various stores.
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We believe that there is more work to do in the area of solar R&D. I just came back from a visit to the National Renewable Energy Laboratory in Colorado which is spending a considerable amount of its resources in trying to find more breakthrough technologies for solar.
We still want to reduce the cost for certain technologies, and we think that there is great promise there. We are going to do a $10 million competitive solicitation to help us develop and deploy even more promising solar technologies, and that will be 70 percent shared by the private sector. So we think that will be very helpful.
We are also seeking additional money for photovoltaics, which will again be a cost-shared R&D program with industry to, again, cut down the cost for manufacturing technology and production costs. So those will be more commercial.
So that is the overall strategy that we are using to help us bring down these costs and to help do some of these breakthroughs in cooperation with the private sector, so that solar panels, shingles, and other technologies will be more available throughout the economy.
I think we are making progress. The one million solar roof initiative has been very successful thus far. People are quite interested in participating in that, and we have seen just a renewed sense of interest and enthusiasm for the whole solar industry.
RENEWABLE ENERGY INCENTIVE PROGRAMS
Mr. PASTOR. As you well know, in the West, especially on the reservations, you have a poor infrastructure of getting electricity into those areas. Most recently, I was on Navajo and Hopi reservations, and they have attempted to address that problem with solar panels. I think that maybe the shingles might be a possible solution, but, like anything else, their resources are very limited.
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Do you think that you would have in the future some kind of incentive program that would help those isolated areas to take advantage of the shingles and also provide further information on whether or not they are working?
Secretary PENAE6a. Congressman, we can provide additional information to the reservations, and we are happy to do that.
In addition, there are tax credits that are available in this area that the President has proposed. So there are a number of different techniques that can be used here to encourage people to move in this direction, particularly in a very isolated area.
I have been informed that one utility in Southern California is now finding that it is more cost effective themselves to install a solar panel, for example, in a certain community because it is far more expensive to rip up the pavement and install long lines to get to certain areas, and it also helps them deal with the baseload problem they have during the day when most electricity is being used in that part of the country.
So we are finding in the private sector itself and some of the utilities themselves are now realizing that in certain unique circumstances, it is helpful to their bottom line to actually provide these technologies to some of their customers, but let me follow up on your particular request and see if we can have some people engage with the individuals you are referring to.
EDUCATIONAL PROGRAMS
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Mr. PASTOR. As a short reminder, as you know, at Arizona State University, we have a facility that does a lot of research. As you continue your research and development for photovoltaic, hopefully you will take them under consideration because they are ready to help in any way they can.
The second question deals with the laboratories. I know that in areas that are close to the laboratories, you have developed and you are very supportive of educational programs in the elementary schools and the high schools around the labs.
One of the problems, at least for the people I represent, is they are a little further down from the labs, and sometimes it is difficult for them to take advantage of the programs that you have initiated. I would just like to hear from you what future plans you have to extend those type of programs so that students at least close enough to the labs—not nearby, but say the students from Arizona can get to the New Mexico labs, as an example.
Secretary PENAE6a. Congressman, thank you for that question, and let me address this to all of the members because I think this will be of interest.
We have proposed a relatively modest $15 million addition to our education initiative, and let me tell you how we are going to use these dollars.
We would like to have our scientists and technicians in our laboratories develop math and science tutorials from kindergarten through twelfth grade and put them on the Internet so that they will be available to any child and any science or math teacher anywhere in the country as more and more classrooms are now being connected to the Internet, and we are seeing that happen all over the country.
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We think that given the extraordinary technologies and resources we have in the Department, we have, for a relatively modest amount of investment, here an opportunity to make a huge difference.
You all recently heard of Secretary Riley's report on how our twelfth-graders are performing in science and math. We are almost at the bottom of the list in terms of our competitors worldwide, and while we are not a Department of Education, we think there is a very helpful role we can play in providing these kinds of assistance to teachers and students around the country, so that all you have to do is be connected to the Internet.
Secondly, we are expanding our work and encouraging students to come into our labs from throughout the country, and science and math teachers themselves can come in, get additional training, develop their own home page for their own school, but the whole idea is for us to share our resources not only in the geographic proximity where our labs are located, but throughout the country, so we can have a much better impact on how our children are performing in science and math.
I think this Department has an extraordinary opportunity here to make a big difference for future generations, and our country, I believe, cannot fall behind in science and math as we produce the next generation of scientists and engineers that are going to be sorely needed if we are going to be competitive in the world.
So I hope the members will look at that proposal. I think it has great promise, and, again, I think we can have an enormous impact for kids around the country.
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Mr. PASTOR. Mr. Chairman, I will submit the other questions for the record. Thank you very much.
Mr. MCDADE. We thank you.
I am pleased to recognize now the gentleman from New Jersey, Mr. Frelinghuysen.
STOCKPILE STEWARDSHIP
Mr. FRELINGHUYSEN. Thank you, Mr. Chairman.
Good morning, Mr. Secretary.
I am a veteran newspaper article-clipper, and my office is full of old clippings, yellowed, some new. Also, when I attend my town meetings, I have looking over my shoulders alumnus from Bell Labs, Lucent, what is left of Bell Corp, AT&T, and pharmaceutical companies that make up a good portion of Northern New Jersey. Many of them get on my case relative to the nuclear stockpile stewardship issue, as to the vast amounts of money we spend on this program.
I did get some reassurance when I visited, through your good offices, a couple of your laboratories, earlier this year. But somewhat piggybacking on Mr. Fazio's earlier questions, and Mr. Rogers as well, I would like your reaction to some of the comments that appeared in a New York Times editorial in late November where they described spending for the program, and I quote, ''While some spending is required, the program devised by the Clinton administration and Congress is extravagant.'' The editorial goes on to say, ''Some effort to maintain necessary skills is appropriate. So, too, are computer simulations and mechanical sampling to learn more about what happens, to bomb-trigger mechanisms or plutonium decays. Adequate supplies of tritium must be ensured in case the warheads need to be replaced, but the stewardship program has not subsidized unrelated experimentation or allowed any effort to design and build more advanced weapons.'' Then it goes on to say, in conclusion, ''The Congressional Budget Office has proposed less expensive ways to assure weapons reliability.'' One approach would be to consolidate the work at one of the existing labs and do without the NIF, the National Ignition Facility. Another would rely on commercial reactors to produce tritium instead of calling for a new government plant.
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When you read, and the New York Times is one of many papers, these types of editorial comments and then a couple of weeks later, Stephen A. Schwartz writes his comment here. He is a writer, a director of the U.S. Nuclear Weapons Cost Study Program, Brookings Institute—obviously, Brookings may have a certain agenda. He writes, ''Your editorial of November 30th criticizing the administration's nuclear weapons stockpile stewardship and management program as extravagant is on the mark. From 1948 to 1991, the Department of Energy and its predecessors spent nearly $150 billion to research, develop, build, and maintain more than 70,000 nuclear warheads,'' et cetera, et cetera. An additional $160 billion was expended producing the nuclear materials to fuel these weapons,'' and he goes on to say, ''Now with production halted, the arsenal shrinking and nuclear tests likely to be banned forever, the administration proposes to spend at least $45 billion over the next decade maintaining the arsenal, $800 million more per year than what was spent on average during the cold war.''
When you read these types of comments as a member of Congress—and public perception is everything—even though I want to be a believer, can you tell me that we are now, in fact, for instance, doing some unrelated experimentation that is not necessarily—or are we doing unrelated experimentation that might not conceivably be considered to be under the certification process?
Secretary PENAE6a. The direct answer, Congressman, is no. Let me try to respond to the editorial, which I also read, and some of the other concerns that have been raised by others.
Number one, we would be happy to provide you a side-by-side analysis of the cost to the government of our old program when we had nuclear testing compared to the costs that are envisioned in the stockpile stewardship program. We would very respectfully argue that the costs that we are using for this program are less than the costs of the old program.
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[The information follows:]
"The Official Committee record contains additional material here."
STOCKPILE STEWARDSHIP
Secretary PENAE6a. I am not including, by the way, in that analysis the cost of cleanup that was part of the work we did in the so-called old days, reference to the gentleman who wrote that article, and if you want to include those costs in, we have no comparison.
Secondly, there are some statements made in the editorial which are, in effect, incorrect about the purpose of the stockpile stewardship program. Perhaps I need to spend some more time with that newspaper to clarify our program.
Mr. FRELINGHUYSEN. Would you specifically comment on the subsidization of unrelated experimentation issue?
Secretary PENAE6a. I do not know what that is in reference to. We are not subsidizing unrelated work. The National Ignition Facility——
Mr. FRELINGHUYSEN. I must say, I was excited about what I saw in California——
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Secretary PENAE6a. Absolutely.
Mr. FRELINGHUYSEN [continuing]. And, obviously, I know you have got the brightest and best in the Nation working on some very basic research that perhaps could not be done anywhere else, certainly in a private facility, but is it all tied in to the nuclear weapons stockpile safeguard issue?
Secretary PENAE6a. Yes, it is. And we can go through each of those technologies, whether it is the NIF or any others, or our super computer program, and explain very clearly why they are essential to our stockpile stewardship program.
The NIF, for example, is necessary to test the heat and the pressure of a nuclear weapon explosion without actually having any detonation.
We are conducting our subcritical experiments which do not reach criticality because we still need that kind of information.
We have to continue to produce at least some number of pits in Los Alamos. We have to produce tritium because the fact that tritium is declining by 12.5 percent, I think, in a cycle.
Mr. FRELINGHUYSEN. Relative to that, do we need a new government plant, and why can't we rely on commercial reactors?
Secretary PENAE6a. Congressman, as you know, my responsibility this year is to make a decision on the tritium options that we have before us, and we will be making that decision.
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There are two options that we are pursuing. There was a third option or a parallel option that was put in place by Secretary O'Leary, which was to keep the Fast Flux Test Facility on standby condition. So we are looking at all of those options, but we are going to make a decision about that this year and come to closure on what process we are going to use for tritium production.
Mr. FRELINGHUYSEN. The overall proposals from the CBO, have you responded specifically to the CBO's findings, and have you, in fact, embraced any of their recommendations?
Secretary PEñA. CONGRESSMAN, LET ME ASK OUR DEFENSE PROGRAM TEAM IF THEY HAVE HAD AN OPPORTUNITY TO RESPOND TO THE CBO. I AM GOING TO ASSUME THEY HAVE, BUT I AM NOT CERTAIN THEY HAVE.
Mr. FRELINGHUYSEN. I think it is a fairly basic question.
Secretary PENAE6a. Let me find out if they have.
Mr. FRELINGHUYSEN. Some could say maybe they do not have the scientific base or knowledge or responsibility you have, so they may not know what they are talking about, but, certainly, from our perspective, I think it would be good.
Secretary PENAE6a. Let me check to make sure we have responded to that.
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[The information follows:]
CBO REPORT ENTITLED ''PRESERVING THE NUCLEAR WEAPONS STOCKPILE UNDER A COMPREHENSIVE TEST BAN''
Attached is a letter dated September 30, 1997, from Secretary of Energy Peña to the Congress, which responds to the May 13, 1997, letter from Senator John Glenn concerning the Congressional Budget Office Report entitled, ''Preserving the Nuclear Weapons Stockpile Under a Comprehensive Test Ban.''
"The Official Committee record contains additional material here."
LABORATORY CONSOLIDATION
Mr. FRELINGHUYSEN. Could you comment on the idea of consolidating the work at one of the existing labs, a lot of this work, the consolidation issue? I know each one of these in and of itself is a remarkable facility. I mean, the brain power there, the experimentation, cross-pollenization, which I assume is worldwide in facilities and between facilities, but from a layperson's view, it does seem to me that we have the potential there for a tremendous amount of duplication.
Secretary PENAE6a. Congressman, I agree that those are questions that are very legitimately asked. I am very happy to give you much more detail, but let me give you a general answer today.
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Number one, the three laboratories we are discussing do, in fact, have different and distinct missions. However, when it comes to the stockpile stewardship program, one of the byproducts that we get from having the different labs is our ability to cross-check using completely different approaches to stockpile stewardship to make sure that, in fact, the analysis being done by one group of scientists is verified by a second group of scientists.
That has been, for better or worse, the approach that our country has used in much of the defense work going back many decades to ensure that we have this kind of verification on such sensitive issues, like nuclear security. I do not think we want to abandon that kind of an approach because it has worked very well in the past, and I think we ought to continue to have it. Again, there are distinct missions that are undertaken by those labs. It is my view that they are necessary, and we think the work they are doing is fully justifiable, but I would be happy to give you a much fuller answer describing very specifically the work that they do and why there is not duplication.
[The information follows:]
THREE DEFENSE PROGRAMS LABORATORIES
The three Defense Programs nuclear weapons laboratory configuration is particularly important because it provides the differing scientific approaches, span of technologies, and technical peer interactions that are integral to stockpile stewardship without nuclear testing.
In February 1995, the Galvin Commission recommended that the Department of Energy (DOE) give consideration to consolidating nuclear weapons activities in two vice three laboratories. In response to that recommendation, the Department has carefully examined the roles, missions and responsibilities of each of the three Defense Programs Laboratories—Los Alamos National Laboratory, Lawrence Livermore National Laboratory and Sandia National Laboratories. With the commitment of the nation to a Comprehensive Test Ban Treaty (CTBT), and the resulting need to pursue a stockpile stewardship program capable of maintaining the safety, security and reliability of the nation's nuclear stockpile without underground testing, the Administration determined that retaining all three weapons laboratories is critical. This decision was announced by the President on September 25, 1995.
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Stockpile Stewardship is a technically challenging program and requires a broad spectrum of capabilities to ensure success. The retention of two nuclear design laboratories—Los Alamos and Lawrence Livermore—is particularly important. Together, these two facilities have the responsibility for the weapons' nuclear explosive packages. Because each takes an independent approach in addressing the scientific and technical issues associated with stockpile stewardship, the two provide each other with critical peer review—something made even more crucial now that the weapons will not be tested by nuclear explosion.
The activities of all three laboratories are coordinated and integrated in support of the Stockpile Stewardship Program. Each has common capabilities in critical ''core'' areas and individual specialities in various supporting technologies. This arrangement provides for the full range of required capabilities, a system of checks and balances, and effective use of limited resources. Some examples of individual specialties critical to stockpile stewardship include:
Accelerators and spallation neutron sources (Los Alamos), High-power lasers (Livermore), Radiation-hardened electronics (Sandia), Plutonium processing (Los Alamos), Radiochemistry for nuclear test readiness (Livermore), and Pulse power (microsecond, Los Alamos; nanosecond, Sandia).
The three-laboratory configuration has proven itself essential in the development and peer review of the W87 life-extension program. In addition, the three-laboratory configuration is fundamental to two formal processes required by the Stockpile Stewardship Program—namely, dual revalidation of all stockpile weapon systems over a multi-year cycle, beginning with the W76, and annual certification of each weapon system in the stockpile. Both of these processes began in 1996.
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Both nuclear design laboratories apply a wide spectrum of weapons-related scientific and technical core capabilities to their unique responsibilities. Of particular importance, each laboratory continues to be responsible for the weapons systems it originally designed. Sandia maintains capabilities in non-nuclear component development, assessment and system integration for all systems. By making detailed decisions on actual weapons issues and engaging in revalidation and recertification projects, each laboratory maintains its expertise (and trains new weapons scientists) in the science underlying nuclear weapons.
LABORATORY RESEARCH
Mr. FRELINGHUYSEN. At the chairman's suggestion, and certainly if you serve on the committee, you have some responsibility to visit DOE facilities, and I have a lot more to visit. As excited as many of the men and women were who showed me what they were working on, it did seem to me, since I do get around, some of these projects seem to be similar to what are going on in other research facilities around the country. It is almost like we have a little piece of everything. In terms of the Human Genome Project, I mean, there are plenty of these types of efforts which appear to be going on in major universities around the country.
I just think the potential here—and I would specifically like you to address the unrelated experimentation issue. Everybody showed me their piece, advanced cancer research. I mean, with all due respect, humankind may benefit from a lot of this work, but it does seem that the annual certification that you certify appears to be quite a large rug to put things under. Maybe that is the wrong analogy, but it is a huge umbrella here, and I think the New York Times has raised some legitimate issues, and members of Congress need to raise these issues.
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Thank you, Mr. Chairman.
Mr. MCDADE. The Chair recognizes the gentleman from Indiana, Mr. Visclosky.
STOCKPILE MANAGEMENT BUDGET
Mr. VISCLOSKY. Thank you, Mr. Chairman. Mr. Secretary, welcome.
Mr. Secretary, looking now to fiscal year 2003, there is a significant increase in the stewardship funding for stockpile stewardship. There is not a corresponding increase in the stockpile management funding. Would you want to comment on that?
I have, I must tell you, just a concern that we are not investing enough in our plant infrastructure as far as the management program.
Secretary PENAE6a. Congressman, I do not have—I am going to do this from memory.
Mr. VISCLOSKY. Yes. The exact figures are unimportant. I guess my generic comment is that I am concerned this year, next, and in the outyears, we are not maintaining the physical plant facilities that we have in our ability to use the new technologies and the stewardship program.
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Secretary PENAE6a. Congressman, as I have visited our labs, I observed that we are going to have some challenges in the future in a number of areas, basic infrastructure, for example, and plant maintenance. Again, those are outyear numbers.
We, of course, do an annual budget which I think responds to the immediate needs that we have, but let me give you a more specific answer about the difference for the 2003 number for stewardship as opposed to management. It may have to do with some of the technologies that are coming on board in those out years, but I don't have the information in front of me at the moment.
Mr. VISCLOSKY. Secretary, I am not, again, so much interested in the ratio or, in this case, the justification for the stewardship program. It just obviously caught my eye, and we certainly had comments and complaints raised that we are running dangerously close as far as our under-investment, as far as the plants, the equipment, the wiring, computerization, to implement, if you would, the stewardship program as far as those weapons plants.
So I am more interested in the concern looking out, if we are close, if those are outyear numbers, why are they outyear numbers and they are not numbers now. That would be the response I would be looking for, if I could.
Secretary PENAE6a. I will get you a fuller answer.
[The information follows:]
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STOCKPILE STEWARDSHIP FUNDING
The overall level of $4.5 billion throughout the period recognizes the technically challenging workload in the stockpile stewardship and management plan, as well as the need to provide for major new experimental facilities while significantly downsizing capacity in some older facilities that were geared for a larger stockpile and the large production quantities of the past. Precise funding requirements for FY 2000 through FY 2003, using the FY 1999 level as a baseline, will be determined in conjunction with the appropriate fiscal year budget cycle.
It is important to understand that Stockpile Stewardship and Stockpile Management are budget and accounting decision units, not programs. Historically, most laboratory funding was contained in the Stewardship decision unit, and most plant funding was contained in Management; however, that distinction is less clear today. In fact, Defense Programs is considering budget structure changes to move to a single decision unit in FY 2000 to more accurately portray the total integration of the laboratories and plants in carrying out the Stockpile Stewardship Program activities. We will be discussing any proposed changes with the Congress in the near future.
The five year planning budget estimates you reference for Core Stockpile Stewardship activities provide an average growth of about 2 percent annually. This near term growth is related principally to experimental facility construction. Funding is included to complete the 2nd axis of the Dual Axis Radiographic Hydrotest Facility and to complete the National Ignition Facility. Assumptions include the option to begin construction of an advanced hydrotest facility and/or an advanced pulsed power research facility at the end of the five year period, depending upon the outcome of research and technology development activities currently underway. The Accelerated Strategic Computing Initiative continues to grow throughout the five year period consistent with aggressive program plans through 2004.
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Funding for Core Stockpile Management activities declines about 4 percent by the end of the five year period. This reflects the progression of the Stockpile Management Restructuring Initiative construction projects to downsize the capacity of the weapons production plants consistent with the recommendations of the Programmatic Environment Impact Statement. Simultaneously with the physical downsizing, funding for advanced manufacturing, design and production technology nearly triples during the five year period to develop and integrate new technology into the remaining stockpile surveillance, manufacturing and operations facilities. Funding is also included for activities to reestablish pit manufacturing capability in the complex. The Enhanced Surveillance Program concludes during the five year period, with the last year of funding projected to be 2002.
WORK FORCE SKILLS
Mr. VISCLOSKY. Thank you very much.
The next question I have, also, looking at the plants themselves, it is my understanding that by the year 2005, 90 percent of the skilled trades work force at the Kansas City plant, for example, will have been hired between 1977 and 1981, and, again, concern about a bulge as far as retirement of the personnel at those plants.
I assume—and, again, in varying degrees—that may be fairly typical of some of the other plants. I may be incorrect in my assumption.
What concerns do you have, does the Department have, and what actions is the Department looking at?
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Secretary PEñA. Congressman, we have the same concerns.
We had a prior conversation about the fact that we are losing some of our scientists and engineers in that time frame, but we are losing lots of other highly technical people in that time frame.
So we are very focused on two things. One is making sure we have the technologies which will allow us to bring on this new leadership of scientists and engineers who are coming out of our universities. Defense programs, for example, now has a very specific program focus on key universities to make sure that we are generating the right kind of graduate and postgraduate students who will have those technologies. So we are trying to link two key universities now to make sure we have that stream.
Mr. VISCLOSKY. That includes Notre Dame, I assume, Mr. Chairman?
Mr. MCDADE. One would assume so. [Laughter.]
Secretary PEñA. But it applies to other skill mixes that we have in the Department, and so we are focused on that and trying to anticipate those shortages and trying to determine how we are going to recruit the next wave of technical people to fill those slots. That is going to be a challenge.
We are looking at various options right now about the kinds of incentives or changes in our personnel procedures needed to allow us to have some flexibility to do that, but it is going to be very targeted, and it is going to have to be done in a way that will allow us to keep people that we need to keep and yet, bring in these new skills that are needed in that time frame. So we agree with your concern, and we will be very focused on it.
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WEAPONS RELIABILITY
Mr. VISCLOSKY. A final question, Mr. Chairman. My understanding is DOD is making or planning a number of changes as far as existing warheads. My understanding is that DOD has expressed some concern about the possible safety and reliability of the warheads given these changes. How are the two Departments matching up on that controversy?
Secretary PEñA. If I understand your question correctly, Congressman, we work in tandem to ensure that from the stockpile stewardship perspective and for the annual certification that we agree that the work we are doing in verifying the weapons is of the same degree of confidence, and we have that today.
If the question is what levels of weapons we are using either under START I or START II, there is still a difference between both Departments about what we are doing. DOD has asked us to use START I numbers for the work that we are doing, but I believe in some areas, they may be using START II numbers, and that is a function of how quickly we get to START III.
But if your question is geared at some issues that we have discovered in certain weapons in our particular surveillance and investigation, my view is that we have addressed all of those to the satisfaction of DOD, and that is why this year, Secretary Cohen and I were both able to certify the safety and security and reliability of our weapons.
I do not know if that was the question you were asking, but I am trying to hit at least three different parts of the concerns that may be out there.
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Mr. VISCLOSKY. Mr. Secretary, thank you very much.
Thank you, Mr. Chairman.
BUDGETARY PRIORITIES
Mr. MCDADE. Mr. Secretary, let me ask you this question. We have had a good relationship built between you and the Department and this committee, and it may come as we go downstream that we are going to hit some financial glitches. We usually do.
Your Department has about a $1.1 billion, I think it is, or a bit more increase in this fiscal year. Can you prioritize either the growth of the $1.1 billion or the baseline as to where you might be putting your priorities or, in effect, to the committee volunteering lower-priority programs? I know that is a hard question for you, but we may come to that. We probably will. We usually do, and I want to ask you up front.
Secretary PEñA. Mr. Chairman, I have not done that analysis. Obviously, let me take your question under advisement and see how we think about that.
EXTERNAL REGULATION
Mr. MCDADE. We will be in contact with you, and we would love you to take a look at it.
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One of the issues that percolates around is the external regulation of a DOE facility. As you know, this has been an ongoing question for a long period of time. There have been some pilot projects, as we understand it, that have demonstrated the kind of regulation that could be applied externally works very well.
The pilot plants moved along efficiently. There was a lot of money saved, and the external regulation appears to be, by a large consensus, the way to go. What is your position on that, please?
Secretary PEñA. Mr. Chairman, we support the notion of external regulation. We have embarked on two pilot projects with the Nuclear Regulatory Commission. They are not completed, however. We have just started them, and they will probably go on for at least a year, almost perhaps 2 years before we finally have the results of those pilot programs, but, thus far, they are on track, and we try to find very discrete aspects of DOE work that were most amenable to NRC, the supervision and regulation here.
So we will continue to work on this, and, obviously, the more confidence we see as this work continues, we can then begin to work in more complicated areas, but I want to avoid, if I might, the mistake that I think this Department has made in past years, and that is to bite off more than we can chew too early and then find out we have made a serious misjudgment.
Mr. MCDADE. We do not, of course, want you to do anything like that, but, on the other hand, there seem to be areas within the Department that would not have to wait for a year or two to make decisions about whether or not they ought to be externally regulated. Some of them are less complicated, it seems to us.
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My question to you is, can you segment the complicated from the ones that might be easier solved for external regulation purposes?
Secretary PEñA. I think we can, Mr. Chairman, and we would be happy to look at whatever suggestions you might have of other areas that we might be looking at. We would be happy to look at that.
Mr. MCDADE. All right. Take a good look at it because it appears that in terms of efficiency, in terms of savings, that there can be a significant amount of money on the table and a great deal more efficiency in terms of accomplishing the Nation's objectives.
LABORATORY OPERATIONS BOARD RECOMMENDATIONS
One of the things that everybody has looked at and talked about here greatly today is the operation of the laboratories, and as you know, the board issued a series of findings. They were quite critical of headquarters operations and its contract structure.
Now, you talked about that a bit in your opening remarks, and I was delighted to hear you addressing that. It is a serious problem.
Will you articulate a little bit more for us about how you intend to cope with those problems? First, do you agree with the findings of the board?
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Secretary PEñA. Yes, we do, in the sense that we have a problem with, number one, communication, lines of responsibility between headquarters, the field, and some of our other facilities. Yes, we have to do a better job in that area.
Mr. MCDADE. What can the committee look forward to seeing you do to implement the recommendations to the board?
Secretary PEñA. Well, we have already started to take several actions.
First of all, we have put together a Research and Development Council which is chaired by the Under Secretary, which, we believe, will be able to make sure that across the Department, our R&D work is more focused and that we do not duplicate the work that we are doing.
Secondly, we have reconstituted the Secretary's Energy Advisory Board which reviews all major projects. As I said earlier, that had been discontinued in years past. We now have that working again, to look at major projects to make sure that we are using the best expertise in the Department.
So there are other cross-cutting areas where we are, I believe, doing a better job of making sure we are synchronizing the work across the complex, so that we have better communication.
There is more work that needs to be done, and there are other recommendations in the report that we are still reviewing.
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Mr. MCDADE. We will look forward to that.
The committee was furnished with a management chart of the Pantex plant which is so important, and I do not know if you have had a chance to see it, but we would recommend it to you, just to kind of look at the way there is need for improvement in the management of the contracts as we have an opportunity to speak today.
YUCCA MOUNTAIN
Let us talk a bit about the nuclear waste repository at Yucca Mountain. We know that the administration continues to, as a policy, oppose interim storage. What proposal is the Department going to make about how to solve that problem? Do you have anything in mind, Mr. Secretary?
Secretary PEñA. Mr. Chairman, our position, I think, has been very clear. We believe that the solution to take in these wastes is the long-term geological disposal facility that we are working on.
Last year, we completed the 5-mile tunnel. This year, we will complete what we are calling a cross-drift, which is another segment of the tunnel to give us more information. We are now heating the mountain in ways that no other country is doing anywhere else, to test the moisture and the capacity of the mountain.
At the end of this year, we will complete the viability assessment. Next year, we will begin the preliminary environmental impact work for a record of the decision in, I believe, 2001 and then get to a suitability determination about the mountain. That is the work program that we have in place.
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As respects the immediate problem, which is the fact that the Department has not been able to take waste physically as of January of this year—and as you know, there is litigation about that. Right after I became Secretary of Energy, I sat down with representatives of the plaintiffs in that matter and offered a number of different options.
Number one, I talked about the possibility of the Department taking legal title to the fuel.
Number two, I talked about our interest in perhaps paying some kind of damage or compensation for costs that are being incurred by the utilities while they were still paying into the fund, and, yet, maintaining the material on their own site. And there were other suggestions that we made at that time.
I must tell you, Mr. Chairman, there was no interest in those options, and the parties that I met with simply explained to me that the only solution they had in mind was the passage of the legislation pending before the Congress.
You know the administration's position, which is longstanding, long before I became Secretary of Energy, and that has not changed. So we will continue to work on the Yucca Mountain Project. We want to continue to make sure we are using the best science and engineering analysis we have. On the other hand, I am still pleased to sit down and have additional conversations with the plaintiffs in the litigation.
Mr. MCDADE. We are gratified by that comment, Mr. Secretary. We know it is a hard problem, and there are kind of intractable positions on the people who are contesting, but we hope you can work something through. We encourage you to continue.
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DEBT COLLECTION IMPROVEMENT ACT
There was a new act called the Debt Collection Improvement Act—you can answer this for the record, Mr. Secretary—expediting methods by which Departments can get back the debt that arose. The Department apparently has a debt of $2.3 billion outstanding. Will you indicate to us, please, what steps you are going to take to remedy that situation?
Secretary PEñA. I will provide that for the record.
[The information follows:]
DEBT COLLECTION IMPROVEMENT ACT
Delinquent debt in the Department, totaling approximately $2.363 billion as of December 31, 1997, is comprised almost entirely (about 97 percent) of amounts to be collected from firms that engaged in alleged or adjudicated violations of petroleum price and allocation regulations established as a result of the Emergency Petroleum Allocation Act of 1973. These petroleum pricing violation (PPV) receivables are in various stages of litigation and bankruptcy. The remaining delinquent debt, totaling about $65 million, consists of amounts due from utilities from the sale of electric power and related services from the Department's power marketing administrations and other miscellaneous administrative debt.
The Department has taken aggressive action to meet the requirement contained in the Debt Collection Improvement Act of 1996, which directs Federal agencies to transfer to the Secretary of the Treasury debts delinquent for more than 180 days. As of December 31, 1997, the Department had $2.309 billion of debt delinquent for more than 180 days. PPV and other Departmental debt in bankruptcy or at the Department of Justice for enforcement action comprise all but $103 million of this amount. About $78 million of the $103 million has already been transferred to Treasury for collection with an additional $4 million expected to be transferred by the end of this month. Substantially of the remaining $21 million is either at legal counsel for action, will be written off, or is in dispute. The Department's Chief Financial Officer is working diligently with the field chief financial officers to facilitate the prompt resolution of delinquent debt and the timely transfer of all eligible and appropriate debt to Treasury. Field performance is also being monitored on a quarterly basis.
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GRANT DELIVERABLES
Mr. MCDADE. Also, the IG report that was issued about final deliverables from grants indicated that there were a lot of final reports, technical or financial, that were not, in fact, presented to the Department as a final product. I do not understand why that would not occur.
Have you had a chance to look at that, Mr. Secretary?
Secretary PEñA. I am not familiar with that particular report, Mr. Chairman. The concern regards deliverables conducted by contractors?
Mr. MCDADE. Yes. The final report does not show whether it is technical. The final report on costs are not showing up. This is your IG who looked at it.
Secretary PEñA. Let me look into that again, Mr. Chairman.
[The information follows:]
INSPECTOR GENERAL REPORT ON GRANT DELIVERABLES
The report in question cited instances where the grantee failed to provide final technical and/or financial reports and yes, we have looked into the matter and have taken corrective action. The Department's regulation provides that Contracting Officers shall take appropriate enforcement actions when a recipient is in noncompliance with any grant term or condition. However, our review showed that the procedures regarding enforcement actions needed to be strengthened and that a more aggressive approach was required to follow-up on late deliverables and implement subsequent noncompliance actions.
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To correct the situation, direction will be provided to all field activities regarding actions which must be taken during preawarding, administration, and closeout phases of the grant award cycle to ensure that reports are received in accordance with the requirements of the award. We will also require field offices to identify all overage reporting requirements and provide immediate notice of the consequences of a recipient's failure to provide reports. In the absence of a positive response from the recipient, the matter may be referred to the Department's debarring official for consideration of Government-wide exclusion from receiving future Government grants.
ELECTRICITY RESTRUCTURING
Mr. MCDADE. We would appreciate it if you would.
There is an issue that may well be the most significant issue, energy issue, affecting the country in the next 20 years, deregulation of the utility industry, electrical utility industry in the country. We have not really heard anything about the Department's position with respect to that or whether you had an opportunity to look deeply at it or whether we are going to get recommendations or what kind of leadership the Department is going to provide the citizens of the country when this enormously important decision is reached.
What, if any, is the position of the Department on deregulation, et cetera, and what do you recommend?
Secretary PEñA. Mr. Chairman, the Department has been the lead in the administration on this issue, and we have basically completed a year-and-a-half analysis of the various approaches we would take as respects restructuring the industry.
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In the way the administration normally presents its formal position to the Congress, we have engaged in an interagency discussion about this. We are very close to reaching final conclusions about this as an administration. Obviously, this is being coordinated by the White House, and we hope to be able to make that public as soon as possible, but, prior to that time, we have discussed in a general way principles that we believe ought to be a part of any restructuring package, but we want to be engaged with the Congress.
There is work both in the House and in the Senate. We think that it is helpful for us to be engaged, and we very much want to be at the table to be part of that discussion.
Mr. MCDADE. A lot of the States are moving right out, smartly, on it now as we speak.
Secretary PEñA. That is correct.
EDUCATION PROGRAMS
Mr. MCDADE. We will be grateful to hear from you.
There was an issue that came up involving Department of Energy's pre-college program management fund which was reported by the General Accounting Office to be inefficiently managed. The Department did not request any money. The Congress did not provide any money.
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We were informed, nevertheless, that activities which had been previously carried on were still being carried on, no request from your budget, no appropriation from this committee.
I wrote a letter to the department, addressed to you, but down to the people that run the department, asking what authority was being used since there had not been an appropriation and since there had not been a budget request to continue these activities, and the letter back said, well, we are using the authority of prior Congresses. That is a letter I would like you to look at again. As far as the committee is concerned, that is a declaration of war.
Secretary PEñA. We do not want that, Mr. Chairman. [Laughter.]
Mr. MCDADE. Article 1 is pretty specific about who does what. So take a good hard look at it, and as soon as you can, get a paper back up to the committee so that we can see what occurred there.
Secretary PEñA. I would be happy to, Mr. Chairman.
[The information follows:]
UNIVERSITY AND SCIENCE EDUCATION
I would like to provide additional details regarding the Department's science education activities at the precollege level. In particular, I would like to address your concerns about the Department's authority to carry out these activities and about my letter to the Committee on December 10, 1997. To put this information in perspective, I think it would be useful to step back to preview the status of science education activities at the Department of Energy when I was confirmed in 1997.
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During my first appearance before your Committee, on March 19, 1997, in response to a question from Congressman Pastor, I stated my interest in continuing and expanding our laboratories' work in sharing their assets with America's youth to ''expose these young kids to the excitement of what we're doing, and, hopefully, generate more interest and more talent.''
On April 9, 1997, as part of the Subcommittee's hearings on the FY 1998 request, the Department's Controller, Betty Smedley, provided the Committee information on our science education programs, including precollege activities for which she reported the Department had spent $10,192,000 in FY 1996; $7,224,000 in FY 1997; and, as of that point, was proposing $5,849,000, for FY 1998. Most of these activities are carried out by our national laboratories, with guidance and approval from our program officers, and involve school systems and students in areas near their facilities. In addition to the funding Mrs. Smedley reported, the laboratories also dedicate some indirect funding from overhead and other sources, including non-Departmental, to operate these successful activities that have been ongoing for decades. Brookhaven National Laboratory, for example, has had an active science education program for high school teachers since 1958. Over the decades, our other laboratories also have developed significant educational materials and courses for college students, teachers and students at all levels. The funding amounts for all the science education activities reported by Mrs. Smedley were allocated in compliance with the Committee's FY 1997 report language concerning science education which directed that ''to the extent such activities benefit and are a byproduct of the line programs, those programs should, within available funding, be the educational sponsor.''
Regarding the mention in my previous letter to you of existing legislative authority for the Department to engage in science education activities at all levels, I regret any misunderstanding which might have occurred. There is no specific appropriation in FY 1998 for precollege science education activities within the Department. As mentioned above, in compliance with the Committee's FY 1997 directive, individual programs do sponsor precollege activities from within their appropriated program funding. The Department has provided for these activities since its inception, following specific authorizing language included within the 1977 Department of Energy Organization Act and the Department of Energy Science Education Enhancement Act of 1990, as well as other Acts. In FY 1998, the program accounts are continuing to provide for precollege science education activities, which the Department believes to be in compliance with existing law and the Committee's directives. However, if the Committee believes this interpretation is not correct, we certainly will work with the Committee staff to assure that we follow both the letter and the intent of the Committee's directions. I assure you that the Department will follow Congressional direction regarding its science education activities.
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The Committee's language included in its FY 1998 Report, concerning the Department's science education efforts, directed the Department to ''continue to place a high priority on graduate and post-graduate students.'' The Department is in compliance with the Committee's directions. As you know, the Department provides grants to colleges and universities for basic research programs totaling approximately $600 million each year. This investment supports research which yields new knowledge from which the Department's scientific programs benefit greatly. Also, the graduate and post-graduate students providing this research, at universities throughout the nation, derive significant educational benefit from their research efforts. Thus graduate and post-graduate education does represent the majority of the Department's investment in education. I have directed that the appropriate Departmental personnel work with your staff to assure our Department remains in compliance with Congressional direction regarding the proper balance to maintain among the four major activity areas within our science education programs: precollege; undergraduate; graduate; and science literacy.
Finally, let me address the issues raised by the General Accounting Office report on science education. This report was completed by the GAO in 1994 and evaluated the precollege education programs in fiscal years 1990 through 1993. Prior to the issuance of the report in September 1994, the Department began a process for evaluation of existing programs and development of criteria for future funding. There is now in place a process for assessment and evaluation of programs administered by the laboratories, which we believe addresses the concerns raised by the GAO.
I hope this response provides the information you were seeking. I look forward to continuing our discussions on the Department's science education activities.
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Mr. MCDADE. I now recognize the gentleman from California.
Mr. FAZIO. Thank you, Mr. Chairman.
Do not worry, Mr. Chairman. It is just conventional war in this case. We do this every year. [Laughter.]
NEXT GENERATION INTERNET
Mr. FAZIO. I wanted to ask a question about the Next Generation Internet. This is the second year in which the administration has requested funding in this bill, and I think there are six agencies that total about $110 million this year, $22 in your budget.
There is no question on the part of any of us that the Internet has grown tremendously since 1968, 400 percent a year, but as you said earlier in responding to some other questioner, you have the biggest computers and probably the most technical competence of any of the agencies in the Federal Government for this.
I guess I am concerned, as are others, that a large number of agencies as well as university and laboratory beneficiaries make this program a little bit unwieldy, and I am wondering about how we are going to perform as an interagency effort and what sort of interaction we are going to have with the national scientific community.
There were clearly other beneficiaries in the original Internet's development, universities, labs. Have we got them all factored in? Are they all participating? They are clearly all going to benefit.
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Secretary PEñA. Congressman, you are right.
First of all, this is an administration. Different Departments are taking different parts of this Next Generation Internet.
As respects the Department of Energy, our immediate need is for our own scientists in our own laboratories. When you visit our labs, you will see, and when you talk to our scientists, their need for having this new generation of Internet communication so that they can do their work simultaneously and particularly with the new challenges we are going to be facing in the subject we talked about earlier, and that is the stockpile stewardship program.
So, for our own scientific work, for our own in-house capabilities, particularly in the next decade, we need the Next Generation Internet for the DOE, but we are going to make sure that as we develop this, with your support and with other Departmental interactions with universities and the private sector, we find a way to make sure that this is done in a way that will have broader use, but we need it immediately for our own use in the Department of Energy.
Mr. FAZIO. Well, I think there is an assumption on the part of some of us that given all the investment we are making in computers, there ought to be a way to make sure that we perhaps make a contribution to the Next Generation Internet without necessarily additional funding. There may well be ways to make savings and find opportunities for synergism between the efforts that we are going to be making to build up your computer capacity and, at the same time, expand the usage of the Internet.
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Secretary PEñA. Congressman, let me do this. Let me give you a more specific explanation about why we need additional funds as opposed to the monies we are now using for our super computers. That in and of itself is a big enough challenge just to do that, and that is to make our commitments for the next super computing power we are going to need. The Next Generation Internet effort is, in effect, a distinct program, and we believe we need additional funding, but let me give you some more information about that.
[The information follows:]
NEXT GENERATION INTERNET
The Department's investments in high performance computing are absolutely critical to our missions. The Accelerated Strategic Computing Initiative (ASCI) program, a cornerstone in our commitment to support the Comprehensive Test Ban Treaty, has made detailed estimates of the level of computing required to accomplish its task. Investment in high performance computers are also essential if we are to fulfill our mission of maintaining the leadership of the U.S. in science and technology R&D, leadership which is critical to the future economic and national security of the country. With today's level of investment in high performance computing to support basic research we are only able to fulfill a quarter of our researchers' demands for these capabilities. Therefore, reducing the rate at which we invest in high performance computers could endanger our ability to accomplish our missions.
In fact, recent events, including the National Center for Atmospheric Research's attempt to purchase a Japanese supercomputer and the fact that most of the climate modeling data used at the Kyoto conference was provided by European researchers, suggest that we are underinvesting in this area now. The modest additional investment that we are proposing for the Next Generation Internet (NGI) leverages this underlying investment in computers as well as our investment in unique experimental facilities. It will enable us to successfully address the challenges of making these resources available to remote users at other DOE laboratories, universities, and industrial partners in ways that make remote access the same as ''being there.'' In addition, the investment in the NGI, coupled with our ongoing investments in computing, and the Department's long history of leadership in computing and communications R&D will enable us to develop a new collaborative science and engineering applications that will be the foundation of U.S. leadership in the next century.
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NONPROLIFERATION
Mr. FAZIO. Let me just conclude by saying I think we need to hear also from the private sector as to the value of the NGI. We have seen a lot of support from the various agencies involved, but I think Congress needs to get a better picture of the overall advantage of moving on this, and we need to hear from people who have used the Internet as a method of expanding commerce as well as the benefits that have accrued to the private sector.
One last question as it relates to nuclear nonproliferation. You have in the material protection control and accounting program an increase for $15 million in additional funds. Given the problems we face around the world with issues of nuclear materials being lost and perhaps falling into the hands of terrorist, I wonder if you could describe the benefits of this program and indicate why you think this increase is important.
Secretary PEñA. Congressman Fazio, I think that if one looks at this program, which I believe is only 4 years old, which essentially was started from scratch, and when one recognizes that today we are in 53 different sites in the former Soviet Union entities, it has been a remarkably successful program. The fact that we are asking for more money indicates that we want to expand that in terms of more work at those sites.
When I visited the Kurchatov Institute, for example, in Moscow, outside of Moscow, and I saw pictures of the old facility and I went in and saw the new facility and I saw not only the fences, the cameras, the computerized system that now accounts for the materials, whereas they used to do it by hand, the new vaults, the new systems that are needed to get in these facilities, I am reminded of just how important this work is, and given the enormous volumes of material throughout those countries and now that many of these sites are now open which had previously been closed, we have got to make sure that we are doing our very best to work with them to secure those materials.
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So it is a high national security priority. I think we are on track, and the amount of money we are requesting will allow us to do an even better job.
Mr. FAZIO. Are we getting the kind of cooperation from the Russian government that makes it possible for us to spend this money successfully?
Secretary PEñA. Yes, we are, Congressman.
In fact, the Russians are here this week, and we are in our tenth Gore-Chernomyrdin meeting. This is one of the issues that we talk about.
There are bureaucratic administrative issues that come up every once in a while, but we are trying to resolve those. By and large, this program has been enormously successful.
In fact, we have now expanded it to include the Russian Navy, and in my meetings with the Russian Navy, they have indicated their, at first, concern about our being involved with the Navy, and now that they see we can do this in a way that does not jeopardize any classified information, they are strong believers in it and want us to be even more involved with their materials.
Mr. FAZIO. So the submarine ballistic missile launching platforms in the Soviet Navy are now going to be looked at as well? The materials they have maintained separately and apart from land-based nuclear weapons?
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Secretary PEñA. These are materials that their Navy has in preparation for use, and which need attention.
Mr. FAZIO. We hear a good deal about the degree to which the, former Soviet, Russian Navy continues to be a nuclear threat. You are telling us that we are beginning to turn the corner on that element of Russian weaponry as well?
Secretary PEñA. I think, Congressman, the work that our two governments have done in trying to defuse the nuclear tensions has been extraordinary. We continue to make very good progress there. We are hopeful that the Duma will ratify START II very soon so we can get on with negotiations in START III, but, in the meantime, the work that we have done in Russia in particular and making sure that materials are safeguarded is work that is very important to our national security.
Mr. FAZIO. I guess the real problem is the Duma and not President Yeltsin and his administration.
Secretary PEñA. Well, we are still hopeful that the Duma will move forward.
Mr. FAZIO. We all are.
We thank you very much for your testimony today. We appreciate your being here.
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Mr. MCDADE. The Chair recognizes the gentleman from Arkansas, Mr. Dickey.
Mr. DICKEY. Thank you, Mr. Chairman.
Hello, Mr. Secretary.
Secretary PEñA. Hi.
Mr. DICKEY. How are you doing?
Secretary PEñA. Fine.
RUSSIAN ARMS PROLIFERATION
Mr. DICKEY. I have two lines of questions. One is continuing on the Russian idea. Russia, I guess about a year and a half ago, maybe a year ago, sold three nuclear submarines to China, as I recall. We are spending a lot of money trying to help them, and I think, to some degree, they are standing aside and saying if you are going to spend money to help us in our nonproliferation efforts, we will just let you keep spending the money.
Do we have any leverage when Russia sells arms to North Korea or Iraq or Iran or China? Do we have any leverage to get some of that money applied to their responsibility in doing what we are doing in Russia?
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Secretary PEñA. Congressman, the answer is yes. What we attempt to do is have an understanding from the Russian government about the resources that they are applying in this work, so that we know how our resources are leveraging, if I can use that word, the resources of the Russian government.
Congressman, I think it is well known that the Russian government and the Russian people have their own economic challenges that they are dealing with. They are working very hard on those issues, and I believe that the relationship we have established at least in the MPC&A program and other programs has worked well in order for us to make sure that we work on these issues together and that we maximize our limited resources on both sides.
RETROFITTING ENERGY SYSTEMS
Mr. DICKEY. Good.
As far as a domestic matter now, I think it is called the State University of New York at Buffalo, has just retrofitted its—I was reading—has just retrofitted its energy system, delivering heat and air-conditioning, and they are saving either $6 or $9 million a year. Are you familiar with that?
Secretary PEñA. Not with that particular retrofit, Congressman.
Mr. DICKEY. What are we doing? I have got at least five universities in my district. It seems like that is a fertile field. What are we doing to encourage institutions like that to retrofit and to save that amount of money for energy?
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Secretary PEñA. We have issued what are called—they are sort of like energy audits—and we bid these competitively. Companies will come in and win these bids, which then gives them the prerogative of working with Federal departments. We are doing this on behalf of the entire government.
For example, we issued a competitive bid for the western part of the United States which allows any Federal facility from any Department to participate, and what it permits is for a company to come in, into one of our facilities, and say that we will install at our own cost the new technologies, the energy-efficient technologies in your building, and we predict we will save you 30 percent of your energy bill. They do that, and if they make that mark, they then get compensated from the savings the Department achieves from those efficiencies. We are now doing that throughout the government in different Departments, and it is working very well.
When I recently addressed State legislators, mayors and others, I asked that they work with us to see if they can, in effect, piggyback on the contracts that we now have out so that they perhaps can also capitalize on this work, so that they do not have to go out and do their own contract solicitations themselves.
There may be some technical and procedural issues we have to work out, but I think there is a way for State institutions to utilize our Federal contracts for their benefit.
We have now done our second contract for the South. Later on this year, I believe we will do the Northeast and complete the entire country, I think in about a year, and in that sense have all of the Federal facilities in the United States covered.
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So we will continue to work with universities and State institutions and others to see if there is a way that they can participate in these contracts.
Mr. DICKEY. Good.
I have only one other question that I do not think I can even read. It is so complicated that I would like to provide for the record. But I also want to say that I think you have done an excellent job in your testimony for the time I have been here, and you seem to be doing an excellent job in your position, Secretary Peña.
Secretary PEñA. Thank you.
Mr. DICKEY. Thank you, Mr. Chairman.
Mr. MCDADE. The gentleman from Texas is recognized.
CASPIAN SEA RESERVES
Mr. EDWARDS. Thank you, Mr. Chairman.
Secretary Peña, thank you for your excellent testimony today.
Let me ask you, briefly, and it probably would be appropriate to respond in greater detail in writing, but recognizing the time, in just a few minutes, could you briefly summarize what we are doing in terms of the Caspian Sea reserves, recognizing that the recent actions by Saddam Hussein remind us how incredibly overdependent we are upon oil from a very unstable part of the world?
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I know you have taken a leadership role in this area, but perhaps you could briefly update us on what you and the Department have done over the last 12 months regarding the Caspian Sea.
Secretary PEñA. I would be happy to, Congressman, and it is a very important issue, and I am glad that the media, in particular, has focused more on the whole Caspian area.
We begin first with a part of our national energy security strategy which calls for diversifying world oil supplies so that, speaking for the United States, we are not overly dependent on one particular part of the world.
We have made some progress there. For example, Venezuela is now our largest exporter of oil to the U.S. I think Mexico is second. I think Saudi Arabia is third. That is very different than it was several years ago, but the Caspian Sea area is, we think, the next most important part of the world for diversifying oil supplies.
I recently took a Presidential mission to the Caspian where I met with the presidents of five of the key countries in the Caspian area, and we have reached general agreement that we should explore a concept called multiple pipelines, which means that oil which comes out of the Caspian Sea should not have only one route.
Today, the early oil coming out of, for example, Azerbaijan, goes primarily north to Russia, but in the fall of this year, the consortium will make decisions about other pipeline routes, for two reasons, one, our own national security and, two, for world stability. We think it would be very helpful to have what is called an east-west series of pipelines, taking oil across the Caspian to Baku and Azerbaijan, north perhaps to a place called Supza, and then down through Turkey.
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The reason we believe that is important from a national security perspective is because we fundamentally disagree with the actions being taken in Iran, where Iran is attempting to become a dominant player in that part of the world, as respects energy. We disagree with that for many reasons.
But, secondly, we think that for the economic stability of the countries in the Caspian, energy is going to be the life blood for their economic security and stability in the future, and we believe that by having multiple pipelines that go east and west, there will be more benefit to more countries in the region, again, making that oil available for world supplies.
So that is a brief summary of our strategy. We are working very hard on this. We are making some progress. There are still some issues to be resolved, but I think that we now have at least a very firm and specific policy in the Caspian region.
Mr. EDWARDS. I will be glad to yield to the gentleman from Indiana.
Mr. VISCLOSKY. Were the Armenians included in those discussions?
Secretary PEñA. Yes. I visited with the then-president who is, as you know, no longer the president of Armenia, but I did visit with him, also.
Mr. VISCLOSKY. They are included in those discussions?
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Secretary PEñA. Yes.
Mr. VISCLOSKY. Okay, thank you.
Mr. EDWARDS. Thank you. Perhaps in your written answers, without putting you in the uncomfortable position of asking you to lobby when we are telling you not to, if you could perhaps list what are the areas of policy that this Congress and the next Congress must deal with, whichever direction we go to facilitate the development of the Caspian Sea energy reserves.
Secretary PEñA. I would be happy to do that, Congressman.
[The information follows:]
CASPIAN SEA ENERGY RESERVES
The most important action the U.S. Congress could take is to repeal Section 907 of the Freedom Support Act. This statutory restriction on assistance to the Government of Azerbaijan limits our ability to advance U.S. interests in Azerbaijan. The Clinton Administration has from the start opposed this restriction. Section 907 hinders U.S. policy objectives, including support of the Nagorno-Karabakh peace process, and promotion of U.S. investment opportunities in Azerbaijan. Section 907 restrictions have placed American firms at a disadvantage because they limit the ability of the U.S. Government to provide financial support, such as risk insurance and grants for pipeline studies, to companies that are involved with the Azerbaijani government or its institutions, including the State Oil Company of Azerbaijan (SOCAR). Section 907 prevents the U.S. from offering many kinds of technical assistance and exchange programs offered to other governments throughout the region and which are needed to help create an attractive business climate and commercial infrastructure. When the European Union, Japan, Iran, or international financial institutions step in to fill this void, the U.S. loses influence and U.S. businesses lose opportunities.
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More generally, we need the help of the U.S. Congress in structuring assistance to the region to encourage economic reform and the development of appropriate investment climates in the region. Continued U.S. government support through technical assistance is essential in assisting these countries to establish strong market economies and encourage the emergence of financially vibrant energy sectors. Transparent legal and regulatory environments, and restructured and privatized energy sectors in these countries will ensure the commercial viability of new investments and expand opportunities to U.S. industry. To a great extent, the U.S. Government's ability to tailor assistance strategies to address U.S. interests is hampered by restrictions on how assistance money can be spent. Besides the restrictions imposed by Section 907 on assistance to Azerbaijan, Congressional earmarks limit assistance flexibility and often channel money away from projects and programs which might further U.S. interests more rapidly. We recommend that earmarks and other restrictions be kept as low as possible, if not completely eliminated.
Mr. EDWARDS. Thank you, Mr. Secretary.
Mr. Chairman, thank you.
Mr. MCDADE. The gentleman from Michigan is recognized.
YEAR 2000 COMPUTER ISSUE
Mr. KNOLLENBERG. Mr. Chairman, thank you very much.
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Mr. Secretary, we are getting down, I think, closer to the end here. This is a very quick question. It may have been brought up, but I didn't hear it. What is the status of the DOE being on-line to handle the computer problem in the year 2000? Is that a quick answer?
Secretary PEñA. We are very focused on this, Congressman. I have a team of people who are determined to make sure that we comply.
The President raised this himself in a recent Cabinet meeting. So we are determined to meet our goals.
We have, I think, 370, what are considered, critical mission items. We are making our target in ensuring that we resolve the Y2000 problem, but we have to do it. It is a priority. We have to do it. There is just no question about it.
Mr. KNOLLENBERG. Have a gun at your head, I guess, almost.
Secretary PEñA. Absolutely.
ROCKY FLATS SUPPORT COSTS
Mr. KNOLLENBERG. One of the problems I have with Rocky Flats in particular, and coming back to that subject, you may think I am a broken record, but let me tell you why I am a little confused about the end game or the closure date and some of the numbers that are in the budget that we discussed on the last time around.
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Just last Thursday, my office received from the Department of Energy a notebook entitled the Functional Cost Data Report for 1994 through 1997, for each of those 4 years. In this report, there is a variety of charts. I am sure your staff has those, perhaps, with them. I have a couple or three copies here, but in these reports are various charts of the EM sites. This is just for the EM sites.
Under each site, there is a chart that demonstrates the trend of cost over the last 4 years, and these charts are broken down into three categories. One is the mission direct cost. That is the cleanup guys. Then there is the mission support cost, and then there is the general support cost.
Now, the mission direct is indicated by a red line. You cannot see that from here, and I am more than willing to share these with you, but, for example, I should say that the mission support costs are a yellow line. Finally, general support costs are a blue line.
In the cleanup operations, where we are trying to bring to closure like in Rocky Flats, it would seem to me that the mission direct folks should be top heavy because you are trying to bring it together.
To give you an example, and I do have the charts here, Rocky Flats, if you look at this, and I know perhaps you cannot see it, but the yellow line is at the top, and that, we think, should be the least top heavy. It should be down here someplace. The red line is where the real cleanup activity should be taking place. Now, if I am wrong in that assumption, tell me, but that is what I have always been led to believe. The blue line then, of course, is the general support.
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To give you an example, Fernald is in a closure status; I think you can see that is pretty clear. The red line is way on top, and your other activity, your other dollar amounts for cleanup or for other activities is way down, and that is what I would think it should be or we should be moving toward at Rocky Flats.
Savannah River is somewhat the same way. It is kind of top heavy with some of the mission support people, but the real mission-direct activity, as you can see, is this red line.
What is disturbing about Rocky Flats is that the mission-direct moved below the other two in 1997. They are kind of flat, so to speak, but it still moved below.
I am wondering if maybe we are not getting the kind of support that we need more heavily in the mission-direct category, and that would bring about, I think, more of a feeling from us, if these charts are to be believed, that we are moving closer to an end game in sight here.
I just wanted to get your thoughts about that as to why the apparent inconsistency about the support costs that seem to be moving away from mission-direct, particularly at Rocky.
Secretary PEñA. Congressman, let me get to the bottom of that and get you a very specific answer about those lines.
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Obviously, the reason we are trying to close Rocky as quickly as possible is because some of these indirect costs are so high. Because they are so high and they should not be there, for the benefit of the entire complex, we want to close it as quickly as possible, but let me get back to you with a comparison between the other two sites you indicated and try to detail why it is those lines are where they are.
Mr. KNOLLENBERG. I would remind you, and I am sure you know, there is one for every single site.
Secretary PEñA. Yes.
[The information follows:]
ROCKY FLATS SUPPORT COSTS
I agree that the mission support costs at Rocky Flats appear to be high, higher than at other sites. This is a category of costs that is generally viewed as supporting direct cleanup work, rather than doing the actual cleanup. It is important to keep ''mission-direct'' and ''mission-support'' costs in proper balance if we are going to meet our ambitious goals for closing Rocky Flats.
However, it can be difficult to compare one site with another. It is difficult to determine whether support costs at Rocky Flats are inappropriately high, or are a function of legitimate site differences, or the way costs are counted and aggregated. First, it is important to understand the type of activities DOE includes in the support cost category. For example, under the definitions DOE currently uses, waste management and property disposition activities are classified and reported as Mission Support, although they should probably be considered Mission Direct activities for an EM closure project.
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In addition, the unique ''Integrated Management Contract'' structure at Rocky Flats may affect the support cost totals when compared to the traditional Management and Operating structure. Despite this, the total funding for support activities, including both General and Mission Support Cost categories, has dropped considerably at Rocky Flats since FY 1995 and is expected to drop again in FY 1998.
Responding in part to concerns raised by this Committee, we have formed a team to investigate the underlying reasons for the disproportionately high support costs. The team consists of Federal DOE personnel from Headquarters and the Rocky Flats Field Office and includes representatives from DOE's Office of the Chief Financial Officer (CFO). The team is now reviewing the CFO and Environmental Management reports to develop a common understanding of the issue. If this joint review concludes the Rocky Flats support costs are indeed unacceptably high, the team will develop recommendations for reducing support costs at Rocky Flats and throughout the Department complex.
Mr. KNOLLENBERG. So there seems to be a consistency about a lot of them, most of them in fact, but this one bothers me a little bit because now I am seeing focus on an activity that should be secondary in purpose. So we would appreciate some details on that, and I look forward to that.
Finally, I just want to say thank you again for coming before us. Everything that we are trying to do, I hope you realize is a mutual thing. It is something that you want. It is something that we want, and we have talked about that. So we will continue to work with you.
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Thank you.
Secretary PEñA. Thank you.
Mr. KNOLLENBERG. I appreciate it.
YEAR 2000 COMPUTER ISSUE
Mr. MCDADE. Mr. Secretary, let me conclude on the issue that my friend from Michigan raised about the computer conversion. Can you tell us how many computers have been converted and how many remain to be converted within the Department of Energy?
Secretary PEñA. I cannot give you the exact numbers today. I know that we had approximately, at last count—I believe this is correct—370, what are called, mission-critical systems, and we have a specific schedule for making sure that those issues are addressed before, obviously, the year 2000.
The other point about this and the reason this is urgent is because the budget we have before you is, in fact, the last budget that will allow us, where we have to buy computers, to go out and get them now, so we can install them the early part of next year and have them ready.
OMB has given us a target, I think, of March of next year or April of next year. So we are not waiting until we get to 2000. We are trying to anticipate that and hit it before that deadline.
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[The information follows:]
NUMBER OF COMPUTERS CONVERTED FOR YEAR 2000
The Department, as of the February Report to the Office of Management and Budget (OMB), has identified 370 mission-essential systems. Approximately one-third (125) of these systems are already Year 2000 compliant. The remaining two-thirds are scheduled to be repaired (114) and replaced (120) as part of the Department's efforts to achieve Year 2000 compliance. Eleven of the 370 systems are scheduled to be terminated. In the February report to OMB, the Department provided its projected implementation schedule through the Year 2000; it shows that the Department is slightly ahead of its implementation schedule.
COMPUTERS
Mr. MCDADE. When you talk about mission-critical computers, are they all on the defense side? Would you be more specific about what you mean?
Secretary PEñA. This is a general definition that OMB has used with all of the Departments that basically makes the point. These clearly must be addressed before the year 2000 because they have a critical function in the Department. Some of them are defense, obviously, but there are others that are not defense-related.
Mr. MCDADE. Across the spectrum.
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Secretary PEñA. Across the spectrum.
Mr. MCDADE. Would you give us——
Secretary PEñA. I would be happy to give you a list of——
Mr. MCDADE. Well, no, I was going to ask you, if you would, just spread upon the record at this juncture the consequences if your Department and others—you are the lead agency for the Federal Government—if it does not get done expeditiously, what are the consequences?
Secretary PEñA. They are draconian, Mr. Chairman. Just speaking very generally, it would affect our ability to do stockpile stewardship. It would affect virtually all of the science work we do throughout the complex. It would affect, again, major operations of the Department, and that is why it is a must-do priority.
Mr. MCDADE. I agree with you. It is, to a lot of people, kind of a peripheral issue. In fact, it is a core issue that we have to deal with.
Secretary PEñA. It is a core issue, absolutely.
Mr. MCDADE. Mr. Secretary, there are no more questions from the subcommittee. We want to thank you for your appearance. You have done a fine job, and your testimony will be very helpful to the committee in reaching its conclusion.
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Secretary PEñA. Thank you very much, Mr. Chairman.
Mr. MCDADE. It is a pleasure to see you, Mr. Secretary.
Secretary PEñA. Thank you.
[The questions and answers for the record follow:]
"The Official Committee record contains additional material here."
Wednesday, March 11, 1998.
ENERGY RESEARCH, RENEWABLE ENERGY, AND NUCLEAR ENERGY
WITNESSES
DR. MARTHA A. KREBS, DIRECTOR, OFFICE OF ENERGY RESEARCH
DAN W. REICHER, ASSISTANT SECRETARY FOR ENERGY EFFICIENCY AND RENEWABLE ENERGY
DR. TERRY R. LASH, DIRECTOR, OFFICE OF NUCLEAR ENERGY, SCIENCE AND TECHNOLOGY
Mr. MCDADE. The committee will come to order. We are pleased this morning to welcome Dr. Krebs and Mr. Reicher to discuss energy resources with us. Dr. Krebs, we would like you to lead off. You are an old pro up here. You have been here many times. We are delighted to welcome you and to hear your testimony.
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Oral Statement of Dr. Martha Krebs
Dr. KREBS. Thank you, Mr. Chairman and members of the subcommittee. It is, again, a pleasure to be here, and I would like to submit my remarks, my written remarks for the record.
Mr. MCDADE. Without objection. You may proceed as you wish, Dr. Krebs.
Dr. KREBS. Thank you. I am going to limit myself to very brief remarks this morning and to talk only about the major elements of the Energy Research budget request, and that means I am going to leave a lot unsaid. As you assume something about me, I am assuming something about you in terms of your familiarity and awareness of Energy Research's programs.
We have a history of great science and effective management of scientific facility construction and operation. It continues. I think all of us can be proud of it, in the administration and here in the Congress.
The fiscal year 1999 budget request is about $2.7 billion. It is $246 million above the fiscal year 1998 appropriations, or a 10 to 11 percent increase.
From my perspective, that is good news for science. It builds on and sustains our investments in large scale scientific user facilities. It establishes and enhances some research agendas that will advance science, but also enhance the economy as well.
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Within the increase, a major element of that increase is associated with the Spallation Neutron Source to be built at the Oak Ridge National Laboratory. This facility that will advance neutron science in this country and the energy and science agendas and missions of the Department of Energy has been on the scientific community's agenda specifically since 1984, and before that in less specific terms for at least 20 years. Neutron science is something that was discovered, or not neutron science, but neutron diffraction, the effect that we are taking advantage of, was discovered at Oak Ridge National Laboratory and was one of the Nobel Prizes that I talked about a few years ago that was given to Cliff Shull and his colleague.
We are very proud of that. But in addition to the scientific value, the use of neutron science in the Department of Energy has resulted in improved casting and forging technologies for gears and brake disks and improved performance of automobiles. It has enabled industry, the chemical industry, not only to develop improved fibers, but also improved processes, more energy efficient processes for developing new fibers and plastics. Drug companies have identified neutron diffraction as a mechanism for developing higher potency, low side effect drugs. Magnetic materials have been developed, identified and characterized by neutrons, and have appeared in efficient electric generators, in improved magnetic recording tapes.
SPALLATION NEUTRON SOURCE
The Spallation Neutron Source facility, we are asking for $157 million in FY 1999, the first increment to enable us to build this facility.
Mr. MCDADE. If I may interrupt you there, I think we ought to get on the record the investment we are going to make in this.
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Dr. KREBS. It is a $1.3 billion facility.
Mr. MCDADE. $1.3 billion complex. We appropriated last year $23 million?
Dr. KREBS. $23 million associated with R&D and conceptual design.
Mr. MCDADE. The request this year is——
Dr. KREBS. $157 million.
Mr. MCDADE. The purpose of that money is?
Dr. KREBS. To begin construction, to do detailed design and initiate construction.
Mr. MCDADE. If colleagues come up to me on the floor and say, you know, tight budget, we should not be spending this money, once we appropriate this, we are going to be underway, it is construction money, it is the new start, et cetera.
Dr. KREBS. Yes.
Mr. MCDADE. As you know, this committee has been supportive of it. What is your response to someone that says it is the wrong time to get involved in a new start approaching $2 billion?
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Dr. KREBS. What I can say is as far as the administration is concerned, we have included the outyear funds for the construction of this project on top of the targets that have been established for the Department of Energy science programs.
Mr. MCDADE. It is within the——
Dr. KREBS. Within DOE's planning processes and the administration's.
Mr. MCDADE. And coordinated within the budget caps?
Dr. KREBS. That is from our perspective.
Mr. MCDADE. I guess I have to correct the record. It is proposed by the administration to fund this outside the budget caps through the settlement of the tobacco money. Is that the indication?
Dr. KREBS. It is very clear that there are—within the administration's proposal for the budget, some additional revenues have to be identified. The impact of these revenues associated particularly with the science programs is something, my understanding is that if we do not find the revenues in the discussions with the Congress, that there will have to be reductions taken across the board in Federal Government activities.
Mr. MCDADE. However, once we appropriate the money this year for construction, if we want to be efficient and hold the costs, et cetera, we are going to have to go all the way through with it. This is the real critical decision here.
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Dr. KREBS. That is correct.
Mr. MCDADE. Would you again in three sentences, what is the national interest in doing this?
Dr. KREBS. The national interest in doing this is improved materials for better energy production and use, and multi-consequences for improved drugs and other scientific achievements. I think it supports the mission of the Department of Energy.
Mr. MCDADE. It is opening a whole new door in research, isn't it?
Dr. KREBS. That is right. It will be world class.
Mr. MCDADE. I am sorry to interrupt you. I thought it was important to talk about it.
Dr. KREBS. You helped me to make all the extra points I was going to make.
Mr. MCDADE. You and I get along very well.
Dr. KREBS. Indeed, the one thing I did not say, is we are going to be ready to go. This is a cost and schedule profile that is optimized. We have had it reviewed by external experts at various times, several times in the last 6 months, and we believe that if you appropriate this, we will be able to do it right.
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CLIMATE CHANGE TECHNOLOGY INITIATIVE
Another element of the increase that we are proposing to you is associated with the President's Climate Change Technology Initiative, coordinated with our Colleagues in Energy Efficiency, Fossil Energy and Nuclear Energy. We have a total of $27 million identified in the energy research programs associated with materials for improved efficiency and renewable energy. There is a special emphasis in carbon sequestration through natural processes, ocean sequestration, as well as subsurface sequestration in coal and oil-gas reservoirs and aquifers.
SCIENCE FACILITIES
Another element, just as we are going forward or propose to go forward with the Spallation source, we are taking care of our existing facilities. We have increased the operating dollars going into our facilities from $915 million in 1998 to $1 billion in FY 1999. This is an initiative that we first proposed in FY 1996 which was very strongly supported by the committee, and we appreciate it.
In addition to running our existing facilities at the most productive level, we will also be bringing on in FY 1999 several new facilities, the B-factory at Stanford, the Fermi Main Injector in Illinois, the Relativistic Heavy Ion Collider at Brookhaven, and we believe that we cannot be compelling in our arguments for starting new facilities if we are not taking care of the existing ones.
NEXT GENERATION INTERNET
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Another initiative in this budget is the Next Generation Internet. This is an inter-agency effort. We have $10 million in our base program that will enable activities like the DOE 2000 efforts, the network R&D, and some of the work we are doing in visualization, to be fully coordinated with the NGI effort and even an additional $12 million to enable us to more fully participate and take advantage of the very high speed network research that is being done in NGI and also to make our energy science network more fully incorporated into the efforts of NGI, which is the ESnet. ESnet is one of the premier production, science production networks, in the country, which currently we cannot incorporate into the NGI.
SCIENCE EDUCATION
Finally, there is a $15 million request for increasing our efforts in science education and to use our laboratory assets more fully to cooperate with NSF and the Department of Education.
LARGE HARDON COLLIDER AND ITER
There are also activities in the budget associated with increased effort in the Large Hadron Collider. We have fully entered into an agreement with CERN that governs our investment. For the fusion budget, though not increased over last year, we are in the process of transitioning that program more fully from the commitments to the ITER design towards one which is a domestic program emphasizing science and trying to get the most out of our domestic facilities.
I would be happy to answer further questions on that during the question period. Overall, I am very pleased to be able to present the budget to you. I believe this serves science in a way that is consistent with bipartisan values for and recognition of the contributions of science to our lives, and I welcome the opportunity to work with you.
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[The statement of Dr. Krebs follows:]
OFFSET FOLIOS 710 to 751 insert here
Oral Statement of Dan Reicher
Mr. MCDADE. Doctor, thank you for a fine statement.
Mr. Reicher, would you like to give us your statement? You may proceed in your own way. If you wish to file and extemporize, you are encouraged to do so.
Mr. REICHER. Thank you. I appreciate the opportunity to appear before you today for the first time and to discuss the fiscal year 1999 budget of the Department's Office of Energy Efficiency and Renewable Energy.
Mr. Chairman, there is an unfortunate tendency, I think, to view energy efficiency and renewable energy as somehow different from our traditional energy investments, as some green alternative to the real business of energy. Given that over 90 percent of the energy we consume today comes from fossil and nuclear fuel, we must use these sources as efficiently as possible. The investments we make in energy efficiency do not simply save energy, they represent one of the best public investments we can make to ensure the productivity and competitiveness of our economy and one of the cheapest and least intrusive ways of accomplishing our environmental objectives.
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Renewable technologies are also far more than just some green alternative. They are, in fact, essential elements of our energy mix today, tomorrow, and in the coming decades. Today, hydropower, just one renewable, provides approximately 10 percent of the total U.S. electrical generating capacity. In fiscal year 1999, we propose to begin engineering design of an efficient friendly turbine that will better protect fish, while allowing existing hydropower facilities to function at capacity. Without these and other technological improvements, the Nation risks losing a large portion of this existing clean energy source.
In terms of tomorrow's energy market, wind is well positioned to become another major renewable energy source. In fiscal year 1999, we propose to continue our work with the wind industry to design and test the next generation of wind turbines which will reduce energy costs to as low as 2 1/2 cents per kilowatt hour by 2002.
WIND TURBINE TAX CREDITS
Mr. MCDADE. Let me ask a question if I may. Was there a tax credit or some kind of a tax incentive built into the code for wind energy?
Mr. REICHER. Yes, there exists a tax credit today.
Mr. MCDADE. Will you elaborate on that? Give me an example of how it would work.
Mr. REICHER. It is a tax credit of about, I think, a penny per kilowatt that is provided as a production tax credit for wind. It has been on the books for several years. It is due to run out quite soon. There has been a proposal made to extend it for another 5 years. But it has provided a credit against that cost of about a penny.
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Mr. MCDADE. A penny per——
Mr. REICHER. Per kilowatt hour.
Mr. MCDADE. Take an average stand that successfully operates in your judgment.
Mr. REICHER. I am sorry, one and a half cents per kilowatt.
Mr. MCDADE. If you took a stand that was producing wind energy and I had invested X amount, you pick the amount, could you give us an illustration of how it would work? How much energy does an individual stand, because I understand people bought a lot of them who invested in them, they bought a field. Is that pretty accurate?
Mr. REICHER. Mr. Chairman, they have been invested in different ways, but several of them, of the projects, particularly in California, were developed with large numbers of turbines. The investments were made. This penny and a half tax credit encouraged these investments.
Mr. MCDADE. Sure.
Mr. REICHER. Wind is now down to a cost of about 4 to 6 cents per kilowatt hour, which makes it slightly higher than what we generate electricity, for example, from coal or from natural gas. But where we are headed, and this is the important thing, is that in the next couple of years, with some development work that is going on, we will produce turbines that can operate in large parts of the country where there are moderate wind speeds as opposed to simply the heavy wind speeds out in California and other areas like that.
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This will open up the upper Midwest, for example.
Mr. MCDADE. What I am trying to get into the record is an example, assume you are an investor and you are making a judgment about whether or not you want to invest in wind energy. You pick the number. I don't know what it costs to build a field or anything else. And if you make a decision to go and the production is—you figure the normal production rate, what kind of a tax credit would you get? How much would it amount to?
Mr. REICHER. I am sorry, you would get a penny and a half production tax credit for each kilowatt hour you produce.
Mr. MCDADE. I understand that. What is the norm after production of kilowatt hours for a stand of wind energy?
Mr. REICHER. A typical turbine is half a megawatt, or about 500 kilowatts.
Mr. MCDADE. So the investment tax credit would be how much?
Mr. REICHER. It would be 500 kilowatts times a penny and a half per kilowatt hour.
Mr. MCDADE. Have you got a mathematician in the room?
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Mr. REICHER. $7.50 per kilowatt hour.
Mr. MCDADE. Is that continuing for the life of the program?
Mr. REICHER. Yes. This is available to investors for development of a wind turbine system before the expiration of the tax credit, for the life of the system. It is a ten-year tax credit.
Mr. MCDADE. So if you are trying to make a judgment as an investor, period, and you look at what the government might help you with, there is a tax credit on the one end that you went through and tried to help us put a number on. What about at the other end, in terms of the appropriations you are asking us for? What do you do if that investor shows up in your shop and says I am thinking about doing this? What can you do for my company or my research project or whatever? What is the answer to that?
Mr. REICHER. There are two different things. One is that if you are a developer of turbines, you are a technology company, we have entered into competitive contracts with those developers to improve the state of the technology. We announced a major one last summer that will develop two new designs in the next couple of years that will bring the price down. So that is if you are a technology developer.
If you are a builder, there are programs that are available where there can be cost sharing, again competitively done, with the government, to take some of these new turbine designs and begin to deploy them and test them out in a more commercial setting.
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For example, there is a new project that was just developed in the State of Vermont, a 6-megawatt project. That was cost shared. It took a relatively new design, tested it in northeastern conditions, in cold weather conditions. It is up and running, it is doing reasonably well, and we are learning a lot from that.
On the new set of turbines we have contracted for, when they come on line, we may well ask you for some funding to again do some cost share to test out the deployment of those.
Where this is all headed, and we have had a very nice ramp down from costs that were in the 30 to 40 cents per kilowatt range down to this 4 to 6 cent range, moving down we hope to the 2 to 4-cent range, which at that point will make these very competitive in large areas of the country.
Mr. MCDADE. I was going to ask you what number you have to come to to be competitive.
Mr. REICHER. In the 2- to 4-cent range, particularly with the turbines that can operate in the moderate as opposed to heavy wind speeds. So states in the upper Midwest, where there are large expanses, windy expanses, where these turbines can be built.
For example, we are seeing quite an increase just this year alone in various companies investing in turbines. There are several hundred megawatts being installed in Minnesota and in other states in the central part of the country. So this is truly beginning to take off.
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One more point, I am sorry. It is to emphasize that the turbines we are dealing with today have worked out a number of the bugs—let me call them the bugs—that have existed for turbines that were put in 10 and 20 years ago, problems with their reliability, problems with bird kills, a whole host of things. They have also, as I say, been designed to operate at lower wind speeds, which becomes critical.
Mr. MCDADE. We thank you for your explanation. Continue, please.
Mr. REICHER. Thank you.
As I said, by building these kinds of turbines that can operate at moderate wind speeds, we can open up major areas of the country, particular the Nation's midsection, as we call it, the Nation's ''Saudi Arabia of Wind.''
We will also establish, and this is important, Mr. Chairman, a U.S.-based certification organization to certify U.S. wind turbine systems, to certify them to be what we say they are, what they will produce, their reliability, so we can compete better internationally where there is a rapidly expanding market for wind turbines across the globe, and U.S. companies wanted to get a bigger share of the development in countries like China and India, in Russia and other places where there are major investments being made.
BIOMASS CO-FIRING
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I would also like to mention our rapidly expanding efforts to burn energy crops and agricultural wastes in combination with coal in existing power plants. There is strong industry interest in this co-firing technology, particularly in agriculture states, because it could provide a cost-effective option to meet more stringent environmental regulations for coal-fired power plants and provide new agricultural markets, particularly in the agricultural areas of the country, for both crops and crop wastes.
I would be happy to talk about that.
Mr. MCDADE. Let me just ask a question. Do we have plants up and running now that are combining those products and generating electricity?
Mr. REICHER. Yes, there are a limited number of coal-fired power plants that are testing the burning of agricultural waste and agricultural crops. For example, in some of the agricultural areas of the dairy country in upstate New York, there is testing of dedicated crops. It is a willow crop, actually, being grown on land that has been taken out of dairy production. Those are being tested now in two coal-fired plants there.
The way this technology works is that up to about 10 percent of the coal that goes into an average coal-fired power plant can be replaced, without doing major tinkering to the coal-fired power plant, with agricultural wastes or dedicated crops. These could be dedicated crops like certain kinds of trees, certain kinds of grasses, and it also can be the wastes that we leave in the fields in the production of a whole host of agricultural crops.
Mr. MCDADE. Would you kindly insert into the record a listing of the facilities that are out and operating, and some idea of the capital investment in them, and what it is costing to produce electricity at the other end?
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[The information follows:]
ELECTRIC POWER PLANTS CO-FIRING AGRICULTURAL CROPS AND RESIDUES WITH COAL
Although the Department did not help fund the retrofit of the New York State Electric and Gas plant, we have been helping to establish the willow crop as part of our Biomass Power for Rural Development initiative. There are three utilities involved in the project and we have contributed about $1 million towards willow crop development for all three facilities which will eventually be co-firing with willow.
New York State Electric and Gas is currently cofiring with willow when it is available. By 2002, it is projected that the dedicated willow crops will be providing a major portion of the co-firing material for the plant. The modification to the 108 MW coal plant cost on the order of $2 million. The $2 million will be spent on feed handling and preparation. Because the material that is presently being co-fired is from pilot projects, a precise calculation of the cost of producing electricity is not available. Once these willow plantations are fully operational, more accurate estimates of the costs will be available.
In addition to the current co-firing operations at the New York State Electric and Gas plant, Niagara Mohawk Power Corporation plans to permanently retrofit their Dukirk facility for co-firing operations during 1998. No other plants are currently cofiring with crops or crop residue, though several have performed short-term tests.
SOLAR AND RENEWABLE PROGRAM OVERVIEW
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Mr. REICHER. Yes. I would like to emphasize one of the great interests we have in the fiscal 1999 budget is, in fact, to move that to be a much more general kind of operation with these coal-fired power plants.
Looking to the future, Mr. Chairman, our R&D investments are stimulating the development of entirely new technologies that will fundamentally change the energy landscape. Superconductivity, which allows electricity to move through wires without resistance, has potential to reduce the Nation's electrical system logs by 50 percent, equivalent to the output of 60 conventional power plants. In our fiscal year 1999 budget, we propose to transfer breakthrough technologies to industry so that we can eventually manufacture miles, instead of just meters, of superefficient wires.
Our R&D programs not only build the foundation for our energy future, but also open markets for U.S. manufacturers of advanced energy technologies. The World Bank has estimated that, over the next four decades, developing countries alone will require 5 million megawatts of new electricity capacity, and this compares to the world's current total installed capacity of 3 million megawatts. That is 5 million on top of the current 3.
In order to meet this explosive energy demand and reap the resulting sales and jobs, we must invest in research, development, and, yes, in appropriate circumstances, the deployment of energy technologies. With Federal support, for example, the U.S. photovoltaics industry has grown more than 20 percent annually over the last 7 years and now holds over 40 percent of the world markets. We expect even greater market penetration with the Million Solar Roofs Initiative.
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As part of our focus on the most promising technologies, we are increasing the level of competition in selecting contractors, and we are proposing a $10 million R&D solicitation to stimulate the best proposals for crosscutting renewable technologies to address economic competitiveness, air quality, and climate change. We are also better coordinating our research with state energy R&D programs.
I want to emphasize that state energy R&D programs have in total in excess of $200 million spent annually on energy R&D. We wanted to better coordinate with those programs. Just last week, we signed an agreement with the California Energy Commission to increase R&D cofunding and decrease duplication between our investment programs. We are also expanding our collaboration with other DOE programs, including fossil energy, energy research, and nuclear energy.
Mr. Chairman, just as we are committed to a wise R&D strategy, we are also dedicated to managing taxpayer dollars responsibly. I recognize that we must put our financial house in better order. I have already mentioned our expanded emphasis on competition. We are also looking carefully at our noncompetitive grants and contracts. We are focusing closely on program evaluation and terminating projects that have reached their goals or don't measure up. In 1999, for example, we will finish testing and conclude our work on the Solar Two power tower. We are also developing a clearer budget and more open budgeting process.
I thank you and members of the subcommittee for the opportunity to discuss our budget request. I truly look forward to working with you and your staff over the coming year.
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Mr. MCDADE. We thank you for a very informative statement.
[The statement of Mr. Reicher follows:]
"The Official Committee record contains additional material here."
UNIFIED SOLAR AND RENEWABLE ENERGY BUDGET
Mr. MCDADE. Let me ask you a couple of questions, if I may, please.
Last year, the committee recommended a more unified budget of solar and renewable research and development to give what we thought was a much better picture of the effort, the total effort, that we are trying to make as a Nation in this area.
Tell us how you have complied with that recommendation, please.
Mr. REICHER. By a unified budget, we have done a number of things with respect to our budget that I think are responsive. First of all, we have tried to be much more clear about what we intend to accomplish, what we are asking for the dollars, how we measure that progress against the goals that we set in the budget.
Mr. MCDADE. Well, how many funding streams have you included in the gross total this year in this account, renewables, et cetera?
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Mr. REICHER. I don't know the number of budget lines or the number of codes.
Mr. MCDADE. Is it easier if I say the programmatic lines and the funding that follow you have joined in one place to show the effort?
Mr. REICHER. There are on the order of, I don't know, 10 or so; 10 or 15 budget lines. I need to get you that specific answer.
Mr. MCDADE. You may answer that question for the record, if you would. When you go back downtown and have a chance to prepare it, send it up to the staff so we can have a look at it, please.
Mr. REICHER. I will do that.
[The information follows:]
NUMBER OF BUDGET LINES IN THE EERE ENERGY AND WATER REQUEST
There are 15 separate budget lines in the Office of Energy Efficiency and Renewable Energy based on the FY 1999 request for Energy and Water Development activities, each representing a discrete area of research, development or program support.
USE OF FOREIGN VERSUS DOMESTIC TECHNOLOGY
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Mr. MCDADE. There was a concern last year that there was some money that, taxpayer money, spent collaborating with Japanese and German manufacturers in renewable technologies. Are you familiar with that controversy that arose?
Mr. REICHER. Mr. Chairman, unfortunately I am not.
Mr. MCDADE. Well, the Department's policy, I would assume, would be to reserve taxpayer dollars for U.S. research in this country, absent some very strong, compelling reason to have to go offshore to achieve a result.
Mr. REICHER. Yes. Let me say as a general matter, I am familiar that there are some detailed requirements in law and regulation that govern how we collaborate with foreign entities. I know that as a general matter, having worked at the Department for several years. I unfortunately don't know the details of what you are referring to with respect to the Germans and Japanese.
Mr. MCDADE. Amplify it for the record, and in the same procedure get a letter or whatever you want to do up to the committee so we can have a better idea.
Mr. REICHER. We will do that expeditiously.
[The information follows:]
FUNDING TO JAPANESE AND GERMAN AFFILIATED COMPANIES
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Given the overwhelming globalization of commerce and the rise of multi-national corporations, it is inevitable that the Office of Energy Efficiency and Renewable Energy (EERE) would deal with organizations having foreign affiliations. In virtually every instance, however, foreign affiliated organizations under contract with EERE have U.S. operations where the work is performed. In most cases as well, the organizations are cost sharing and have existing or planned manufacturing facilities in the U.S. The following contracts are with Japanese or German affiliated companies.
ASE Americans (German affiliation); $600,000; photovoltaic cell R&D.
Siemans Solar (German affiliation); $1,300,000; photovoltaic PVMaT (manufacturing technology) development; photovoltaic copper indium diselenide cell development.
United States Systems (U.S./Japanese joint venture); $600,000; photovoltaic thin film R&D.
Voith USA, Inc. (German affiliation); $478,000; hydropower hydro turbine R&D.
COMMERCIALIZATION ACTIVIIES
Mr. MCDADE. One issue that we have a lot of problems with, and, I am sure, you do, too, is the balance of basic research and the level of development of renewable energy technologies. We have a problem in that we have not been getting the necessary information we need to help us understand that balance.
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I want to ask you, are we comfortable that the level of commercialization activities in the fiscal year 1999 budget is fully accurate?
Mr. REICHER. Mr. Chairman, we have done our best to describe in the fiscal year 1999 budget those activities which are best described as fundamental research, applied research, development, deployment, demonstration, and we will provide any and all information to further clarify that.
Mr. MCDADE. We get guidance that the Department is not involved in the business of commercialization.
Mr. REICHER. Let me answer that for you. Obviously these terms, starting with basic research on one end and going all the way to commercialization, are not bright line terms. Commercialization means different things to different people. Let me say very candidly to you, there are a limited number of activities that some might consider commercialization or commercialization-like in what we do.
For example, the Commercialization Ventures Program, which the Energy Policy Act directed us to carry out, that is a program that we have undertaken, is ramping down now.
The Geothermal Heat Pump Program some might consider commercialization or commercialization-like. That has been a program that you have funded and has actually shown quite a bit of success.
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But they are limited, and I commit to you today, as I have committed to your staff, that we will give you any and all information and be as clear as we can to divide these different areas along this research spectrum.
Mr. MCDADE. We realize the difficulties of definition, but we want to make sure that we are fully informed as you go along.
[The information follows:]
COMMERCIALIZATION
The Office of Energy Efficiency and Renewable Energy's (EERE) does not generally undertake commercialization activities. EERE's research and development activites are balanced across the technology development continuum. These efforts range from:
Basic (or fundamental) and Applied Research, which are needed to specify and conceptualize the technology; to
Development, which advances the technology from concept to feasibility testing (in an engineering sense); to
Pre-Commercial Demonstration (or pre-commercial deployment), to prove that a technology will be viable, both technically and economically, under actual market conditions.
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In most instances, the Federal role does not include commercialization activities. Commercialization is properly the role of the private sector. Upon occasion, however, there may be compelling reasons for the Federal Government to engage in early efforts to facilitate later commercialization. These may include introducing, in a limited manner, a technology or range of technologies for which market penetration faces numerous institutional, financing, infrastructure support, information and training barriers.
Two programs funded by Energy and Water Development appropriations are considered to be contributing to commercialization efforts by industry: the Commercialization Ventures program and the Geothermal Heat Pump program. These are described below
The Department's Commercialization Ventures program, mandated by EPACT, was intended to assist newly emerging renewable technologies to enter the marketplace. The program provided up to 50 percent matching funding for projects intended to showcase technologies for potential future commercialization. The program is currently closing out its operations and managing the remaining ten projects funded through competitive solicitations issued in FY 1994 and FY 1996. No funding was provided to the program in FY 1997 and no funding was requested in FY 1998 and FY 1999. The ongoing projects are located in California (two projects), Arizona, Arkansas, Massachusetts, Florida, Colorado, Wisconsin, Virginia and New York. The Denver Regional Support office is managing the close-out of this program.
Both DOE and the EPA support geothermal heat pumps (GHPs) as a major option for saving energy and reducing emissions. However, the technology, even though commercially available, is not widely employed or even familiar to most consumers. We believe that utilities are the key to increasing GHP market penetration. The utilities, GHP industry and DOE are working together to increase the annual sales of GHPs to 400,000 annually early in the next century by educating building owners, architects and engineers, and contractors. We are also reducing the cost of the ground heat exchanger through research in advanced design software, improved thermally conductive grouts and drill bits. A program partner, the Geothermal Heat Pump Consortium (and organization of over 200 utility members who together serve the majority of the nation's electric meters), has committed over $25 million in utility funds to be program.
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MARKETABILITY OF PHOTOVOLTAICS AND BIOMASS TECHNOLOGY
Mr. MCDADE. It would seem like the most dramatic improvements in the marketability of renewable technology have been in photovoltaics and biomass. Would you agree with that?
Mr. REICHER. There have been dramatic improvements across a broad spectrum. Photovoltaics and biomass have shown quite a degree of success in recent years.
Mr. MCDADE. What others would you include, if you think there are others out there that are comparable?
Mr. REICHER. I think there has been—I think the wind program, I think geothermal has shown success. I think there have been various significant areas of success in most of the renewable areas. But, frankly, we face the challenge of continuing to bring costs down for many of them, particularly as we restructure the U.S. electricity industry.
UTILITY RESTRUCTURING
Mr. MCDADE. Do you think that deregulation of the utility industry and electricity around the country—everybody is saying it is a better deal for the consumer. Prices are going down. Do you agree with that?
Mr. REICHER. The expectation is that with restructuring, state by state, and potentially with Federal restructuring, that prices will drop. That is the expectation. I think it is too early in the state restructuring process to see the results of that, but that is the expectation.
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Mr. MCDADE. Okay, that is everybody's expectation. What the committee wants you to do is keep us on the curve of the research projects that may fall out as being noneconomic. I am sure there will be some that you just will not be able to continue working with.
Mr. REICHER. If I could, let me respond to that briefly.
Mr. MCDADE. Please.
Mr. REICHER. Restructuring holds the promise of increasing competition, and with increasing competition could come the increased emphasis on efficient production of electricity. It also holds the promise of distributed generation of electricity, which would figure well for renewables. As we also are seeing state by state, starting in California and moving on to other states, states are making strong provisions for renewables in their restructuring legislation to better ensure that renewables have a role in our energy mix and continue to provide the diversity of energy supply that they are important for.
So, we think that a combination of competition emphasizing efficient energy production bodes well for some of our programs. We also think that distributed generation bodes well, that electricity restructuring will provide, and also the provisions states are making for renewables, will be supportive of what we do.
We are analyzing this, though, quite intensively as we move forward with restructuring in what are now, I am told, about 47 states across the country that are in some state of restructuring, either beginning to look at it or actually having adopted something.
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Mr. MCDADE. Just a cautionary word for you. When the oil shock hit the country, I think every economist in the country said the price was going to $35–40 a barrel. Because of that, the Nation tried to get into all kinds of alternative sources of energy, from oil shale to synthetic gas to everything imaginable. Well, the economists were wrong. Every one of those plants never produced any real energy. They are boarded up. It was a bad experience for the country based on cost assumptions.
So, keep us apprised as you go along of what it looks like. We want to be in on the take-off, if you please.
Mr. REICHER. Absolutely. Thank you.
Mr. MCDADE. There will be other questions.
I want to now turn to Dr. Lash.
REPROGRAMMING OF FUNDS WITHIN NUCLEAR ENERGY
Mr. MCDADE. Mr. Lash, you have been the subject of interest to the committee, as you know.
Dr. LASH. Yes, sir.
Mr. MCDADE. We have been disturbed, to put it mildly, by some of the actions that have been taken in your shop, and you are aware of that, aren't you?
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Dr. LASH. Yes, sir, I am.
Mr. MCDADE. How many years have you worked at the Department of Energy?
Dr. LASH. I have been an employee for almost 4 years.
Mr. MCDADE. And before that you were in government——
Dr. LASH. I was in Illinois State government.
Mr. MCDADE. So, if I were to ask you your total life in public service doing these kinds of things, it would be how long?
Dr. LASH. In government itself, it would be about almost 10 years.
Mr. MCDADE. Yes. I assume that in all that time you were at the Department of Energy, you were responsible for preparing the budget estimates that were sent up here?
Dr. LASH. I have always been involved in the budget.
Mr. MCDADE. You probably engaged in reprogramming actions?
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Dr. LASH. I have been aware of or approved of reprogrammings.
Mr. MCDADE. There is one that is highly troublesome, as you know.
Dr. LASH. Yes, sir, I do.
Mr. MCDADE. It was one in which the committee zeroed out a program in 1996, and from our perspective, that was ignored by you. Even though we zeroed out the program, you set out to find a way to fund it. Indeed, the zeroed program was funded; isn't that accurate?
Dr. LASH. May I give a little bit longer response?
Mr. MCDADE. Sure.
Dr. LASH. The program was proposed to do work on the core conversion project to shut down the three remaining plutonium production reactors in Russia for fiscal year 1996. It was proposed. We did not have a program, but it was proposed.
Prior to the beginning of fiscal year 1996, money was found internally at the Department of Energy, including using some lines that had appropriate authorization for this kind of project and reprogramming close to——
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Mr. MCDADE. Dr. Lash, let me ask you a question. Did anybody in the Department advise you that that was inappropriate conduct, to tap those streams of money?
Dr. LASH. No.
Mr. MCDADE. Nobody?
Dr. LASH. No. At the initial part of this, no. And there was——
Mr. MCDADE. What fiscal year are you talking about now?
Dr. LASH. I am talking about the end of fiscal year 1995.
Mr. MCDADE. Go ahead.
Dr. LASH. At any rate, so there was approximately $3 million of Department of Energy money that was to be combined with about $2 million from the State Department in their nonproliferation and disarmament fund.
These monies, and Congress was notified of this by the chief financial officer, I believe, these monies were to pay for two feasibility——
Mr. MCDADE. Excuse me, how was Congress notified? Verbally? Was there a letter written?
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Dr. LASH. I have seen a letter from——
Mr. MCDADE. Do you have it with you?
Dr. LASH. I don't believe I have it with me, but from the chief financial officer, it was Joe Vivona at the time.
Mr. MCDADE. We are not aware of notification in the committee.
Dr. LASH. Okay. Well, I will be happy to provide that.
EXPLANATION OF USE OF FUNDS WITHIN NUCLEAR ENERGY
Dr. LASH. As I say, 2 of the 3 million was out of accounts where the Department judged there was authorization to use the money for these feasibility studies. Close to $1 million additional was internally reprogrammed. That was combined with what at that time we thought we could get about $2 million from the Department of State.
At that time, which was the August-September 1995 time frame——
Mr. MCDADE. Dr. Lash, I have to interrupt you. The threshold for reprogrammings in your shop was how much money at that time?
Dr. LASH. At that time, my understanding was up to $1 million.
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Mr. MCDADE. Did you exceed that amount when you requested the reprogramming?
Dr. LASH. No. As I say, the notice came over from the chief financial officer, and that was for less than $1 million. The notice came over for less than $1 million.
Mr. MCDADE. Didn't you have a conversation up here with the committee staff in which they were upset that you didn't notify them of this activity?
Dr. LASH. I recall a meeting with committee staff at that time where there was——
Mr. MCDADE. Because there was no notification.
Dr. LASH. Well, I know there was a great deal of unhappiness about that project going forward.
Mr. MCDADE. I am talking about notification. You said the Congress was notified. I am trying to discover where and when, and I am pointing out to you that as you met with the committee staff, they chastised you for taking that money without responding to the notification requirements of this committee.
Dr. LASH. I recall that the committee was very unhappy with this project.
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Mr. MCDADE. Why? Why? Why?
Dr. LASH. Because at the time——
Mr. MCDADE. What were you doing?
Dr. LASH. Congress was considering a proposed fiscal year 1996 budget for—what we had proposed for the core conversion replacement project, and we got started early through the use of other accounts and this internal reprogramming. Staff expressed their great unhappiness about that.
Mr. MCDADE. How much money did you reprogram to start early?
Dr. LASH. As I say, close to $1 million, a little under $1 million was reprogrammed.
Mr. MCDADE. Are you sure the number is not $3 million?
Dr. LASH. The total amount was $3 million. There were three accounts used. Two of the accounts—one of them from the Office of Nonproliferation and Arms Control said they had the authority to use those funds for these feasibility studies. They provided that money to Pacific Northwest National Labs for the feasibility studies.
In addition, my office had at that time, a different account that was used for international activities, and the authorization for that was quite broad. That account supplied $1 million. That is two.
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In addition, there was $1 million under the control of the Chief Financial Officer that had a variety of carryover funds from Nuclear Energy.
Mr. MCDADE. You are still in fiscal 1995?
Dr. LASH. Yes. And these are carryover funds. That money was internally reprogrammed, and it was close to $1 million, bringing the total close to $3 million that was available from the Department of Energy for the feasibility studies.
My understanding from having been shown a piece of paper recently was that the Chief Financial Officer informed the Congress, and I will have to see exactly who or how, that this $1 million was reprogrammed. I don't know about any notification of the use of the other funds, since my understanding is the determination was that those monies had sufficiently broad authorization and could be used.
Mr. MCDADE. I have a lot of problems with your recitation as being unfactual. I don't like saying that to you, because I want you to be forthcoming to the committee.
Dr. LASH. I am trying to be forthcoming. That is my understanding of it.
Mr. MCDADE. Well, when did you last look at the events that led to this discussion this morning?
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Dr. LASH. I have reviewed staff papers prepared for me just very recently.
Mr. MCDADE. Did you find a notification sent to this committee?
Dr. LASH. As I say, I can't remember which committee was notified. I did see a letter from Joe Vivona, the Chief Financial Officer, to some part of Congress. Now, whether it went to this committee or not——
Mr. MCDADE. Do you remember being chastised by the committee for not notifying them?
Dr. LASH. I remember a very strong meeting.
Mr. MCDADE. You were not able to cure that. You didn't provide a letter to the committee at that juncture that had been prior sent, did you?
Dr. LASH. I did not send a letter.
Mr. MCDADE. What did you do after they chastised you about the procedures that you engaged in for inappropriate conduct?
Dr. LASH. Well, let me say that I met with the committee staff. I talked about why we were interested in pursuing this project. There was an agreement between the Vice President of the United States and the Prime Minister of Russia. There were also agreements signed by the Secretary of Energy to go forward, and I explained that as far as I understood, if——
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Mr. MCDADE. You are getting far afield now. You are talking about actions that occurred downtown and actions generally supported by this committee.
Dr. LASH. Let me say, what I was trying to say is I didn't understand that I was to provide any further materials to the committee after that meeting with staff.
Mr. MCDADE. Could you have?
Dr. LASH. Would I——
Mr. MCDADE. Could you have?
Dr. LASH. Absolutely. And if asked, I certainly would.
Mr. MCDADE. You know that notification was a key issue when the committee staff spoke with you rather sternly.
Dr. LASH. I know that the committee staff was very upset that we were going forward with this project.
Mr. MCDADE. But you made no effort to show that there was a notification exigent at that time that you are now claiming was in existence?
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Dr. LASH. I have no recollection of being asked to show any documentation personally. Now, I can't speak for anybody else at the Department. I have no recollection of being asked to produce anything following that meeting or as a result of that meeting. I mean, we explained at the meeting what we had done and what we were proposing to do and why, and I know that there was a great deal of unhappiness with that action. I attributed that to a policy disagreement between the committee and the administration.
Mr. MCDADE. You are quite wrong.
You also reprogrammed $3 million, didn't you?
Dr. LASH. No, we reprogrammed close to $1 million internally at the Department of Energy. We used another $2 million where the authorization——
Mr. MCDADE. You reprogrammed within the Department. You went to other accounts and applied them to this account?
Dr. LASH. We reprogrammed close to $1 million to be used for these feasibility studies.
Mr. MCDADE. Did you send a reprogramming up to the committee?
Dr. LASH. I personally did not, no.
Mr. MCDADE. Did the Department? Were you aware of a request coming to the committee?
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Dr. LASH. No, I was not aware of a request from the committee, but I——
Mr. MCDADE. Coming to the committee, from your Department.
Dr. LASH. I was aware of—this morning I was shown a letter from the Chief Financial Officer to the Congress, and I am sorry, I don't, it was just this morning, and I don't remember to whom it was addressed, but it was to Congress——
Mr. MCDADE. Let me say something to you. This is not a new conversation that you are engaging in. You have been talking about this issue with members of the staff, with people who are examining your conduct, a host of people who want to know what you were doing and what you were thinking of when you engaged in individual inappropriate conduct. This is not new to you when you say you just saw it this morning. All of this issue has been on the table for some time, hasn't it?
Dr. LASH. It has not been on my table for some time, sir. I am sorry. I was trying to provide some background as to what was done before fiscal year 1996. The questions more recently that have come up have to do with the $690,000 that was made available, it wasn't reprogrammed, that was made available to Pacific Northwest National Laboratory, and it was only more recently that I asked questions of the staff to provide me with documentation about the original $3 million that was provided by the Department for the feasibility studies.
The staff has just given me the letter that I had seen before. It was addressed to the staff director of the Committee on Science.
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Mr. MCDADE. The Committee on Science. You didn't notify us.
Dr. LASH. I personally did not notify——
Mr. MCDADE. Who was that signed by?
Dr. LASH. Joe Vivona.
Mr. MCDADE. Read it, please.
Dr. LASH. Enclosed—it is to Mr. David Clement, the staff director.
Dear Mr. Clement: Enclosed for your information is the Department of Energy's fiscal year 1995 base table as of September 30th, 1995. This table consists of two sections. Section A reflects all Energy and Water Development Subcommittee appropriations, and section B reflects all Interior Subcommittee appropriations. A detailed summary of changes occurring in the first quarter of fiscal year 1995 is also provided, see enclosure A. I hope you find this report useful. Please let me know if I can be of further assistance.
I believe it is in these attachments that the close to $1 million is referred to.
Mr. MCDADE. You can have your staffer make a copy of it and submit it.
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Dr. LASH. Sure, I would be happy to do that.
Mr. MCDADE. Before the day is done.
[The information follows:]
BASE TABLE LETTER
A copy of the letter from Joseph F. Vivona, Chief Financial Officer to David Clement, Staff Director, House Science Committee dated November 13, 1995 is provided for the record.
[The information follows:]
"The Official Committee record contains additional material here."
REPROGRAMMING OF FUNDS WITHIN NUCLEAR ENERGY
Dr. LASH. You can probably have this copied now.
Mr. MCDADE. Let's go to FY 1996.
Dr. LASH. Yes.
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Mr. MCDADE. You used a figure of about $700,000.
Dr. LASH. Yes.
Mr. MCDADE. Roughly. We are rounding.
Dr. LASH. Yes.
Mr. MCDADE. You are aware of that money?
Dr. LASH. Yes.
Mr. MCDADE. And how did you come to spend it?
Dr. LASH. As I mentioned, the Department had this $3 million made available for the feasibility studies and the Department of State's nonproliferation and disarmament fund was to make about $2 million available for the feasibility studies.
At that time, around August and September of 1995, it was believed that this money would be sufficient to pay for all the feasibility studies. The feasibility studies were conducted between about September of 1995 and December of 1995, with a report submitted to the Chernomyrdin Commission in about January of 1996.
Somewhere around then the State Department made clear that the funds from the nonproliferation and disarmament fund could be used only to pay for work that was conducted in Russia, there were several Russian institutes that were involved in these feasibility studies, and that none of this money could be used to pay for work done by the Pacific Northwest National Laboratories in Richland, Washington, in this country.
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The amount that was not therefore covered was approximately, as you say, $700,000; somewhat less.
I asked the staff to see if there was a way of paying for this, and I didn't hear anything for quite some time. There was a possibility, I am told, that the State Department had other funds that they might be able to make available, and we so reflected that in questions and in answers to questions submitted to this committee in April of that year, 1996.
Later, towards the end, I believe it was about August or so, the Richland operations manager of DOE wrote to my office or notified my office that there was a problem with the PNNL, Pacific Northwest National Laboratory accounts, that it was for the work—they weren't yet compensated for the work that was done on the feasibility studies in the amount of close to $700,000, and that unless we found some way of paying for that, they were going to take the funds out of the International Nuclear Safety Program account.
So I again, you know, said to staff, we have got to solve this problem. My deputy director, to whom I had assigned this responsibility, saw the problem, told me that they had found funds within the Department's—within my office's accounts——
Mr. MCDADE. Tell me when this happened, Mr. Lash. What month are we talking about?
Dr. LASH. Well, the letter authorizing PNNL, that they could use these funds, was, I believe, early September of 1996.
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Mr. MCDADE. And you say——
Dr. LASH. These discussions took place somewhat before that.
Mr. MCDADE. How much before; do you know?
Dr. LASH. I am sure it was in August, and, you know, maybe September 1st.
Mr. MCDADE. Pretty close to the date of the letter?
Dr. LASH. Yes.
Mr. MCDADE. Who among your staff did you speak to?
Dr. LASH. The principal person I spoke with was Ray Hunter. He is my deputy director. He is the one I assigned the problem to and asked him to find a solution. Then he reported back to me that he had found a solution and that we could make these funds available to the Pacific Northwest National Labs. He sent the letter saying that Pacific Northwest National Labs could have access to these funds.
Mr. MCDADE. Mr. Lash, let me say that the committee has had an opportunity to examine what is allegedly a notification, and it doesn't comply at all with standard procedures. It is dated November 13th, which was, of course, post-fact.
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I really want to come to closure on this and get specific responses. I am concerned that the committee is not getting the specific responses that are actually the facts. I am very concerned about that. I am about to put you under oath and require you to answer questions under oath. I don't want to do that, Mr. Lash. I would rather have you be forthcoming with us and not talk about, I didn't reprogram $3 million, only $1 million, when you know you did $3 million. You were chastised by the staff. We never got notification, and we haven't even gotten into discussing the $700,000 yet.
Dr. LASH. Mr. Chairman, I apologize if I am not. I am doing the best I can to answer these questions. I am not a budget—you know, I am not trained in budget matters. I have no recollection of being asked——
Mr. MCDADE. Mr. Lash, we talked about your career in government. You have been down there 5 years. You have been putting the budgets together. You submit them up to your agency, to OMB and to the Congress. You initiate reprograms out of your Department. You have a broad base of knowledge, Dr. Lash, about how this process is supposed to work.
Dr. LASH. Mr. Chairman, when we want to reprogram money, we go to the Chief Financial Officer's staff and raise it with them, and they are the ones who tell us whether this is proper or not. Now, frankly, I am not clear on who within the Department of Energy specifically has the responsibility to notify your committee of proposed changes. I certainly wish that I had contacted you or your staff and talked about this issue, particularly the $690,000, and I apologize for not doing that. I am very unhappy with myself that I did not take the initiative to do that. But quite frankly, I am not clear about who actually has that formal responsibility within the Department to do that.
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Mr. MCDADE. When you came to the government, you took an oath to uphold the Constitution; did you not?
Dr. LASH. Absolutely.
Mr. MCDADE. You know that Article 1 of the Constitution provides that the Congress appropriates money to programs. You are aware of that, aren't you?
Dr. LASH. Oh, yes.
Mr. MCDADE. And if you engage in activity which in effect has you appropriating the taxpayers' money, you are very much in violation of the procedures of the Department, the procedures of this committee, and indeed, in my view, your constitutional oath.
Now, you took that $700,000 from a nonrelevant program, didn't you?
Dr. LASH. Mr. Chairman, what my staff told me was that this money could be used appropriately for that purpose. There is language in what was submitted that I didn't look at at the time. I admit I did not review this at the time.
Mr. MCDADE. Did anybody tell you that you were doing the wrong thing in the Department?
Dr. LASH. No.
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Mr. MCDADE. Nobody?
Dr. LASH. No. In fact——
Mr. MCDADE. I am going to come back to that question. I am going to have you answer it under oath if I have to.
Dr. LASH. I would be happy to answer that under oath. I know there is a Department employee that may have a different view.
Mr. MCDADE. There may be some others, Dr. Lash.
Dr. LASH. Well, I have absolutely no recollection of anyone suggesting anything of that sort, and I do have a specific recollection of my deputy director assuring me, after having talked to people, other people, within my office and within the CFO's office, that this was an appropriate action to take. So I said to Mr. Hunter, okay, Ray, go ahead. I did not personally go over all the papers. I have no recollection whatsoever of anyone telling me, you shouldn't do this because it is improper or anything like that.
Mr. MCDADE. Do you know Sterling Franks?
Dr. LASH. I know Mr. Franks, yes.
Mr. MCDADE. Did you have a colloquy with Mr. Franks about this issue?
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Dr. LASH. I recall a meeting in my—in the entrance to my office——
Mr. MCDADE. My first question is did you have a colloquy with him about this issue?
Dr. LASH. Mr. Franks expressed his displeasure with the proposed use of these funds.
Mr. MCDADE. He told you you were wrong, didn't he?
Dr. LASH. I don't recall the exact words he said.
Mr. MCDADE. If he came to a conclusion, would the conclusion be you were wrong, you shouldn't do it?
Dr. LASH. No, he told me he didn't want the money used for that purpose.
Mr. MCDADE. Why?
Dr. LASH. Well, these were monies that were in his program that he didn't want used for that purpose.
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Mr. MCDADE. They were also monies that were zeroed out of the budget, weren't they? You got zero for this account in 1996.
Dr. LASH. For the——
Mr. MCDADE. For this program.
Dr. LASH. I am sorry?
Mr. MCDADE. The Russian Studies Program.
Dr. LASH. Yes. Monies were not appropriated by Congress for fiscal year 1996 for this program.
Mr. MCDADE. So you went over across the way and tried to get the money out of Frank's budget, didn't you?
Dr. LASH. In the end when there was a shortfall, I looked——
Mr. MCDADE. Is the answer yes, and then you can explain? Is the answer yes?
Dr. LASH. Monies were transferred from that program—weren't transferred, they were made available to Pacific Northwest National Laboratory for these feasibility studies, yes.
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Mr. MCDADE. You engaged in that discussion with Mr. Franks, didn't you?
Dr. LASH. Mr. Franks came down to my office. It was not a long conversation. He said he was not happy with this. He didn't want it to happen.
Mr. MCDADE. He told you he thought it wasn't the right thing to do, didn't he?
Dr. LASH. I don't remember his precise words.
Mr. MCDADE. Did you believe it was the right thing to do?
Dr. LASH. I thought it was an appropriate thing to do, and I didn't think there was anything improper or illegal about it.
Mr. MCDADE. In other words, you don't understand if there is a program zeroed out of the budget by the Congress, that it is supposed to be zeroed?
Dr. LASH. What I understood was leading up to this, when we had the $3 million available, there were accounts that were used where the authorization was broad enough in the opinion of the people of the Department to use for this project. That is what I was told for this particular sum of money.
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Mr. MCDADE. We are not talking about authorization, and it is a cute use of the word. You know the difference between authorization and appropriation, don't you?
Dr. LASH. Yes, I do, sir.
Mr. MCDADE. Well, we are talking about appropriation, sir.
Dr. LASH. Yes.
Mr. MCDADE. There was zero appropriated to the program.
Dr. LASH. That is correct.
Mr. MCDADE. Against which you put $700,000 to continue it.
Dr. LASH. Yes.
Mr. MCDADE. In addition to the $3 million that you had reprogrammed.
Dr. LASH. Yes.
Mr. MCDADE. Do you think that was the right thing to do?
Dr. LASH. I quite honestly feel at the time it was, but believe me, when I have looked at this now, I wish we hadn't done it. If I had it to do over again, first of all, I would have paid attention to it, I would have been more serious about this, and I apologize, I wasn't. And given my review of it and hearing the committee's concerns, no, I wish we hadn't done it, quite honestly. It was a mistake.
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APPROPRIATIONS AUTHORITY
Mr. MCDADE. It was even more than a mistake, it seems to me. It was willful conduct. It was absolutely egregiously negligent to try to fund a program that had been defunded. Don't you agree with that?
Dr. LASH. I understand your opinion, sir.
Mr. MCDADE. Do you agree with it?
Dr. LASH. I don't believe—no, I don't.
Mr. MCDADE. Well, where do you get the authority to appropriate money?
Dr. LASH. I don't have authority to appropriate money. I understood——
Mr. MCDADE. If a program is zeroed, does that mean it is to go forward or stop?
Dr. LASH. It means there is no money appropriated by Congress to conduct that activity.
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Mr. MCDADE. Does it mean the program is to be stopped?
Dr. LASH. I don't know what—I mean, at the time——
Mr. MCDADE. Come on. You know, Dr. Lash.
Dr. LASH. I am not trying to be cute, sir, and I apologize. As I say, I wish we hadn't done it. I think it was a mistake. It was not a willful mistake. I was not trying to go against the will of Congress. I did not pay attention to this. I delegated this problem to be solved, and I am sorry I did that.
ASSERTATION OF COMMITTEE PREROGATIVES
Mr. FAZIO. Mr. Chairman, if I could comment at this point, we have a lot of important issues before us, and I think from my perspective, the Chairman has been right in taking the time to lead this inquiry.
It seems to me, Mr. Lash, that you have either knowingly done something you shouldn't have done or been inept in the way in which you went about doing it, one or the other. I think that point has been made clear.
The merits of this case are not the issue. In fact, this committee in the next fiscal year provided funds, and then the Foreign Ops Committee under Nunn-Lugar continued the program. But there is a prerogative that the Congress feels strongly about, and that is that we make decisions. And moving money around so that you don't breach the $1 million limit and get to appropriate $3 million is wrong. I am glad to hear you say that you wish you hadn't done it. I wish you hadn't done it at the time you did it.
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It seems to me that it is pretty clear that the committee has reasserted its prerogatives and its role, and I hope not only in the Department of Energy, but in all the departments that the committee deals with this sort of behavior will not take place at any time in the future.
But, Mr. Chairman, I don't know what more we can obtain. I don't think we are going to get to the goal we have, and that is a complete satisfaction that the work the committee staff has done will be corroborated by Dr. Lash. It seems to me you have done the right thing and sent a very powerful message today, and I hope we could leave it at that and move on and get back to some of the more important policy issues.
Mr. MCDADE. Vic, I thank you very much for your comments, and they are right on with respect to the conduct of Dr. Lash and his awareness of what he was doing, and I have a hard time, my friend.
You are not a rookie in government. You have been around a long time. For me to believe it is just an honest error is very difficult.
I haven't sworn in a witness in 26 years—in 36 years—and you are very close to being the first. I am going to drop this matter for now—for now. We may have to have you back, Dr. Lash. If you think of anything you want to provide to the committee at the conclusion of this hearing or in the balance of the week or whenever, you are encouraged to do so.
In the meantime, we will proceed with questioning. I recognize the gentleman from California.
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Mr. FAZIO. Thank you, Mr. Chairman. I would like to welcome all of you, even you, Dr. Lash, at this point.
Dr. LASH. Thank you.
BUDGET CONSTRAINTS
Mr. FAZIO. Martha, I would like to go right to the heart of one of the dilemmas this committee faces this year. As you know, we have had a fairly decent budget submitted from the Department of Energy in terms of putting money behind the Department's priorities. Regrettably, we haven't had the same on the other side of our jurisdiction. In an El Nino year, which is also an election year, we had a reduction of $829 million in the Corps of Engineers construction budget. We may have some assistance from the full committee, but frankly, it will not be enough, I am sure, to mitigate the impact that that will have on our overall funding.
In the face of that, we have the Spallation Neutron Source as really the most significant new investment made by the Department, $157 million for fiscal year 1999. In light of what you said in your earlier comments about all the investments we have made at Argonne, Lawrence Berkeley, Brookhaven and Fermi, what is the first liability of the Department to spend $157 million, and when in the outyears can we anticipate the DOE science that would lead us to conclude we could actually utilize these newly burnished investments for the good of all the various purposes they are pursuing?
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I guess we are all concerned about buying into an expensive, however valuable, investment that might dilute what we could do in so many other areas and so many other ways that are important to the country. I would like to get your general reaction, specific and general.
Dr. KREBS. Yes. I will try to do it briefly, and then I would like to be able to expand on it for the record.
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SPALLATION NEUTRON SOURCE
First of all, can we spend it? As I indicated earlier, we have paid a great deal of attention to the cost of this project, to have it reviewed and to have it validated. We have paid a great deal of attention to the management structure and putting in place the right people at the lab, at the field office, in headquarters, to make this thing happen.
We believe that the budget and schedule is now optimized to provide this facility, which has basically been recommended to us, as I said, for the last 20 years.
In addition, as we go forward, the administration is committed to putting the outyear funds, or to meet the funding profile for this facility, over the targets or over the base budget of the science program. So I feel that this administration has made as much of a commitment as it can and for that I am extraordinarily grateful.
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In the long run, the operation of this facility, I believe, would be covered within the construction profile if we can manage to keep that. That, of course, is something that I can't guarantee, what will happen in 2005 and beyond, but I believe that we certainly have put the facilities on line that we have there that way, and although we are always struggling to maintain their productivity, I think we have done a reasonable job of that as well.
OUTYEAR BUDGETS
Mr. FAZIO. What sort of years, outyear budgets, are we going to be anticipating to ramp up to the completion of this? What we fear is the crowding out of other important work to be done in our existing facilities. I know the entire lab community and others in the university community have all gotten behind this one, because I think it is something that they all see as needed and feasible. But we worry about it being affordable, and I am sure they do as well.
Dr. KREBS. I think the peak, and I am going to have to get you this for the record, but the peak is somewhere between $250- and $275 million.
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That is what the peak spendout on this, I believe, is. One of the reasons why in my testimony I focused on the increases we have provided for facilities utilization is exactly to convey the seriousness which I personally, but more significantly, the Department and the administration, take this.
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This is something that we are going to have to deliver on every year, I believe, to you. But I take great heart and believe that the administration has made a very significant commitment when it says it is taking care of the outyears for this facility.
Mr. FAZIO. I think that is the major question this committee is struggling with, and I know the Department would be as well. I assume OMB is, because ultimately they will have a lot more to say about it than those of you sitting here.
Dr. KREBS. And in my opinion, they have, for our outyear budgets.
Mr. FAZIO. Well, again, this committee is struggling with the other responsibilities we bear, and I hope you understand what we face.
Dr. KREBS. We do.
CARBON SEQUESTRATION
Mr. FAZIO. Maybe there is a relationship to global climate change. Who knows. We don't know whether El Niño is or isn't a factor. But this committee seems to be bearing the brunt of expenditure on both sides, and I wanted to ask you about carbon sequestration in that regard. That is one of the issues in climate change that this Department is going to be taking some responsibility for. I know it is an ongoing program in some ways, but it is being consolidated and reemphasized.
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I wondered if you could comment on your office's role in that and what you might see as some benefits to global warming to be derived?
Dr. KREBS. Well, I believe in the discussions we have had over the last year inside the Department and within the scientific community for both basic research and applications, one of the really significant opportunities that has emerged is this area of carbon sequestration. One of the opportunities that has been identified, because of our advances in understanding natural ecosystems and plant science, because of our recognition that there might be opportunities for injecting carbon from fossil fuel power generation into deep subsurface, not potable aquifers, that this has opened up a new area of research for a long-term response to climate change. It actually could sustain and lengthen the time in which we might be able to use fossil fuels, both domestically and around the world.
As a consequence, we have taken a look at our research programs. And when you see what we would invest in the basic science area, we would put it into deep subsurface science to understand better the possibilities of sequestering carbon in deep formations. In some new ocean research, that would focus not only on sequestering in oceans as sort of bodies of water, but also to paying attention to the biological mechanisms that are involved, and then looking at terrestrial systems and the possibility for enhancing the sequestration in plants and forests.
Mr. FAZIO. I don't want to go on too long on this, but I don't think this is an issue the committee is very familiar with. Could you put in context the problem of global warming as it is being defined generally, what contribution could we derive from this particular approach? I know Mr. Reicher and I had a conversation about this as well. If you want to join in, you may.
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Dr. KREBS. Dan may actually have some of the numbers a little more in his head than I do, but I certainly can provide for the record some of the estimates that are associated with the amount of carbon, the tons of carbon we are sequestering in the environment now and the possibilities that we envision if we are successful in being able to access this kind of sequestration.
[The information follows:]
Context and Benefits for the Climate Change Technology Initiative
The Climate Change Technology Initiative is a research and development program to reduce this Nation's emissions of greenhouse gases. While there are those who would argue that reduction of greenhouse gases is unnecessary, all should be in favor of the development of new, cost-effective technologies that save energy and lessen our dependence on foreign oil, while sustaining our growing economy. These are the goals of the Climate Change Technology Initiative.
The Department's activities under the government wide initiative were developed with input from a broad spectrum of scientific experts. The President's Committee of Advisors on Science and Technology (PCAST) ''Report to the President on Federal Energy Research and Development For the Challenge of the Twenty-first Century'' provided pivotal guidance. Similarly, the DOE 5-lab study, ''Scenarios of U.S. Carbon Reductions; Potential Impacts of Energy-Efficient and Low-Carbon Technology by 2010 and Beyond'' and the DOE 11-lab study, ''Technology Opportunities to Reduce U.S. Greenhouse Gas Emissions'' provided important input to the identification of research and development activities to be supported under the Climate Change Technology Initiative.
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Within the Department, the Initiative includes $261 million within the Office of Energy Efficiency and Renewable Energy budget; $30 million in the Office of Fossil Energy budget; $27 million in the Office of Energy Research budget; $10 million in the Office of Nuclear Energy budget; and $3 million in the Energy Information Agency budget. Research and development efforts across the Department will focus on low carbon technologies and carbon sequestration.
Within Energy Research, both the Biological and Environmental Research (BER) and the Basic Energy Sciences (BES) programs, will undertake fundamental studies in carbon sequestration science, focusing on underground sequestration, ocean sequestration, and enhancing natural terrestrial sequestration. Clearly, for the foreseeable future, fossil fuels will continue to be a dominant source of energy in this country, and we need to minimize the impact of their use on the environment. If we can develop the fundamental understanding that will enable us to sequester in large reservoirs the carbon dioxide that is produced by fossil fuel usage, then, as we continue such usage, the damage that they cause to the environment will be lessened. Using extant technologies, one of the greatest costs in carbon sequestration is separating the carbon from other by-products. Natural sequestration does not require such separation; thus, if natural sequestration can be enhanced, there is significant potential for cost savings.
The development of new sources of sustainable energy that are carbon-free or carbon neutral requires advances in a wide range of fundamental scientific disciplines. For example, while there have been many technological developments that enable the use of hydrogen as a clean fuel source, the efficiency of hydrogen production, separation, storage, and transportation is not yet what is needed to enable us to reduce significantly our reliance on fossil fuels. Similarly, biological systems and biomass hold a vast potential to provide sustainable energy sources, but more fundamental understanding of metabolic pathways and energy-producing and carbon storing mechanisms must be provided before technology can capitalize on this potential. The BER and BES programs will seek to provide that necessary understanding.
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The BER and BES programs will support those parts of the CCTI fundamental science activities for which they have the greatest expertise, developing joint activities across Energy Research and with the Department's technology offices, as appropriate. Discussions are underway at both the level of individual subprograms and office-level to enhance the interplay between the fundamental science that Energy Research provides that underpins the Climate Change Technology Initiative and the relevant activities within the sister Departmental technology offices.
ESTIMATES OF TONS OF CARBON NOW SEQUESTERED AND WHAT WE ENVISION FOR THE FUTURE IF THE CLIMATE CHANGE TECHNOLOGY INITIATIVE IS SUCCESSFUL
As discussed on p. 26 of the January 1997 report, DOE Order No. DE–AF22–96PC01257, entitled ''CO2 Capture, Reuse and Storage Technologies for Mitigating Climate Change'', if the Climate Change Technology Initiative is successful, we will be able to sequester 5,100–100,000 gigatons of carbon dioxide in the deep oceans; 320–10,000 gigatons of carbon dioxide in deep aquifers; 500–1100 gigatons of carbon dioxide in depleted gas reservoirs; and 150–700 gigatons of carbon dioxide in depleted oil reservoirs. This potential sequestration would build on a current baseline of essentially zero sequestration for these technologies.
CARBON SEQUESTRATION
Mr. FAZIO. We are so frequently using the term ''sequestration'' in budgetary terms, I don't think we all have fully appreciated it. What are we talking about here? Mr. Reicher?
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Mr. REICHER. Well, very simply, I think it is an unfortunate term. It is a complicated one. It is a big word.
Mr. FAZIO. I am looking for something even Members of Congress could understand.
Mr. REICHER. Or my simple mind.
Mr. FAZIO. That is why I am calling on you.
Mr. REICHER. Thank you.
That is right. It simply means how do we keep carbon dioxide, the chief global warming gas, out of the atmosphere, which is where it causes warming. You can put it any number of other places. You can put it deep underground. You can have it taken up by plants and trees. These are the so-called sinks; that is the term that people use. You can do any number of things to basically keep it out of the atmosphere and put it somewhere else, bind it up with something else. So the whole effort is focused on the opportunities to do that.
If you look in sort of a three-part strategy, as some of our labs have looked at, in terms of climate, the real opportunities in the near term are to improve the efficiency of energy use. The next opportunity, sort of in the second decade beyond that, are renewables and other kinds of clean energy. The labs have said really it is in the decade after that where if the work that we are hoping to do, with your support, in sequestration proves out, that sequestration could be at a point where it could have a significant impact on CO2 emissions.
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Mr. FAZIO. So the $42 million we are being asked to spend this year really doesn't pay off for a couple of decades.
Mr. REICHER. The lab work indicates it is going to take some sustained R&D work in sequestration to show the big payoffs that many believe it could show, but we are at the very beginning. Our Fossil Energy Program earlier this year put out a $2 million solicitation for the best early ideas in carbon sequestration, and in the near future we are going to make an announcement of the results of that competition and we are going to get going. But that is a pretty small down payment.
SCIENCE AND MATH EDUCATION
Mr. FAZIO. Martha, let me ask you, we have seen recent test scores on science and math that are appalling to those of us who like to think we are a major power. My State of California, one you know well, has been really lagging and probably contributes, even more than I would like, to add myth to those lower scores.
We have four national laboratories in and around northern California, certainly within our state and region.
What can we do to get the help that these test scores obviously indicate we need for students in this country, certainly in this area, to try to make—in fact, just like our most recent conversation—a real impact two and three decades from now by improving the education of our children?
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Dr. KREBS. Well, when those test scores came out, the day before in the science section of the New York Times, there was an article about the fact that IQ scores have been increasing in this country. I thought how ironic that the capability of our—or at least the demonstrated possibility of our children's capability was going up, and yet we were not even engaging them in science in a way that was effective for them or effective for our Nation.
So I feel very passionately about this. I feel that there is a problem here that needs the capabilities of all of our science and technology and engineering assets to be brought to bear. The national laboratories are not educational institutions per se, but they have human capacity, and they have technology that can be made available to educators, and the experience of that research environment for educators throughout the educational spectrum is critical.
We have been providing that experience for people, young people, for undergraduate through graduate schools. The need in K through 12 is something that can also be addressed, and it is within that framework that we have made the proposal to increase or reestablish an education program, a separate corporate education program, for the Department that would enable our laboratories to be even more effective than they have been in the past.
As you know, in California, the laboratories have been very engaged in their local communities. Just last weekend Livermore ran and Sandia ran an Expanding New Horizons program for young women in the whole Central Valley area close to them. This is only one example of the kind of activities they carry out.
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Mr. FAZIO. This is something all of the labs nationwide are participating in and hope to do more as a result of our budget this year.
Dr. KREBS. Hope to do more.
Mr. FAZIO. I have a very important question on biomass, which I will put in the record for you, Mr. Reicher. I don't have time. I would love to, but I don't want to take my colleagues' time at the moment.
Mr. FAZIO. I do appreciate the clarity of the renewable budget request, and I know that the committee staff believes you are off to the right start, and I am hoping we will be able to find internal agreement on your share of the budget. Generally I just would like to thank those of you who have been working in that particular area for your improving presentations, because I think it will have some effect.
I thank the committee for the indulgence.
Mr. MCDADE. We thank you, Vic.
The gentleman from Michigan is recognized.
ENERGY EFFICIENCY PRIOR YEAR BALANCES
Mr. KNOLLENBERG. Mr. Chairman, thank you very much.
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Welcome, panel.
I do want to at the outset associate myself with the Chairman's concern about the specifics of the approach that was used in this matter of appropriating funds. I don't think—that may not be the proper choice of the word, but misallocation, we can work into that later. But there is—I think it is very disturbing and it bothers me that we have that to deal with.
Let me move right into this whole idea of prior year balances. I have always been disturbed by the various agencies coming before Congress, coming before this committee, asking for money, when in fact they have unspent balances. I notice that there is some $166 million in unspent, unobligated balances that appeared in the last day of the fiscal year 1997 for the Office of Energy Efficiency and Renewable Energy.
Now, I don't know how much of that was done in the year 1997. Perhaps it is over a period of years. You don't have to comment now, but I would like an answer specifically as to where that money—in what accounts is it; in fact, does it go beyond DOE, does it go into Interior? I would like to know the specifics of that. You can present that, if you would. I will formalize that with a request for the specifics.
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KYOTO CONFERENCE
Mr. KNOLLENBERG. Let me get into Kyoto. As some of you may know, I attended the Kyoto Conference as a part of the congressional delegation last December. I frankly was a little unhappy, in fact, quite unhappy, with the decision reached there. The signatories decided they would bind the U.S. to that 7 percent factor below the 1990 standards. By the time, I think 2010, or 2008 through 2012—and I still have a problem with all the exempt nations in that grouping. I know yesterday or last week it was widely reported if this were to come to pass, if the Senate ratified it, it would only amount to about $110 per household.
I have heard and been on panels with individuals from the various organizations who have said it may be $600, it may be as much as $2,000 a household. So the answer is probably somewhere in between. I don't believe it is going to be at the low end. I don't know if it is going to be at the high end, but there is something disturbing about that.
I think my question touches on each of you, and you don't have to all respond, but how much does the DOE spend in programs dedicated to the Climate Change Technology Initiative? Again, it is a multiagency thing, but how much does DOE spend as it applies to the initiative to reduce greenhouse gases?
Mr. REICHER. Mr. Knollenberg, the Climate Change Technology Initiative, as you say, spreads across the administration, and the largest proportion of it is in the Department of Energy, and that is spread among the Offices of Energy Efficiency, Renewable Energy, the Fossil Energy Office, the Nuclear Office, and the Office of Energy Research. And the total identified is $331 million that is identified as the Climate Change Technology Initiative as part of the larger proportion of the administration.
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Mr. KNOLLENBERG. Is there funding outside of the Climate Change Technology Initiative?
Mr. REICHER. Within the Department of Energy?
Mr. KNOLLENBERG. Yes.
Mr. REICHER. Let me step back and answer that. What is difficult in answering a question like this is that so much of what we do related to energy across the various offices of the Department of Energy relates to issues like climate change and clean air. So the answer to your question, are there other dollars that we spend across our various programs that relate to climate change, the answer is a definite yes. In fact, I would say that much of the budget in the various offices had some climate connection.
Mr. KNOLLENBERG. Could you not necessarily now get that information if it is not something you can put a dollar value on now? I am willing to wait for that information, but I do want to raise that question as to how much more money is being spent.
Mr. REICHER. We can amplify on that. Just not to take your time, but I just want to emphasize that this energy work responds to multiple drivers, economic competitiveness, clean air, energy security, climate change. It is difficult to disaggregate.
Mr. KNOLLENBERG. I understand. But there is other spending. You can get the specifics to me.
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NUCLEAR ENERGY AS AN ANSWER TO CLIMATE CHANGE
Mr. KNOLLENBERG. Nuclear energy, in Kyoto, in Japan, which was a strong proponent of that treaty, obviously can meet its goal very easily, I think, simply by advancing its nuclear program. They intend to add some 20 new plants. They have 44 now. Some 40 percent, as you know, 40 percent of their energy is supplied by nuclear energy.
We don't seem to have anything like that in the U.S. There is nothing ongoing. As a matter of fact, the Nuclear Energy Research Initiative and the Nuclear Energy Plant Optimization programs play some role, obviously, in our Nation's nuclear energy program, but I see nothing we are doing that would compare with Japan. They have got kind of a pass on this thing. They are going to be able to meet their requirements simply with nuclear power. No such thing seems to be the case in this country.
I don't know what the DOE is doing with respect to expanding any kind of concentration or interest in improving our capacity, our interest, at least, in starting a new plant. There is nothing on-line that I have heard anywhere. Is there anything being done to do something to bring about a greater awareness of nuclear power and hopefully to put it in the form of advancing some plant construction?
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Dr. LASH. Mr. Knollenberg, we are very interested in seeing a strong nuclear industry in the United States, including the cost-effective and continued operation of existing plants, as well as to have an opportunity for utilities to select new nuclear power plants in the future if it fits their plans.
We have not proposed a specific number of new plants, as have Japan and a few other countries, but the proposal to Congress is to address both the existing plants, to see that they can operate, be relicensed and operated effectively into the future, and have an opportunity for new plants.
INTERIM STORAGE
Mr. KNOLLENBERG. Let me interrupt a second. The thing that bothers me is DOE has affirmatively taken a stance against the creation of an interim nuclear waste facility out in Yucca. And even though the Department cannot comply with the Nuclear Waste Policy Act of 1982, which states, as you know, that the Federal Government has a legal obligation to manage used fuel from nuclear power plants beginning in 1998. What I have a hard time trying to understand is why should this committee support placing these two nuclear energy programs in the care of the same Federal agency who is working against resolving this dispute, this nuclear waste issue?
I know you don't have jurisdiction over all of that, so perhaps you don't have to weigh in on making a response to that. We will get a chance tomorrow to talk to some people who have more direct answers or responses to that. But that is a question I raise. Why should we give the same agency that responsibility?
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Dr. LASH. As you indicated, my office does not have responsibility for that. But, on the other hand, I think it is clear we are working very hard as a Department to check out whether Yucca Mountain is going to be satisfactory for waste disposal. A great deal of progress has been made on that.
Mr. KNOLLENBERG. Interim is the key word for that.
Dr. LASH. Well, you know the issues on that. I will leave that to those who are most directly involved. But I want to say I care a lot about, and my office cares a lot about, solving the waste management, waste disposal problem. I think there is good progress at Yucca Mountain, and we hope that that will prove to be acceptable with further studies.
NUCLEAR ENERGY R&D PROGRAMS
Mr. KNOLLENBERG. One of the concerns I have, Dr. Krebs, I wanted to relate, too, and I will yield back. I do support the nuclear R&D programs, particularly the university programs. I know that you are aware of that.
Dr. KREBS. Yes.
Mr. KNOLLENBERG. But I am torn as to whether DOE should have this responsibility for those funds if we don't have some certainty, some guarantee, they will be appropriated and used specifically for those programs, both the university program, of course, and the nuclear R&D.
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Dr. KREBS. May I make a comment on that? I think that we in Energy Research as well as in the Department overall, are very enthusiastic about the initiative that has been started in the Nuclear Energy Science and Technology Program aimed at a competitive peer-reviewed program that will be open to universities and laboratories. We have been working with the staff in the program to identify the mechanisms and the processes by which we go out to the scientific community and make this as effective a program as it was envisioned to be.
Mr. KNOLLENBERG. We could do more, I think. We really truly could.
Thank you, Mr. Chairman.
Mr. MCDADE. Thank you, Joe.
The gentleman from Indiana is recognized.
ALTERNATIVE FUEL SOURCES
Mr. VISCLOSKY. Thank you, Mr. Chairman.
Mr. Reicher, let me ask you, what do you consider alternative fuel sources? I have biomass, solar, wind, geothermal. As far as any major categories, should I be adding anything to that?
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Mr. REICHER. Hydropower, which, in fact, represents the largest percentage of the renewable energy sources in terms of today's electricity generation.
Mr. VISCLOSKY. I believe you mentioned in your testimony that represents about 10 percent of the power used to generate electricity in the United States?
Mr. REICHER. Correct.
I would add to that the work we are doing related to hydrogen.
Mr. VISCLOSKY. And you had also mentioned, I think, between nuclear and fossil fuels, that represented about 90 percent of the power generated in the United States?
Mr. REICHER. Actually of total U.S. energy. So beyond electricity generation, if you look at the full range of energy, that would be transportation fuels, fuels for industry, as well as electricity, when you add that all up, you arrive at that number.
Mr. VISCLOSKY. Ninety percent.
Mr. REICHER. Correct.
Mr. VISCLOSKY. Using that same standard then, what percentage is hydro, so we are comparing apples and apples?
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Mr. REICHER. On the order, I am told by my colleagues, about 3 or 4 percent of total U.S. energy. What I was told was electricity accounts for about a third of total U.S. energy.
Mr. VISCLOSKY. Okay. That takes us to 93 percent. So would I be correct in understanding then the other 6 or 7 percent comes from biomass, solar, wind, geothermal, et al.; about, give or take?
Mr. REICHER. Yes. I think—I am getting all sorts of numbers thrown at me. A fair proportion of the remaining is renewables; for example, biomass. For example, there are many states, as you know, where, actually, wood is used substantially to heat homes in the wintertime and where we burn municipal solid waste. Things like that are relatively significant portions of energy in that remaining percentage.
Mr. VISCLOSKY. Okay.
Mr. REICHER. I am sorry, I don't have the exact figures.
Mr. VISCLOSKY. That is fine.
You also mentioned, I just wanted to make sure, I forgot what the definition was, but I remember the figure 3 and 8. Was that for the developing world as far as a proportion of energy?
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Mr. REICHER. Oh, yes. The current installed electrical generation capacity in the world is about 3 million megawatts. What is going to have to be added, particularly to meet the needs of developing countries, is on the order of 5 million megawatts over the next couple of decades, the next four decades.
Mr. VISCLOSKY. Is that primarily because of industrial development?
Mr. REICHER. It is expanding population. It is increasing the standard of living in large countries. It is industrial development, and it is represented in countries like China and India, and as the per capita energy use increases, those are the big challenges we face.
Mr. VISCLOSKY. Mr. Chairman, I have a line of questioning, but I am——
Mr. MCDADE. We have a vote in the House, ladies and gentlemen. There is about 6 minutes left. Mr. Knollenberg is going to vote and return and accommodate the Members who have to ask questions. So if you wish, you can keep going until we get down to about 4 minutes, or you can leave now and come back.
Mr. VISCLOSKY. Can we leave now?
Mr. PASTOR. Mr. Chairman, what I am going to do is submit the questions for the record. They basically fall on the increases on Federal research, and also a question on what happens to communities that are not close to the labs and how are they going to be served in the future.
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Mr. Reicher, if you can give me the information on the ASU proposal, I would appreciate it.
[The information follows:]
ARIZONA STATE UNIVERSITY
After extensive search we could not find a proposal submitted by Arizona State University (ASU) to the Department of Energy. We have also contacted both the Chairman of the ASU Research and Development committee and a member of the ASU President's staff. Neither could locate the referenced proposal. Arizona State University has been instrumental in promoting the need for increased university funding in the Photovoltaic R&D Program, especially in regards to experimental equipment. In FY 1998, the Photovoltaic R&D Program is increasing university participation by issuing two solicitations, one for ''Future Generation PV Research'' with $1.5 million in funding and one for ''University PV Research Equipment'' with $1.0 million in funding. Both solicitations have been finalized and will be issued by the end of April 1998. We will send both solicitations to Arizona State University and encourage their response.
Mr. MCDADE. It is also good to have questions from the gentleman from Arizona.
The committee will stand in recess until approximately 12:15.
[Recess.]
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MILLION SOLAR ROOFS INITIATIVE
Mr. KNOLLENBERG [presiding]. The meeting will come to order. I am going to entertain one quick question, and by that time I hope some of our voting folks will return. We will resume with Mr. Visclosky, who was in the process of asking his questions.
On the matter of solar and renewable energy, I notice that this year the requests have been in this order, 88 percent increase for solar building technology, 53 percent for biomass-biofuels energy systems, 35 percent for wind, which has already been talked about, 56 percent for national renewable energy laboratory, and that is a good chunk, and 540 percent increase for the international solar energy program. The smallest increase anywhere is 20 percent for all of the renewables or the solar programs.
This may be a question for Mr. Reicher or anyone that wants to jump in, but how much is it going to cost? I have been told specifically the Federal Government wants to sell some 1 million solar roofs by the year 2010, and I have some concerns about why the government is saying that. Why shouldn't that be determined in the marketplace? I keep coming back to that.
I ask how much will it cost to install 1 million solar roofs? Any estimate of that? Mr. Reicher.
Mr. REICHER. Actually, Mr. Knollenberg——
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Mr. KNOLLENBERG. How much will be paid for with Federal funds?
Mr. REICHER. What I need to get you for the record, if I could, is the actual total cost, because the Federal component of this is not, by and large, to buy solar systems to put on these 1 million roofs. In fact, it is very much the opposite of that. We have asked for a little over $6 million in this year for the 1 million solar roofs campaign, initiative.
[The information follows:]
MILLION SOLAR ROOFS INITIATIVE
As part of the Million Solar Roofs Initiative, the Department is reviewing Federal loan and mortgage guarantee authorities that already exist in various agencies. These authorities include provisions to assist in financing solar technologies on buildings. Several programs are designed to support Native Americans, such as the Department of Housing and Urban Development Section 184 Indian Housing Loan Guarantee Program. In addition, the Department of Agriculture's Rural Utility Service makes low interest loans to rural utility cooperatives, including those owned by Native Americans. Also, as part of the Initiative, the Department is discussing special loan products with large private lenders who have also expressed an interest in serving the Native American Community.
The proposed Solar Roof tax credits for 15% of system costs up to $2000 would be available for Native Americans.
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Mr. KNOLLENBERG. Are these for residences, for businesses, for commercial, for everything?
Mr. REICHER. This is any kind of a building, and it is for really two different types of solar technology. One is solar hot water systems.
Mr. KNOLLENBERG. So they are not independent of other heating sources, is that right? Or are they?
Mr. REICHER. This can be in addition to an existing heating source. This can replace, for example, one's gas or electric-fired hot water heater. That is one type. They can be used for different types in a home. And solar electric or photovoltaic systems, to provide electricity to a home or business or office.
Mr. KNOLLENBERG. Wouldn't the building with solar roofs have to have some other form of energy as a source? Wouldn't they have to have—they couldn't be totally independent, could they?
Mr. REICHER. There are a variety of applications of solar, many in use today, where people are not hooked up to the electricity grid and the solar energy does in fact provide most——
Mr. KNOLLENBERG. In Michigan?
Mr. REICHER. Most, if not all of them.
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Mr. KNOLLENBERG. I could have said Alaska, but I didn't.
Mr. REICHER. There are examples included all over the country, including cloudier areas of the country, where people off the grid are supplying most, if not all, of their power using various solar technologies. In fact, the rule of thumb, it is a pretty general one though, is if you are more than about a quarter of a mile away from an electric line and you have to put in an electric line to your home, that makes solar in many parts of the country, including, as I say, in cloudier parts of the country, fairly cost effective as an alternative to digging that line and paying the large costs to put in power from the grid.
WINDMILLS
Mr. KNOLLENBERG. One of the things that I am troubled by, and I draw a comparison from the amount of money we are putting into the Grenoble program, particularly wind. For example, my staffer went out to, I am not sure, Palm Springs, California. On the day he was there, maybe it was an unfortunate day, all of these windmills were like statues in Statuary Hall. They were not doing anything. They were just there. Not a single one turned.
SUPPORT FOR NUCLEAR ENERGY
I go back to the nuclear point. We are doing nothing to subsidize nuclear. In fact, we are doing nothing, and here we are subsidizing this technology, hoping it will work. I am hoping it will work too, but I am really concerned about the commercial viability, to how much investment that the Federal Government, if you want to call it that, how much subsidizing there is that takes place.
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So you can respond to that, if you will, but there doesn't seem to be anything of substance that is being done to promote nuclear. Not subsidize it, I am not asking for that, but we continually subsidize these other programs to the extent that the return just doesn't seem to be practical.
Mr. REICHER. I will let Mr. Lash amplify, but, of course, in the last couple of years, we have in fact asked for additional funds to support nuclear power, and——
Mr. KNOLLENBERG. In regard to the specific initiative? Which one? Mr. Lash.
Dr. LASH. Well, of course, we did have a program on advanced light water reactors and supported that, and the administration request was not granted by Congress, so right now we have no nuclear energy program per se and have had to move staff into other activities. But we do have these proposals, increasing support for universities in nuclear energy R&D, as I mentioned before, for working with the industry to make existing plants more cost effective and able to operate for a longer period of time.
Mr. KNOLLENBERG. No new plants too.
Dr. LASH. And to conduct more advanced research into such matters as ultra high burnup fuels that will make nuclear power even more attractive in the future.
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Mr. KNOLLENBERG. As new plants?
Dr. LASH. In new plants, yes.
Mr. KNOLLENBERG. I am going to halt at that point and defer to my colleague, who has yet to provide any questions. So Congressman Frelinghuysen.
FUSION—ALTERNATIVE CONCEPTS
Mr. FRELINGHUYSEN. Thank you, Mr. Chairman. Most of my questions will go to Dr. Krebs.
Dr. Krebs and gentlemen, good afternoon. We are past high noon, so I realize that everybody wants to get out of here, but I do have some questions relative to fusion research, something that is important to the Nation, and certainly important to my State.
Dr. Krebs, last year the Office of Fusion Energy Sciences solicited proposals for innovative or alternative approaches to fusion. Personally, I feel that alternative concepts at a range of scales are important, but may require additional funding.
Could you tell me how many proposals have been received?
Dr. KREBS. I can tell you more than that.
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Mr. FRELINGHUYSEN. Please. How many of them were funded and what and where. Are they all?
Dr. KREBS. Sure. We received a total of 40 proposals, and we have funded 8 new proposals and then continued, renewed, two other proposals.
The kind of proposals, the five top rated proposals were concepts such as the dipole confinement of fusion, relevant mass, that is at MIT, a proposal from Livermore in a certain kind of spherical configurations, magnetic configurations, and then a joint theory proposal from Princeton Plasma Physics Lab and the University of Washington and Cornell. Then there were some renewals at Cornell and at Los Alamos.
So we are making fairly substantial forward progress in exploring alternative concepts. I would like to add data for the record.
[The information follows:]
FUSION ENERGY SCIENCES
Last year, the Office of Fusion Energy Science solicited proposals to increase alternate confinement concept research. A total of 40 proposals were received. A total of eight new proposals and two renewal proposals have thus far received funding as a result of this process.
Topics of the five top-rated new proposals include:
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Dipole confinement of fusion relevant plasmas in a magnetic dipole field will be studied at Massachusetts Institute of Technology in collaboration with Columbia University. This dipole field is similar to that of the earth's magnetic dipole field, which traps the particles responsible for the aurora borealis.
New stabilization principles for straight current carrying pinches, one of the simplest fusion systems, will be carried out at the University of Washington.
The possibility of sustaining small spheres of magnetized plasma (spheromaks) at high plasma temperature will be studied at Lawrence Livermore National Laboratory.
Studies of the physics of magnetic helicity of importance of spheromak sustainment will be carried out at the California Institute of Technology.
A joint theory proposal from Princeton Plasma Physics Laboratory, the University of Washington, and Cornell University will study stabilization of a class of fusion systems where the plasma itself provides its own confining fields (reversed field configurations).
Topics of the two renewal proposals are: ion rings at Cornell University to produce self-sustained configurations capable of using advanced fusion fuel: and penning traps for fusion at Los Alamo National Laboratory using confinement physics principles similar to those used in the recent experiments that demonstrated Bose-Einstein condensation for the first time.
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In addition, three small grants have been established to continue the study of new ideas. Of these, two are in the compact stellarator area at Auburn University and the University of Texas, and the other is studying rotating plasma confinement at the University of Maryland.
Mr. FRELINGHUYSEN. Could you talk about some of the dollar levels for fiscal years 1998 and 1999?
Dr. KREBS. Yes. I know some of the FY 1998 numbers, but what I would suggest is I provide you that for the record, if that is okay. I have some FY 1998 records, but I don't really have them in my head.
[The information follows:]
FUSION ENERGY SCIENCES
The total funding for these proposals is $4,200,000 in FY 1998, and a similar amount is planned in FY 1999. This is in addition to an ongoing research effort in alternative concepts that includes a variety of university-scale efforts as well as the larger National Spherical Torus Experiment. The total for all of these other alternative concept activities in FY 1998 is $33,200,000, and about $46,700,000 is planned for FY 1999.
FUNDING FOR ALTERNATIVE CONFINEMENT FUSION CONCEPTS
Mr. FRELINGHUYSEN. If OFES received additional dollars for funding alternative confinement concepts, I would be interested in knowing also perhaps for the record how that money would be used.
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Dr. KREBS. All right.
[The information follows:]
FUSION ENERGY SCIENCES
If additional funds were to be made available, significant starts could be made in several new programs, and existing programs could be significantly strengthened through hardware upgrades and the addition of scientists from other institutions.
FY 1999 FUNDING FOR NATIONAL SPHERICAL TORUS EXPERIMENT
Mr. FRELINGHUYSEN. The completion of the National Spherical Torus Experiment (NSTX) and its efficient operation is a high priority program mission performance measure in the administration's budget. Is the completion of this project, its advanced diagnostics and heating systems, fully funded in the fiscal year 1999 budget?
Dr. KREBS. There are two parts to that question. I believe that we are committed to completing the original concept of the NSTX. The issue of the advanced diagnostics, I believe we have at least begun to make a start on that. Whether that is fully included in the FY 1999 budget, I will have to get back to you on.
[The information follows:]
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FUSION ENERGY SCIENCES
With this request, the National Spherical Torus Experiment (NSTX), located at the Princeton Plasma Physics Laboratory, will begin operation in FY 1999. The NSTX research program will address fusion science issues such as current drive by radio waves, very high power density, and nearly total self-generation of the plasma current that helps to confine the plasma. This program will be organized as a national collaborative experiment. The conversion of a Tokamak Fusion Test Reactor neutral beam heating system for reuse on NSTX will add significantly to NSTX heating and diagnostics capability when it is completed in FY 2000.
The FY 1999 request is $26,300,000. This provides for fully funding the device itself, preparations for a Neutral Beam (NB) heating system during FY 2000, and some of the associated advanced diagnostics that will be provided by July of FY 2000.
Mr. FRELINGHUYSEN. Would any additional funding be required to complete that?
Dr. KREBS. I will let you know. I have to explore that.
[The information follows:]
FUSION ENERGY SCIENCES
Additional funding in FY 1999 would be used to expand participation of collaborators from other institutions, advance the installation of the neutral beam system and the associated diagnostics to earlier in FY 2000, and install several advanced diagnostics.
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Mr. FRELINGHUYSEN. How many run works are planned for the NSTX in fiscal year 1999?
Dr. KREBS. I will have to provide that for the record as well.
[The information follows:]
FUSION ENERGY SCIENCES
The National Spherical Torus Experiment is a new facility that is to begin operations in April 1999. It is scheduled for 6 weeks of operation during the second half of FY 1999.
OPERATING WEEKS AT FUSION FACILITIES
Mr. FRELINGHUYSEN. In regard to our other major tokamak facilities, how many weeks will the DIII–D, the General Atomics, the one at MIT, the alcator C–MOD operate during fiscal year 1999 under the current budget proposal?
Dr. KREBS. I don't have the specific number but I will provide it. What I do know is as a result of decreasing our investment in the joint baseline design with ITER, we are redirecting some of the funds from the FY 1998 participation to increased numbers of operating weeks at the facilities you mentioned.
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[The information follows:]
FUSION ENERGY SCIENCES
In the current FY 1999 budget proposal, DIII–D will operate for 14 weeks, and Alcator C-Mod will operate for 18 weeks.
Mr. FRELINGHUYSEN. What is considered full utilization?
Dr. KREBS. I am going to have to provide that.
[The information follows:]
FUSION ENERGY SCIENCES
Full utilization for DIII–D would be 24 weeks, and full utilization for Alcator C-Mod would be 26 weeks.
USAGE OF FUSION FACILITIES BY RESEARCHERS
Mr. FRELINGHUYSEN. Since both the General Atomics and the MIT are user facilities, what percentage of those who actually wish to use them are actually able to do so?
Dr. KREBS. Obviously not 100 percent, and that is basically because indeed these facilities are not operating at the levels that we would like to see them operate at. But the details I will provide.
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[The information follows:]
FUSION ENERGY SCIENCES
In FY 1998, only about 30 percent of the experiments proposed for DIII–D at General Atomics and 60 percent of those for C-Mod at MIT were included in the experimental programs because of limited runtime. The proposals themselves are usually jointly proposed by multiple users from the 45 institutions represented on DIII–D and the 22 institutions participating on C-Mod.
SCIENTIFIC FACILITIES USER INITIATIVE
Mr. FRELINGHUYSEN. All right. Has the DOE used any of its Scientific Facilities User Initiative dollars for the purpose of modernizing or better utilizing existing fusion experiments at all scales from university base to user facilities? Is it possible to increase the overall funding for this initiative to include fission?
Dr. KREBS. The fusion facilities, when we began the scientific facilities initiative, or the facilities utilization initiative, the fusion program and the fusion facilities were not included because at that time they were not seen as user facilities. We have made a transition in the program during this period.
The funding in the other programs for which we have seen an increase in our commitment to the utilization of the facilities, whether it is Basic Energy Sciences or High Energy and Nuclear Physics, has, in general, come from within those programs, but with a change in the investment direction. As we have rolled off construction of facilities, we have been able to put it into utilization.
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In the fusion program, there is not a separate pot of money for the facilities utilization program. This is something we have been doing and paying attention to within the funds that we have available. And similarly, within the funds that we have had available for the fusion program, we have tried to increase productivity and operation of those facilities as well. As I said earlier, it is always a struggle, and we never make our users happy. But we try to make them as productive as we can.
Mr. FRELINGHUYSEN. I have a lot of questions that relate to fusion, and I would like to get them in the public record, Mr. Chairman.
ITER
Mr. FRELINGHUYSEN. The last I would like to have Dr. Krebs comment on, what is the present status of the ITER negotiations and what are the positions of our international partners on the question of the redesign of the ITER project?
Dr. KREBS. The current status of the ITER agreement, I think, is that our partners, Russia, the European Union and Japan, would like—and we—would like to extend the agreement that governed our engineering design activities during a transitional period where the partners from Europe and Japan examine whether or not they would like to go forward with offering up some sites for the construction of ITER.
The continued participation of the United States is contingent on both a reduction of the dollar level of our involvement during that period, and on the consideration of ways to reduce the costs of ITER.
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We believe at this time we are all in agreement that it is important for all of us to examine cost reductions associated with the ITER design, and, as a result, at a meeting a few weeks ago, the representatives initialed the conditions for accepting an extension, and that is just the next step. We will have to do some stuff with the State Department to actually agree to extend.
Mr. FRELINGHUYSEN. Just for the record, how much money for international collaboration is in the fiscal year 1999 budget and what about those contributions from our international collaborators?
Dr. KREBS. I will have to provide you the details for the record. What I know is that we are going to put—we are putting $12 million into joint baseline design activities with ITER. We have other activities in fusion and plasma technology that will utilize facilities in Europe and Japan, the JT–60. There are other activities in our domestic program, the redirection, that we think will also benefit our international partners, but are not immediately directed towards that.
I will have to provide you for the record the dollar level of those international collaboration.
[The information follows:]
FUSION ENERGY SCIENCES
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In FY 1999, there is a total of $4,200,000 direct funding for non-ITER international collaboration in Science and $1,000,000 in Technology. The funding in Science is for collaborations from PPPL ($3,220,000) and ORNL ($980,000), mostly on tokamaks and some on stellarators, in Europe and Japan. The funding in Technology will support hardware development and deployment on foreign fusion experiments, in support of the physics collaborations.
The major non-ITER foreign contribution to the U.S. fusion program is in the materials area in which the Japanese provide about $2,000,000 annually for materials testing in the High Flux Irradiation Reactor at ORNL. This is expected to continue in FY 1999. In the physics area, the foreign programs contribute to the U.S. Program through their participation in the U.S. experiments. In FY 1998, there were the equivalent of 8–10 European, Russian, and Japanese scientists (about 40–50 individuals) working on the U.S. experiments and other fusion physics issues. These exchanges, which also include some U.S. scientists from DIII–D and C–MOD working on foreign facilities, contribute to effective exchange of ideas and data and increase the pace of progress and understanding.
WIND PROJECT AT BONNEVILLE POWER ADMINISTRATION
Mr. FRELINGHUYSEN. Thank you, Mr. Chairman.
Mr. KNOLLENBERG. Mr. Visclosky, back to you.
Mr. VISCLOSKY. Mr. Reicher, if I could continue my line of questioning, it was my understanding in September of last year the Department of Energy announced the Bonneville Power Administration would participate as a partner in a 41-megawatt wind energy project. Could you tell me what the cost of this project is, including the land design construction transmission infrastructure and other environmental costs?
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Mr. REICHER. Congressman, I don't have the answer to that, but I would be happy to provide that for the record.
[The information follows:]
41 MEGAWATT WIND ENERGY PROJECT
The total capital cost of this project is about $55,950,500. Including the cost of the transmission line connection results in a total cost of about $64,274,680. BPA, however, is not a partner in the project but, rather, has agreed to purchase part of the electrical generation from two of the project partners, Eugene Water and Electric Board and PacificCorp. BPA's power purchase from those two utilities will be 37% of an anticipated project output of 41.4 megawatts.
Mr. VISCLOSKY. When you are doing that, if you could give us an estimate as to the cost per kilowatt produced from that new facility.
Mr. REICHER. I would be pleased to do so.
[The information follows:]
COST PER KILOWATT OF WIND FACILITY
The expected capital cost per kilowatt of project capacity is about $1,350 excluding the transmission line connection, and $1,552 including the transmission line. The levelized cost of energy (in constant 1998 dollars) is expected to be about 42 mills per kilowatt hour or 4.2 cents per kilowatt through the 25 year term of BPA's power purchase arrangement.
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Mr. VISCLOSKY. Also, if you could give me an answer as to what the comparable costs would be if we simply installed a new gas turbine project.
Mr. REICHER. I would be happy to.
[The information follows:]
COMPARABLE COSTS TO NEW GAS TURBINE
Comparable costs for a new combined-cycle gas turbine project are about $747 capital costs per kilowatt of capacity. The kilowatt hour cost of generation varies according to the price of gas, but in today's West Coast market situation, it would be about 33 to 35 mils per kilowatt hour or 3.3 to 3.5 cents per kilowatt hour.
Mr. VISCLOSKY. And also if we could have an explanation if we are trying to foster a domestic industry, why the managers apparently chose a Japanese built wind turbine system.
Mr. REICHER. I will look into that as well and determine the answer to that as well.
[The information follows:]
WHY JAPANESE TECHNOLOGY
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BPA has been informed by the project partners, that the original agreement with Kenetech required that the turbines be designed to have a 30-year life. When SeaWest acquired Kenetech's Wyoming Wind Project assets through a Bankruptcy Court, the utility project partners insisted that SeaWest honor the 30-year commitment as a condition of proceeding with the project. SeaWest solicited bids from turbine manufacturers on that basis. According to the project partners and SeaWest, the only manufacturer that both expressed interest and that was judged by them to be capable of standing behind such a commitment was Mitsubishi.
Mr. VISCLOSKY. Am I correct in understanding that the managers chose the Japanese built wind turbine?
Mr. REICHER. I don't know that. I will ask staff right now to get an answer to that.
Mr. VISCLOSKY. If you could.
Mr. REICHER. The deputy assistant secretary for our utilities program said he was not aware of that.
Mr. VISCLOSKY. If you could, for the record, that would be great.
[The information follows:]
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CONFIRM—IS IT JAPANESE TECHNOLOGY
BPA has been informed by the project partners, that the original agreement with Kenetech required that the turbines be designed to have a 30-year life. When SeaWest acquired Kenetech's Wyoming Wind Project assets through a Bankruptcy Court, the utility project partners insisted that SeaWest honor the 30-year commitment as a condition of proceeding with the project. SeaWest solicited bids from turbine manufacturers on that basis. According to the project partners and SeaWest, the only manufacturer that both expressed interest and that was judged by them to be capable of standing behind such a commitment was Mitsubishi.
FOREST WASTE ETHANOL PROGRAM
Mr. VISCLOSKY. Would you hazard a guess as to whether or not the program as designed is cheaper per kilowatt hour than a gas turbine project?
Mr. REICHER. I would hazard a guess that the cost per kilowatt hour, the installed cost per kilowatt hour, is more expensive than with a new gas-fired plant.
Mr. VISCLOSKY. Mr. Reicher, on page 12 of your testimony, in talking about an ethanol program, the phrase used is ''This will enable us to pursue opportunities such as utilizing forest underbrush to produce ethanol to also reduce the risk of catastrophic forest fires in the West.''
I admit my prejudice. Growing up in Gary, Indiana, we cut our trees down a long time ago. They are gone. We don't have forest underbrush. How do you collect and who collects and how much does it cost to collect enough forest underbrush for an ethanol program to be cost efficient?
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Mr. REICHER. I don't know the details. The concept is that with the need, as I understand it, with the need for forest thinning to prevent some of the major fires that have occurred out West, there is a large collection of underbrush, and the question is what you can do with that, those resulting forest wastes. What we are looking at in a couple of different technologies is how one could take those forest wastes, just like agricultural wastes in your own State and, using a variety of technologies, produce a usable fuel.
As you know, we have a major industry in this country devoted to corn-based ethanol, which produces a great deal of fuel. What the challenge here is are there other natural materials, either agricultural wastes or forest wastes or some other dedicated crops that could be used also to produce ethanol. That is what we are seeking funding to do. If we do what we think we can do and there are plants being pursued that rely on wastes, it will be quite a cost effective way to produce fuels.
Mr. VISCLOSKY. So the underbrush would have been collected as a matter of course with fire prevention and the question is what do you do with the underbrush?
Mr. REICHER. I don't know the details of how it is collected, but the idea here would be that it would be collected in some efficient fashion.
ETHANOL TAX SUBSIDY
Mr. VISCLOSKY. On ethanol, my understanding, and I stand to be corrected, is that we voted last year to phase the tax subsidy program for ethanol out over the next five years.
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Mr. REICHER. I don't know the answer to that.
Mr. VISCLOSKY. I don't know if that has anything to do with your particular program, but as far as a policy issue.
Mr. REICHER. My colleagues are saying that is not the fact. We will check on that for you.
[The information follows:]
ETHANOL TAX SUBSIDY PROGRAM
The current partial Federal excise tax exemption, which equates to 54 cents per gallon of ethanol used in blended fuel with gasoline, is scheduled to expire October of the year 2000. Last year efforts were made by some members of Congress to terminate this exemption sooner. However, on March 11, 1997, the Senate voted 71–26, in favor of extending the ethanol tax incentive through 2007, as part of the Senate's highway reauthorization bill, S. 1173. The legislation reduces the benefit to 53 cents per gallon in 2001, 52 cents per gallon in 2003, and 51 cents per gallon in 2005. A companion House of Representatives bill to extend the ethanol incentive had 48 co-sponsors as of February 19, 1998.
COSTS AND BENEFITS OF FUNDING RENEWABLES
Mr. VISCLOSKY. I guess my point is the concern I have about the cost-benefit for dollars spent on renewables vis-a-vis other dollars we could spend to make what we have today more efficient, I understand the issue of fossil fuels and the environment, but I am wondering if money spent on turbine research, transmission research, that has been discussed here today, storage of energy, improving the life and the economics of nuclear facilities, for dollars spent per additional kilowatt gained on a cost basis would be more effective for us to do? If you could just comment on that?
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Mr. REICHER. I would like to do that, and also Mr. Knollenberg asked a similar sort of question. I think there are a variety of cost effective applications of renewable energy that exist today and more coming down the pike. They respond to some significant challenges that we have in the form of meeting new and more stringent clean air requirements, in reducing our dependence on foreign energy sources, in responding to climate change, and some great opportunities in terms of sale of technology by U.S. companies abroad. So that is what is driving this.
Let me quickly get to the fundamental question of what are the cost effective technologies today or soon to be developed. We talked about solar a few minutes ago. As I said, off-grid solar is quite cost effective. We should understand there are 2.2 billion people who live in the world today who are off the grid. The explosion in sales for solar responds in part to the needs of those individuals who are off the grid and do not have electricity. So that is a cost effective example, both in our own country off the grid and in other countries, much more predominantly there.
On the grid in terms of solar, I talked to a utility the other day. I asked them, ''why did you just install three solar systems in your service territory?'' They said it was very simple. They were faced with upgrading a power line to provide additional electricity. It was expensive to upgrade the power line. They determined that it was far more cost effective to install solar as an alternative.
Mr. Knollenberg, if I could, in your own state, in Michigan, there is a company that makes, I brought one today, this shingle.
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Mr. KNOLLENBERG. I have been there.
Mr. REICHER. This is a replacement for an asphalt shingle, when one goes to reshingle a house. This can be put on, the solar panel is here. There would be wires on the back. They would be wired together.
Now, let me be very candid about this. This is an expensive technology today, but the costs are coming down as a result of a lot of work we are doing at DOE with industry to reduce the production costs and increase the cost effectiveness.
There are foreign builders that are buying these today, because they find themselves in places in the world where they are quite cost effective. The opportunity, in this example, to at the same time put on a new roof or replace your old roof and provide a power source for your house, is quite an opportunity.
So that is in the solar area. Let me give you another very cost effective technology today, and that is geothermal heat pumps. This takes existing heat in the ground or in water close to the surface, runs it through a heat exchanger in the form of a heat pump, and puts it in a building. The Army has made major investments in this. They found it to be very cost effective. McDonald's has put them in McDonald's around the country. Texaco has been putting them in gas stations. There are thousands being installed, and the source of energy is the surface geology of the Earth. This is not geothermal in the sense of having to drill deep wells and having to find really hot water. This is just the ambient temperature not too many feet below the surface. Cost effective today.
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Mr. KNOLLENBERG. Mr. Reicher, there is a subsidy involved too in a great, great many of those programs. We can't discount that.
Mr. REICHER. There is no subsidy.
Mr. KNOLLENBERG. The shingle, are you saying it is not subsidized?
Mr. REICHER. Quite the opposite, there have been government dollars cost shared with industry. But, Mr. Knollenberg, as you know, we have cost shared in many energy technologies quite successfully across the sector. We are bringing on line a whole host of energy technologies throughout the past decade through very generous government-industry partnerships.
If I could finish, biomass, I particularly point out in the agricultural states, you probably know this better than I, but I am told we leave about half of a corn crop on the ground in the field after we take the cobs. We have just signed an agreement with the National Corn Growers Association and the National Soybean Association to find new uses for the agricultural wastes that we leave behind. We signed this agreement a week ago. The corn and soybean growers are very excited about it. The use falls into several categories. First, you can take biomass and burn it directly, as I mentioned, in coal-fired power plants. Secondly, you can take biomass and you can make it into fuel, either into ethanol fuel or actually turn into another kind of gas and fire a turbine. Third, you can actually take these waste, forest and agricultural products, and replace it in the production of things like plastics. If you look at the bottom of a piece of paper that says soy-based ink, that is the result of soybeans grown and used as a feedstock to replace the oil in the production of ink. You can use it for fuel, you can use it for power, you can use it for products. So I would assert whether you look at—there are areas of solar that are quite cost effective, there are areas of biomass that are cost effective, or soon will be, there are areas of geothermal that are cost effective, and, indeed, we are making great progress in the area of wind to bring down those costs. As I said, if you looked at the cost curve, it has come down dramatically.
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Mr. VISCLOSKY. I don't mean to interrupt, but I have asked for cost figures on wind projects. I have a number of other questions. I don't dispute, Mr. Reicher, that there are benefits to the research. No question. And Mr. Fazio had mentioned earlier, we are under incredible pressure, and for dollars spent on improving turbine efficiency, transmission efficiency, storage efficiency, are we going to be better off for that dollar being spent?
NEW STARTS IN NUCLEAR ENERGY
Dr. Lash, if I could, on the nuclear program, looking at the research and development budgets, there are two new items this year. One is on Nuclear Energy Research Initiative, and we also have—that is for, I believe, $24 million. Then an additional $10 million for Nuclear Energy Plant Optimization.
On the Nuclear Energy Research Initiative, that is a new program, and I would understand that part of the emphasis there is on the issue of proliferation.
Dr. LASH. That is correct. It is a new start. It is a new initiative on our part, and we expect, based on input we have received from the national laboratories and industry, that one of the areas where there is a great deal of interest is on proliferation resistant reactors, particularly smaller ones that might be useful for export to countries that can't, frankly, handle at least today the very large nuclear power plants.
Mr. VISCLOSKY. Could I ask how that differs from the international nuclear safety program that the Department of Defense has asked for $35 million for?
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Dr. LASH. I am not familiar with the Department of Defense request. I would like to stress that both the programs on energy research and plant optimization would be conducted by an entirely new process for the office. This would be a peer reviewed process. We are using as a model the work that is done in the Office of Energy Research. In fact, staff in Energy Research has been very helpful in setting this up.
So what would happen is that we would designate areas, such as proliferation resistant reactors, and solicit proposals from industry, universities and the national laboratories. These proposals would then be peer reviewed independently of the staff at the Department of Energy, and ratings made, and then the higher priority research proposals funded within the limits of the appropriation.
So we can designate areas in which we are interested in having such research done, but we cannot tell you at this stage precisely which proposals will be accepted, and we wouldn't be able to until the peer review process comes to an end.
Mr. VISCLOSKY. That is under the research initiative. That is the new program.
Dr. LASH. That is under that, as well as the plant optimization proposal. Plant optimization would focus on the existing nuclear power plants, what kinds of upgrades and improvements can be made there, what kind of help can we provide in answering questions that may come up during license renewal, that kind of thing. The Nuclear Energy Research Initiative would be on new technologies, including development of fuels that might be used farther in the future.
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INTERNATIONAL NUCLEAR SAFETY PROGRAM
Mr. VISCLOSKY. The international nuclear safety program is run out of your shop.
Dr. LASH. Yes, that program is in our shop, and the request there is for $35 million.
Mr. VISCLOSKY. The initiative is not duplicative of those efforts?
Dr. LASH. No, the programs are very different. The International Nuclear Safety Program is focused on improving the safety of 65 reactors in Central and Eastern Europe and the former Soviet Union. We have activities in nine countries.
Now, American technologies are used to improve those reactors. We are a key part of that the transfer of U.S. technologies to those countries, the nine countries with those reactors, so they use American technologies. But it is not an R&D program, and it is focused on the biggest safety problems associated with those reactors in the nine countries.
Mr. VISCLOSKY. Just so I understand that program, our subcommittee funds that out of a defense function. Is that supplemented, is that $35 million supplemented through other appropriations, through other agencies and departments of the government?
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Dr. LASH. Yes. Typically, the Agency for International Development, using foreign appropriations funds, asks that same staff to oversee activities funded with monies that they transfer to us. In the current fiscal year, the biggest such activity has to do with the Chrenobyl nuclear power plant, which is a G–7 initiative. The United States has allocated through foreign operations some significant money to work at Chrenobyl, and we are responsible for managing several million dollars of that.
INTERNATIONAL NUCLEAR SAFETY PROGRAM
Mr. VISCLOSKY. Could you for the record detail where the monies for the International Nuclear Safety Program come from and which agencies are providing you the funding for that, just so I have an understanding, because my sense is there are several sources of money, and I am very concerned that we are looking at it as a whole program.
Dr. LASH. We would be happy to do that. We can certainly tell you what has been transferred to us from AID currently. We can also tell you what current discussions with AID staff suggest will come next fiscal year. But those are always estimates on our part, because AID changes its priorities from time to time, and comes to us and asks us to do additional work.
But we have certain things that are fixed now, certain estimates are available for fiscal year 1999. We would be happy to provide those to you.
[The information follows:]
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INTERNATIONAL NUCLEAR SAFETY PROGRAM FUNDING
In FY 1997 the Department of Energy (DOE) received $45 million in direct appropriations for the International Nuclear Safety Program. This funding supported a core program that includes activities such as operator training improvements, fire safety upgrades, safety system equipment upgrades, flaw detection equipment, emergency procedures development, configuration management, safety assessments of Russia's older plants, and operational safety improvements. The Agency for International Development (AID) provided supplementary funding of $36 million in FY 1997 for safety upgrades to the Armenia nuclear power plant and for Ukraine in three specific areas: (1) safety parameter display systems, (2) plant training simulators, and, (3) safety analysis reports.
Likewise, in FY 1998 DOE received $35 million in direct appropriations for its core program and expects to receive $30 million from AID to continue the same activities funded by AID in FY 1997. In FY 1999 DOE has requested $35 million in direct appropriations for its core International Nuclear Safety Program. For FY 1999, AID has indicated that funding may be provided to complete the activities begun with AID funds in previous years.NUCLEAR FACILITIES PROGRAM
Mr. VISCLOSKY. My final question I would have is under the budget request you have a reduction of about $3 million in requests for facilities. I had expressed concern to the Secretary of the department yesterday that we have good people, we are doing good work, and our facilities need a lot of upgrading. I note in the budget that we have a $3 million reduction.
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From a program standpoint, is that fully funding your needs, or are we starting to fall short as far as facility operation maintenance and upkeep?
Dr. LASH. Well, I share your concern about the upkeep of facilities, and there is a great deal of work, more work that can and over time will have to be done. Unfortunately, that is true of other areas of my office's budget and other parts of the budget. So that is an amount that we judged appropriate for next year, but, yes, there are additional things that will have to be done with time in the facilities area and should be done over time. We are addressing in this budget some important safety issues, such as out in Idaho, and over time we are going to have to do more of that.
Mr. VISCLOSKY. Thank you very much.
YEAR 2000 ISSUE
Mr. FRELINGHUYSEN [presiding]. Thank you very much for your comments. I know everybody's blood sugar is low at this hour, but that doesn't mean we are through. I have just a couple of questions. Maybe your blood pressure is high. I am not sure there is a relation. To Dr. Krebs, the year 2000, the potential computer meltdown, how are you handling that issue? You have got more advanced computers than anybody, some remarkable people operate them. Where do we stand relative to an orderly transition?
Dr. KREBS. Well——
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Mr. FRELINGHUYSEN. You don't sound very confident.
Dr. KREBS. Well, first of all, I think this is an area of responsibility within the department that I know the Deputy Secretary is intimately familiar with and concerned about, and she has relayed her concerns and given each of the assistant secretaries who have responsibility some very clear marching directions. So I have received mine. There is no question about it.
So I am aware that the Department of Energy has, you know, quite a few critical systems that have been identified as problematic. I am aware of the systems that are within my responsibility. In fact, the real issue here is less the big scientific computers, for which I have some responsibility——
Mr. FRELINGHUYSEN. I thought you had major responsibility.
Dr. KREBS. Dr. Reis in Defense Programs also has major responsibility. But it is our administrative computers in the Department of Energy, in the field offices, and at our laboratories, where people depend on the year 2000 turning over correctly for their salaries, for environment, health and safety, record keeping, for these sorts of things, that I think the year 2000 issue is as important as anything else.
So what I can tell you is that we are paying attention in a very clear and urgent way, and we are being kept track of.
Mr. FRELINGHUYSEN. I am not sure I have got the answer I seek. Is the DOE, or at least your portion of the DOE, organized on this issue?
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Dr. KREBS. I believe we are. I mean, we are working to upgrade, to take care of the systems.
Mr. FRELINGHUYSEN. How much money specifically is dedicated to this issue?
Dr. KREBS. Within energy research, I can't tell you that number.
Mr. FRELINGHUYSEN. I think the committee would benefit knowing DOE-wide how this issue is being addressed and what types of dollars are being committed to the effort.
Dr. KREBS. Yes.
[The information follows:]
"The Official Committee record contains additional material here."
CO-FIRING IN COAL FIRED POWERPLANTS
Mr. FRELINGHUYSEN. I was intrigued by Mr. Reicher's response to an earlier question. You are suggesting we start burning corn stalks as a way to meet renewable energy demands? Did I hear that right?
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Mr. REICHER. Yes.
Mr. FRELINGHUYSEN. Coming from New Jersey, and I don't want to get the gentleman from Indiana excited, we are on the receiving end now of quite a lot of particulate and other types of matter, and you are suggesting that there is some excitement afoot about the burning of corn stalks?
I thought, and I am not a farmer, that one of the things you do is that you actually plow those back into the earth and that is a way of renewing the soil. Is there something afoot that I am not aware of?
Mr. REICHER. Let me answer. First of all, you are obviously on the receiving end of a great deal of air pollution, and the predominant source of that are coal-fired powerplants. The proposal here——
Mr. FRELINGHUYSEN. I didn't mention that, but thank you for mentioning it. I am glad to have that as a part of the record. Mr. McDade may want to come back and seize the microphone away from me, but go right ahead.
Mr. REICHER. I point that out only to say that the idea of co-firing, that is, taking a small percentage of the coal that goes into a coal-fired powerplant and replacing it with any number of biological kinds of materials, either dedicated crops, where you grow the crop to mix it with the coal or waste from agricultural or forests, actually can have a salutary environmental effect and, for example, it can reduce——
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Mr. FRELINGHUYSEN. How is that though? Explain to me how is that salutary?
Mr. REICHER. Let me talk about it in terms of climate.
Mr. FRELINGHUYSEN. If you could do it very briefly.
Mr. REICHER. Very simply. Crops that you grow in the Earth take CO2 out, and then when you burn it, they put the CO2 back. This is a net zero in terms of CO2 in the atmosphere. Whereas coal, the coal stream produces the CO2 that has not been in the atmosphere.
So what we say is these renewable crops that we replace a small percentage of the coal with are net CO2 zero kinds of substances. So from a climate perspective, you can reduce emissions.
I think there is also substantial possibilities to reduce other kinds of more traditional pollutants as well. Again, this is a small percentage of the coal stream, but other kinds of traditional pollutants as well that come from these powerplants.
Mr. FRELINGHUYSEN. I would welcome any rebuttal to that if anyone wishes to submit it for the record. Anything further?
YEAR 200 ISSUE
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Mr. VISCLOSKY. Just one question, following up on the year 2000, Dr. Krebs. I was told by a constituent from Hobart, Indiana, who claimed that he had a good Lutheran education, that the other problem in the year 2000 is it is not a leap year for the first time in 400 years, and because we will not have a February 29th, is that also going to cause an administrative problem?
Dr. KREBS. I can't answer that question.
Mr. FRELINGHUYSEN. Dr. Krebs, you have lots of work ahead of you. Unbelievable.
Mr. VISCLOSKY. Thank you, Mr. Chairman.
Dr. KREBS. I will certainly relay that to the people who are paying attention.
[The information follows:]
YEAR 2000 AND LEAP YEAR
Members of the DOE Year 2000 Project Team are aware of the special leap year situation associated with the century date change as it is mentioned in the Department's Year 2000 Project Plan. A reminder will be included in future communications with the Team and details about the leap year will be available on the Department's Year 2000 website for reference purposes. Year 2000 is a leap year and this could cause problems in two ways.
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The rule laid down by Pope Gregory in 1582 is that leap years are those that are divisible by four. Century years are only leap years if they are also divisible by 400. So the year 2000 is a leap year but 1900 was not, even though it is divisible by four. If the computer thinks it is dealing with the year 1900, not 2000, it will have a problem because 2000 is a leap year, but 1900 was not. Therefore, all entries for February 29, 1900, will be rejected.
A more likely scenario is that the computer system may recognize that the year is 2000, but because of programming error, may not understand that it is a leap year. Software programmers sometimes forget about leap years or have not provided for all the exceptions. An Internet site with an in-depth explanation (http://www.gmt-2000.com/leap.html) quotes from the Latin version in which Pope Gregory XIII defines ''anno vero MM'' (Year 2000) specifically as a leap year.
Mr. FRELINGHUYSEN. As one of your true fusion advocates, I am disappointed you can't answer that question. The committee is through, and we stand in recess until 10 a.m. tomorrow. Thank you very much for participating.
[The questions and answers for the record follow:]
"The Official Committee record contains additional material here."
Thursday, March 19, 1998.
ALASKA POWER ADMINISTRATION (APA)
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BONNEVILLE POWER ADMINISTRATION (BPA)
SOUTHEASTERN POWER ADMINISTRATION (SEPA)
SOUTHWESTERN POWER ADMINISTRATION (SWPA)
WESTERN AREA POWER ADMINISTRATION (WAPA)
WITNESSES
RODNEY L. ADELMAN, ADMINISTRATOR, APA
JACK ROBERTSON, ACTING ADMINISTRATOR, BPA
CHARLES A. BORCHARDT, ADMINISTRATOR, SEPA
MICHAEL A. DEIHL, ADMINISTRATOR, SWPA
MICHAEL S. HACSKAYLO, ACTING ADMINISTRATOR, WAPA
Mr. MCDADE. Please be comfortable, gentlemen.
The committee will come to order.
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We want to welcome our power administrators to the Nation's capital. We are looking forward to hearing your testimony. And I have seen your statements, which we are grateful for, and they have been made available to the members of our subcommittee. If there is no objection, I would appreciate it if each of you would submit them for the record, and proceed in that order.
A couple of brief observations, if I may, as we begin, and you are invited to comment. First, the PMAs have been the subject of some harsh criticism, and we have seen lots of proposals, as you are aware, to privatize, sell them, or move them to a market-based pricing system. And in response, there have been prohibitions to say don't even look at that issue; these are crown jewels and we don't want them touched.
Today we are rather at a crossroads as the States, one by one, participate in deregulation and restructuring, and fundamental questions are being asked about the role of the power marketing administrations in this new competitive environment.
I expect the members of our subcommittee have some strong views about what the Federal role ought to be, and we welcome their ideas and hope their questions are penetrating. If we are not sufficiently skillful at penetrating questions, please, you be penetrating. You are the experts.
CHALLENGES FACING THE POWER MARKETING ADMINISTRATIONS
I want to ask each of you to take whatever time—not too long, please, but take what time you think is necessary to concisely share your thoughts on the challenges that you see facing the power marketing administrations in the emerging national electricity market. We heard it said in here, and I don't think any of you would disagree, that this is probably the most significant energy step the Nation may take during our lifetime. It is entirely possible it is that significant.
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So, Mr. Adelman, if you would kindly kick it off and get us started, we would like to hear your comments.
ALASKA POWER ADMINISTRATION
Mr. ADELMAN. Mr. Chairman, Alaska Power Administration is a somewhat unique and isolated situation in Alaska with only two projects, and our solution, if you will, to deregulation has been the enactment of the Alaska Power Administration Asset Sale and Termination Act in 1995. So essentially we are about to complete the sale of our assets to the local utilities and be out of the business of power generation and transmission.
Mr. MCDADE. How soon do you expect that to occur?
Mr. ADELMAN. I expect to sell the final project this July and to have the agency totally closed by the end of fiscal 1999.
Mr. MCDADE. You sure have a clear-cut path, and we congratulate you for knowing exactly what you are going to do.
[The statement of Mr. Adelman follows:]
"The Official Committee record contains additional material here."
BONNEVILLE POWER ADMINISTRATION
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Mr. MCDADE. Mr. Robertson, we would like to hear from you.
Mr. ROBERTSON. Thank you, Mr. Chairman.
Let me say, first of all, I understand you may be retiring at the end of the term, and I wanted to thank you personally——
Mr. MCDADE. Guaranteed, sir.
Mr. ROBERTSON. Yes. I just want to thank you for your leadership and help on the committee side; Mr. Fazio also. I just want to express thanks to members of the committee who have done a tremendous amount of good for Bonneville and the West Coast and wish you well in retirement.
Mr. MCDADE. Thank you, and we welcome you here. We know that you have been in public service a long time.
Mr. ROBERTSON. Thank you.
Mr. MCDADE. And we are grateful to hear from you.
Mr. ROBERTSON. Let me just make—I will try to boil my statement down and make some of the most important points that I want to leave with the committee.
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Mr. MCDADE. Please.
Mr. ROBERTSON. First of all, this is Bonneville's 60th year and we had a very, very good year. The Bonneville news is very good at this point. We are going to come up with net revenues of $118 million, we expect, in fiscal 1997, which was the highest net revenue mark since 1991. We have made our 1997 annual payment of more than $775 million to Treasury. This is the 14th straight payment in a row; we are very proud of that record.
Mr. MCDADE. Mr. Robertson, can I ask a question? How is that calculated?
Mr. ROBERTSON. It is a calculation against the total debt that Bonneville has for both the transmission—
Mr. MCDADE. It is total debt, not on income?
Mr. ROBERTSON. Federal debt, against Federal debt for dams and transmission systems in the Northwest.
We have paid about $14 billion total to the Treasury through 1997. Our finances are in good shape. We expect to make our Treasury payment this year of $614 million; we expect to make another one next year and probably in the years after that.
Our power sales are going strong. We have gone out with a presubscription contract to test the future market. We have contracts guaranteeing our revenues through 2001. We are going out to test the market post-2001—we went out with a test of about 1,200–1,300 megawatts, and we have already sold over 700 megawatts, and that is about the equivalent to the City of Portland. We have achieved prices that are at or above our existing rates. And we expect to have a rate reduction coming up in the next rate period.
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Mr. MCDADE. Would these all be new starts as far as companies coming in? Relocations, expansions, that kind of thing?
Mr. ROBERTSON. These are mostly sales, Mr. Chairman, to existing utilities or other marketers in the Northwest. In some cases, there are sales to public utilities that we already sell to now; in some cases there are sales to other marketers or investors or utilities.
Our financial reserves are at $400 million this year. The average for the last 5 years has been $313 million. We are watching El Niño. El Niño has had an enormous impact on the water year in the Northwest. It has been about a 90 percent of average water year, so actually we end up looking like we are going to lose about $90 to $100 million simply on not having what would be a normal water year in the Northwest, but we hope to manage our costs such that we will maintain our reserve levels at or near $400 million.
We have cut costs since we met last—I don't think we have been in front of the committee for a couple of years. We have cut $600 million a year in our budgets since 1995. We think this has contributed greatly to our competitiveness.
Mr. MCDADE. Yes.
Mr. ROBERTSON. We have——
Mr. MCDADE. Can I interrupt you there, because we appreciate your expertise.
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Of that $600 million, how would it—I am sure part of it is downsizing efficiencies. Could you comment—spend a minute and describe how you were able to achieve that?
Mr. ROBERTSON. You bet. We cut costs in virtually all program areas except fish and wildlife funding. We cut in operations and maintenance, we cut in transmission planning, we cut in conservation and renewable energy areas, we cut in our overheads. We had about 3,750 Bonneville employees in 1994. We have cut 20 percent of those employees; at the end of this year, we expect to be down to 2,755 employees, which is the lowest level Bonneville employed since 1965.
So it was an across-the-board cut except in the area of fish and wildlife where——
Mr. MCDADE. Anything but fish and wildlife was on the table for examination?
Mr. ROBERTSON. Yes, correct.
So we cut those costs, and to make a long story short, that resulted in a 13 percent rate reduction which we put in place for this 5-year period, 1996 to the year 2001, and again we now have solid contracts and solid revenues. And that is the reason we think that our reserve levels will increase over time. It puts us in an excellent position to begin to market in the post-2001 period, so that we can provide additional stability and guarantees of Treasury payment in the long term.
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And the most important thing, I just want to leave a couple of points and then I will stop, Mr. Chairman, I have a couple of high priorities for this year particularly. We need to continue our cost-cutting. We have had recommendations from an independent, outside cost review panel that looked at our overall structure and said, we have made a lot of progress, we can make more—the panel suggested about $140 million in additional cuts not just from the Bonneville budget but from the Corps, Bureau, and other indirect budgets that Bonneville also supports. We are going out to the region to discuss how we can accomplish increasing the cost-cutting.
We need to stabilize fish and wildlife costs for another 5-year period. We have done that through 2001, and we want to come up with a mutually acceptable agreement in the region between 2002 to 2006.
When we add that to our cost structure, we then can turn to my highest priority, which is to begin to offer all of Bonneville's basic power supply in long-term, subscribed contracts beginning this summer. If we do that and get that done and accomplish it over the course of the next year or two, we will have stable prices not just through year 2001 but through 2006; and so we will then have over 10 years of stability, and we will be able to guarantee a continuation of our objectives for the committee.
So with that, I have other things I can say, but I will just leave it open for questions in the end.
Thank you for your——
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Mr. MCDADE. Thank you, Mr. Robertson.
[The statement of Mr. Robertson follows:]
"The Official Committee record contains additional material here."
SOUTHEASTERN POWER ADMINISTRATION
Mr. MCDADE. Mr. Borchardt, we are delighted to hear from you. Give us the benefit of your expertise.
Mr. BORCHARDT. Yes, thank you, Mr. Chairman. I appreciate very much the opportunity to meet with you all today.
The Southeastern Power Administration is located in Elberton, Georgia, and it markets power in 11 States stretching from southern Illinois to Florida and from Mississippi over to Virginia. We market within that quadrant approximately 3,300 megawatts of capacity and a little over 8 billion kilowatt hours of energy.
Last year we were——
Mr. MCDADE. Can I ask a question there? Eight billion kilowatt hours?
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Mr. BORCHARDT. Yes, sir.
Mr. MCDADE. I can't—I have a hard time relating to that. How can you explain it to me as a layman about how much——
Mr. BORCHARDT. It is not as big as you think it is.
Mr. MCDADE. Around here billions are billions.
Mr. BORCHARDT. A billion here, a billion there, it all adds up.
But basically, to give you an example, in our region, in the 11-State region, our energy constitutes a little less than 3 percent of the total amount of energy. So it is about 2.7 percent. So, relatively speaking, it sounds like a big number, but it is not that large.
Mr. MCDADE. Okay, that helps, thank you very much.
Mr. BORCHARDT. Last year we paid a little more than $35 million on the Federal investment. Up to fiscal year 1997, we paid about $582 million on the Federal investment. We still have approximately $913 million yet to recover in our effort.
We do feel like we are in a good position financially. To directly respond to your question about the impact of the restructuring of the utility industry generally, we are still in the throes of negotiating transmission arrangements.
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Southeastern, unlike the other power marketing administrations, does not own any of its own transmission facilities at all. So we achieve the transmission and marketing of power through wheeling contracts with neighboring utilities, and have done that since we came into business in 1950.
The restructuring of the electric business has brought into question some technical problems in regard to transmission. I don't want to bore you with all the details, but the concept of being able to obtain network transmission service as opposed to, say, point-to-point transmission service has been a big issue with us, and we think we have finally resolved that issue with the Federal Energy Regulatory Commission.
Mr. MCDADE. Would you define those two——
Mr. BORCHARDT. Yes, point-to-point service basically means that you have to designate a source of generation to a particular customer's load. That takes away the diversity of a hydropower system where one day we may have generation out of one project, the next day it may be from another project that we want to generate power from. So it gives us a great deal of flexibility with a hydropower system.
We have no thermal generation facilities to back up the hydropower so——
Mr. MCDADE. Mr. Borchardt, will you kindly pull that mike over a little bit? I am having a little bit of——
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Mr. BORCHARDT. Yes, how's this? Is this on?
So technical issues such as these have slowed down some of our transmission contract negotiations, but these are coming around.
Mr. MCDADE. Who are you negotiating with?
Mr. BORCHARDT. Well, we have several customers—I mean, several entities that we negotiate with, the Southern Companies, Duke Power, Santee Cooper out of South Carolina, Virginia Electric and others—Kentucky Utilities——
Mr. MCDADE. A lot of folks at your table, Mr. Borchardt.
Mr. BORCHARDT. Yes, sir.
Mr. MCDADE. Go ahead, sir.
Mr. BORCHARDT. Basically we feel like we are poised to recover the costs of the Federal investment, and we are positioned to work well in a restructured utility industry. I would be glad to take any questions you might have.
Mr. MCDADE. Thank you, we appreciate your testimony.
[The statement of Mr. Borchardt follows:]
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"The Official Committee record contains additional material here."
SOUTHWESTERN POWER ADMINISTRATION
Mr. MCDADE. Mr. Deihl, we will be delighted to hear from you.
Mr. DEIHL. Thank you, Mr. Chairman. It is a pleasure to be here this morning to present Southwestern's FY 1999 budget.
I agree with you. I have 22 years in Federal power systems, since 1992 as administrator, and these are probably the most challenging times, I think, that I am aware of and exciting times. I think there is a lot of opportunity here for us. Southwestern is in good financial shape. I believe we are well positioned to deal with the changes that we are aware of right now in the electric utility industry, and I think we will be able to handle what comes down the pike to us.
We have filed open access tariffs with FERC. Even though we are a nonjurisdictional entity, the Department of Energy has taken a position that we should support those efforts. We have actively participated in and are a strong proponent of participation in the Southwest power pool. We are in total support of region-wide tariffs and working with them.
We are also actively working with them to develop an independent system operator for the future, and at the end of 1998, we are estimating that we will pay back $433 million of approximately a $1 billion Federal investment; and our net revenues for that year—we believe we have got a pretty good water year going this year—will exceed $100 million, which we will return to the United States Treasury this year.
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And with that—I will keep it brief—I would be happy to answer any questions I possibly can here today.
Mr. MCDADE. Thank you, and we appreciate your 22 years. We need to hear from you on your expertise, so don't hesitate to inform us. That is why we are here.
Mr. DEIHL. Thank you.
[The statement of Mr. Deihl follows:]
"The Official Committee record contains additional material here."
WESTERN AREA POWER ADMINISTRATION
Mr. MCDADE. Mr. Hacskaylo, we are delighted to have you here and appreciate your testimony.
Mr. HACSKAYLO. Thank you, Mr. Chairman. I am pleased to be here.
Western Area Power Administration is well situated to participate in the changes in the electric utility industry in the upcoming years. We are taking very seriously the direction and guidance from the conference committee in last year's appropriation act that we need to keep our wholesale rates as competitive as possible while maintaining as robust a repayment stream back to the Treasury as possible.
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To that end, we reduced our budget by $48 million, approximately 13 percent over the last 2 years. We have reduced staff by about 25 percent, over 300 people in the last 2 years. We have filed with the Federal Energy Regulatory Commission our open access tariff that will permit anyone who is interested to have access to Western's 17,000 miles of transmission line throughout the western United States.
We are participants in the major restructuring initiatives with regard to independent grid operators, independent transmission operators and security coordinating centers in the western United States. We are playing a significant role with the Western Systems Coordinating Council with regard to the changes that we are dealing with in terms of reliability and improved communications, and improved system reliability. We are well situated.
In fiscal year 1997 we made a $107 million payment to Treasury on our debt. We had revenues of $882 million last year. We are situated, we are ready to go, we look forward to changes. It is a challenge for all of us. It is going to be very, very interesting.
Mr. MCDADE. We thank you very much for your testimony and all of you.
[The prepared statement of Mr. Hacskaylo follows:]
"The Official Committee record contains additional material here."
ROLE OF PMAS IN A DEREGULATED ELECTRIC INDUSTRY
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Mr. MCDADE. We have referred obviously to the competitive environment that is going to exist when we get to deregulation, and I think we are all agreed that it is coming. That is going to develop a whole new scenario of competition, and I hear you saying that you know you are cutting costs, you are downsizing, you are leaning out for the fight, if you will.
How do you see your role when you get to a new environment where the—theoretically, the country is totally deregulated with respect to electricity. What do you see as the niche that you will fill, the purpose that you will serve when that time comes?
Suppose we go the other—Mr. Hacskaylo will start.
Mr. HACSKAYLO. The initial Western feeling is that we have close to 17,000 miles of high voltage transmission line throughout the western United States in our service territory. We are interconnected with all of the major utilities in the West, both publicly owned and privately owned. We have contractual arrangements with all of them. We handle power for them, they handle power for us. So we see our role as a transmission provider as being very significant in this deregulated industry at the wholesale level.
We also see that we will continue to sell both firm power and nonfirm surplus energy in good water years, helping keep costs low for consumers throughout the entire 15-State service territory that we serve.
TRANSMISSION SYSTEMS
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Mr. MCDADE. You mentioned that the transmission miles—to a person from the East it sounds like a lot, but I look at your territory, and it sort of sounds like that might be a drop in the bucket in terms of—I am not saying it is insignificant, 17,000 miles is enough to get anybody's attention, but the geography that you serve is so large. Who, for example, would be the biggest transmission outfit in that area and how big would they be in relation to you?
Mr. HACSKAYLO. Okay, well Western has the third largest transmission system in the western United States. Other very large transmission providers are PacificCorp, PG&E, Los Angeles Department of Water and Power, Southern California Edison Company. So it is a mix of companies in the West.
Mr. MCDADE. Explain L.A. Power to us, will you? Is that municipally owned? It sounds like it.
Mr. HACSKAYLO. Yes, the Los Angeles Department of Water and Power is municipally owned. It has an extensive transmission system interconnected with Western's Boulder Canyon project at Hoover Dam, from which Los Angeles buys power.
Mr. MCDADE. But you see no bumps coming your way as a result of the deregulation around the country?
Mr. HACSKAYLO. Sir, we see plenty of bumps coming, but I think we are poised, we are situated to deal with those bumps, all of us in the electric utility industry——
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MAJOR DEREGULATION CHALLENGES
Mr. MCDADE. What is the top mountain you have to climb?
Mr. HACSKAYLO. The top mountain we have to climb is that we need to be able to maintain a good solid core staff of Federal employees to deal with the competitive wholesale industry. That is the major challenge I face as acting administrator.
Mr. MCDADE. Mr. Deihl, would you like to comment, please?
Mr. DEIHL. Thank you.
Southwestern is very similar to Western Area Power Administration's situation, but on a much smaller scale. We serve a six-State region, and we have about 1,400 miles of transmission line. In addition to being a fairly important player in the transmission systems of that area, and in integrating our systems with theirs, Southwestern has a very important role in the management and assisting in the management of scheduling power out of multipurpose hydro projects.
Not being a profit-based organization we have cost-based rates. We feel we play an important role in the management of a valuable resource, and that is the water which goes through those dams to generate that power. And I believe that is one of our most important roles in our part of the country.
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Mr. MCDADE. And you will continue to exercise full authority over that deregulation or not, won't you?
Mr. DEIHL. Authority over the water?
Mr. MCDADE. Yes, you will still have the same abilities no matter what happens with deregulation.
Mr. DEIHL. The actual authority of scheduling the water lies with the Corps of Engineers, not with the Federal Power Marketing Administration, but——
Mr. MCDADE. They're talking to you pretty regularly, aren't they?
Mr. DEIHL. Yes, sir, we work hand-in-hand daily.
Mr. MCDADE. There won't be any interruption or impediment in that relationship.
Mr. DEIHL. No, sir, that will be a continuing relationship. In fact, it is getting stronger and we are scheduling and have conducted our first joint conference with the Corps, the public in the areas we serve and the Power Marketing Administration to discuss future issues and how best to manage the power systems and the hydrosystems.
Mr. MCDADE. Mr. Borchardt.
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Mr. BORCHARDT. Yes, we at Southeastern, of course, like the other two PMAs that just spoke, do market power in the wholesale area. We, unlike the other two, or really other PMAs here—of course, do not own any transmission facilities; and as I mentioned earlier, that has become a bit of a challenge, but we feel like we are surmounting that.
One of the biggest challenges I believe we face is the unknown—the fallout of deregulation and the decreasing prices that may be occurring in the wholesale area; and our customers may be wanting to give up some or all of their allocation. We want to be flexible and be able to meet whatever needs need to be met in the area. I think—reflecting what Mr. Hacskaylo said earlier, what we need to do there is maintain a core of competent Federal employees to meet that challenge and be rather flexible.
Mr. MCDADE. Thank you.
Mr. Robertson.
Mr. ROBERTSON. Mr. Chairman, Bonneville markets about half the electricity consumed in the Pacific Northwest region—Montana, Idaho, Oregon and Washington. We own about 75 percent of the high voltage grid in the Northwest, and we also act as the U.S. entity for the U.S. Canadian treaty which governs the flow of the Columbia River across Canada and the United States.
What is most important to me as deregulation approaches, first of all, we feel we went through deregulation in 1992 when the wholesale deregulation occurred. For Bonneville, it caused a major change in cost structures. Bonneville met that challenge by cutting costs, as I described earlier, and through a whole variety of actions, and we now feel like we have turned the corner in that competition and we are well prepared to now move the competitive costs at the wholesale level out to the retail level as retail competition begins to take place state by state and is considered in the Congress.
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My biggest objective in all of this is to meet my Treasury payment obligation, which is very large, one of the largest I think in the country, to meet my public purpose obligations, which means we have to integrate a complex hydrosystem across four states. We have to provide open access and very competitive transmission rates and allow others to use the transmission system freely in order to encourage competition.
We have to continue managing the Canadian treaty system. We also provide a series of public benefits in the region that are key and provide about $400 million a year in fish and wildlife program moneys which is the largest, at least financially, I think, the largest such program of its kind in the country or the world.
We provide conservation and renewable energy; we have provided about $2.5 billion in energy exchange benefits to higher-cost utility customers throughout the region since 1980 and a variety of other objectives that we meet on an integrated basis under a variety of laws that govern Bonneville.
Mr. MCDADE. Thank you, Mr. Robertson. It is an interesting discussion.
Mr. Adelman.
Mr. ADELMAN. Mr. Chairman, with Alaska's capital city Juneau being an electrical island, there is really no impact with the sale of this national project. In the case of Anchorage, essentially our role has been to get out of the way. By selling the Eklutna project, we have essentially turned over the transmission lines to the three potentially competing local utilities.
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Mr. MCDADE. Mr. Adelman, there are a lot of folks down here looking for a good employee. There are none better than you, it sounds to me.
I am pleased to recognize my friend from California.
POST 2004 CVP MARKETING PLAN
Mr. FAZIO. Thank you, Mr. Chairman, and let me thank you for scheduling this hearing because there are some important issues that are vital not only for the regions impacted, but for the country as a whole; and I am pleased to have a chance this year to have some interaction.
I wanted to indicate, by the way, that Mr. Pastor had been here and misses the opportunity to interact with you all, but he has taken on one of those unique assignments here, the Ethics Committee, and he is in a bunker somewhere all day and won't be able to come out for air. So he isn't here with us, but he may have some questions for the record.
I have a lot of constituents, city council members, mayors in California, some directly in my area, who are very pleased with the public process that we have been going through to extend CVP power contracts; and as Mr. Hacskaylo knows, it will be the one we are particularly focused on, negotiating at the moment would be about to expire in 2004.
A lot of money and a lot of work have been spent in this process up to now. I am wondering if you could give us some sort of a reading on how the process is proceeding and whether or not we are going to get where we need to get before that date.
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I know we have had extensions in the Midwest and the Southeast; I assume we are operating on a similar premise. But I think particularly in light of the importance of the Central Valley Project to Western Area Power Administration's purview, I would like to hear from you, Mr. Hacskaylo.
Mr. HACSKAYLO. Yes, sir, Mr. Fazio.
Western Area Power Administration's post-2004 marketing plan is on schedule. We have completed our environmental documentation, and our public process involving all interested parties and stakeholders. Where we are now is reviewing policy issues within the Department, and we hope to be able to make some decisions in the near future with regard to bringing the marketing plan to successful closure.
COMPETITIVE ELECTRIC POWER RATES
Mr. FAZIO. I know the Chairman has asked about how we are all going to be responding to restructuring. You know, I think that we might as well talk about it publicly here, concerns that some of our colleagues have that the PMAs provide municipal utilities with an unfair advantage in a deregulated electricity market. I would be interested in your reaction to that, and then perhaps some of your colleagues here on the panel.
Mr. HACSKAYLO. Yes, sir.
With regard to concerns about an unfair advantage, I don't see any unfair advantage, given the fact that Western's power rates are competitive in the industry at the wholesale level. I might also add that with regard to our nonfirm energy sales, that is, energy that is generated with surplus water in fiscal year 1997, we sold about $110 million of that to investor-owned utilities as well, so the benefits——
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Mr. FAZIO. This year could be an even bigger year.
Mr. HACSKAYLO. Given the amount of rain in California, given the amount of moisture in the upper Midwest, we expect to have again quite a bit of surplus generation.
So I think we do provide public benefit to the public at large. Our rates, as I said, are competitive; there are power marketers out there that are beating our rates, that have rates lower than we do because of natural-gas-fired generation. That is why we are working very hard to cut our costs, control our costs, maintain our costs to keep our rates competitive, to stay in business, and to ensure that we can repay the Treasury for the investment allocated to power.
Mr. FAZIO. Let's go down the panel, and I would like to hear, you know, response in general to some of the arguments that we occasionally pick up here in Congress as we review your budgets. We have often had some asset sale proposals that in the past have troubled this committee, and I hope would continue to.
Mr. Deihl.
Mr. DEIHL. Thank you, Mr. Congressman.
As you know, it is an issue that has been around quite awhile; it is not a new issue. But as our rates compare in the area—for an example, our composite 1,200-hour peaking power rate is about 3.04 cents per kilowatt hour. If you look across the board to the customers that we serve, their average rate is about 3.5 cents per kilowatt hour. There is not a big difference there.
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The one thing that has always troubled me when we talk about rates is comparing apples to apples. For Southwestern Power Administration we sell 1,200-hour peaking power contracts, and it seems like we get caught up in the comparison with nuclear and coal, all these other facilities that have fuel costs. We don't have fuel costs and we have never done any kind of detailed study on market rates in the Southwestern Power Administration. We are prohibited by law from studing anything like that as far as the sale, so we haven't, but I think it would be interesting to take a look.
Mr. FAZIO. Your First Amendment rights have been imposed upon, we realize that. [Laughter.]
Mr. DEIHL. Thank you, sir.
Well, I am sitting between two attorneys. [Laughter.]
Mr. FAZIO. That is why we want to listen to you.
Mr. DEIHL. I would like a copy of the record so when I talk—the point I am trying to make here is that there are a lot of discussions about ''on a level playing field,'' and I guess I would just encourage all Members of Congress, and everybody really, to take a hard look at this to make sure we are comparing apples to apples; and when we talk about a level playing field, especially with the market the way it is going, it is changing, I am not so sure you are ever going to get a level playing field with anybody. To me, the playing field is always going to be tilted—the one that has the lowest rates in the competitive markets is going to be the winner.
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So I guess that is my contribution to that, sir.
PMA RESPONSIBILITIES
Mr. FAZIO. Mr. Borchardt.
Mr. BORCHARDT. I would second a lot of what my colleague, Mr. Deihl, just got through saying; but I would add, too, that as far as Southwestern and Southeastern, I know a little bit about Southwestern, having worked there previously, but I do know that we—let me just talk about Southeastern; maybe I will be on safer ground that way.
We have primarily just a hydropower system. We do not have any kind of thermal generation to back that up, so the bottom line is, when it rains, we can sell power. When we are in drought conditions, though, we have to purchase power to meet our contract commitments.
Our contract commitments are based upon average water conditions. So consequently, in good water years, we have surplus energy to sell and we generate more revenue. That is offset, of course, by drought conditions.
I think people—I would also add that we do not have utility responsibility; that is to say, if somebody comes to us and says, we want to purchase power from you and we want you to supply energy and power to our town or our home, we cannot do that. We have very limited generation facilities. We are one purpose in a series of multiple-purpose hydropower projects.
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On the other hand, investor-owned utilities and certain state agencies do have that utility responsibility. If somebody comes to them and says, hey, we want electricity and we want it reliable and we want it now, if the utilities don't have it, they have got to go out and build those generation facilities and see that the people have it. It is a tremendous responsibility, but it is far——
Mr. FAZIO. Or conserve it these days.
Mr. BORCHARDT. But it is far different from what—the way we operate.
I do think that the multiple-purpose aspect to these projects is overlooked. We have to compete with the use of the water for many other purposes at the project—flood control, water quality, recreation and fish and wildlife, and navigation. A lot of times we have—I can't say a lot of times, but sometimes we will be generating, and they will ask us to stop generating at one project and start generating at another because they simply have a barge hung up on a sandbar; and we have got to be flexible in doing that.
Mr. FAZIO. You have a wide variety of other public pressures on you to balance the use of the resource.
Mr. BORCHARDT. That is right, and the Corps has to balance those.
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Mr. FAZIO. And you don't really have the operational authority to override any of those agencies?
Mr. BORCHARDT. We can make requests to the Corps of Engineers in our case.
Mr. FAZIO. Right, I get the impression that they don't always respond to those requests because they have got other pressures on them.
Mr. BORCHARDT. That is true.
Mr. FAZIO. Some of which we bring.
Mr. BORCHARDT. That is very true.
Mr. FAZIO. Mr. Robertson.
Mr. ROBERTSON. Yes, Mr. Fazio, I just have to add to a couple of points in the comments that have already been made.
Bonneville has paid off all of its debts. It remains constant on its debts, and we also have a very large public mission in which the cost-based rates that we provide are funded, a $400-million-a-year fish program in addition to all the other things I had mentioned earlier.
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We went through a regional review as to how Bonneville would sell its power in the context of a new deregulating environment. In the last couple of years, the region's governors came together and came up with a plan, and basically the plan was for Bonneville to come back with its cost-based rates to provide sales to public utilities and then to farms and homes of the investor-owned utilities of the region, and beyond that to the industries in the region and then to California, so there is a plan. Bonneville is not going to compete at retail. We are basically providing wholesale service, we think at very competitive, cost-based rates while adding a large public mission that we don't see anybody else providing.
Mr. FAZIO. I appreciate your response because it really leads into this whole question of whether you should be forced to charge cost-based rates or market-based rates in the future, which the Congress may well want to deal with in the context of the overall restructuring.
Do you think it would be? And maybe we should start back the other way. Mr. Adelman? I don't know what you want to add at this point.
By the way I liked your bio, recovering parent of two teenagers.
Mr. ADELMAN. Thank you.
Mr. Fazio, as you well know, the idea of competition in Alaska is probably not very meaningful, except possibly in the Anchorage area, and I would think when the Alaskans think of the level playing field, they would think more of the difference between what it costs for electricity in the rural areas, 50 cents per kilowatt hour, or upwards and maybe down—really, that is the only thing that I could offer with respect to this question.
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MARKET BASED RATES
Mr. FAZIO. Well, maybe we could go back and specifically focus in on what Mr. Robertson has put on the table here, and that is this potential for Congress to try to—or even perhaps the administration—to recommend that we go to a system of market-based rates.
Mr. Borchardt, I guess Mr. Robertson said pretty much what he had to say on that subject.
Mr. BORCHARDT. Well, by statute, our rates are based upon our costs, and certainly if Congress changes that, we will go with the mandate Congress gives us. But I hear the term market-based rates and cost-based—market-based rates tossed around here frequently; and I am not real sure exactly what that means. We, for example——
Mr. FAZIO. Courageous to say that most of us wouldn't admit it, but I think it is true as well.
Mr. BORCHARDT. Well, in my homestate the investor-owned utility there is Georgia Power Company, which is part of the Southern Company. They don't sell their power at market-based rates; they have a specific rate that they have for their power, and that is based upon their costs and a reasonable return of revenue and so forth.
I don't know how you would go about composing or obtaining a rate for a resource primarily that is dependent upon the water. If we have the water, we have it; if the water drops below the power pool, we can't market. We sell peaking power, it is not like you are selling out of a coal fired plant which is a base-load plant. The thing that bothers me most is how you would go about composing or obtaining the actual market-based rate, so to speak.
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Mr. FAZIO. Um-hmm.
Mr. Deihl.
Mr. DEIHL. Well, I would concur with what Mr. Borchardt just said. All of us have talked at different times, and we always end up back at this point: What are ''market-based rates''? What does that mean? So to me the first obstacle would be to define it, establish the equation of what those market-based rates would be.
I think the only other thing I might add to this discussion is, I believe it was in the CBO report, there was a number quoted in there, about a 40 percent increase, to the market-based rates, and I have never figured out how that number was arrived at. I don't understand that other than perhaps I go back to my apples-to-apples type of thing.
I don't know how that number was arrived at, and if we were to seriously look into that, if Congress looked into this, as you are authorized to do, or go to market-based rates, I think our energies would first have to be focused on establishing the equation of what that is.
Mr. FAZIO. Tends to have a bias in the outcome of the debate when you come up with that kind of a number out of thin air.
Mr. DEIHL. I believe so.
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Mr. HACSKAYLO. The only thing I have to add, Mr. Fazio, is that with regard to Western Area Power Administration, we compete at the wholesale level. If there is upward pressure on our rates, the question we really have to face is what that will do to our efforts to repay the investment we are required to repay by law. It could make us unmarketable, and that is a significant concern.
ENVIRONMENTAL MITIGATION AT WAPA
Mr. FAZIO. Just for you Mr. Hacskaylo, and this will be my last question, give the committee some feel for how WAPA works to integrate its environmental mitigation. I know you and Bonneville have tremendous problems, growing problems in this regard with your hydropower producing capabilities, which are your major sources of supply obviously. And how would this be impacted—by some sort of privatization or restructuring which would include you?
Mr. HACSKAYLO. Well, in the western United States, water is released through the dams by the Bureau of Reclamation not to meet hydropower requirements, but to meet other requirements ahead of hydropower, such as flood control, navigation, municipal and industrial water supply, and irrigation. What we have been tasked to do by the Congress both in the Central Valley Project of California and on the Colorado River is to provide, through power revenues, moneys to restore the Central Valley Project as part of the Central Valley Project Restoration Act of 1992.
We are doing the same thing with regard to the Grand Canyon under the Grand Canyon Protection Act of 1992 as well. So our revenues are applied to assist in mitigation and restoration of environmental issues, environmental concerns, on both of those major river systems.
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With regard to the Colorado River and Glen Canyon Power Plant, the power plant itself effectively has been de-rated by, I believe, 400 megawatts or so, because of a change-in-flow regime to benefit downstream environmental uses. So what is happening is, the resource we market is being reduced as we work with other Federal agencies to comply with the environmental requirements of law.
Mr. FAZIO. Mr. Robertson, do you just want to comment on that, as well, and that will be the end for me.
Mr. ROBERTSON. We have been engaged since before 1990—well, since 1980, Bonneville has had responsibility for mitigating damage for fish and wildlife in the Columbia Basin, and that program has grown, as I indicated earlier, to a base level program of costs of about $252 million, on average, per year for the next 5 years and a flow regime that literally changes the flow of the Columbia River and costs, depending upon if it is a high-water year or a low-water year, some place between $90 and $280 million, depending on what goes on.
In fact, just yesterday I was involved in negotiations with the National Marine Fishery Services regarding biological opinions associated with prospective listings of endangered stocks in the Columbia River basin. We are engaged constantly in discussions with other Federal agencies, tribes in the region, and states in the region, about how to integrate the river for both environmental purposes, but also for energy efficiency and economy purposes.
Mr. FAZIO. Thank you.
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Mr. MCDADE. Ladies and gentlemen, you probably are aware we have some votes called in the House of Representatives and we have to absent ourselves. We will be back. We are going to recess for approximately 15 minutes, and we will see you then.
The Committee stands in recess.
SALE OF PMA POWER
Mr. KNOLLENBERG [presiding]. The committee will come to order.
Let me focus on—in my questions on some specifics on the auction of PMA power. By the way, I want to thank all of you for being here. We appreciate your testimony.
It seems to me that when the Federal Government enters into contracts to sell its resources—this includes coal, timber, oil and natural gas—the process is governed by a series of statutes such as the Mineral Leasing Act, the National Forest Management Act; and it is my understanding that these programs require open and public bidding; number 2, the disclosure of all bids and prices; and number 3, the careful determination of fair market value. However, the PMAs seem to sell their excess electricity with virtually no oversight. In fact, the Federal Government has more protections, I mean, for the sale of scrap paper, than it does for the PMAs and their sales of millions of dollars of electricity.
Specifically and for example, it is my understanding that in 1996 the Bonneville Power Administration contracted to sell a minimum of 200 megawatts of power to new energy ventures in California.
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The question—I think this will be for Mr. Robertson—I know that you are the acting administrator, but I presume this would fall under your background there, in your time in the arena:
One, were there any competing bids in that transaction?
Mr. ROBERTSON. If I may go back over that a little bit, what happens in this situation, specifically with respect to surplus sales of power into California, is that we went out to the region and we said okay, we look like we have a measurable amount of surplus for a certain period of time, we want to go market that in California; and because California is deregulating, because it is a complex environment, we said we want to engage, as we have historically, with various marketers, including NEV, but also with other utilities and marketers in the region to sell our power at the highest price we can achieve. We indicated, as a result of that, that we would not go out into those California markets without achieving——
Mr. KNOLLENBERG. Was that minimum bid price set?
Mr. ROBERTSON. Yes. What we said was that we would want to make sure that any product we sold to California would meet or exceed the existing priority firm rate of Bonneville in the region. We set a criterion which said we wouldn't do an arrangement with NEV or anybody else that wouldn't meet our minimum cost standards, or exceed that over time; and the NEV deal, among others, that we are hoping and proposing to do in California, would meet that standard.
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Mr. KNOLLENBERG. Was that information made available to the public?
Mr. ROBERTSON. We went through a public process to establish both the amount of the surplus we had and the amount of surplus that would be made available; and in that public process and record of decision, we described how we would sell the power and under what terms we would sell the power.
Mr. KNOLLENBERG. So there was sunlight on the whole process?
Mr. ROBERTSON. On the structure. Now there is not sunlight on the entire process, I have to be honest and say what we have done is, we set up and created a box within which we would then go market power within criteria that were set in the public process. Within that box, because the market is so dynamic, we needed to have the flexibility to market to what we think are the highest cost bidders, the highest value responders.
And so in that context, the NEV deal fits within that context. But no, the specific NEV deal did not go through a public process to check it out before we went forward; and if we did, we would be worried that we wouldn't be able to complete processes necessarily because there would be potentially a lack of folks competing for the——
Mr. KNOLLENBERG. Was any EIS statement required?
Mr. ROBERTSON. We completed a record of decision generally associated with the surplus power sale to California and we did an EIS on our general business plan. We covered all sales of Bonneville, and this also included surplus sales to California. There was not a specific EIS on the NEV arrangement, but it did go through a public process, and it was directly related to actions taken by Congress allowing us to——
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Mr. KNOLLENBERG. There was some daylight, but there was also, some of it was behind closed doors; is that what I'm getting?
Mr. ROBERTSON. We agreed to set up the structure and to assure the people in the region that we would not sell the product in California at less than that which was being sold in the Northwest.
Mr. KNOLLENBERG. Can we in Congress have the assurance that this—and the committee, know that the taxpayers did get a fair shake on this? Is there a way that we would know that?
Mr. ROBERTSON. Well, I think that we certainly are adding up all of the sales we make. As I indicated earlier, we sold about 700 megawatts of power, right now about the equivalent of the City of Portland; and we are selling additional—we expect to sell an additional 500 or 600 megawatts in our early sale offerings. We will put the total accumulated sales on the table; we will describe, and already have described generally, where those sales are going and at what prices those sales will be achieved at.
Mr. KNOLLENBERG. For the record, I would appreciate it if you could provide information on other contracts that Bonneville might have; and also the other individuals here representing your various entities, information on anything like the New Energy Ventures/Bonneville undertaking. If there is any other out there, we would like to have that information for the record, as well, and if you would also provide how much power was included, the contracts and at what price?
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Can you provide that? Not now, but can you get that information and get it to us, all of you?
Mr. ROBERTSON. We will work with the committee to get you that information.
Mr. KNOLLENBERG. All right.
[The information follows:]
"The Official Committee record contains additional material here."
VOLUNTARY SEPARATION INCENTIVES
Mr. KNOLLENBERG. Let me go on now to the so-called—may not be what would be referenced as ''golden parachutes'' in some people's minds, but as you know, in fiscal year l996 the Bonneville authority gained—the Bonneville facility gained the authority to dole out some $25,000 separation incentive packages; and in bill language that year, the Bonneville administrator may offer, it says, ''employees voluntary separation incentives, as deemed necessary, which shall not exceed $25,000. Recipients who accept employment with the United States within 5 years after separation shall repay the entire amount to the Bonneville Power Administration.''
How much has Bonneville reduced the number of their FTE since 1996?
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Mr. ROBERTSON. Well, if I may, in 1994 we had 3,755 FTEs, in 1996 we had 3,160 FTEs. We expect to have, by the end of 1999, about 2,755 FTEs.
Mr. KNOLLENBERG. How many FTEs does Bonneville have today?
Mr. ROBERTSON. Today, we expect to have 2,930 FTEs at the end of fiscal year 1998 .
Mr. KNOLLENBERG. How many of these $25,000 packages have been used as an incentive for voluntary separations for those?
Mr. ROBERTSON. We have had—I will give you specific numbers going back to 1994 if you like. In 1994 we used 240 VSIs.
Mr. KNOLLENBERG. Meaning?
Mr. ROBERTSON. Voluntary separation incentives, yes.
In 1995 we used 192; in 1996, 138; in 1997, 138; and as of December 30, 1997, we have used 82 for fiscal year 1998. If I may say, this was provided by Congress. It has been a tremendously valuable tool in getting Bonneville down to an FTE level that is now equal to our 1965 level. So this is one of the things that was very helpful.
Mr. KNOLLENBERG. How much total money has Bonneville spent in arranging for these packages since—well—let's go back to 1994, and if you don't have that number on hand, you can provide it for the record.
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Mr. ROBERTSON. I would be happy to do that. I don't have it on hand. Do you want the total number associated with the VSIs?
Mr. KNOLLENBERG. How much they spent in voluntary separation packages for the last 4 years. Really, I think that falls into that time frame that you were just expressing.
Mr. ROBERTSON. Yes, we will provide that.
[The information follows:]
"The Official Committee record contains additional material here."
VOLUNTARY SEPARATION INCENTIVES
Mr. KNOLLENBERG. All right. Do you plan to, and I presume you do—plan to reduce the number of employees in the coming year?
Mr. ROBERTSON. Yes. We have a fairly extensive reduction effort underway. In fact, we just had an outside management review suggest that we cut overhead by 50 percent at Bonneville, and that will mean that we cut hundreds of additional employees not just in the next year, but going through the year 2001.
Mr. KNOLLENBERG. Are there any other power administrations that are able to give their employees $25,000 voluntary separation incentives?
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Mr. HACSKAYLO. Mr. Knollenberg, Western Area Power Administration has, in the past, used the legal authority provided by Congress to the government as a whole, to the executive branch as a whole, for these voluntary separation incentives, yes, sir.
Mr. KNOLLENBERG. Good.
Mr. Deihl.
Mr. DEIHL. And that also applies to Southwestern Power Administration.
Mr. KNOLLENBERG. Mr. Adelman.
Mr. ADELMAN. Congressman, we have used a total of three buyouts in trying to reduce our staff from 31 in 1996 down to the five that we have today.
Mr. KNOLLENBERG. Mr. Borchardt.
Mr. BORCHARDT. We have that authority. I just offhand don't know how many we have used, if any.
Mr. KNOLLENBERG. Again, if you would, we would like to have the information for the record on each case—even in the three, if you wouldn't mind, Mr. Adelman. And I presume that the—at each of the other locations, the other entities have reduced their FTEs in the last 4 years as well?
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How much would you say that—and if you don't know this number, I think that may have been in my previous question. What I would like to know is how much money has been spent voluntarily to separate employees from the entire group of PMAs, and if that is something that needs to be requested in writing, we can do that, but I would like to know that in addition.
I would appreciate all of that information going back—it would actually be through fiscal year 1996, I guess, wouldn't it? That would give us the time frame we are talking about to be consistent with everybody. Or are you going back to——
Mr. ROBERTSON. I go back to 1994. I think we provided this information last year, Mr. Chairman, and we would be happy to supply it with all of the other PMAs.
[The information follows:]
"The Official Committee record contains additional material here."
Mr. KNOLLENBERG. I am going to conclude at this point and will bring back the Chairman—oh, okay, I will bring back the Chairman in just a little bit, but first of all, let's recognize Mr. Visclosky, who is next in line.
SALE OF ALASKA POWER ADMINISTRATION
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Mr. VISCLOSKY. Thank you very much, Mr. Chairman.
Does the Alaska Power Administration cease to exist at some point in time here?
Mr. ADELMAN. Yes, Congressman. Within one year of the sale of the final project, the Snettisham project, which is now targeted for July 15th of this year, the Alaska Power Administration will be totally terminated and it will no longer exist.
Mr. VISCLOSKY. And that last sale was anticipated to take place sometime in the summer of this year; am I correct?
Mr. ADELMAN. It is targeted for July 15, but under the terms of the purchase agreement it must take place no later than August 20 of this year.
FY 1999 PMA BUDGET REQUESTS
Mr. VISCLOSKY. Okay, and as I understand it, you are not asking for an appropriation and Bonneville is not asking for an appropriation, is that correct? If I am correct, Southwest, Western and Southeast are asking for appropriations this year.
Mr. ADELMAN. That is correct.
Mr. VISCLOSKY. And Western's request is $215 million, thereabouts; Southeast is about $8.5 million, as I understand it; and Southwest is about $25.2 million.
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Okay, if I could just ask a couple of philosophical questions because apples and oranges had been raised earlier. Mr. Fazio had a line of questioning; I think I was one of the people he had in mind at least for a portion of his questions.
Mr. FAZIO. You were listening.
Mr. VISCLOSKY. And Mr. Pastor, who was going back to captivity, on the elevator reprimanded me as well, so he is here certainly in spirit if not in person.
FUEL COSTS AND FEDERAL, STATE AND LOCAL TAXES
Someone had mentioned in their testimony that you don't have any fuel costs. I think Bonneville is the only—I mean, nonhydro, but you have nuclear if I understand it.
Mr. ROBERTSON. We are about 85 percent hydro and about 15 percent nuclear from one nuclear plant.
Mr. VISCLOSKY. And everybody else is water?
And so somebody had said here, you don't have fuel costs; and in response to some questions, obviously you have environmental costs, and other utilities have environmental costs, too; is that correct?
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Okay, do any of you pay Federal taxes?
Mr. DEIHL. No, sir, like all other Federal agencies we are exempt.
Mr. VISCLOSKY. Do your private competitors pay Federal taxes?
Mr. DEIHL. I would assume they do.
Mr. VISCLOSKY. So kind of talking apples and oranges in another fashion, do you pay State taxes?
Mr. DEIHL. No, sir.
Mr. VISCLOSKY. Do you pay State taxes?
Mr. BORCHARDT. No.
Mr. VISCLOSKY. Do you pay local tax?
Mr. ROBERTSON. No.
Mr. VISCLOSKY. Mr. Chairman, I don't have any other questions.
INTEREST RATES ON PMA DEBT
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Mr. MCDADE. At this point, I am going to relinquish the chair to Mr. Frelinghuysen, because I have to adjourn to a vote upstairs in a markup; and in that capacity, he will ask his questions because he's next in line.
Mr. Frelinghuysen.
Mr. FRELINGHUYSEN. Good morning, gentlemen. Following along with some of my colleague's questions of a few minutes ago, do the PMAs pay private sector interest rates on their volunteer loans?
Mr. HACSKAYLO. The Western Area Power Administration pays interest rates in accordance with a formula established by Congress.
Mr. KNOLLENBERG. Well, to answer my question, do you pay private sector interest rates on your bonds?
Mr. HACSKAYLO. With regard to the appropriations that Western utilizes, Western does not have any bonds.
Mr. KNOLLENBERG. You don't?
Mr. HACSKAYLO. No, sir, we do not, with regard to the appropriations that Western and the Bureau of Reclamation utilizes for construction of projects, we repay those costs with interest. The interest rates we use, as I mentioned, are set by Congress in terms of a formula. Some of those rates are above private sector rates, some are below.
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We would be happy to provide an interest rate table or schedule for you, if you would like, sir.
[The information follows:]
INTEREST RATES
On September 1, 1983, the DOE, the Department of the Army, the Commissioner of Reclamation, and the Administrators for Bonneville Power and Western Area Power Administrations agreed upon interest to be charged in repaying the power features of federal multiple-purpose water projects. For the period 1971 to 1983, many of the multiple purpose projects continued to use project interest rates of 3% for the power features rather than market based rates. Department of Energy Order RA 6120.2 was modified on October 1, 1983, to reflect the agreement. Section 11 of the order defines the calculation of the market based interest rates used in the repayment of the power features for those projects not having interest rates defined in legislation. The table below contains interest rates calculated by fiscal year based on the Colorado River Storage Project (CRSP) legislation and definitions contained in Department of Energy Order RA 6120.2.
"The Official Committee record contains additional material here."
Mr. FRELINGHUYSEN. Any other of you have a comment relative to that response?
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Mr. DEIHL. Same applies to Southwestern.
Mr. BORCHARDT. And with Southeastern, too.
FERC RATE REVIEW
Mr. FRELINGHUYSEN. Does FERC or any other regulatory body have meaningful authority to review PMA rates—to one of you, perhaps, speaking for all?
Mr. HACSKAYLO. Speaking for Western Area Power Administration——
Mr. FRELINGHUYSEN. You have a name like mine which is difficult to pronounce. That is why I'll call on Mr. Robertson next.
Mr. HACSKAYLO. Thank you, sir.
With regard to Western Area Power Administration, I do believe that the Federal Energy Regulatory Commission has meaningful authority and oversight with regard to Western power and transmission rates. FERC regularly schedules reviews of our rates, and when we file them, we have, in terms of the public process opportunity for parties to intervene, both when we set our rates and before the Federal Energy Regulatory Commission. We have had contested rate proceedings in years past.
Mr. FRELINGHUYSEN. So they literally challenge your basic cost estimates. Is that a fair assumption on all of your parts?
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Mr. ROBERTSON. Yes, it is relatively the same as Bonneville's.
OPEN ACCESS TO TRANSMISSION LINES
Mr. FRELINGHUYSEN. Are PMAs required to provide open access over their transmission lines?
Mr. DEIHL. Speaking for Southwestern, yes, sir, and we just recently filed open access tariffs with FERC.
Mr. FRELINGHUYSEN. Is that true with the rest of you?
Mr. BORCHARDT. Well, I will just add that Southeastern has no transmission——
Mr. FRELINGHUYSEN. Yes, you mentioned that earlier, I remember that.
Mr. ROBERTSON. Bonneville has also provided open access tariffs with FERC. We think we have run a pretty open transmission system for the last 60 years; we think we set a standard for that, and we are doing our best to voluntarily comply with FERC regulations separating generation and transmission.
Mr. HACSKAYLO. Western Area Power traditionally has provided open access to anyone who asks. We have filed open access tariffs with the Federal Energy Regulatory Commission.
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REPAYMENTS OF COSTS AND DEBT
Mr. FRELINGHUYSEN. The General Accounting Office—I am sure most of you are aware of this—in September of last year found that net costs to the Federal Government in the four PMAs—and I assume that excludes Alaska—total $3.5 billion between 1992 and 1996. GAO also found that, quote, ''The revenues earned by these entities do not cover the full costs of their operations,'' end of quotation marks.
The Congressional Budget Office in March of 1997 found that PMAs are selling their electricity at some $200 million annually below market rates. The Oregonian, which is the paper, I understand that Mr. Robertson sort of covers your territory, the leading paper in your hometown of Portland, Oregon, notes and I quote, ''U.S. taxpayers do keep the Northwest rates low. Much of Bonneville's $7.8 billion Federal debt originated as discount loans from the Treasury. Current interest rates are set well below the market. These loans guarantee that Bonneville will never repay the full costs to taxpayers. In 1996 alone these discount loans cost taxpayers and saved Northwest ratepayers $270 million in interest, according to the Oregonian's loan analysis,'' end quotes.
Another interesting statistic from that paper, for every dollar BPA has borrowed from the U.S. Treasury, it has paid back only 14 cents.
I would like to know whether you contest some of those comments.
Mr. ROBERTSON. I do.
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Mr. FRELINGHUYSEN. Would you be good enough to succinctly——
Mr. ROBERTSON. I don't know if I can be succinct, but I will be happy to try to take you through our logic in terms of our responsibilities under repayment provisions.
First of all, Bonneville owes today about $4.5 billion in appropriated debt and about $2.5 billion in bonded debt vis-a-vis Federal appropriations, the Federal Government.
If I could just go back, Mr. Chairman, the basic argument about Bonneville is whether or not we have been subsidized, an argument about whether or not we had low interest rates going back to the origination of Bonneville Grand Coulee Dam and so on. And the answer is, of course, we have to pay off in 50 years the debt stream associated with the Bonneville Dam, or the Grand Coulee Dam or any other Federal dam. We took on that debt in the 1930s and the 1940s, at the rate that was prevailing at the time, and we have paid that debt off.
In fact, as of now, the original Bonneville Dam and the original Grand Coulee Dam have been completely paid off. Using a home mortgage analogy, we paid the debt off on time and with interest. In this case, the mortgagee, the person who owns the mortgage and pays it off, is in the form of the ratepayers in the Northwest through Bonneville, and the banker is in the form of the Federal Government that gets to keep the house.
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So we think that there is high value in the fact that Bonneville has paid it off, and continues to pay it off—has paid over $14 billion in repayment to the Treasury, and continues to make timely payments for the 14th year in a row. We also went through a refinancing of our old debt 2 years ago, and we refinanced it at today's market—at that day's market interest rates, which averaged about 7.1 percent. We added $100 million to the net present value. Bonneville, the Administration, and Congress accepted that arrangement. That bill passed, and the purpose of that bill was to essentially end the question about long-term or historic subsidies.
SUBSIDIZED POWER
Mr. FRELINGHUYSEN. You should know where I am coming from. I come from the Northeast, and when I go to town meetings, people say to me, why are we subsidizing these power market authorities?
I know this committee, by nature, thank goodness, has always been relatively congenial and that you are all likable people, but I find at times the present power marketing authority situation to be totally indefensible. I know you are here to defend the status quo, but from the perspective of many of the people I represent, the origins of PMAs came out of the New Deal and Franklin Delano Roosevelt, and they can't understand for the life of them why these types of entities exist in the 1990s. They consider it—even though you are good people, we understand you represent, you know, millions of people and provide good services and you do things for fish and wildlife, you work with the Army Corps—we like the Army Corps in this committee. Many people view this type of subsidy, and you are saying it doesn't occur, as an anachronism.
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And this is why we have a responsibility not only to represent our district, but I do think that there are many Members of Congress that are uncomfortable looking at the global marketplace, an era of deregulation that we have, these types of entities within our overall energy picture nationally.
I am not sure that I need to have a response from each of you, but you should know where some of us come from on this committee.
I would like to recognize at this point Mr. Edwards.
REVENUES RETURNED TO THE TREASURY
Mr. EDWARDS. Thank you. I haven't had any of those questions at my town hall meetings, but what they do ask me about is Federal subsidies to mass transit in the Northeast.
Mr. FRELINGHUYSEN. I will let you have a shot across the bow.
Mr. EDWARDS. But I think the point has been well made. There is an economic benefit given to you, and that was done for public policy reasons; and I think it is appropriate that members ask, is their existence valid in today's environment. I think that debate is very healthy.
We also established that you don't pay Federal taxes, and I don't have any numbers later than 1995, but am I correct, ball park, that in 1995 we appropriated you approximately $272 million, but you returned to the Treasury $3.5 billion; is that correct? Does that sound like it is a ball park figure for you?
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Mr. DEIHL. I guess I will take a stab at that, it sounds about right, but we would have to check.
Mr. EDWARDS. Some of you did mention numbers. Could you maybe mention—maybe go down the line, in the last 2 years, for example, what you were appropriated by the Federal Government and what you returned? We could call it taxes or we could call it general revenue, but looking at the outflow and the inflow, I think it is helpful. Whatever we decide to do, we at least need to do it with the recognition that if we did not have not only your revenue, but the appropriations to you we would have to find a cut of around, according to my numbers, $3 billion in the budget.
But just let me be sure at least we are, whichever perspective we come from, we are on a level playing field with the facts and the numbers. Could each of you mention last year or the last 2 years that you have information on, both appropriations and revenues?
Mr. HACSKAYLO. Sir, with regard to Western Area Power Administration our gross revenues in fiscal year 1997 were $881.6 million; our appropriations, I believe, were in the neighborhood of $230 million.
We would be happy to check up on that for you.
[The information follows:]
APPROPRIATIONS VERSUS DOLLARS RETURNED TO TREASURY
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Western's gross operating revenue for Fiscal Year (FY) 1997 was $881.6 million. From these revenues, Western deposited $1.0 million into the Falcon and Amistad Dam Maintenance Fund. Western appropriations for FY 1997 consisted of $109.0 million for Program Direction, $34.0 million for Operation and Maintenance, $74.2 million for Purchase Power and Wheeling, $29.8 million for Construction and Rehabilitation, and $5.4 million for Utah Mitigation and Conservation. Western's total program for FY 1997 amounted to $252.5 million. Use of $66.5 million of prior year balances reduced Western's overall budget authority (current and permanent) for the year to $186 million. These appropriations do not include any funding for Western's revolving funds.
REVENUES RETURNED TO THE TREASURY
Mr. EDWARDS. So about $600 million in net income to the Federal Government?
Mr. HACSKAYLO. That is accurate, but we need to factor into that, as well, that we have carryover that is involved in the budget calculation itself. But certainly our annual operating revenues far exceed the annual appropriations to Western, yes, sir.
Mr. DEIHL. For Southwestern Power Administration, FY 1997 unaudited numbers, we had a total budget request of $27.8 million. We returned $102.4 million to the United States Treasury.
In FY 1998 the total budget request was $26.5 million. We estimate right now—our current revenue estimate is $95.6 million; I do believe it will be somewhat higher than that. We are starting to run into some good water months. I anticipate that should exceed $100 million.
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In FY 1999 our budget request has been reduced by a half million dollars, down to $26 million, and we estimate our revenues to the Treasury would be $93.2 million. But I would make a point, in these outyears where we estimate, those are based on average water years. So if we have good rainfall, we traditionally return more. On average, I believe Southwestern for the last 16 years has produced more than $100 million into the Treasury.
Mr. EDWARDS. Okay. Thank you.
Mr. BORCHARDT. For last year, Mr. Congressman, we had a budget request of about $12.2 million. We had revenues in the neighborhood—this is FY 1997, in the neighborhood of $160 million. I will get those exact figures for you. Those are the ones I have with me right now.
[The information follows:]
APPROPRIATION VERSUS DOLLARS RETURNED TO TREASURY
Southeastern's FY 1997 budget request was $16,359,000. Our total revenues in FY 1997 were $163,433,000.
Mr. EDWARDS. Thank you.
Mr. ROBERTSON. Mr. Edwards—we do not borrow, we do not receive appropriated dollars from the committee, we have a permanent indefinite fund, we borrow money and to kind of maybe put it in the context of your question, we borrowed this year about $258 million, we will return to Treasury, we think, $614 million, and our budget overall as an agency is about $2.3 billion.
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Mr. EDWARDS. Very good. Thank you.
Mr. ADELMAN. Congressman, we will get down to some small numbers with us. Our appropriation for 1997 was $4 million and we collected about $10 million in revenues. Our appropriation for 1998 is $13.5 million; we will collect approximately $8 million in revenues, not counting the about $85 million we will collect for the sale of the two projects.
SALE OF ALASKA POWER ADMINISTRATION
Mr. EDWARDS. Let me ask, in the sale—in the Alaska situation for the potential sale this July, is that a bidding, an auction process? What sort of process do you have and how many utility companies or other kinds of companies are interested in bidding for that entity?
Mr. ADELMAN. Congressman Edwards, the sale will take place about July 15 in accordance with the Alaska Power Administration Asset Sale and Termination Act, which was passed in 1995, and a purchase agreement that was negotiated in 1989. To get us to that purchase agreement in 1998, it was a 2-year public process where we essentially opened up the process to not only the type of bidders, but also how we would actually go about selling the projects. There has been a public process, but that process has long since been completed.
ELECTRICITY RESTRUCTURING
Mr. EDWARDS. Okay. One other question if I could.
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Just last month EPA projected that by the year 2010 there will be an increase of 553,000 tons of nitrogen oxides and 62 million tons of carbon as a result of electric restructuring. Subsequently, the agency recommended that in order to prevent those types of increases, any administration electric restructuring bill must include the authority to cap and trade programs.
Could either one of you or all of you make comments on this recent development in the electric restructuring debate?
Mr. ROBERTSON. If I may, on behalf of Bonneville, Bonneville recently received an award by the National Resources Defense Council as the cleanest utility in America with respect to pollution, so if there is in fact a credit system established for renewable credits, for example, we expect to receive high value for that, since we do not add a single particle of pollution to the air at this point.
Mr. EDWARDS. Thank you.
Mr. Chairman, let me also say in fairness that when some Texans recently suggested that we equalize highway spending between Texas and the Northeast, some people in New York recommended cutting defense spending in Texas so, you know——
Mr. FRELINGHUYSEN. Since you were good enough to open up the issue again, my State of New Jersey in terms of what we send in terms of income tax dollars to Washington, we are 50 out of 50 in terms of what we get back. So like you—your good self, we don't apologize obviously for getting our fair share for mass transit since we are—we are the ultimate donor State in the Northeast in terms of tax dollars going to Washington, we get so little back. So I think we are both—you know where we are both coming from.
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Mr. EDWARDS. I think we are both on the same end of that spectrum. Thank you, Mr. Chairman.
Mr. FRELINGHUYSEN. Thank you, Mr. Edwards.
The Chair recognizes the gentleman from Alabama, Mr. Callahan.
VALUE OF THE POWER MARKETING ADMINISTRATIONS
Mr. CALLAHAN. Well, I am going to join forces once again with the South.
Mr. Freylinghuysen, Chet Edwards indicated that he was firing a shot over your bow; I am aiming for the midsection. I want to sink this ship that you and Congressman Knollenberg I think are on with respect to your philosophical thoughts about PMAs and to tell you that you seem to question things about the fact that they are not paying taxes.
Well, let me inform you that the utilities don't care whether or not they pay taxes because all they do is pass their taxes on to the users. So if Alabama Power Company in south Alabama, or any place in the South, they include that tax in their rate base, who do you think pays those taxes? It is those people who come to our town hall meetings.
And, Rod, while I have the most respect for you—and you know that because I have told you that, and we serve on several committees together, and we have become very close friends—you are off base, and I would invite you to come to Alabama and to get out of that rural, godforsaken area of New Jersey.
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Mr. FRELINGHUYSEN. Southern Alabama especially; isn't that right?
Mr. CALLAHAN. And to come and to look and to see the rural programs and to understand how necessary these programs are—affordable power to rural areas of my district, for example. I know in some areas of your—the areas of the country that you lived in, they are so upset about the cost of power there that they are now reverting to such things as the privatization themselves of utility companies.
You have a utility company, a powerplant being built in New York, but simply because they cannot afford to pay the excessive rates that are caused by government regulations, by taxes on top of profits for the utility companies. So this system of providing power to rural utilities is working in the South, and it has been—it has been a godsend to us because not only with these agencies through the PMA, but then you have the TVA that actually was responsible for people even having power in south Alabama.
You all so devastated us with Sherman coming through Georgia and blowing up every possible asset we had, that set us back so many years that it has become—it became an absolute necessity in the 1930s and the 1920s to recognize that we needed to electracize all of the South, all of the country, not just the rural areas of New England.
So I am here to tell you that I am going to join Congressman Edwards not only in fighting to keep the PMAs in business, but to stop this single shouting because what the administration is doing—well, you are joining hands with the liberals, and you are not a liberal.
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What the administration is requesting that they do, what you all think we ought to do, piece by piece, is that we start with the poorest area, we start with Georgia, and we start abolishing the PMAs piece by piece.
So as long as I am a member of this subcommittee, and as long as we have the brilliance of people like Congressman Edwards there to join with me, and as long as we can get a conservative majority of this committee, nothing is going to come out of here that would do detriment to PMA. So you know the respect I have for you; I invite you to come to a town hall meeting in Foley, Alabama, or come to a town hall meeting in Monroe County or in—and listen to what our people have to say, the people who have a lower level of income than the blessed people of New Jersey, a people who talk slower than the people of New Jersey, people who even speak English in contrast to some of the people in New Jersey.
So you know I say all of this in jest, Mr. Chairman, but I am very serious in our passion about the importance of this; and while I recognize the few people that have come to you at your town hall meetings expressing some dismay, I just want to let you know that this is a very, very important thing to a great number of people in south Alabama and that we are going to do everything we can to preserve the status quo.
So I don't have any questions. I think they are doing a good job, and I will yield back the balance of my time.
Mr. FRELINGHUYSEN. I can't resist saying—something.
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Mr. Callahan chairs a committee that I serve on, so I have to step very gingerly here.
One of the benefits of serving in Congress is you get to have a good idea as to the caliber of the men and women that represent the entire United States; and I have never been to Alabama, but I am looking forward to specifically a visit to southern Alabama.
Let me just say, last year in this committee we took some controversial steps. We never seem to take any relative to the PMAs, but we did take some steps that I thought were absolutely necessary, and a majority of Members on the House side did try to remove the subsidy for the TVA, Tennessee Valley Authority.
And while we can argue till the cows come home, it is interesting that that particular behemoth has been able to—the ratepayer, the consumers have not had an increase in their electric rates for 11 years now, and I understand—and I know that the people that I represent have been paying each and every—with every bill an increase in their power rates. So I do feel that there is a degree of unfairness.
I understand that we take a little—a few bites at the apple each and every time, but we will try to take as few out of the hides of those of Alabama as possible.
Mr. CALLAHAN. Fine with me.
Mr. FRELINGHUYSEN. Mr. Visclosky.
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PAYMENTS TO TREASURY
Mr. VISCLOSKY. I would simply, to help the Chair here with Mr. Callahan, reference that I must be another one of those liberals who wanted to cut spending here, so I would want to defend some of the criticism, and do sit here and wonder sometimes who actually won the recent unpleasantness, but I think I am beginning to learn that.
Also I think really this hearing is a classic textbook example; what makes the United States Congress such a fascinating place in which to work is the balance that we have to strike. And I just have one question, in seriousness.
Mr. Hacskaylo, Mr. Edwards, I think rightfully, brought up a good point as far as payments that go back to the Treasury from each one of the administrations. Just so I understand what those payments represent, there is an appropriation, but in your case, I guess there is about $600 million that goes back. What is that for and how does that operate? Why is the direct appropriation still necessary if money is being returned—seriously, so I can understand?
Mr. HACSKAYLO. I would be pleased to respond to that, sir.
With regard to Western Area Power Administration, we set our power rates at levels sufficient to recover all of our annual expenses—my salary, for example, the electricity that we use to run the lights in our office buildings. We set power rates sufficient to recover a portion of the investment allocated, the capital structure, and the transmission system, with interest.
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We recover in our power rates every year sufficient amounts to deal with all of our operations and maintenance expenditures to maintain the reliability of the transmission system. We set in our power rates a cost component to recover the cost allocated to the power generation system run by the Bureau of Reclamation and the Corps of Engineers with interest.
Congress requires us to come back every year for appropriations for almost all of our program. What we do with our revenues, those revenues are deposited directly into the reclamation fund to the Treasury as required by law. We do accounting then to determine where the moneys do flow.
Last year we repaid to Treasury $107 million of principal in addition to our annual expenses, I believe of about $500 million. So that is how our cost accounting works, how we set the rates, how the revenues are divided within the Treasury.
Mr. VISCLOSKY. Thank you, Mr. Chairman. Thank you very much.
Mr. FRELINGHUYSEN. Mr. Knollenberg.
BURDEN OF DEBT
Mr. KNOLLENBERG. I don't want to go back to the recent unpleasantness, whatever that was, but I do have—and in fact I wish the Chairman had remained for a few moments, because there are some questions that not just we, but this country has, the taxpayer does have about a seemingly nonlevel playing field when it comes to the utility companies, the private companies and, of course, your operations.
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And I quote, for example, with respect to electricity deregulation. There are some who doubt that the PMAs will exist after electricity deregulation, and that is because open—the opening free market situation, the end of subsidies, if that is going to come about, the end of tax breaks.
And also there is a thing that we haven't talked about today, and it is called debt; there is some huge debt that is outstanding out there. One of the references in this article from the—from the National Journal suggests that, for example, Bonneville is no longer, no longer produces the cheapest electricity in the Nation. In part that is because the authority is still paying off the imposing $7 billion debt left over from its ill-fated investments in a variety of plants, including nuclear power. That debt is still out there.
And the other thing I wanted to mention, too, is that I am referencing this article and the authority that put this in print says that in all of the—he mentions, of course, that—the other critics have already mentioned this as well, that the government entities have an unfair advantage because they were built with taxpayer dollars, pay no State or Federal taxes and have access to Treasury-backed financing.
Another point is that in all the deregulation movements today putting airlines, telecommunications and trucking, this is the first one where the government is the participant. That is the statement that is made. I would like for you to—maybe start with Mr. Robertson—just reflect on this print as to your point of view and the accuracy of those statements; and refer also, if you would, to the debt situation.
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Mr. ROBERTSON. Let me describe our debt if I could. We have approximately $4.5 billion in appropriated debt today. We refinanced that, as I described earlier, at existing market rates. In fact, we refinanced it at a rate of 7.1 percent, which is significantly higher than existing market debts today. So I think if we had refinanced it today—about $40 or $50 million less per year, I think, that is flowing to the Treasury as a result of that debt having been locked in at a 7.1 percent rate a couple of years ago.
In addition to that, we have provided $100 million as a result of that refinancing and net present value to the Congress and to the American public as a result of the bipartisan refinancing agreement on that effort.
We have $4.5 billion in appropriated debt resulting from the refinancing; we have about $2.57 billion in Bonneville bonds which are backed by Bonneville; and we have about $6.6 billion in debt you refer to as ''old nuclear debt''; and the answer is absolutely.
Mr. KNOLLENBERG. It is all nuclear, but it is——
Mr. ROBERTSON. It is virtually all nuclear. It is related to nuclear plant investments that were made back in the late 1970s and early 1980s. They were not, in retrospect——
Mr. KNOLLENBERG. Private sector has these same problems.
Mr. ROBERTSON. I would say, in deference, that we certainly wish in retrospect that we hadn't made those investments, but there is a whole group of the country that made large investments in large, single, central station generation back then and everyone, including utilities, is dealing with that.
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Many utilities in the country have a big stranded cost problem because of that, but because of Bonneville's relatively low hydrobased rates, we are still able to compete straight up in a very competitive market, even carrying that debt load.
Now, in addition to that we don't pay taxes, and I think that is a fair point. On the other hand, I have to be fair and honest in saying we have great costs, public responsibility costs that no other similar private utility shares. We pay about, on average, $252 million plus about $150–$160 million for hydro operations. This is for fish and wildlife recovery, for example. For every dollar we generate, 20 cents of that goes to environmental mitigation, gross.
Now, I don't know any system in the country that is making that kind of investment in long-term environmental advantage. We have a series of other public responsibilities that we have paid for, about $1.5 billion in energy conservation in the last 15 years, about $2.5 billion in transfers to ratepayers of privately owned utilities.
ELECTRICITY MARKET DEREGULATION
Mr. KNOLLENBERG. What do you say to the folks out there, critics that say that your survival is going to be challenged by virtue of deregulation?
Mr. ROBERTSON. I think, as I said earlier, that when Congress enacted the NEPA legislation in 1992 and opened up wholesale legislation—excuse me, wholesale competition in electric energy, we really faced a very difficult challenge, as did everyone else in the wholesale business. And so, to be completely honest and fair with you, a couple of years ago when we were working through these $600 million in cost reductions and trying to become competitive, we were really working hard to get our costs down to where the marketplace was.
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Right now, we feel we have turned that corner, we are solid, we are making Treasury payments to 2001; and we are testing the market out beyond that period. We are finding people are very interested in our product again.
So I have to be honest that, yes, we do have a large debt load; it is a serious challenge for me and for the agency. But we have managed that, we have turned the corner. In the long run, we will become even more competitive as that WPPSS debt, the nuclear debt, simply begins to disappear in the year 2000, gets paid off beginning in 2011.
RESIDENTIAL EXCHANGE
Mr. KNOLLENBERG. I think this applies to Bonneville, and this is my last question.
In your written testimony—I believe it was you, Mr. Robertson, that stated that you reached a phase-out agreement with all the public utilities; am I misrepresenting you—you reached an agreement with all public utilities that have participated in the exchange program—this is a residential exchange phase-out—and that all but one investor-owned utility is out there. Who is that?
Mr. ROBERTSON. Portland General Electric Company.
Mr. KNOLLENBERG. And what is the status of that?
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Mr. ROBERTSON. We are trying to negotiate that out right now. We have had discussions on it as recently as last week, and we feel, at least at this point, that we are approaching, I think, an agreement.
Mr. KNOLLENBERG. Are these agreements phased out?
Mr. ROBERTSON. They will have phased out the residential exchange program by the year 2001.
Mr. KNOLLENBERG. Three years?
Mr. ROBERTSON. Yes, and our plan then is, instead of exchanging money, which is what the exchange was basically all about, we want to sell Columbia River power directly to the consumers of these investor-owned utilities, pass it through directly at its relatively low cost and get out of the money exchange business and into a simpler power sale.
Mr. KNOLLENBERG. Is the financial relief front-loaded or back-loaded?
Mr. ROBERTSON. The financial relief in terms of the exchange? Well, the exchange goes back to 1980, and since then we have paid about $2.5 billion in rate relief during that entire period; and what has happened is, it is now phasing out kind of in stages over the next 3 or 4 years, and it will be phased out by congressional directive by the year 2001, and then we will replace that.
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Mr. KNOLLENBERG. Wait until 2001 to really see any substantial financial relief, is that what you are saying?
Mr. ROBERTSON. No, we have received financial relief by phasing it down in the last few years, so the exchange costs were above $200 million per year. That is being phased down, and then what we are going to do is sell power directly to consumers throughout the region after 2001 and get the value of the Columbia River by the sale of power rather than the exchange of dollars.
Mr. KNOLLENBERG. Mr. Chairman, I have no further questions, and I thank the panel.
STRANDED COSTS
Mr. FRELINGHUYSEN. Thank you, Mr. Knollenberg.
Just a few additional questions, Mr. Robertson, relative to the stranded cost issue. How are those costs being addressed? I understand that you are trying to shift some of those costs onto others through a transmission charge.
Mr. ROBERTSON. No. First of all, let me just say, I think that we will not have stranded costs exposure if we succeed in the subscription process that begins this summer to sell our product entirely post-2001; and initial indications are that we will be successful in that. We are talking now about the 2002 to 2006 period, so it is a projection ahead.
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Mr. FRELINGHUYSEN. So you don't anticipate being saddled with the stranded costs?
Mr. ROBERTSON. What Congress is considering is that if the market changes dramatically downward and surprises people and it goes back down to less than 2 cents, or significantly less than 2 cents, Bonneville hopes to be able to meet that through cost-cutting. If we can't, the Northwest delegation, as part of our regional agreement, is looking at the ability of Bonneville on a transition basis to recover whatever costs there may be that we couldn't cover through power rates, through a temporary transmission tax or fee.
Mr. FRELINGHUYSEN. Is there legal authority?
Mr. ROBERTSON. We believe we have legal authority to do that. The legislation would clarify that authority. The purpose of the transitional tax would be to simply assure that we can meet our Treasury payment to the taxpayers no matter what market conditions we face. I will provide Bonneville's analysis of this issue for the record.
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Mr. FRELINGHUYSEN. Does DOE agree with you?
Mr. ROBERTSON. DOE would like to see, and I think Members of Congress would as well, the assurance that we can cover our Treasury payment obligation under any circumstance.
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MANAGEMENT OF SALMON RECOVERY PROGRAM
Mr. FRELINGHUYSEN. A recent audit of the management of your salmon recovery programs reveals many serious shortcomings. This is of tremendous concern to this committee, considering that Bonneville has spent $3 billion on these efforts.
I am sure you are familiar with—found that competitive bidding for this work is nonexistent, that awardees are allowed to electronically withdraw funds from a Bonneville account long before submitting invoices and that invoices did not match payment. The audit is cited as an appalling lack of controls at Bonneville. What is being done to correct these problems?
Mr. ROBERTSON. That was a serious audit, and we took the results of it very seriously. We have already corrected the electronic transfer issues, and we have in fact taken a number of steps to correct that as early as last year.
What is really fundamentally at stake here is making sure that the investments, which as you said are quite large, are being managed efficiently under contracts that demand specific, measurable results. We must assure that we obtain those results, and if we don't, we must pull the contract.
We did not have those kind of guarantees in place in previous years. It is a complicated story about how we get this done with State and tribal involvement, fish agencies and other program managers. However, we have instituted those as a result of this audit; and I am hoping by the time we talk next year, we will have a structure not just in place, but working to assure that there is high efficiency in the fish program.
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Mr. FRELINGHUYSEN. Your local paper, again the Oregonian, reported that the BPA has not spent nearly $300 million in revenues earmarked for salmon recovery programs. Would you describe briefly to the committee the discrepancy between the amounts estimated for that recovery and the amounts actually spent?
Mr. ROBERTSON. When we put together the 5-year fish and wildlife agreement about 2 years ago, we tried to come up with a number which guaranteed stability for fish and wildlife investments, and also provided certainty in terms of what our cost structure would be. Back then we estimated that the measures that were contained, on average for the 5-year period, would add up to $252 million in direct and indirect payments to specific efforts, including the Corps and Bureau and so on; and then on top of that, there was a flow regime in the Columbia River which was put in place, a series of measures of flow and spill that reshaped the river toward migration for juvenile salmon.
That flow regime, depending upon whether it is a low-water year or a high-water year, can cost someplace between $90 to $280 million. The average back then was calculated, because of market conditions, to be about $183 million. So adding the $252 million to the $183 million, we thought that the average for the 5-year period would be about $435 million.
What has happened in the first 2 years, fortunately, is that we have had two record-water years or near-record-water years, and so the costs that we thought were going to be, on average, about $183 million per year were only about $100 million; a little more than $100 million each year, at the low end of that spectrum for the operational costs.
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This year is a dry-water year because of El Niño. It is dry in the Northwest and we could end up having operation costs significantly above $183 million.
So in simple terms it was two good water years that allowed us to not have to spend the money for those flow regimes, as was contemplated in the agreement. We also did not spend as much money in the $252 million category because Congress did not appropriate all of the funds as was conceived—in the time frame we conceived in the deal, in 1995, and there were some other delays that we are going to catch up on. That money is being transferred forward and will be spent sooner or later.
Mr. FRELINGHUYSEN. Thank you for your response. And, gentlemen, on behalf of Chairman McDade and all members of the committee, I want to thank you for your participation. We appreciate your time and your testimony, and committee members will be submitting some questions and we would appreciate a prompt reply.
The committee stands adjourned. Thank you.
[The questions and answers for the record follow:]
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