Remarks by
Robert S. Kripowicz
Acting Assistant Secretary for Fossil Energy
U.S. Department of Energy
to the
National Council of Coal Lessors
April 23, 2001

I am honored to represent the Department and the Administration here today.

Ninety-nine times out of a hundred, if someone said to me, "Bob, you are a man ahead of his time," I would take it as a compliment. Today is that OTHER time.

I'm here today because I know you want to hear a discussion of the Administration's national energy strategy. And yet - as all of you know....and as Secretary Abraham went to great pains to remind me before I came over here - the Vice President is leading a task force that is putting together such a strategy.

And if there is anything I've learned in the 30 years I've spent in this town, it is " don't get out in front of your boss....and even more so, don't get out in front of your boss' boss."

It will probably be around the middle of next month before the task force completes the initial phase of its work. At that point, the time will be right to discuss in detail the course the Bush Administration wants this nation to follow to solve its energy problems.

So I hope you will understand today is not the time for me to be " ahead of my time." Nonetheless, I think there are some clear directions and principles that this Administration is articulating that will help shape the forthcoming strategy.

First and foremost is the President's clear belief that we need one.

I have been fascinated - and a little amused - by some of the semantics I've heard debated recently. For example, are we really in an energy " crisis?" Or is it more proper to call it an energy " challenge?" Or perhaps it is a " serious energy challenge."

It reminds me of some of the matters we used to debate when I worked on Capitol Hill. [As you heard in my introduction] Most of my Hill experience was in the appropriations process, and we used to have normal appropriations, then if that wasn't enough, we would have supplemental appropriations, and then if necessary, we would have " emergency supplemental appropriations." .But somewhere along the way, someone decided that even an " emergency supplemental appropriation" didn't convey the true significance of the need for Congress to appropriate money.

So they came up with the term " DIRE emergency supplemental appropriations."

I've often wondered if the people who were receiving the funding really appreciated it more if it came as a " DIRE emergency" or just as a regular " emergency" appropriations.

And I think the same is the case with energy today. For those people on the West Coast who suddenly see the traffic light go out in front of them, or those businesses who have to curtail their operations or who have to defer expansion plans, or those employees who are laid off because businesses don't operate - for them, the energy problem is real.

And it doesn't really matter whether people in Washington call it a crisis, a shortage, or perhaps even a DIRE emergency shortage, it IS negatively impacting daily lives and livelihoods.

And although it may seem like it, the energy problem is not confined to California or the West Coast.

I believe - as do many others in the Administration - that we are heading for our worst summer ever in terms of energy.

Not just because of power shortfalls on the West Coast. Remember, in New York City last summer, temperatures were COOLER than normal. Yet, wholesale power rates went up 30 percent. New power plants are planned in California and in New England and elsewhere, but it will be the fall in California and perhaps another 2 years in other parts of the country before they come on line.

Natural gas is the preferred fuel for most of these plants, but for many large natural gas turbines, there is a four-year backlog of orders.

And our power problems are not the only reason why I think we are in for a tough summer.

We've seen the rise in natural gas prices, but as you in this audience know better than most, there is a lag time between price rises and production increases. We really haven't seen gas production begin heading upward yet.

And because gas is now consumed by power plants year-round, its use no longer has the same seasonal peaks and valleys of the past. So natural gas prices are likely to continue taking a big chunk out of the consumer's pocketbook.

And then there is gasoline. Dan Yergin - the Cambridge energy analyst - made a perceptive comment a few months back when he said that of all the numbers people deal with in their daily lives, the one figure that virtually everyone can cite without hesitation is the current price of gasoline.

We are on the razor's edge of gasoline supply and demand. Already we're seeing prices at the pump rise steadily. And if anything unforeseen should happen - a refinery go down unexpectedly, a pipeline taken out of service - we would see gasoline prices skyrocket.

So, America's energy problems are NOT confined to one region or one energy source. And they are NOT temporary. Whether you want to call it a " crisis" or not, Americans are once again beginning to understand how society and the economy are shaped by energy.

So the first point I want to make is that President Bush - more than any President in probably the last 20 years - has said unequivocally, that now is the time to put energy at the top of the nation's agenda.

The second clear direction laid out by the President is that we no longer have the luxury of playing favorites in shaping our energy future.

Those of you who are in the coal business know well what I am about to say. You have seen the politics of energy. You have seen how the pendulum has swung - where one energy source seemed to be the favored child. Maybe it was solar energy, or wind energy, or renewables. Perhaps it was natural gas.

Back in the 1970s and early 80s, you probably remember, it was coal and maybe oil shale. But the pendulum always seemed to be swinging - first it would be massive new programs like synfuels, then just as suddenly, those programs and those fuels would be out of favor.

President Bush has sent a very clear message to the Vice President's task force, and to this Administration and the people of this country - it is time for the energy pendulum to stop swinging from side to side and for this country, instead, to begin moving forward to solve its energy problems.

I don't think I'm getting out ahead of myself by saying that the forthcoming energy policy is going to be based on the premise that this Nation remains an energy-rich country.

Like the former President of the National Mining Association once said " There is no bad domestic energy resource."

And there is no better example of the energy strength of this country than coal.

I cannot give you a lot of specifics about the Administration's forthcoming energy strategy at this point, but I can say this - coal will play a prominent role.

The President has already signaled that. As candidate Bush, he included in his energy proposal a commitment to invest $2 billion in clean coal technology over the next 10 years.

Two weeks ago, the Administration submitted its budget request for the fiscal year that begins this coming October - FY 2002. In the President's proposed budget, he includes the downpayment on his clean coal technology pledge. There is $150 million for something we are calling the Clean Coal Power Initiative.

Let me take a few minutes to describe what this is, why we think it is necessary, and what we believe the benefits will be.

In 1984 and 85, Senator Robert Byrd pushed through legislation in Congress that would provide federal matching funds for a program to demonstrate new technologies that would use coal - but use it cleaner and more efficiently than the technologies then in use.

In 1986, President Reagan listened to Special Envoys appointed from the both the United States and Canada - and also, by the way, to his Vice President, George Bush - and decided that expanding Senator Byrd's program was the best way to address the problem of acid rain.

That set into motion the Clean Coal Technology Program. Eventually, the program committed nearly $5.3 billion to demonstrate a new generation of coal technologies. Most of the technologies were for power plants, but some went to steel mills, cement plants, and industrial facilities.

The Federal government's share was about $1.8 billion - the private sector's share nearly doubled that, almost $3.5 billion.

And what came of that investment?

Let me say this as strongly as I can - this was one of the most successful government-industry partnerships that has ever been carried out. It has produced real, tangible results. For example:

Nearly 3 out of every 4 coal-burning power plants in this country today either have installed - or are installing - low-NOx burners that " cut their teeth" in the Clean Coal Technology Program.

Prior to the Clean Coal program, the only technology available for cutting large amounts of nitrogen oxide emissions from power plants cost more than $3,000 per ton of NOx removed. Low-NOx burners now reduce nitrogen oxides at around $200 per ton.

We reported a couple of weeks ago that one of the companies that helped develop low-NOx burners in our Clean Coal program had passed the billion-dollar sales mark for these devices.

Let me give you another example. Prior to the Clean Coal Technology Program, we had virtually no experience in this country with a technology called Selective Catalytic Reduction. We actually had evidence that the catalysts used in overseas versions would be poisoned by some of the impurities found in U.S. coals. . Yet, this technology was likely going to be needed for coal plants to meet some of the most stringent NOx and ozone regulations.

Because of the Clean Coal program, two things happened - we developed catalysts that would work with U.S. coals, and the cost of the technology was cut in half.

Within the next couple of years, 30% of the power plants in this country will meet new environmental regulations using this technology.

Or take scrubbers. Many of the coal-burning power plants built since the early 1970s have used scrubbers to meet sulfur emission targets. But scrubbers were expensive, and many produced a wet sludge that was almost as much of an environmental hazard as the sulfur air pollutants.

Again, the Clean Coal program did 2 things - it showed how new scrubber technologies could be built that were more reliable and didn't require the redundancy that drove up costs. Today, scrubbers are 1/3rd the cost of those in the 1970s.

Second, the Clean Coal program demonstrated scrubber technology that would produce a dry powder, rather than a wet sludge. That powder - calcium sulfate - can be used to make gypsum wallboard. Today, there is a wallboard manufacturer in northern Indiana that uses the waste product of a Clean Coal power plant to make drywall. And there are homes in Florida, rebuilt after Hurricane Andrew, that have some of that wallboard in their walls.

You might say that the Clean Coal program showed a way to turn " pollution into products" that had value on the commercial market.

One final example - ever since Thomas Edison first used coal to generate electricity at the Pearl Street Station in New York in 1882, the way utilities extracted energy from coal was to burn it.

Now, because of the Clean Coal Technology Program, utilities have a new option. They can turn the coal into a gas, then clean the gas to purity levels rivaling natural gas, and burn it in a turbine, exactly like natural gas.

The Clean Coal program helped construct two pioneering plants that are operating in this country today using gasification technology. One is the Tampa Electric plant in Polk County, Florida. The other is the Wabash River plant in West Terre Haute, Indiana. They are the two cleanest, most efficient coal-fueled power plants in the world.

And a third Clean Coal plant is being designed for siting outside of Trapp, Kentucky, that will gasify a mixture of coal and municipal waste - and use part of the gas in a turbine and part in an even cleaner fuel cell.

This is the new technology of coal - technology that can put coal on the same level with natural gas when it comes to environmental performance.

So why is the President wanting to spend another $2 billion on clean coal technology. For two reasons:

First - there are new challenges.

The Clean Coal Technology Program of the 1980s and 90s was largely geared to address acid rain concerns. But emission levels have subsequently been ratcheted downward.

There are also new emission requirements - or there soon will be. Mercury is one. Coal-fired utilities will likely have to meet new mercury emission standards in the next several years. Yet today, there is no technology that can control mercury reliably across all of the different types of boilers used in coal-fired plants. And to achieve emission standards with the technologies that are available will likely be very expensive. So new, lower cost, more reliable technology is needed.

Second - this country is relying more and more on electricity. Today's best forecasts indicate that over the next 20 years, electricity demand in the United States will increase by 45 percent. That will require the construction of more than 1,300 new power plants -- about 65 each year. The nation has not experienced that type of capacity growth in the last 15 years.

Moreover, this could be a conservative estimate. .The rise of the digital economy has led to increases in power demand that were unanticipated when the original Clean Coal Technology Program concluded.

Throughout the 1990s, actual electricity consumption far outstripped the best projections - driven largely by the energy-hungry information economy.

Today, anywhere from 8 to 11 percent of the nation's electricity goes to power digital commerce and Internet-based businesses. That is power demand no one predicted 5 or 6 years ago, and no one can predict with any accuracy whether it won't be much more than that in another 5 or 6 years.

The President's energy policy will correctly recognize that coal now supplies 54 percent of the nation's electricity. For 12 States in the Midwest, Southeast, and West, coal accounts for more than 80 percent of electricity generation.

It is uncertain whether the U.S. can generate the electricity it needs if coal-fired power production is curtailed. Yet, many coal plants could be shut down if new technology isn't available to keep them operating and meet new environmental requirements.

That is why the President has said it is in the national interest to continue investing in clean coal technology.

Coal is the primary reason why, even with the rate increases some parts of the country have seen recently, the U.S. consumer still benefits from some of the lowest cost electric power of any free market economy.

Technology is a big reason why the nation's use of coal has increased by 60 percent since 1980, yet at the same time, emissions of sulfur dioxide have declined by 23 percent and nitrogen emissions by 12 percent.

So we know that a public-private partnership in clean coal technology works. We know that coal is critical to America's energy and economic future. And we know that coal and coal technology is essential for continued economic growth and environmental progress.

So while there may be a lot of uncertainty yet in exactly what the Vice President's task force will produce in the form of an energy strategy, I can say with a great degree of confidence that coal and clean coal technology will be a key part of it.

Now before I stop and take questions, let me make one final point about coal technology - and that has to do with climate change.

You've heard the President's statements regarding the need to weigh the need to sustain economic progress against the potentially damaging impacts to our economy from an overly restrictive climate change treaty.

The Administration is fashioning its climate change policy in the context of its energy strategy. I've been part of the input to that process, but at this point, I can't give you a precise picture of its output. But let me make a couple of points about how techology can play a role.

First, the clean coal power technologies we're developing are inherently more efficient technologies. When we've talked about fuel efficiency over the last few years, almost all of the conversation has gone to end-use efficiency - the mileage that our automobiles get, the energy use of our refrigerators and air conditioners.

But one of the major gains we can make in energy efficiency is at the front-end - at the power plant. If we can increase coal-fired power plant efficiencies from today's 33 to 35 percent to, say, 50 percent, the energy savings would be equivalent to weatherizing every home in America...five times over!

Efficiency at the power plant also reduces greenhouse gas emissions. We have technologies being developed today that could nearly double today's power plant efficiencies. And that, alone, could reduce carbon emissions by 40 to 50 percent.

We also have an active research program underway to develop ways to capture and store carbon gases from a power plant. And we see the possibility of being able to do that for costs as low as two-tenths of a cent per kilowatt-hour. Many of the clean coal power technologies also lend themselves to this concept of carbon sequestration.

So it may be possible within the next 10 to 15 years to have a coal-fired power plant that emits virtually no emissions - no sulfur, no nitrogen, no solid wastes, and with carbon sequestration, no greenhouse gases. That's the path we see clean coal technology taking us.

Now I know I haven't addressed some of the issues that concern you directly - mountaintop removal, clean water requirements, other land use policies.

Those are all under review by the Vice President's energy task force, and the Administration's policies in these areas will likely evolve from the analyses and recommendations that emerge from the task force.

But the message I want to leave with you today is that coal is no longer the energy " villain" that some in Washington - and elsewhere - have made it out to be in the past.

That's because of the remarkable progress made in clean coal technology. And because this Administration recognizes that with this new technology, it simply doesn't make sense for this country to turn its back on one of its most abundant, secure and affordable energy resources.

I know I haven't given you " chapter-and-verse" of what the President's energy strategy will be. But it will be balanced. It will be based on sound market principles. .It will be developed in a way that sustains and builds on environmental progress. It will reject the notion that there is no middle ground between environmental protection, regardless of the cost, and energy production, regardless of the impact.

It probably will NOT be universally embraced by everyone. It will likely be the subject of debates and arguments on Capitol Hill and elsewhere.

But I believe that most people - no matter whether they live in California or anywhere in the country - will agree on one thing - it will NOT be a policy ahead of its time.

It will be a policy and a clear direction that is needed and needed now. It will be presented at the right time -- when this country must stop swinging from side-to-side and begin moving forward.

Thank you very much, and perhaps if there is any time left, I can answer some questions.