Opening Statement
of
Robert W. Gee
Acting Assistant Secretary
for Fossil Energy
U.S. Department of Energy
to the
Subcommittee on Interior and Related Agencies
Committee on Appropriations
U.S. House of Representatives

March 18, 1999

Good morning, Mr. Chairman [and Members of the Subcommittee]:

I am pleased to be here and to have Mr. Robert Kripowicz - who is well known to this Subcommittee - seated beside me. I am going to rely on Mr. Kripowicz to fill in many of the details during our discussion this morning.

My formal statement describes the content of our FY 2000 proposal. Let me take just a few minutes to describe the reasons behind our budget request.

Mr. Chairman, some of your colleagues often ask "why support fossil fuel R&D? The coal, oil and natural gas industries are mature industries and shouldn't need Federal support." Let me answer that question in two ways.

First, much of the research we are proposing is research to achieve two national benefits - a cleaner environment and a growing economy.

Americans are being asked to pay more for cleaner air, safer drinking water, and healthier living conditions. The research proposed in this budget, however, can substantially reduce the burden of future environmental costs by literally billions of dollars each year - while sustaining environmental progress.

That is good for consumers, good for the economy, and good for the environment.

For example, we have research in this budget that will significantly reduce the costs of meeting new smog and ozone controls that 22 eastern and midwestern states must implement in the coming years under the Clean Air Act amendments.

We have research that will help tell us where microscopic airborne particles - called PM2.5 - are being emitted and how to control them.

We have research that will give us new ways to remove mercury and other air toxics from the exhausts of power plants - if that becomes necessary in the future.

These are programs that can benefit our environment and our economy over the next 10 years. But a major portion of our budget looks beyond that time frame - to the next wave of power plants that will be built in 2015, 2020 and beyond. We believe technologies are in sight that could make those plants nearly pollution-free. That means not just reducing the release of airborne pollutants, but virtually eliminating them.

This is our "Vision 21" power plant program. It is perhaps the best example of research that is too long-range and too high risk for industry to do on its own. Yet, the payoffs could be tremendous.

The Vision 21 concept is applicable to a wide variety of fuels, but it is perhaps most relevant to coal.

Coal is one of the true measures of this Nation's energy and economic strength. It generates 56 percent of our electricity. It is our lowest cost fuel, and one of the primary reasons why the United States has the lowest cost electricity of any free market economy.

There is no reason why - with the right technology - we cannot continue to rely on coal, AND at the same time, improve the quality of our environment. We have solid evidence on our side that demonstrates what R&D can do. Let me give you two examples.

Twenty years ago, there was basically one way to remove large amounts of air pollutants from coal - by installing expensive, sometimes unreliable scrubbers. Today, because of public and private R&D, scrubber costs are way down and reliability is way up. Government helped move these advancements forward, and they have saved consumers more than $40 billion in the last 20 years.

Or consider that 10 years ago, devices to control nitrogen oxide pollutants cost nearly $3,000 per ton of NOx to install and operate. Today, because of government-industry R&D - and the Clean Coal Technology Program -

low-NOx burners cost only $200 per ton - a savings of more than 10-fold. As a result, nearly three quarters of U.S. power plants will have them installed in the next year or so.

The track record is good, Mr. Chairman, and you can see evidence of it in the hundreds of fluidized bed combustors operating throughout the world- or in the state-of-the-art coal gasification power plants -- like the Tampa project -- all of which can trace their roots to the Federal fossil energy program.

So what about the truly long range? The next 30 or 50 years? What if the world community ultimately decides that it must address another major environmental issue - climate change?

Plants like Vision 21 will help. They will be more efficient - in fact, nearly twice as efficient as today's power plants - and that will reduce the release of greenhouse gases. But if we have to go beyond that, we will need other options. And we are exploring one of those options in this budget.

We are asking for a slight increase in funding for research into carbon sequestration. This is potentially revolutionary research, Mr. Chairman. Theoretically, it may be possible to capture and permanently dispose of all of the carbon dioxide released by energy systems. Sequestration could not only become a major tool for reducing carbon emissions, it may be essential for continued large scale use of fossil fuels.

We also recognize that when we talk about the environment, we must also talk about natural gas. It is the cleanest of our fossil fuels. Demand for gas could increase by a third over the next 10 years. To meet this demand at reasonable prices, it is important to diversify our domestic gas supplies.

There are projects in this budget to develop the tools that will find and produce gas from formations that are deeper, denser, and more difficult to produce than any being tapped today.

There is also an effort to look, again, beyond the near term - to gas supplies that may be needed 20 or 30 years into the future. One of those future gas supplies may be methane hydrates. We have asked for a moderate increase in hydrates funding because - among other reasons - it is a resource that could be 5,000 times larger than all of the world's current gas reserves.

I said there were two reasons why the Federal Government is involved in fossil fuel programs. One is to produce national benefits - such as a cleaner environment and a vigorous economy. The other is because there is clearly a strategic interest.

The strategic value of crude oil is one of the main reasons we are requesting funding for oil technology research. We import more than half our oil today. If prices stay low, that figure could be 65 percent or possibly 70 percent in the next 20 years.

A key reason why much of our domestic industry is in difficulty today is because our largest oil reservoirs have been producing for 40 or 50 years or more. That doesn't mean we are running out of oil - in fact, for every barrel we've produced in this country, there remain 2 barrels in the ground. It does mean, however, that producing domestic oil is becoming more expensive - it often costs more to pump it from the ground than the oil brings on the market.

R&D can help lower those costs. But the companies that can most afford R&D are no longer concentrating on U.S. resources - they have moved to more lucrative prospects overseas. Smaller, independent producers now drill 85 percent of the wells in this country. Most of them have less than 20 employees. For many of these companies - and the oil they produce - it is the Federal R&D program that will make the difference between continued production or shut-in.

Finally, Mr. Chairman, the strategic value of oil is the reason why we maintain support for the Strategic Petroleum Reserve in this budget. As Members are aware, we have announced initiatives in the last few weeks to add oil to the Reserve, without having to ask this Committee for additional appropriations.

In summary, Mr. Chairman, we are recommending continued support for our fossil energy budget because fossil fuels supply 85 percent of our Nation's energy, and that percentage is likely to grow in coming years.

A commitment to fossil fuel technology - and a commitment to maintaining our Strategic Petroleum Reserve - mean that this Nation can continue to benefit from fossil fuels at the same time we continue to improve the environment, grow the economy, and enhance our energy security.

Thank you for giving me the opportunity to present the reasoning behind our budget request, Mr. Chairman. With Mr. Kripowicz's assistance, I will be pleased to answer any questions you may have.