AMERICAN STATISTICAL ASSOCIATION





                             SPRING 2007 MEETING OF THE

                          AMERICAN STATISTICAL ASSOCIATION

                           COMMITTEE ON ENERGY STATISTICS

                                      WITH THE

                         ENERGY INFORMATION ADMINISTRATION



                                     DAY 1 of 2















                                  Washington, D.C.

                              Thursday, April 19, 2007







                                                          2


           1    PARTICIPANTS:

           2       COMMITTEE ON ENERGY STATISTICS:

           3          NAGARAJ K. NEERCHAL
                      Department of Mathematics and Statistics
           4          University of Maryland

           5          DEREK BINGHAM
                      Simon Fraser University
           6
                      EDWARD A. BLAIR
           7          University of Houston

           8          CUTLER CLEVELAND
                      Center for Energy and Environmental Studies
           9
                      JAE EDMONDS
          10          Pacific Northwest National Laboratory

          11          MOSHE FEDER
                      Research Triangle Institute International
          12
                      BARBARA FORSYTH
          13          Westat

          14          WALTER W. HILL
                      St. Mary's College of Maryland
          15
                      NEHA KHANNA
          16          Department of Economics
                      Binghamton University
          17
                      EDWARD KOKKELENBERG
          18

          19       PRESENTERS:

          20          PHILLIP TSENG
                      HOWARD BRADSHER-FREDRICK
          21          ROBERT SCHNAPP
                      BOB RUTCHIK
          22          RUEY-PYNG LU
                      MARIE LARIVIERE



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           1    OTHER PARTICIPANTS:

           2          WILLIAM (BILL) WEINIG
                      ALETHEA JOHNSON
           3          ANTHONY RADICH
                      CAROL BLUMBERG
           4          MARK GIELECKI
                      LAWRENCE STROUD
           5          LOUISE GUEY-LEE
                      GUY CARUSO
           6          HOWARD GRUENSPECHT
                      NANCY KIRKENDALL
           7          BOB SMITH
                      TANCRED LIDDERDALE
           8          MIKE CONNER
                      SUSAN HARRIS
           9          WILLIAM (BILL) HELKIE
                      STEVE EBEL
          10

          11

          12

          13

          14

          15

          16

          17

          18

          19

          20

          21

          22




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           1                   P R O C E E D I N G S

           2                                             (8:15 a.m.)

           3              MR. NEERCHAL:  I think we should

           4    get started.  First of all, welcome you all

           5    to the ASA Committee on Energy Statistics.  I

           6    want to emphasize that this is an ASA

           7    Committee, it is not an EIA Committee, which

           8    is an advisory body to EIA.  And EIA is free

           9    to choose to take that advice whenever it

          10    thinks it is appropriate.

          11              I'm Nagaraj Neerchal; I'm the chair

          12    of this Committee.  This is my first chair

          13    job here, I think.  But I had some beautiful

          14    experiences --

          15              MR. CLEVELAND:  And you're doing a

          16    great job.

          17              MR. NEERCHAL:  Pardon me?

          18              MR. CLEVELAND:  You're doing a

          19    great job.

          20              MR. NEERCHAL:  Thank you.  It's the

          21    easiest job in the Committee, actually,

          22    because you don't need to do any discussions




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           1    and --

           2                   (Laughter)

           3              MS. FORSYTH:  I think we should

           4    change that this year.

           5              MR. NEERCHAL:  So --

           6              MS. KIRKENDALL:  I actually thought

           7    we stuck you with the discussion.

           8              MR. NEERCHAL:  I think you may have

           9    it, yes.  The meeting is open to public,

          10    public comments are welcome.  Time will be

          11    set aside at the end of each session inviting

          12    public to make their comments.  And there are

          13    two microphones there.  We would like you to

          14    come to the microphone and make the comments

          15    so that the transcription picks it up.  And

          16    whenever you have something to say, please

          17    announce your name and affiliation, and then

          18    make your comments.

          19              All attendees -- I think that

          20    includes everybody, including the EIA

          21    employees, should sign the register in the

          22    hall as you're entering in, and put down your




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           1    e-mail address.  I think if you're new to

           2    this room and this floor, the restrooms are

           3    at the two ends.  So you go out of the room

           4    and either turn right or left.  And there's a

           5    drinking fountain on both sides.

           6              We have Chrissy Campbell (?) and

           7    Donna Arrington (?), two people from the ASA

           8    meetings department here helping us.  And if

           9    you have any questions regarding the expense

          10    reimbursements or any logistics issues,

          11    please contact them, they'll be helping you.

          12              So we do have a new transcriber by

          13    the name of Christine, but she is asking me

          14    to remind you that if any are speaking,

          15    please bend over and this is not a mouse pad.

          16              COURT REPORTER:  Just project.

          17              MR. CLEVELAND:  We can't take these

          18    with us?

          19              SPEAKER:  Actually, you can.

          20              MR. CLEVELAND:  I thought it was a

          21    perk of some sort of --

          22              MS. KIRKENDALL:  Yeah, it's a perk.




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           1    Alethia thought that they would be a nice

           2    token.  And so -- they are a perk actually.

           3              MR. NEERCHAL:  But make sure that

           4    you're close to the microphone, not too far

           5    away from it.  No, don't lean back and talk.

           6              We have two new members: Ed Blair

           7    from University of Houston, Ed Kokkelenberg

           8    from Binghamton University, and John Weyant,

           9    who is not here yet.  When he comes, we'll

          10    give him a warm welcome.  I would like us all

          11    to welcome our new members.  Thank you for

          12    agreeing to --

          13                   (Applause)

          14              MR. NEERCHAL:  We have two people

          15    helping from the EIA side this time, I think:

          16    Bill and Alethia.  And I think some of you

          17    already corresponded.

          18              So the EIA type of questions,

          19    something you can direct to them, and

          20    Alethia, when Bill was away on vacation --

          21                   (Laughter)

          22              MR. NEERCHAL:  On his surgery,




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           1    Alethia took care of the EIA liaison duties

           2    and did a fantastic job.  Thank you very

           3    much.  And they're responsible for putting

           4    together this program and things like that

           5    and making -- make sure that the chair looks

           6    good and stuff like that, so it's a very

           7    important job.

           8              And we have Lawrence, who is

           9    helping us with -- right, yeah, helping us

          10    with the audiovisual thing.  And the people

          11    who are talking, they will get a microphone

          12    if you want, or if they can stand at the

          13    lectern and speak, whatever they want to.

          14              SPEAKER:  Okay.

          15              MR. NEERCHAL:  And once again, I'm

          16    Nagaraj Neerchal, and I'm the chair.  And if

          17    you don't know where -- who to go to, just

          18    come to me, I'll find out the person who can

          19    help you.  I won't help you necessarily.

          20              All right, so I think we should

          21    probably start with the introduction around

          22    the room, including the audience members.




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           1    I'm Nagaraj Neerchal once again.  And I'm

           2    from UMBC.  I'm the chair of the Math and

           3    Stat Department since July.

           4              MS. KIRKENDALL:  I'm Nancy

           5    Kirkendall; I'm the Director of the

           6    Statistics and Methods Group, and

           7    orchestrater of this event.

           8              MR. CARUSO:  Guy Caruso,

           9    Administrator of the Energy Information

          10    Administration.

          11              MR. KOKKELENBERG:  I'm Edward

          12    Kokkelenberg, Professor at SUNY Binghamton.

          13              MS. KHANNA:  Neha Khanna, State

          14    University of New York, Department of

          15    Economics.

          16              MR. CLEVELAND:  Cutler Cleveland,

          17    Washington University, Professor in the

          18    Department of Geography and Environment.

          19              MR. HILL:  I'm Walter Hill, St.

          20    Mary's College of Maryland; currently the

          21    chair of the Political Science department.

          22              MS. FORSYTH:  Barbara Forsyth, I'm




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           1    in Westat for another week.

           2                   (Laughter)

           3              MR. BLAIR:  Ed Blair.  I'm at the

           4    University of Houston.

           5              MR. BINGHAM:  Derek Bingham, Simon

           6    Fraser University, Department of Actuarial

           7    Science and Statistics.

           8              MR. STROUD:  Lawrence Stroud,

           9    Statistics and Methods Group, EIA.

          10              MR. HODGE:  I'm Tyler Hodge with

          11    the EIA short-term energy outlook team.

          12              MR. EBEL:  I'm Steve Ebel with

          13    Lyondell Chemical, Houston.

          14              MR. WEINIG:  Steve, you'll need to

          15    restate.

          16              MR. EBEL:  Steve Ebel with Lyondell

          17    Chemical, Houston.

          18              MS. BLESSING:  Colleen Blessing,

          19    EIA.

          20              MS. MILLER:  Renee Miller, EIA.

          21              MS. BLUMBERG:  Carol Blumberg,

          22    Office of the SEIA.




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           1              MR. DELEY:  John Paul Deley, EIA's

           2    records officer.

           3              MR. BOURNAZIAN:  Jake Bournazian,

           4    EIA.

           5              MS. WEIR:  Paula Weir, Office of

           6    Oil and Gas.

           7              MS. LENT:  Janice Lent, Statistics

           8    and Methods Group, EIA.

           9              MR. CONTI:  John Conti, Director of

          10    Integrated Analysis and Forecasting.

          11              MR. RUTCHIK:  Bob Rutchik,

          12    Statistics and Methods group, EIA.

          13              MR. BROENE:  Tom Broene (?) SMG,

          14    EIA.

          15              MS. O'BRIEN:  Christina O'Brien,

          16    EIA.

          17              MR. RASMUSSEN:  Eric Rasmussen, EIA

          18    Office of the Administrator.

          19              MR. TSENG:  Phillip Tseng, SMG,

          20    EIA.

          21              MR. BRADSHER-FREDRICK:  Howard

          22    Bradsher-Fredrick, SMG, EIA.




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           1              MR. WEINIG:  Bill Weinig, SMG, EIA.

           2              MR. NEERCHAL:  Thanks.  And I think

           3    without wasting too much time, I think that

           4    we should get on with our agenda.  I just

           5    want to announce that -- this is a mandatory

           6    announcement -- this is an ASA Committee, but

           7    Nancy has the authority to adjourn this

           8    meeting at any time she feels --

           9              MS. KIRKENDALL:  So you all behave.

          10                   (Laughter)

          11              MR. NEERCHAL:  She feels that you

          12    don't behave.  So we can start with our

          13    traditional session with Guy.

          14              MR. CARUSO:  Thanks, Nagaraj.

          15    Welcome.  Good morning, everyone, and

          16    congratulations on your assumption of the

          17    chairmanship.

          18              Welcome to Ed and Ed.  That's easy.

          19    I know you're going to enjoy your time on the

          20    committee, and we really appreciate all of

          21    your time because I know you're all very

          22    busy.  And so this time is valuable, and we




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           1    value your advice.

           2              I'm going to bring you all

           3    up-to-date on some of the things that have

           4    been going on in the EIA since our last

           5    meeting in October, especially those that are

           6    directly affecting some of the work we do

           7    that you have given us advice on.  And in

           8    particular, looking forward to some of the

           9    things that we are going to be doing in the

          10    next one or two years that I know the

          11    committee will have a chance to give us some

          12    advice on.

          13              So we really look forward to

          14    talking to you these two days, and then

          15    throughout the next couple of years about

          16    some of these initiatives that are either

          17    beginning now or will begin in fiscal '08.

          18    Then I want to start with the budget, which

          19    is already, I think, a significant departure

          20    of our -- all of my previous reports to you.

          21              We usually put the budget last

          22    because it was usually bad news, but this




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           1    year it's good news, so I'm going to start

           2    off with that and talk about some other of

           3    the things that are going on here.

           4              In the last six weeks or so, we

           5    finally got a budget for Fiscal Year '07, and

           6    the good news is that EIA was singled out in

           7    the Department of Energy budget for an

           8    increase above what most other organizations

           9    were getting, which was a continuation of

          10    their FY '06 budget in a continuing

          11    resolution.

          12              So EIA was given another

          13    $5 million, which for us is very important

          14    going from 85 to about 90, and even a bit

          15    above what the administration had requested

          16    for EIA.  So I think that reflects the hard

          17    work and the quality of work that the EIA

          18    staff has done over these years to earn

          19    Congress's trust in EIA.

          20              So that's why I particularly think

          21    that's good news.  And a number of the things

          22    that that will allow EIA to do this year have




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           1    been activities that you have given us advice

           2    on, including a number of -- redesigning a

           3    number of key oil and gas surveys, which

           4    during a period of declining real budgets, I

           5    think we all agree had suffered in terms of

           6    quality that we wanted to maintain.  And

           7    certainly, the statistical accuracy that we

           8    have gotten the advice from this committee

           9    on.

          10              We're also going to be able to

          11    increase the modeling capabilities in both

          12    the oil and gas area as well.

          13              And then the mandated requirement

          14    that was in the Energy Policy Act of 2005

          15    that EIA start collecting, on a monthly

          16    basis, biofuel data.  They had mandated that

          17    in that Act of 2005, but there had been no

          18    monies appropriated for it in Fiscal '06.

          19    And if we had not gotten this additional

          20    money embedded in that $5 million increase,

          21    we wouldn't have been able to do it.  But we

          22    now will do that, and we're in the process of




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           1    planning for these new surveys, and I'm sure

           2    we'll be seeking your advice on that.

           3              And then there were two petroleum

           4    marketing surveys that -- under the lower

           5    numbered $85 million budget we would not have

           6    been able to continue, and we will now

           7    continue them.  Then, one of the things we're

           8    going to definitely -- be on the agenda this

           9    session, and I think future agendas, is

          10    enhancing the activities of NEMS that you all

          11    have been familiar with over the years.

          12              Especially -- it was designed in

          13    the early '90s, the first Energy Outlook

          14    using the current version of NEMS was I think

          15    about '93 or so.

          16              So it was definitely time, and it

          17    is time for an enhancement.  And I know John

          18    Conti and his team are going to really be

          19    working hard over the next couple of years to

          20    do that.  And then -- mentioned the

          21    improvement in the quality and the

          22    reliability of the oil data, and we're going




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           1    to certainly be working hard on that.  And

           2    with the additional marketing on the

           3    reinstatement of the two marketing surveys.

           4    And then, we are also looking to

           5    improve -- the cost structure of the way we

           6    collect oil data has suffered somewhat from

           7    being -- or having had the Legacy systems

           8    which are less efficient.

           9              And that will certainly change, we

          10    think, during Fiscal '07 and '08.  The Weekly

          11    Ethanol balance is increasingly important.

          12    As many of you are aware, the amount of

          13    ethanol in our gasoline pool is increasing

          14    steadily.

          15              And we expect it will double, and

          16    perhaps triple, even within the next five

          17    years.  So the need to have better handle on

          18    ethanol production, the blending into

          19    gasoline, and what that all means for the

          20    supply and demand for gasoline is critically

          21    important, especially as we enter into the

          22    driving season.




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           1              And of course, it's gotten even

           2    more attention recently as the President has

           3    announced a goal of 35 billion gallons of

           4    alternative fuels, including ethanol, by

           5    2017.  Even better news is the request that

           6    went up in early February for Fiscal Year

           7    '08, the administration is requesting over

           8    $105 million for EIA in Fiscal '08 which is

           9    more than a 17 percent increase over '07.

          10              And that would allow us to continue

          11    to do the improvements in the oil and gas

          12    surveys that I mentioned, would provide even

          13    more money for the enhancement of NEMS, as

          14    well as the normal cost of doing business,

          15    which is mainly salaries and benefits for EIA

          16    employees and contractors as well as the

          17    other fixed costs that we have to pay here as

          18    part of the Department of Energy.

          19              One of the things that's really

          20    ramped up even in the last two to three

          21    months is with the seating of the new

          22    Congress, has been more service requests




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           1    from Congress for EIA.  And they've

           2    concentrated mainly on issues related to

           3    global climate change.

           4              We've done one report; we completed

           5    one report for Senator Bingaman and five

           6    other senators on the energy market and

           7    economic impacts -- to reduce greenhouse gas

           8    emissions using a cap-and-trade system with a

           9    safety valve.  And that was published I think

          10    in about mid-January.

          11              We are now working on another

          12    request from Senators McCain and Lieberman on

          13    a bill that would impose even more stricter

          14    controls on carbon.  We have requests in from

          15    Senators Inhofe, Kerry and Snow.  So I could

          16    go on and on because we have probably about

          17    10 outstanding requests that we're either

          18    working on right now or in discussions with

          19    the Hill staff that involve in some way

          20    greenhouse gas emissions.

          21              And so all the more

          22    important -- some of the advice we've gotten




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           1    from you about the modeling and dealing with

           2    these issues, and how important it is that we

           3    do improve the modeling system that we have

           4    now.

           5              But we also expect that we'll be

           6    doing some work on yet another attempt to

           7    pass a bill on a Renewable Portfolio Standard

           8    that Senator Bingaman tried very hard to get

           9    into the Energy Policy Act of '05.  He has

          10    now, in co-authorship with Senator Domenici,

          11    submitted another bill that would have a

          12    Renewable Portfolio Standard, I believe, at

          13    20 percent.

          14              And the last time they tried it,

          15    that was 10 percent.  The percentage could be

          16    15.  But in any case, we do think that we'll

          17    be getting a request to work on Renewable

          18    Portfolio Standards as well.  And there are a

          19    number of other studies that have been

          20    completed or are underway that are listed

          21    here.

          22              Main point is that this is a very




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           1    active new Congress, and EIA, as I pointed

           2    out in the budget story, has gained the

           3    respect and trust of many members, and that's

           4    definitely good news.  Of course, what that

           5    does mean is we do get -- getting asked to do

           6    a lot more.  And many times, it comes without

           7    specific funding.

           8              So it clearly is a question of

           9    priority-setting.  It makes it very difficult

          10    for -- particularly the long-term forecasting

          11    area, because most of these requests are what

          12    if we pass a bill; what if we change the law

          13    on a particular thing, how does that change

          14    the outlook, and therefore -- and NEMS is the

          15    tool for answering many of those questions.

          16              MR. CLEVELAND:  Guy?

          17              MR. CARUSO:  Yes.

          18              MR. CLEVELAND:  Do you have to

          19    produce a report for every request?  And how

          20    do you set priorities in terms of which ones

          21    get done first, and how you roll them.

          22              MR. CARUSO:  That's an excellent




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           1    question.  The answer is no, we don't have to

           2    accept every request.  And in the past, what

           3    we've done is never say no directly, but

           4    negotiate.  So what we've tried to do is we

           5    limit the scope of a request, because if it's

           6    so open-ended it's going to take enormous

           7    resources, we certainly let them know that

           8    it's possible, but it may be six months

           9    before -- so if you really want this in a

          10    timely fashion, we need to focus the

          11    assumptions and what you're targeting that to

          12    do.

          13              And in other cases, we try to get

          14    similar requests, to combine them.  So we

          15    might have one from Kerry and Snow, which we

          16    do, which is very similar to what we're doing

          17    already for McCain and Lieberman or Inhofe,

          18    or some -- so it's really mostly negotiation.

          19              There are some organizations that

          20    limit requests to chairmen or -- of either

          21    committees or subcommittees or ranking

          22    members.  We don't have such a strict a rule




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           1    as that.  But it's trying to match -- setting

           2    priorities based on what resources we have,

           3    and what impact that would have on other core

           4    work.

           5              So as I said, the brunt of most of

           6    these requests fall on the Forecasting

           7    office, John Conti's office.  So you run the

           8    risk that you actually could delay the AEO

           9    publication or other key activities.  So it's

          10    a balancing act, but no hard-and-fast rules.

          11              Wonder why it's not going.  All

          12    right.  Okay, there we go.

          13              We have finally completed all the

          14    program guidelines for the new voluntary

          15    reporting on greenhouse gas redesign, and we

          16    expect that the new reporting forms will be

          17    approved by OMB by next month.

          18              And we do actually expect to begin

          19    internet data collection by this fall.  And

          20    this been a long process, as Jae Edmunds

          21    knows very well.  I think it's been at least

          22    two years in just getting approval of these




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           1    guidelines.

           2              One of the areas that you have

           3    worked very hard on and given us excellent

           4    advice in collaboration on is the Form 914,

           5    which is now the official natural gas

           6    production data collection as of January of

           7    '07, which was in the March issue of Natural

           8    Gas Monthly.  And it's been performing

           9    extremely well in terms of the degree of

          10    reporting error, reducing the amount of

          11    error.

          12              And we're pleased with the way

          13    that's actually turned out.  We now have a

          14    much shorter time frame -- 60 days instead of

          15    120.  So I wanted to just bring you

          16    up-to-date on that, and you had a number of

          17    sessions with John Wood and others on that,

          18    and that's worked out very well.

          19              EIA was part of the formation of

          20    the Department of Energy, and EIA was

          21    actually put together -- officially put

          22    together in 1977.  And obviously, this makes




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           1    this 30 years.  So the good news is we're

           2    going to have a great anniversary celebration

           3    later this year.  And we certainly want this

           4    committee, which has been a big part of that

           5    history, to be involved in that.

           6              And we're going to schedule a

           7    session that will focus on ASA's

           8    contributions to EIA, including a -- we're

           9    looking at doing a two-day conference, which

          10    will include a session with ASA.

          11              The bad news is something I've

          12    talked about in the past -- and that is a lot

          13    of people, a lot of staff members were here

          14    in 1977 when we began.  And therefore, in the

          15    federal government, 30 years is a magic

          16    number for being able to retire at 55 years

          17    old.

          18              So we're projecting about 30

          19    retirements this year, this calendar year.

          20    And when you combine that with normal

          21    attrition and the fact that we're a little

          22    below our FTE ceiling, we're projecting 50




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           1    new staff members to be hired in '07.  The

           2    last time I checked, we had about 15, so we

           3    got about 35 net more to go.

           4              So we've talked about this in the

           5    past about how much we appreciate your advice

           6    in terms of students or other colleagues that

           7    might have appropriate candidates for -- not

           8    only statisticians, mathematicians,

           9    economists, and operations research.

          10              So we again are working very hard

          11    to get up to full -- to be able to

          12    effectively use that, those monies that we're

          13    getting.  And just specifically on the ASA,

          14    John Paul Deley is our kind of person who is

          15    handling our history of EIA.  And he is

          16    putting together an index of all papers of

          17    all the ASA meetings all the way back to '79.

          18              And we would also be open to having

          19    a web exhibit on the history page directly

          20    related to ASA, this ASA committee, so more

          21    on that later.

          22              I think we're actually going to




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           1    have a little discussion about that with you

           2    all during the next day or so.

           3              Then, the historic -- you're here

           4    at a historic moment.  This last week, for

           5    the first time in 20 years, all of EIA,

           6    except for the Dallas Field Office, is now in

           7    Forrestal Building.  And Nancy and her team,

           8    which you're most familiar with, have moved

           9    down here near -- guess it's two weeks ago,

          10    and then the last of the Electricity folks

          11    came last week.

          12              We now have 525 EIA federal

          13    employees and contractors in this building,

          14    and mostly on the second floor but also on

          15    the first and the basement.

          16              And I think that -- we all believe

          17    that that's going to improve our internal

          18    communications.  And we're already benefiting

          19    from seeing the smiling faces of Bill Weinig

          20    and Alethia every day.  And I personally

          21    appreciate that.  So any questions that I can

          22    answer about this or any other things that's




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           1    concerning EIA and its direction?

           2              If not, Nagaraj, once again,

           3    welcome to EIA.  And we really value the

           4    advice we're going to get from you in the

           5    next day or so.

           6              MR. NEERCHAL:  Thanks, Guy.

           7              Nancy?

           8              MS. KIRKENDALL:  Well, I'll join my

           9    welcome to Guy's for the committee.  We hope

          10    we have an interesting series of talks, and

          11    hope we get lots of good advice.

          12              In terms of SMG updates, as you

          13    heard, we just moved down from the building

          14    up the street.  So we're now all down here in

          15    the same building.  This certainly will

          16    facilitate discussions with people.  Now

          17    there's no more excuse not to just go drop

          18    over and bug somebody about something.

          19              In SMG, one of the reasons why

          20    Alethia is taking on more of a responsibility

          21    for the ASA meetings is that Bill thinks he

          22    might actually retire soon.  And so he has




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           1    been absolutely wonderful in trying to

           2    prepare us for this transition.  And for this

           3    year, he and Alethia are sharing

           4    responsibilities for the meeting, so she's

           5    going to becoming more and more involved in

           6    managing the meetings.

           7              So thanks to both Bill and Alethia,

           8    especially to Bill, for his continuing to

           9    support the committee by making sure that

          10    there's a smooth transition.

          11              Another announcement for SMG is

          12    that Janice Lent has joined us as our senior

          13    mathematical statistician.  She comes to us

          14    from the Bureau of Transportation Statistics

          15    and from the Bureau of Labor Statistics.  One

          16    of the areas that she has a lot of expertise

          17    in is development indicies, and so we'll see

          18    how that proceeds here in EIA.

          19              So this is just a summary of some

          20    of the things we talked about at the fall

          21    meeting.  And as you remember, Lawrence

          22    Stroud and Phillip Tseng gave a talk about




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           1    using models to detect outliers in refinery

           2    data.

           3              The Committee suggested we needed

           4    to be a little more careful in handling the

           5    correlation in the data series, but also

           6    suggested that we should look at regional

           7    data.  So we do plan to pursue this.  We just

           8    haven't had time over the last few months.

           9              On suggestion from the external

          10    study team, I'm not sure we went through a

          11    lot of detail about all the recommendations

          12    that we've received.  But one of the

          13    recommendations was that we should get some

          14    of our high visibility weekly data series

          15    classified as principal economic indicators.

          16              And we have actually moved on that.

          17    We sent in an application to OMB to make our

          18    weekly natural gas storage report a principal

          19    economic indicator.  So we don't know the

          20    outcome yet.  OMB has promised to let us know

          21    in May or June.  They just haven't had time

          22    to think about it.  They said they liked our




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           1    application but they haven't thought about it

           2    deeply.  So that's some progress on one

           3    recommendation.

           4              They also recommended that we

           5    should provide researcher access,

           6    particularly to our commercial building

           7    survey data and to our residential energy

           8    consumption survey data at protected sites.

           9    I think they had in mind particularly using

          10    the Census Bureau's research data centers.

          11              But any way of getting better

          12    access to the data is I think what they

          13    really intended.  So Jake Bournazian will

          14    talk to you tomorrow about some of the

          15    options we're considering on that.

          16              The other thing they talked about

          17    is that we needed to have more collaboration

          18    with academia.  So one of the things that

          19    Ruey-Pyng Lu is going to talk about is that

          20    we have joined the National Institute of

          21    Statistical Sciences as an affiliate member.

          22    And we'll be operating a sort of a research




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           1    grants program for students, and possibly for

           2    new researchers to try to get people to work,

           3    researchers to work, on problems that we're

           4    interested in.

           5              And so Ruey-Pyng is going to talk a

           6    little bit about that arrangement, and he's

           7    going to go over four draft project

           8    descriptions to try to get your input.  What

           9    we'd really like is to encourage people to do

          10    work that we're really interested in.  And so

          11    you need to have something that's a short

          12    description that people might read, but

          13    detailed enough so that they'll know whether

          14    or not they're interested in the topic and

          15    what they need to do.

          16              So there's kind of a little balance

          17    there.  And I'm sure we'll have good advice

          18    on that from you.  So that's a session

          19    tomorrow morning.

          20              Tomorrow morning?  No, it's today.

          21              MR. NEERCHAL:  Afternoon.

          22              MS. KIRKENDALL:  It's today; I hear




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           1    it from the back, okay.

           2              And then other recommendations from

           3    the external study team, we'll be considering

           4    in our strategic planning process.  And

           5    that's going to begin soon.  I think we meet

           6    next week, in fact.

           7              Ruey-Pyng last time also talked

           8    about estimating weekly stocks of other oils,

           9    and I think Moshe recommended that we try

          10    using an unobserved components model with

          11    monthly seasonality.  So Ruey-Pyng did that,

          12    and he found that it was better than anything

          13    else he had tried, so there's a little

          14    success story.

          15              And now we need to work with the

          16    program office to show them what we've done

          17    and see if they'll pick it up and use it.

          18    Last time, George Lady talked about the EIA

          19    quality project, and he's starting out

          20    focusing on forecasting, and in particular,

          21    he is starting out with NEMS.

          22              He's continuing to work on this




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           1    project and he'll talk to you tomorrow

           2    morning, to give you a better update.  The

           3    challenge that we haven't gotten to yet is

           4    the how to do something similar.  He has

           5    ideas on how to handle NEMS in reasonable

           6    ways.

           7              We think steel (?) is different,

           8    but there are other ways of handling it, but

           9    then how do you something consistent on the

          10    data side, because if you are going to have

          11    an annual quality report, we ought to address

          12    all of the areas.  So that's work ongoing and

          13    things to think about.

          14              So in the spring meeting, I think

          15    Stan Freedman talked about the functional

          16    requirements document for the EIA's internet

          17    data collection.  We threw that out as IDC.

          18    The functional requirements document was

          19    adopted within EIA, and we're now in the

          20    process of determining how our surveys, how

          21    to actually implement it.

          22              There are a couple of things being




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           1    considered.  We found out that the National

           2    Agricultural Statistic Service has a software

           3    tool that they have developed already, and

           4    they are willing to share it with us.

           5              It may not be exactly what we

           6    wanted, but it does a lot of the things that

           7    we were interested in doing.  So there's

           8    always a debate -- do you adopt an existing

           9    system and then adapt it to your needs or do

          10    you build a new system?

          11              And so that is going on.  As you

          12    heard from Guy, the greenhouse gas survey is

          13    supposed to go live on that system this fall,

          14    and the electric power surveys are going to

          15    be new beginning in January of 2008.

          16              So they need to be in the new

          17    system in January.  So there are going to

          18    have to be some decisions soon and we will

          19    have to march ahead.  So I'm sure in the fall

          20    meeting, we'll able to tell you even more.

          21              We talked about how modeling can

          22    suggest data needs, and you suggested to




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           1    engage the energy modeling forum -- but one

           2    way we've done that is to invite John Weyant

           3    to join us.  He's not here right now, but he

           4    has agreed to join us.

           5              The other thing was that you

           6    suggested that we have better outreach, more

           7    users' conferences and things, and we have

           8    been having an annual NEMS conference for

           9    many years, and that's slowly becoming

          10    broader.  I think in the last couple of

          11    years, it was the forecasting conference

          12    rather than just the NEMS conference.

          13              This year, we actually had sessions

          14    on electric power, and I think next year is

          15    going to be even broader.  So we are moving

          16    towards an EIA-wide conference.  This is

          17    usually held in the spring in March.

          18              We had a session on the 2006 MECS,

          19    and I think you recommended incentives,

          20    pre-mailing to respondents, and a variety of

          21    other things.  We didn't consider incentives

          22    for that project.  It's a little hard for




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                                                          37


           1    surveys of establishments to come up with

           2    good incentives.

           3              They did do a pre-mailing, and this

           4    is partially because for the first time,

           5    they're using Census Taker, which is the

           6    Census Bureau's internet data collection

           7    system.  And it sounds like they've had -- I

           8    mean, they're still in the middle of the data

           9    collection process.  But it sounds like they

          10    have had very good response to the use of

          11    Census Taker, and so hopefully that will help

          12    response.

          13              The other thing they did was to

          14    have a short form for the survey, it's a very

          15    large survey.  And some very small

          16    establishments can fill out a short form, and

          17    they're hoping that that will help the

          18    response rates among the smaller companies.

          19              And finally, you've heard about the

          20    30th anniversary.  One thing I would like to

          21    point out that's historic about this very

          22    meeting is that Ed Kokkelenberg has joined




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           1    us.  This is the first time we've had --

           2              MR. KOKKELENBERG:  Am I historic?

           3              MS. KIRKENDALL:  Yes, it's

           4    historic.  This is the first time we've had a

           5    former ASA Energy Committee member come back

           6    for another round of appointments.  And so he

           7    served for six years -- was it in the early

           8    '90s?

           9              MR. KOKKELENBERG:  I think so.

          10    Maybe in the mid-90s --

          11              MS. KIRKENDALL:  Just so it was

          12    long enough ago that everybody has forgotten

          13    that he did it.

          14              MR. KOKKELENBERG:  I remember that

          15    NEMS was starting up then.

          16              MS. KIRKENDALL:  So it was during

          17    the NEMS -- so there's a chance that in

          18    another 10 or 20 years, you can come back and

          19    be on the Committee again.  Hopefully, it

          20    will be a good enough experience you would

          21    like to do that.

          22              Then the last one is just -- this




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           1    was the relationship between crude oil prices

           2    and natural gas prices was a paper given by

           3    Jose Villar in Natural Gas Division.  We have

           4    done just a little bit more.  There was Andy

           5    Kydes, who works in the Office of Integrated

           6    Analysis and Forecasting, had an intern who

           7    looked at this project in the summer, and she

           8    added coal prices, I think, to the model, and

           9    was looking what to do with the trend term.

          10              But on the other hand, she was just

          11    a summer intern and so the work isn't really

          12    complete.  So we're still very interested in

          13    this topic.  The topic in general is

          14    co-integration between data series and how

          15    does that affect your forecasts.

          16              So this work is still of great

          17    interest to us, and it is one of the project

          18    descriptions that we have put in for the

          19    National Institute of Statistical Sciences'

          20    student grants program, so maybe you can help

          21    us write that up.  And maybe you have a

          22    student or two who might be interested in it,




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           1    that would be even better.

           2              That's the end of my talk.

           3              So thank you.

           4              MR. CARUSO:  Nancy just reminded me

           5    when she said about the work that the intern

           6    did -- we also as part of our recruitment

           7    enhancement with having to hire so many new

           8    people, had a very expansive interns program

           9    last year.

          10              We had I think 24 interns.  So

          11    that's another area where if you have

          12    students or acquaintances that you know that

          13    might be interested, we're very open to that,

          14    and it's about the right time of the year to

          15    start hearing from them.

          16              Thank you, Nancy.

          17              MR. NEERCHAL:  Thank you, Nancy,

          18    and Guy.  Questions for either Nancy or Guy?

          19              MR. CLEVELAND:  It's kind of moving

          20    ahead to the -- this National Institute

          21    thing, but on this point, I think we really

          22    need to do more to advertise these




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           1    initiatives, like who knows about this intern

           2    program.

           3              This should be on that front page.

           4    Now accepting applications for interns and

           5    developing a communication network, which I

           6    think we'll take about as part of the -- this

           7    research part, I think, where you're going

           8    to -- where you have list servs and

           9    newsletters and e-mail lists, that you target

          10    when these initiatives come out, that people

          11    should be able to sign up for the list serv

          12    on your website and things like that.

          13              We'll talk more about that later,

          14    but I think there's a lot you can do to

          15    enhance your outreach effort.

          16              MS. KIRKENDALL:  Great.

          17              MR. NEERCHAL:  Any other questions,

          18    comments?  Thank you.  Let's move on.

          19              I think since we will not have

          20    another discussion I think as you have said

          21    we're going to -- the time is going to work

          22    out I think, so John is -- so we'll go to the




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                                                          42


           1    next session here.  Phillip Tseng on Modeling

           2    Regional Electricity Generation.

           3              MR. TSENG:   Good morning,

           4    Mr. Caruso, Nancy, and members of the ASA

           5    Energy Committee, and ladies and gentlemen.

           6    Today, I will take about the modeling work I

           7    have been working on for a long time.  It's

           8    Modeling Regional Electricity Generation.

           9              Basically, I will cover a few

          10    topics.  I will talk about how we started,

          11    why we started, and objectives of the

          12    efforts, and the data sources, methodology,

          13    and some of the preliminary findings, and I

          14    have some questions on fuel switching,

          15    because the methodology I used kind of bypass

          16    explicit price representation.  And I have

          17    some other possible applications of the

          18    model.  If I have time, I'll probably go over

          19    it.

          20              We started the project about two,

          21    three years ago, and the objective was to

          22    increase regional details to the short-term




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           1    projections and analysis.  And also, we

           2    wanted to just understand what regional

           3    markets are doing.

           4              And we developed a methodology.  I

           5    think I gave a presentation with Dave

           6    Costello, who passed away, unfortunately.

           7    And we used a methodology -- it was a little

           8    bit awkward to use, and it takes a lot of

           9    effort to actually calibrate a model and to

          10    generate satisfactory results.

          11              And part of the reason we kind of

          12    took so long to complete the model to this

          13    stage is, we lost a valuable co-worker, and

          14    as a result, we're kind of in transition for

          15    a while.

          16              Now to iterate the objectives.

          17              As we move along, we learn more

          18    about data.  We thought, we think we can do

          19    more with the datasets we have.

          20              And so again the first objective is

          21    project power generations from power plants,

          22    burning fossil fuels, and we have regional




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                                                          44


           1    representations.  And the second objective is

           2    actually using the model to conduct scenario

           3    analysis, and hopefully provide insights into

           4    potential power flow problems.

           5              We focus on fossil plants, because

           6    in the short run, dispatching patterns of

           7    other types of power plants are much less

           8    responsive to changes to demand.  Like

           9    renewable, for example, we don't really have

          10    control over when solar will dispatch or wind

          11    will dispatch.

          12              And nuclear power plants is more or

          13    less baseload, and it has to around almost

          14    all the time.  Operators may be able to ramp

          15    up the generation a little bit or ramp down a

          16    little bit, but in general, nuclear is a

          17    baseload power plant.

          18              So only fossil fuel plants are used

          19    to meet changes in demand patterns.  The data

          20    sources we have -- basically the EIA-826, in

          21    the sales and revenue by end-use sectors.

          22    And we use the EIA sales numbers and we have




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           1    the power control area data with a daily

           2    24-hour load, and then from that we create

           3    the demand curves -- average daily 24-hour

           4    load demand curves.

           5              And on the supply side, we use net

           6    generation by generator -- I think we talked

           7    about last time that data record is about

           8    8,000 or 9,000 records, and we have the

           9    generating capacity by fuel type.  It's an

          10    annual number, which covers about 20,000

          11    generators.  And from that net generation and

          12    generation capacity, we create supply curves.

          13    We will figure out a way to kind of identify

          14    the supply curves, and then we use the demand

          15    and supply representation to solve for

          16    generation.

          17              For the electricity region, we have

          18    13 regions -- just for the lower 48, and we

          19    modeled like Hawaii and Alaska separately,

          20    because those two states are kind of

          21    independent of the lower 48 states.  And we

          22    have -- for the Eastern Regions, we have nine




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                                                          46


           1    regions -- number 1 through 7, number 11, 12.

           2    And for the Western Region, we have Mountain

           3    and -- Pacific, excluding California -- and

           4    California, so at the West End, we have three

           5    regions, and Texas is a region by itself.

           6              So this is the map which shows the

           7    regions.  This is the census region, and we

           8    have Pacific, California, and Mountain in the

           9    West, and we have nine regions in the East,

          10    and Texas, we make it as one region.  So

          11    that's the basically three trading blocks,

          12    and we allow trading, say, between the

          13    Mountain region, Pacific, and California, and

          14    then to east nine regions trading as one

          15    trading block, and Texas is itself.

          16              The challenges for us was

          17    to -- yes?

          18              MR. EDMONDS:  Just to make sure I

          19    understand -- when you're modeling, are you

          20    trying to predict the demand and supply of

          21    electricity at each hour of each day of the

          22    year in each of these regions?  Or




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           1    what -- can you just kind of get me on to the

           2    time.

           3              MR. TSENG:  For the modeling

           4    effort, the first step is to use the existing

           5    historical data on demand side and supply

           6    side, and then see if we can dispatch power

           7    patterns for fossil fuel matching the

           8    historical pattern.  So the demand numbers

           9    are historical numbers.  For projection, then

          10    we project monthly demand, and from the

          11    monthly demand, we convert it to average

          12    daily load, and then we solved (?) the model

          13    is based on the average daily load.

          14              So each month, we have a typical

          15    month, a typical day, average day, and then

          16    we have to convert the average day to 24-hour

          17    load.  And then we solve it hourly, so the

          18    model is solved hourly, but with the

          19    projection horizon is normally 24 to 36

          20    months.  So when we look at 36 months --

          21              MR. EDMONDS:  It's 36 times that --

          22              MR. TSENG:  Yeah.  Each month we




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           1    solve 24-hour timestamps, so we get a typical

           2    average day and we convert it to monthly.

           3              MR. EDMONDS:  All right.

           4              MR. TSENG:  So the projection of

           5    demand is based on weather and income.  So

           6    what we're doing here is basically for the

           7    reference case or the base case, is seeing

           8    development methodology -- see if we can

           9    actually replicate historical dispatching

          10    patterns for fossil plants.

          11              And also the challenge is we need

          12    to provide a framework, because we want to

          13    understand if that thing is beyond control

          14    like power plant outages -- if somehow we

          15    lose one or two nuclear power plants, that

          16    could be 2,000 megawatts of power plant

          17    generating capacity in the summer, what

          18    happens?  What happens to the power flow and

          19    what happens to the generation capacity and

          20    capability in meeting the demand?

          21              So those are the kind of things

          22    relevant to the modeling.  And another thing




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           1    is when we do simulation analysis, sometimes

           2    as -- actually, one very important aspect is

           3    what happens if summer demand is higher than

           4    normal, and what kind of power plants would

           5    be used to meet the demand?

           6              And what happens to the demand for

           7    natural gas?  Because a few years ago when

           8    natural gas price was very high, relatively

           9    much higher than even the crude oil prices in

          10    BTU terms, some of the gas combined cycle

          11    power plants, very efficient state-of-the-art

          12    gas power plants, were shut down because of

          13    the high prices.  So there are a lot of

          14    interactions between the electricity sector

          15    and the natural gas market, and we wanted to

          16    get some insight in terms of the interactions

          17    in one sector and its impact on the other

          18    one.

          19              That's part of reason why we want

          20    to build a model which can provide more

          21    consistent information on demand for fossil

          22    fuels.  So that's the purpose of building a




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           1    framework, so that the model should have a

           2    capability to do those kind of analysis.

           3              And of course for the users who run

           4    the model, the short-term model is run on the

           5    EViews.  That's a software that many people

           6    use for econometric simulation modeling.  And

           7    so the modeling framework has to be on

           8    EViews, because it's easier to integrate the

           9    electricity module into the framework of the

          10    overall short-term regional forecast.

          11              So with the next few slides I will

          12    talk about the methodology, how do I create

          13    the supply curve, because the generation

          14    model is about how fossil fuel plants are

          15    dispatched.  And the question is, how can I

          16    have a representation capture the supply

          17    which the supply curve would incorporate the

          18    capacity constraint?

          19              So when we run the model, the model

          20    solution would not go beyond available

          21    capacity.  So that's one of the issues in the

          22    short run.  In the long run, we can always




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           1    add new power plants.  So what we did

           2    actually is we used most up-to-date data, in

           3    this case, it's year 2005, to project

           4    generation for the next 24 months.  And so

           5    power plant owners -- normally, power plant

           6    owners should dispatch power based on the

           7    least cost power plant first.

           8              If you'll look at a system,

           9    however, there are some other factors, like

          10    causing the accessibility of transmission

          11    lines -- if some generators have to sign some

          12    kind of a contract with the transmission

          13    operators, so there are some contractual

          14    issues.

          15              And they send to the load centers

          16    and transmission and distribution losses, and

          17    also availability of fuels, because we look

          18    at data and we see some power plants even

          19    though it's a dual-fuelled, but even when we

          20    see the prices, we see some power plants

          21    would still use more expensive fuels sometime

          22    in the year, just because of there's not




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           1    enough certain type of fuel.

           2              For example, the gas and oil units,

           3    the oil storage capacity will limit how much

           4    a dual fuel units can burn residual fuel, for

           5    example, even though residual fuel may be

           6    cheaper sometimes in the year.

           7              But once that cheaper oil is used,

           8    it may take some time or logistic to bring

           9    those fuel into the storage, and so we still

          10    see some natural gas used.  So those are the

          11    consideration for our estimation of the

          12    supply curve.

          13              So we actually look at a system

          14    cost instead of the variable cost of the

          15    power generation to represent the supply

          16    curve.  So the construction of short-term

          17    supply curves for coal and natural gas,

          18    residual fuel, and diesel fuel uses observed

          19    dispatching patterns instead of -- yes?

          20              MS. KHANNA:  Just a quick question.

          21    Can you clarify what you mean by variable

          22    cost?




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           1              MR. TSENG:  Variable cost is -- for

           2    example, you have a coal power plant, and

           3    each power plant has certain conversion

           4    efficiency.  Coal is probably like

           5    35 percent, for example, and so one unit of

           6    coal, one BTU of coal, and we can get certain

           7    units of electricity -- and then from that,

           8    we can estimate a variable cost of generating

           9    electricity from a coal power plant.

          10              MR. LIDDERDALE:  It's fuel cost.

          11              MS. KHANNA:  Fuel cost?

          12              MR. TSENG:  Yeah, basically it's a

          13    fuel cost, but fuel cost is converted to unit

          14    electricity cost when we incorporate

          15    efficiency loss.

          16              MS. KHANNA:  Okay.

          17              MR. TSENG:  But system cost, then

          18    there's transmission charge tariff, and then

          19    also TMB loss.  So from the end users' point

          20    of view, end user only see the charge for the

          21    end used electricity, but there's usually the

          22    transmission loss of 5 to 7 percent.




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           1              And so someone is paying for that

           2    loss as well, so the end user probably would

           3    prefer the cheapest electricity first.  And

           4    so when we look at this is -- since the

           5    spatial consideration is one element in the

           6    siting and building of infrastructure, so

           7    sometimes power plants with higher variable

           8    cost may be dispatched earlier because it's

           9    closer to the load center.

          10              So when we estimate a short-run

          11    supply curve, we simply use observed pattern,

          12    because we see -- what if this power plant is

          13    dispatched first, then it must be cheaper,

          14    for whatever reason.  It could include the

          15    cost, also could include institutional

          16    factors, because sometimes, from what I have

          17    heard, a big generator may have better

          18    relationship with the transmission line

          19    operators because of the volume, and so in

          20    order to increase the utilization rates of

          21    transmission line, those generators may have

          22    some benefits in getting to the assigned,




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           1    allotted capability of moving their products.

           2              And that's one area.

           3              And so the way I did it to

           4    calculate the dispatching pattern is, we

           5    assign -- first, we calculate the utilization

           6    rate of all power plants, and if power plants

           7    are utilized more, then they must be cheaper

           8    in the system sense -- the cost of delivering

           9    electricity to end users must be cheaper.

          10    That's why those power plants are used more.

          11              And I assigned the power plants

          12    into 10 categories, basically 10 bins, and I

          13    will have little bit more detailed when I

          14    move down.  And then I choose two functional

          15    forms to fit a supply curve, and one for each

          16    of the four types of fossil fuels:  Coal,

          17    gas, diesel, and residual fuel.

          18              And then for each demand level, I

          19    adjust for the non-fossil plants, and then I

          20    can solve the model.

          21              MR. KOKKELENBERG:  Can I ask you a

          22    question about that statement?




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           1              MR. TSENG:  Yes.

           2              MR. KOKKELENBERG:  It says two

           3    forms are selected to fit --

           4              MR. TSENG:  Right.

           5              MR. KOKKELENBERG:  One for each, so

           6    in other words, you have used two forms?

           7              MR. TSENG:  Okay.

           8              MR. KOKKELENBERG:  But not for

           9    each.  You only used one functional form for

          10    each.

          11              MR. TSENG:  One kind for each, yes.

          12              MR. KOKKELENBERG:  Thank you.

          13              MR. TSENG:  Actually, I have

          14    specific example here.  So this is that the

          15    way I did.  Actually, I talked to my

          16    co-worker, Dr. Hodge, he doesn't want to put

          17    his name on the paper.  But he actually put

          18    in a lot of effort.  For this part of the

          19    work, he made very significant contribution.

          20    What we did here is, first, we assigned the

          21    bin numbers.  For example, for coal here, if

          22    capacity -- this is Texas -- and the capacity




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           1    numbers in megawatt, and for coal, we have

           2    the bin number 1, is 4,623 megawatt, this is

           3    the capacity.  So what it means is you have

           4    this much capacity with utilization rate of

           5    more than 90 percent.  So I put the numbers

           6    in in bin number 1.

           7              And in the next bin number 2 is

           8    basically utilization rate between 80 and 90.

           9    So that's the first column for coal.  And

          10    then here on the cumulative capacity, this is

          11    how I estimate a supply curve.  I simply say,

          12    well, as we see that the cumulative capacity

          13    tend to increase, and the maximum is

          14    basically the capacity, total capacity of

          15    coal in the region.  And from that, I create

          16    supply curves.

          17              Before I estimate the supply

          18    curves, I made some adjustments to the coal

          19    power plants.  And part of reason is, from

          20    the data we have, we notice coal power plants

          21    burn some natural gas, burn some oil.  And

          22    part of reason is coal operators, coal power




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           1    plant operators, probably have to do more

           2    maintenance of the coal power plants than

           3    natural gas or oil plant.

           4              And for each time a coal power

           5    plant is shut down, when it needs to restart,

           6    and the way you restart a coal power plant,

           7    you don't just light a match to the coal.

           8    You need natural gas or oil.

           9              And so we look in the data, we

          10    assigned availability factor of 93 percent,

          11    94 percent, and 96 percent to different

          12    regions.  Back to the functional form -- and

          13    we actually select two types of functional

          14    forms.  And for the coal we use semi log

          15    inverted functional form.  And dependent

          16    variable is coal cumulative capacity, and

          17    independent variable is the bin number.

          18              And for gas, diesel and residual

          19    fuel, I selected the quadratic form; I used

          20    semi log.  Part of the reason is, if I used

          21    the normal number, I get into negative

          22    projected capacity, because the curve fit,




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           1    the quadratic forms, tend to go down a little

           2    bit, and then move up.  So the selection of

           3    the functional form is basically is trial and

           4    error, and I get very good fit when I use

           5    these two functional forms.  These are some

           6    of the results.  For Texas, I used July 2005

           7    data, you can see the coal supply curve.  The

           8    R (?) squares above 0.9 -- yes?

           9              MS. KHANNA:  A quick question.  How

          10    many observations are these results based on,

          11    the reverse --

          12              MR. TSENG:  For this run, we used

          13    10 bin numbers, so you should see number 1

          14    through 10 on the X axis.

          15              MS. KHANNA:  But how many

          16    observations in your estimation data set?

          17              MR. TSENG:  For each month, we have

          18    only -- creation of the supply curve.  We

          19    have 10 bins --

          20              MS. KHANNA:  Uh-huh.

          21              MR. TSENG:  But in terms of the

          22    number of power plants and number of




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           1    generation numbers, I think for the U.S.

           2    total, we have about 20,000 generators.  We

           3    have about 8,000 or 9,000 generation numbers.

           4    Because for example, in Texas, if you have

           5    two coal power plants, steam generators, then

           6    the net generation number from the same power

           7    plants is reported as one number.  That's why

           8    the net generation number will have a smaller

           9    number of observations than the capacity.

          10    And that's how we group the power plants into

          11    10 bins, based on the utilization rate.

          12              MR. CLEVELAND:  But your curves

          13    will only fill into 10 data points --

          14              MS. KHANNA:  Ten data points, yes.

          15              MR. CLEVELAND:  Yeah.

          16              MR. TSENG:  Right, yeah.

          17              MS. KHANNA:  So it's not surprising

          18    to get a really good fit.

          19              SPEAKER:  Yeah.

          20              MR. CLEVELAND:  So the axes here

          21    are what?

          22              MR. TSENG:  Okay, the vertical --




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           1              MR. CLEVELAND:  Bins --

           2              MR. TSENG:  The vertical axis is

           3    that the natural log of capacity.

           4              MR. CLEVELAND:  Natural log of

           5    capacity?  Okay.

           6              MR. TSENG:  Yes.

           7              MR. EDMONDS:  Just to sort of see

           8    if I understand this, what you've done is

           9    you've created a dispatch ordering --

          10              MR. TSENG:  Exactly.

          11              MR. EDMONDS:  Based on the

          12    historical observation.

          13              MR. TSENG:  Yes.

          14              MR. EDMONDS:  So you look -- when

          15    you did this, I guess, slide 11, if you had

          16    plotted that, what you would've shown us was

          17    that in bin 1, you've got -- those are just

          18    running all the time.

          19              MR. TSENG:  Yes.

          20              MR. EDMONDS:  They're never off.

          21              MR. TSENG:  Almost, yes.

          22              MR. EDMONDS:  Right.  And bin 2,




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           1    they're running almost as much.

           2              MR. TSENG:  Right.

           3              MR. EDMONDS:  And bin 3 and so

           4    forth, until you get to the higher bins like

           5    8, 9, and 10.

           6              MR. TSENG:  Right.

           7              MR. EDMONDS:  Where they're only

           8    coming on to hit your peak.

           9              MR. TSENG:  Right.

          10              MR. EDMONDS:  And like V, if it's

          11    July, the hottest hour of the day --

          12              MR. TSENG:  Right.

          13              MR. EDMONDS:  Those come on, but

          14    otherwise, they're not --

          15              MR. TSENG:  Yes.

          16              MR. EDMONDS:  So basically what

          17    you've done is essentially a load curve, and

          18    then on the right is your cumulative load

          19    curve or a dispatch curve --

          20              MR. TSENG:  Right.

          21              MR. EDMONDS:  For these units.  And

          22    that's just based on observation.  Basically




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           1    you're saying for whatever reason, this is

           2    what we see -- the behavior of -- in this

           3    case Texas.

           4              MR. TSENG:  Right.

           5              MR. EDMONDS:  Texas electric

           6    utility operators.

           7              MR. TSENG:  Yes.

           8              MR. EDMONDS:  But you

           9    actually -- and there's another calculation

          10    you could've done from those data, and

          11    probably did on the side, which is to take a

          12    look at those units and actually ask what's

          13    the economics of the -- if you were the

          14    operator and you're just looking at the

          15    performance of those units, would --

          16              MR. GRUENSPECHT:  Economic

          17    dispatch --

          18              MR. EDMONDS:  Yeah, how would I --

          19              SPEAKER:  And the whole idea of

          20    this, I think, is to avoid the -- if in fact

          21    the generation of the load were all located

          22    at one point, and there were no transmission




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           1    constraints.

           2              MR. TSENG:  Right.

           3              SPEAKER:  The two should give you

           4    the same result.

           5              MR. TSENG:  Right.

           6              SPEAKER:  But this is sort of an

           7    effort to pick up --

           8              MR. EDMONDS:  Well, this is --

           9              SPEAKER:  Affect --

          10              MR. EDMONDS:  Really did --

          11              SPEAKER:  Affected --

          12              MR. TSENG:  Exactly.

          13              SPEAKER:  Yeah.

          14              SPEAKER:  Right.

          15              SPEAKER:  So --

          16              MR. GRUENSPECHT:  So implicitly,

          17    the notion is if they really did something

          18    that seems like it would be out of order,

          19    based on the second calculation that you've

          20    described, then that implies -- because

          21    unlike in most parts of our modeling, we tend

          22    not to assume rational economic behavior, we




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           1    don't assume that people buy the right

           2    refrigerator or the right light bulb or the

           3    right copying machine.

           4              MR. EDMONDS:  Right.

           5              MR. GRUENSPECHT:  Usually in the

           6    electricity sector, we think -- I mean,

           7    people running this thing pretty much

           8    understand which is cheaper, which is more

           9    expensive, so if they --

          10              SPEAKER:  Right.

          11              MR. GRUENSPECHT:  Use the more

          12    expensive.

          13              MR. EDMONDS:  There's a reason.

          14              MR. GRUENSPECHT:  There's a reason.

          15              MR. EDMONDS:  Right.

          16              MR. GRUENSPECHT:  And we wanted to

          17    reflect that --

          18              MR. EDMONDS:  Yeah.

          19              MR. GRUENSPECHT:  Yeah.

          20              MR. EDMONDS:  And the only thing I

          21    was going to ask you is how do those stack

          22    up?  And presumably, there were some real




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           1    insight -- I presume you probably did that

           2    stack --

           3              MR. TSENG:  Actually --

           4              MR. EDMONDS:  And there are

           5    probably some real insights that came out

           6    of --

           7              MR. TSENG:  At the very beginning

           8    of this project, we actually did a

           9    scattergram with the vertical axis as to

          10    variable cost and the horizontal as capacity

          11    utilization rate, and we found some low cost

          12    with low utilization rate power plants, and

          13    some high costs with high utilization rate,

          14    and so we -- initially, we started with the

          15    cost -- minimization algorithm, and we

          16    realized it -- we couldn't replicate a

          17    historical generation pattern, and then we

          18    stepped back and we said, well, maybe the

          19    system cost is the one.

          20              And for system costs, the only

          21    thing -- the only easiest way to pick up that

          22    is looking at utilization rate, because




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           1    that's almost like reviewed preference type.

           2              MR. EDMONDS:  Oh, yeah.

           3              MR. TSENG:  What we see is really

           4    what happened.

           5              MR. EDMONDS:  Yeah.

           6              MR. TSENG:  And the question is can

           7    we pick up the reviewed preference and then

           8    replicate a historical pattern.  This is the

           9    test.  And there's always trade-off -- when

          10    we pick up something, we use a methodology

          11    which uses information ignoring certain other

          12    types of information, then we miss certain

          13    things.

          14              MR. EDMONDS:  Right.

          15              MR. TSENG:  Yes.

          16              MR. EDMONDS:  And so what you did

          17    in -- when you got to figure 14, is you used

          18    the historical behavior --

          19              MR. TSENG:  Yes.

          20              MR. EDMONDS:  And then stepped

          21    ahead one time period and did a comparison?

          22              MR. TSENG:  Okay --




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           1              MR. EDMONDS:  Essentially, if I

           2    understand it, the green line --

           3              MR. TSENG:  Yes.

           4              MR. EDMONDS:  Is fitting using your

           5    bin system with the --

           6              MR. TSENG:  Right.  So the red line

           7    is actually the table you saw.  I calculated

           8    cumulative capacity.

           9              MR. EDMONDS:  Exactly.

          10              MR. TSENG:  And then I fit the

          11    curve.

          12              MR. EDMONDS:  Right.  Okay, so it's

          13    the same -- essentially, it's the curve --

          14              MR. TSENG:  Yeah.

          15              MR. EDMONDS:  Fitted to the same

          16    years of data?

          17              MR. TSENG:  Yes.

          18              MR. GRUENSPECHT:  So it's not out

          19    of sample?

          20              MR. EDMONDS:  It's all in sample.

          21              MR. TSENG:  For the supply curve,

          22    it's not out of sample, but when we do




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           1    projection and -- like for example, I use the

           2    2005 data -- I have some results, and then I

           3    can use the 2005 data to project 2004 or 2006

           4    dispatching pattern, and that's out of

           5    sample.  Because I use the -- supply curve is

           6    based on one year data, the monthly data to

           7    create it -- yes, Ed?

           8              MR. KOKKELENBERG:  Basically, going

           9    back to -- bin numbers are rather an

          10    arbitrary assignment.  You could've assigned

          11    five bins or 5,000 bins.

          12              And the assumption is when you put

          13    it in, a fixed number of bins, that the steps

          14    are equal --

          15              MR. TSENG:  Right.

          16              MR. KOKKELENBERG:  In the way

          17    you're using this in the model.

          18              MR. TSENG:  Yes.

          19              MR. KOKKELENBERG:  But the bin

          20    number is basically a proxy for the history.

          21    You look back and you say this one's used

          22    90 percent, it goes in this bin, this one's




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           1    used 80 percent and it goes on a different

           2    bin.

           3              MR. TSENG:  Right.

           4              MR. KOKKELENBERG:  So you have a

           5    time series model -- in effect, although you

           6    have filtered the data so that you don't get

           7    all the nuances of the time series

           8    variations.

           9              MR. TSENG:  Well --

          10              MR. KOKKELENBERG:  So if you -- and

          11    if you went to more bins, you would get more

          12    of that detail --

          13              MR. TSENG:  That's --

          14              MR. KOKKELENBERG:  You're really

          15    using 2004 data, because of the -- well,

          16    maybe you're not --

          17              MR. TSENG:  No --

          18              MR. KOKKELENBERG:  Because of the

          19    way the bins are picked off --

          20              MR. TSENG:  Actually, it --

          21              MR. KOKKELENBERG:  And so why don't

          22    you just use a time series model?




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           1              MR. TSENG:  Okay, good question.

           2    The time series data is -- you have time

           3    series data of very aggregated generation;

           4    right?

           5              MR. KOKKELENBERG:  Yeah.

           6              MR. TSENG:  And --

           7              MR. KOKKELENBERG:  But you must

           8    know the capacity utilization rates to be

           9    able to get them into a bin.

          10              MR. TSENG:  The generation number

          11    is monthly data --

          12              MR. KOKKELENBERG:  Right.

          13              MR. TSENG:  And the capacity is

          14    annual number --

          15              MR. KOKKELENBERG:  So you just --

          16              MR. TSENG:  So when you run

          17    regression analysis, you're basically -- is

          18    holding capacity constant.

          19              MR. KOKKELENBERG:  Yeah.

          20              MR. TSENG:  And --

          21              MR. KOKKELENBERG:  Well, you're

          22    doing that throughout the model.




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           1              MR. TSENG:  No -- I'm holding

           2    capacity --

           3              MR. KOKKELENBERG:  But --

           4              MR. TSENG:  I'm holding capacity

           5    constant --

           6              MR. KOKKELENBERG:  Right.

           7              MR. TSENG:  But a dispatching

           8    pattern of each month is different.

           9              MR. KOKKELENBERG:  So why don't you

          10    just use that dispatching pattern plant by

          11    plant and generate a time series model,

          12    because it would absorb all of these

          13    things -- it gets away from the economic

          14    issues that were raised just as well as this

          15    one does, but it doesn't make the assumptions

          16    that the bins are equidistant apart, as it

          17    were, no matter how many bins you push into

          18    it.

          19              MR. TSENG:  Okay.

          20              MR. KOKKELENBERG:  Anyway, that's

          21    something for a -- you're in the middle of a

          22    presentation, and we're interrupting you --




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           1              MR. NEERCHAL:  Could I suggest a --

           2              MR. TSENG:  Yeah.

           3              MR. NEERCHAL:  If you can maybe --

           4              MR. TSENG:  Yeah, okay.

           5              MR. NEERCHAL:  Next five minutes

           6    and --

           7              MR. TSENG:  Right, okay.

           8              MR. NEERCHAL:  Finish and then we

           9    can come back to the discussion.

          10              MR. TSENG:  Right.  Certainly.  And

          11    this is the natural gas supply curve.  And we

          12    have the diesel fuel supply curve.  And so on

          13    the supply side, we created supply curve

          14    based on historical generation pattern, and

          15    then we'll also look at the monthly load, and

          16    we convert the monthly to average.  So this

          17    is just one example to let you see how it

          18    looks.

          19              On the left-hand side is the

          20    monthly -- you look at the 2005 January

          21    through December monthly electricity demand,

          22    and for July, I convert the monthly to an




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           1    average daily load curve, and that's the

           2    shape.  And the interesting part is if we

           3    want to capture the behavior of the

           4    generators, the normal monthly time series

           5    data -- actually, many people tried using

           6    econometric approach, but just couldn't

           7    forecast the variations in demand.

           8              When demand changes, the

           9    dispatching pattern of coal, especially

          10    natural gas, is very different -- depends on

          11    the shape of the load curve, so the monthly

          12    data can never pick up this 24-hour load

          13    shape to reflect the differences in the peak

          14    load demand.  So before I solve the model, I

          15    simply make some adjustment.  I remove the

          16    non-fossil power plants from the load.

          17              So you saw the load curve I removed

          18    from the load, and I make some adjustments

          19    for -- the hydro generation I assume is

          20    proportional to the load curve.  And for

          21    hydro storage, we make adjustment to increase

          22    the evening (?) demand.




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           1              And to solve the model, the

           2    solution is simple.  We look at each slides,

           3    like our number 1, or, you know, like say

           4    1:00 in the morning, and we have this demand

           5    number and we go up, the model simply traced

           6    the demand to supply, and they get a bin

           7    number.  And then from the bin number,

           8    automatically, the model would generate

           9    generation numbers from oil, gas and coal.

          10              So that's automatically generated.

          11    So we have generation by fuel type simply by

          12    equating the demand to total supply.  This is

          13    for a single region, and for trading block

          14    like the eastern trading block, then we're

          15    looking at aggregation of the supply of the

          16    nine regions, and you have this trading block

          17    total supply, and you have trading block

          18    total demand.

          19              And you equate supply to demand to

          20    find out the trading block generation by

          21    different fuel types.  The preliminary

          22    findings we have is the projections is




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           1    actually quite satisfactory.  The out of

           2    sample tests performed satisfactorily for

           3    historical 2004 and preliminary 2006 data.

           4              And the model is capable of

           5    capturing seasonal fluctuations.  The shape

           6    of the load curves may affect dispatching of

           7    oil-based generators, because oil-based

           8    generators are more peak load demand, and

           9    when we use an average daily load curve, we

          10    probably can flatten the load curve a little

          11    bit if we have like actual every -- actual

          12    daily load curves and we just try to solve

          13    it, we could see higher oil dispatching, but

          14    that part -- we can actually do something to

          15    adjust the model behavior or the dispatching

          16    order for the oil-fired units.  And -- but

          17    that's not directly from the data.

          18              So far, everything the model is

          19    doing is straightforward and no adjustment,

          20    and these are the results.  For the eastern

          21    region, the coal and natural gas generation,

          22    the model can pick up the seasonality.  And




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           1    actually, the 2005 month one through month 12

           2    is based on historical dispatching pattern,

           3    and in 2004 and 2006, the out of sample model

           4    runs.

           5              And for the western region, the

           6    model also can pick up the fluctuations.  For

           7    example -- you can see in mid month of --

           8    midyear of 2006, we have a spike in demand

           9    for natural gas, and the model actually picks

          10    up the spike.  And Texas basically followed

          11    seasonality very well.  Not only the

          12    seasonality, also the change in the level of

          13    demand, and because we -- that this model

          14    actually -- because -- models -- the load

          15    curve instead of the monthly time series

          16    data, because when we use average data, it's

          17    very hard to pick up the fluctuations in the

          18    load demand, especially the peak load demand.

          19              The next question people ask is how

          20    does a model perform in terms of -- how do

          21    you evaluate a performance?  So I selected

          22    two methods.  One is the mean absolute




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           1    percent -- percentage error, and the

           2    calculation is very simple.  For each

           3    observation, I calculated difference divided

           4    by the historical number, take the absolute

           5    value, and sum them and divided by the number

           6    of observations.  In this case, I used year

           7    2005, so the h is equal to 12; I have 12

           8    months data.  I can calculate the MAPE.  Now,

           9    also I can look at the 12th month percentage

          10    difference.  Simply sum them up and see how

          11    does it work.

          12              Part of the reason I look at the

          13    second approach is in the natural gas market,

          14    what people look is what happens to the

          15    injection to the storage, like in the summer

          16    months, if natural gas storage injection is

          17    below normal, and then you can see futures

          18    market in December, January, moving up,

          19    because -- the anticipation is there may be

          20    shortage, so that's why I look at it -- the

          21    cumulative -- this is one -- another measure

          22    in terms of specific applications in the




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           1    market analysis.

           2              For the mean absolute percentage

           3    arrow for the 2005, for the east is a little

           4    bit high, but for the west is below

           5    3 percent, and for the Texas is below

           6    3 percent.  And why include other sample

           7    calculation, which means I use 24 months to

           8    calculate the mean absolute percentage error

           9    for the east; for natural gas, it increases.

          10    But for other months still less than

          11    5 percent.  Yes.

          12              SPEAKER:  Do you know what happened

          13    there with natural gas, why did you get

          14    this -- that's -- they're a double or nearly

          15    double.

          16              MR. TSENG:  Part of the reason

          17    is -- in this model, I mentioned earlier,

          18    oil-fired units like diesel and residual fuel

          19    units mostly are peak loaders, and I think

          20    the load shape we use is probably not picking

          21    up the actual load, but we're looking at

          22    average.  When we used average, then some of




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           1    the peak load power plants would not be

           2    picked up by the average load shape.

           3              MR. EDMONDS:  You might have had

           4    some spikes for a few days in there that --

           5              MR. TSENG:  Right, because

           6    sometimes --

           7              MR. EDMONDS:  A lot of gas, but on

           8    the average, it's --

           9              SPEAKER:  Right.

          10              MR. TSENG:  For example, weekday

          11    and weekend peak load demand pattern is

          12    different, because the weekday peak load

          13    demand is probably high, because you have the

          14    commercial end use.  And for the weekend, you

          15    don't have the commercial, so there may be a

          16    few percentage difference.

          17              MR. KOKKELENBERG:  If you use the

          18    median absolute percentage error, you might

          19    find out if that's a good argument.

          20              MR. TSENG:  Right.  So that's part

          21    of the reason.  For this exercise, because

          22    the purpose is just to demonstrate this




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           1    methodology can work, but for -- the actual

           2    use for other analysis, we can actually

           3    calibrate the model a little bit more,

           4    fine-tune the load curve, and also adjust a

           5    bin number for the residual fuel power plants

           6    and diesel fuel power plants so they'll be

           7    used more.

           8              That actually is modeling technique

           9    which can be incorporated.  For the 12th

          10    month percentage difference, Texas actually

          11    showed very good results here.  And west is

          12    very good, and east, and you have positive

          13    numbers for both coal and natural gas and

          14    that's the reason -- yes.

          15              MR. FEDER:  If I understand

          16    correctly, your second performance measure is

          17    not sensitive at all to any monthly or

          18    seasonal inaccuracies in your predictions,

          19    right?

          20              MR. TSENG:  That's basically

          21    looking at --

          22              MR. FEDER:  There's a cancellation




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           1    there, right?

           2              MR. TSENG:  For this one, there's

           3    no cancellation, because it's absolute value.

           4              MR. FEDER:  No.  The second one.

           5              MR. TSENG:  Yeah.  For the second

           6    one, there's cancellation, because the

           7    purpose of looking at a second one is, if we

           8    have a very hot summer, for example, in 2007,

           9    if we have a very hot summer, and we expect

          10    based on the model performance, you can see

          11    that natural gas tend to spike up, and if we

          12    can pick up the spike, then it implies demand

          13    for natural gas will be higher than normal,

          14    and then the seasonal injection to natural

          15    gas storage in the north and northeast will

          16    be below normal, and that has implication to

          17    natural gas prices in the market.

          18              And that's why we say -- it depends

          19    on how we use the model.  You actually have

          20    different kind of criteria to evaluate a

          21    performance of the model.

          22              MR. LIDDERDALE:  On the 12 month




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           1    percentage difference, wouldn't you expect

           2    the coal air to offset --

           3              COURT REPORTER:  Can you use the

           4    microphone, please?

           5              SPEAKER:  You got to speak into the

           6    mic.

           7              MR. LIDDERDALE:  Oh, I'm sorry.  On

           8    this 12-month percentage error, wouldn't you

           9    expect the coal air to offset the gas air,

          10    which is interesting that the east doesn't

          11    have that offset?

          12              MR. TSENG:  The reason east doesn't

          13    have the offset is because the residual

          14    fuel -- in the east, I mentioned a few times,

          15    we're not picking up the diesel fuel and

          16    residual fuel generation very well, and part

          17    of the reason is somehow, the ranking of

          18    those power plants is in terms of numbers too

          19    high, or the dispatching order is too low,

          20    and that may require some offline adjustment.

          21              So the model in issue here is -- I

          22    think one is we need to do some adjustment to




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           1    the residual fuel and diesel fuel dispatching

           2    order, because from the calculation,

           3    straightforward calculation, we cannot let a

           4    model pick up this thing, and -- but from

           5    modelist's point of view, I can change the

           6    dispatching order and try to make it fit the

           7    historical pattern, so that's one approach.

           8              The other thing is, since we're

           9    using the ranking based on the observed

          10    utilization rate, we kind of miss the price

          11    information.  So under normal relative price

          12    market structure, the model will perform

          13    reasonably well, but if we have very drastic

          14    change, like sometimes -- a few years back,

          15    natural gas price was very high, and we could

          16    see more residual fuel, and in the future, we

          17    could see the relationship change.

          18              And so that part is not picked up

          19    in these kind of modeling framework, and

          20    we're actually looking into possible ways to

          21    capture the fuel switch.  And there are

          22    several ways to do it.




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           1              And we're still trying.  And once

           2    that's done, I think the model behavior will

           3    be a lot more consistent and better.

           4              So the questions for the committee

           5    will be -- we 'd like to have some guidance

           6    and help in that area in terms of exactly

           7    what is the best way to model the fuel

           8    switching.  And we thought of several ways.

           9    One is looking at one year -- for example, in

          10    2001 or 2002, we had a year where natural gas

          11    was actually a lot more expensive than oil,

          12    and then in 2005, oil is a lot more expensive

          13    than gas.  So we could look at the

          14    historically -- two years and then try to

          15    fish out the relative price relationship and

          16    see how the dispatching pattern changed.  So

          17    that's one way to do it.

          18              The other one is simply look at the

          19    relative price of natural gas and oil and

          20    look at a total generation, just look at a

          21    time series data and come up with some kind

          22    of coefficient, and then we can actually




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           1    simply apply the coefficient to the

           2    dispatching equation.  And basically, it's

           3    like shifting the curve according to the

           4    relative price.  So each month, if we see the

           5    price changes is drastic, then we shift the

           6    supply curve -- for example, if natural gas

           7    price increases, then we shift the natural

           8    gas price to the left, and then in the

           9    meantime, we shift the oil and supply curves

          10    to the right.  That's when the natural gas

          11    prices have shifted to the left.

          12              Yes?

          13              MR. LIDDERDALE:  Can't you also

          14    consider treating distillate fuel and

          15    residual fuel as exogenous to the dispatch

          16    process, do econometric estimation of those,

          17    and so you're only left with dispatching coal

          18    and natural gas?  In other words, distillate

          19    fuel is almost 20,000 barrels a day, it

          20    doesn't change.  Residual fuel is certainly

          21    price-elastic, but you may not be able to

          22    accomplish it within the dispatch model.




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           1              MR. TSENG:  That's another option,

           2    obviously.  And then the question will be how

           3    do we separate the residual fuel supply from

           4    the dual fuel units, because some of the

           5    natural gas power plants can burn residual

           6    fuel?  And we need to separate that.  So

           7    there's a lot of data issue.  So that's

           8    basically my presentation.

           9              I have some other applications.  I

          10    think I will stop it here.

          11              MR. NEERCHAL:  I think we have

          12    designated ASA discussion.  Shall we do that

          13    first?  And then open it --

          14              MR. FEDER:  Can I ask a question to

          15    clarify?

          16              MR. NEERCHAL:  Sure.  And I --

          17              MR. FEDER:  Although I shouldn't be

          18    allowed to --

          19              MR. NEERCHAL:  I want to remind you

          20    to please use your microphones --

          21              MR. FEDER:  Maybe I shouldn't be

          22    allowed to since I came in late, but when you




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           1    (inaudible) your regression models, are they

           2    separate for each region or not, and is there

           3    any way one region affects the other regions?

           4              MR. TSENG:  In the trading block,

           5    like say if we look at the western block, you

           6    have three regions.  One region -- basically,

           7    when you have trade, one region will affects

           8    the other region.

           9              MR. FEDER:  But you still have

          10    separate regressions for free chains for --

          11              MR. TSENG:  Yes, each region has

          12    its own demand and supply curves.

          13              MR. NEERCHAL:  Shall we go to

          14    the -- I think Neha, you're the --

          15              MS. KHANNA:  I'll keep this

          16    short --

          17              MR. FEDER:  We have a very tough

          18    chairman this year.

          19              MS. KHANNA:  In the interest of the

          20    number of questions --

          21              MR. NEERCHAL:  No, we'll have time,

          22    no problem, okay.




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           1              MS. KHANNA:  I'll keep it really

           2    short.  I think I have two broad suggestions

           3    or comments.  One is, I personally don't like

           4    the use of bin numbers in a regression

           5    equation-type setting, because the question

           6    that -- the comment that Ed made, which is

           7    essentially you're using something ordinal to

           8    make a cardinal decision or to make a

           9    cardinal conclusion.  And that's just not a

          10    very exciting way of doing this.

          11              But I like the underlying

          12    assumption that if a plant has a high

          13    utilization rate, it must be that it's -- got

          14    a low cost, so that is a good proxy for your

          15    system cost.  Can you not use the utilization

          16    rate directly?  Why even put it into bin

          17    numbers?  You're losing a lot information

          18    there by taking 20,000 generators and putting

          19    them into 10 bins, right?

          20              MR. TSENG:  Okay.

          21              MS. KHANNA:  Let me just put this

          22    up, then you can answer -- they probably have




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           1    a lot of questions.  So that's one question

           2    that I had.  The other question that I had

           3    was, is there much historical variation in

           4    the utilization capacity of generators over

           5    time?

           6              If there is, then that's something

           7    your model is not going to pick up, because

           8    you're assuming that it's not -- and observe

           9    utilization rates and just project it from

          10    there, and that thing is like changes in

          11    relative prices, for example, that you talked

          12    about looking at two years when there were

          13    very different relative prices for oil and

          14    natural gas, and see does that actually

          15    affect utilization, which I think is a good

          16    idea, but you have to first answer the basic

          17    question:  Do these utilization rates change

          18    much at all, or are they determined by

          19    something which is exogenous to the system

          20    operator?

          21              On the other hand, I noticed in

          22    your graphs that the model seems to




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           1    systematically overpredict coal use, coal

           2    generation and underpredict gas

           3    generation -- it's a little bit, but that's a

           4    very systematic trend in there.  That's a

           5    little worrying.

           6              And if you have something it gets

           7    very systematic in there.  Is there a

           8    reason -- can you explain why it is that way?

           9    And my last thing is -- actually -- on the

          10    whole, though, I think your model is

          11    performing relatively well because of its

          12    ability to pick up the seasonality, and when

          13    you show those spikes in the month, your

          14    model seems to be able to resolve that,

          15    predict that, so that's actually the positive

          16    side of all of this.

          17              And in anything you do from here,

          18    you have to see what are you getting from

          19    your efforts.

          20              For example, is fuel such really a

          21    big deal in the system or is it a very small

          22    deal and are we chasing -- putting a lot of




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           1    effort on trying to get a very marginal

           2    improvement, given what you want to use in

           3    model 4?  And I'll stop there.

           4              MR. TSENG:  Okay.  Well, actually

           5    using the bin number -- originally, we

           6    started the project looking at the raw data

           7    directly, and the difficulty was when we look

           8    at each region, like say for eastern region,

           9    you have nine subregions, each region has

          10    different number of observations.  And so we

          11    can calculate the utilization rate and then

          12    just process the raw data.  It creates

          13    processing difficulties.  That's one.  And

          14    the other thing is we didn't get really good

          15    results.

          16              MS. KHANNA:  When you use

          17    utilization rates directly?

          18              MR. TSENG:  Yes, when we use the

          19    utilization rate --

          20              MS. KHANNA:  When you say "good

          21    results," what do you mean?

          22              MR. TSENG:  For example, the model




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           1    tend to -- just like you noticed -- as the

           2    model tend to prefer a coal power plants, and

           3    especially if you use the cost information,

           4    then coal power plants dominate no matter

           5    what you do.

           6              Because by looking at the variable

           7    costs, coal is the cheapest, because coal

           8    fuel cost is a lot cheaper.  When we use this

           9    bin number approach, the rationale behind

          10    this so-called ordinal approach, the way I

          11    interpret is, you look at bin number 1, it

          12    could be a proxy to $0.10, a penny per

          13    kilowatt-hour, and then the bin number 10

          14    could be equivalent to $0.10 per

          15    kilowatt-hour.

          16              So that's kind of the way I see it.

          17    It's a proxy, because in reality, in the

          18    end-use sectors, when people look at

          19    electricity prices -- I think in New York,

          20    you probably see $0.15 per kilowatt hour, you

          21    probably -- you pay the bill.  And in

          22    Virginia, we pay probably like $0.08 or




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           1    $0.09.  And so there's a price range, and for

           2    the base load, it really doesn't matter that

           3    much.

           4              So that number actually has some

           5    implications in terms -- how to interpret the

           6    number, and we can probably do some

           7    calculation, and then convert the bin numbers

           8    to a cost information, but it's a system cost

           9    and it's very hard to calculate.

          10              The other thing is -- trying to get

          11    cost information is, because the region is so

          12    big, what we use is an average price.  And

          13    that creates a problem in terms of how to use

          14    like -- for example, if we go back to -- if

          15    you look at the map for the Mountain region,

          16    I think Montana will pay a very different

          17    natural gas price than Arizona.  And so we

          18    think sometimes more information doesn't mean

          19    providing better results.

          20              MR. GRUENSPECHT:  But I think the

          21    question really pointed more toward using not

          22    the underlying cost information, but the




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           1    utilization rate itself.

           2              MR. TSENG:  Right.

           3              SPEAKER:  Yeah.

           4              MR. GRUENSPECHT:  As I understood

           5    the question, it wasn't saying go back to the

           6    economic approach of trying to estimate the

           7    dispatch curve based on fuel cost.  It said

           8    rather than put these things into bin numbers

           9    based on their utilization rates, why not use

          10    the actual utilization rates in the

          11    regression -- not to go back to cost, not to

          12    go back to -- for that economic dispatch.

          13              But rather, the utilization rate is

          14    a cardinal concept; 82.3 percent, this one is

          15    64 percent, this one is 8 percent.  Why not

          16    just use those numbers directly?  That I

          17    think was the question.

          18              MR. TSENG:  Right.

          19              MR. GRUENSPECHT:  I don't know of

          20    any good reason not to do it.

          21              MR. TSENG:  Actually -- actually at

          22    the beginning, we were doing that.  At the




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           1    first round, when we were doing the

           2    dispatching model, when I presented two years

           3    ago, we were actually looking at actual

           4    utilization rate.  And the difficult part is

           5    maintenance of a database is much more

           6    difficult.

           7              And we're seeing a range -- for

           8    example, if a coal power plant -- utilization

           9    rate is 85.51, and natural gas power plant's

          10    is 84 percent, then you have probably more

          11    problem -- the effects of picking coal power

          12    plants is more pronounced in that approach,

          13    when I did the calculation.

          14              MS. KHANNA:  That could be because

          15    your model is mis-specified.  Maybe you need

          16    to add to that something like relative prices

          17    or some other piece.  But I still think that

          18    may be a good starting point.  I mean, use

          19    that and then maybe add some of those results

          20    to that model, which might help you make a

          21    better prediction.

          22              MR. NEERCHAL:  I think you should




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           1    let Jae go next, because he was waiting for a

           2    while.

           3              SPEAKER:  All right.

           4              MR. EDMONDS:  Yeah, just following

           5    down this path a little bit, it's probably

           6    something we don't appreciate going on here,

           7    because you would think that if instead

           8    of -- I can see the motivation for using the

           9    bins because it makes the solution go faster.

          10              But of course, crunching time is so

          11    cheap that who cares?  And so if you actually

          12    take the dispatch curve literally, rather

          13    than binning it, you would think that in fact

          14    you would be getting these things spot-on.

          15              So if you tell us is that, no, in

          16    fact, if you take the dispatch curve

          17    literally, and use that as your supply

          18    schedule, that the performance deteriorates.

          19    And that's what I don't get is, why would

          20    performance deteriorate when you're in

          21    fact -- with the assumption that in fact

          22    those -- the capital stock is really fixed




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           1    and prices are fixed, why isn't that -- why

           2    aren't you getting almost perfect

           3    performance?

           4              MR. TSENG:  Okay.

           5              MS. KHANNA:  Because there's a lot

           6    more noise in that information within the

           7    bins.  That's why.

           8              MR. EDMONDS:  But he is -- he is

           9    actually doing -- he is going month by month,

          10    and he's getting this dispatch curve.

          11              MR. TSENG:  Let me offer you one

          12    example.  In general, coal is preferred,

          13    right?  And so if in the same region, you

          14    have utilization rate in the 80s for both

          15    coal and natural gas, most likely, you will

          16    have coal in the upper 80s and natural gas in

          17    the lower 80s, using the same

          18    region -- definitely there's a preference.

          19              Now, if you put that model, put

          20    that kind of information in the ranking in

          21    the model, what happens -- how do you use the

          22    capacity?  What is the availability factor




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           1    for coal?  If it's 100 percent, suddenly you

           2    have this additional 10 or 12 percent coal

           3    generation out of your model, and you cut

           4    that equally -- percentage from natural gas,

           5    so you have lower gas.  I think that's what I

           6    found out.  And that's my experience, because

           7    I tried, it didn't work.  Because then the

           8    ranking is very rigid, and when it's very

           9    rigid, coal has definitely come out ahead.

          10              MR. KOKKELENBERG:  Can I ask a data

          11    question?  Are you aggregating this when you

          12    did these tests by plant -- all coal within a

          13    region or all gas within a region, or are you

          14    taking the individual plants, individual

          15    generators?

          16              MR. TSENG:  We are looking at

          17    individual plants -- we're looking at

          18    individual plants.

          19              MR. KOKKELENBERG:  And you're not

          20    doing any aggregation when you were doing

          21    that initial sort of testing.

          22              MR. TSENG:  Oh, yes, it was looking




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           1    at individual plants.

           2              MR. KOKKELENBERG:  Okay.

           3              MR. EDMONDS:  Plants or generators?

           4              MR. TSENG:  Okay.  If a plant has

           5    two different kind of generators, like coal

           6    and gas, then you have two different

           7    representation.  But if a plant has two coal

           8    power plants -- steam generators, then that's

           9    aggregated to calculate the utilization rate,

          10    and that capacity is reflected there.

          11              MR. NEERCHAL:  You had one --

          12              MR. TSENG:  I still want to --

          13              SPEAKER:  Go ahead.

          14              MR. FEDER:  Just to clarify what he

          15    had said, when you have binned that in the

          16    equation, it's not the dummy for the bin,

          17    it's actually number of the bin, some --

          18              MR. TSENG:  Yes, exactly.

          19              MR. FEDER:  Because if you're doing

          20    it at the plant level or generator level, I

          21    don't see why it would be necessary.  I would

          22    treat it as a dummy, right?  I mean --




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           1              MR. KOKKELENBERG:  No, he's just

           2    using bins.  He's not using plant level data

           3    in the results he presented today.

           4              MR. NEERCHAL:  Bin number.

           5              MR. KOKKELENBERG:  Just the bin

           6    number.

           7              MR. FEDER:  But what does the model

           8    say when you have a regression where the

           9    number is a coefficient of the dependent

          10    variable?  It doesn't -- I mean, it's not

          11    even a question whether the model performs

          12    well or not -- what does it say?  The

          13    functional dependence is not meaningful.  I

          14    mean --

          15              MS. KHANNA:  And actually, you

          16    could choose your bin numbers to give you a

          17    really nice fit --

          18              MR. KOKKELENBERG:  It would better

          19    fit that.

          20              MS. KHANNA:  Or really bad fit.

          21    I'm sure you didn't do that because you just

          22    picked 1 through 10.  But that's a problem




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           1    with using something like a bin number, I can

           2    just change them.

           3              MR. NEERCHAL:  And from the data

           4    analysis point of view, I think it will be

           5    nice to see where the individual plants fall

           6    in that picture.  I think that's what I would

           7    like to see, that curve fitting -- and nice

           8    to see where the individual points fall.  The

           9    plants that have been binned into sort of

          10    bins, where do they fall in that with respect

          11    to that curve.  It would be interesting to

          12    see.

          13              MR. CLEVELAND:  I think the problem

          14    comes down to in the beginning, you pointed

          15    out we expect this pure -- this variable cost

          16    dispatching, which every rational independent

          17    system operator will follow, except that

          18    there are all these real world things.  And

          19    the problem is that you're not modeling those

          20    real world things.  We do not --

          21              MR. TSENG:  No, I'm not, because --

          22              MR. CLEVELAND:  It's congestion




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           1    pricing or distance from load center.  And so

           2    the reason -- I think if you use the raw

           3    data, and you're not getting as good a fit,

           4    it's because you're not modeling what's

           5    causing the important deviations from what

           6    (inaudible) dispatch.

           7              And if you want to get a better

           8    model, you're going to have to get at that.

           9    And there's certainly a lot of work in the

          10    literature which tries to deal with

          11    congestion pricing and distance issues, and I

          12    think you have more homework to do.  This bin

          13    approach is not very satisfactory, I'm afraid

          14    to say.

          15              MR. LIDDERDALE:  If I may, I may be

          16    to explain.  My name is Tancred Lidderdale.

          17    I'm supervisor of the Short-Term Energy

          18    Outlook Team, which is the consumer of this

          19    product, and has made great progress in the

          20    work on this.  The bin concept is sort of a

          21    legacy approach, where effectively, he is

          22    regressing cumulative capacity by one over




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           1    bin.  Bin 1, 1 over 1; 100 percent, bin 10, 1

           2    over 10, 10 Percent -- so effectively

           3    regressing capacity against an ordinal

           4    capacity utilization number.

           5              One of the reasons for doing it

           6    this way was in the calibration process,

           7    where you have distillate plants that are

           8    running at 10 percent capacity, how do you

           9    move them up in the dispatch process?  You

          10    know, you could arbitrarily assign them some

          11    higher utilization rate, just trying to get

          12    them to work out.

          13              Or we can take one plant and

          14    designate it as a bin 1, just so that it's

          15    forced to dispatch.  So it was part of

          16    convenience.  So I think we have talked about

          17    instead of going to the ordinal.  If we had

          18    100 bins, it would be -- bin 1 would be

          19    representing 1 of 100 percent, bin 100 would

          20    be 1 percent.

          21              The obvious next step to go to the

          22    cardinal approach of regressing cumulative




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           1    capacity against utilization rate.  And I

           2    think we have discussed that before, but at

           3    this point, it's getting the basic approach

           4    down that we -- it's a logical next step.

           5              MR. FEDER:  So the explanation is

           6    valid, but still, what would you do over time

           7    when the bin number will --

           8              MR. KOKKELENBERG:  The bin number

           9    stays the same.

          10              MR. FEDER:  Then the legacy would

          11    become too much of a legacy.

          12              MS. KIRKENDALL:  The bin numbers

          13    change every year, because the model will be

          14    re-run every year.  Every time there's a new

          15    year, so this is based on 2005 data.

          16              MR. EDMONDS:  It's one year,

          17    looking one year ahead.

          18              MS. KIRKENDALL:  It's one year of

          19    base data to fit the model, and then you look

          20    one year ahead and one year back to see how

          21    you did.

          22              SPEAKER:  That's understood well,




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           1    because I --

           2              MR. NEERCHAL:  Jae, you want to go

           3    first -- Howard?

           4              MR. GRUENSPECHT:  How would you

           5    deal with forced outages?  Because again, one

           6    of the things that happens with these plants

           7    is in a particular year, it may have a

           8    load -- a coal plant -- and believe me, coal

           9    plant may have a low dispatch for the reasons

          10    of can't get it on to where the load is, but

          11    another reason it put up a low dispatch in a

          12    particular year is that it blew a steam tube,

          13    and they had to take it out, and they weren't

          14    allowed to run it.

          15              So the question is, in a

          16    year-to-year -- and you know, if you look at

          17    the NERC -- I don't know if you call it now,

          18    I guess you still call it NERC data -- forced

          19    outage rates are pretty high, like for coal

          20    plants are like 13 percent.

          21              You know, that's not a scheduled

          22    maintenance, that's just not available




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           1    because something went wrong.  So I guess how

           2    much -- in going out the next year, it seems

           3    to me what you really want to look at is

           4    really a couple of years of data, and you

           5    want to distinguish -- if you have some coal

           6    plant that's constantly running, and I'll use

           7    your bin nomenclature --

           8              MR. TSENG:  Yeah.

           9              MR. GRUENSPECHT:  Like in bin

          10    40 percent utilization, say, I think that

          11    tells you something, unless it's like very

          12    unlucky -- drew the ace of spades five years

          13    in a row -- you know, then you can take it as

          14    really some issue in the system with getting

          15    this plant running.

          16              But in any given year, you wouldn't

          17    want to draw a conclusion that just because

          18    it ran at 40 percent last year when it maybe

          19    blew a steam tube for several weeks in July,

          20    does that mean that you have it running

          21    40 percent, you know?  So it seems that

          22    looking at one year, you run the risk of




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           1    picking up some of these random events.

           2              And you would obviously want to

           3    take account of new data, because the system

           4    is changing -- new plants are being added,

           5    load is changing.  But on the other hand,

           6    just looking at the latest data might sort of

           7    overstate in the sense of -- in addition to

           8    picking up the latest sort of changes in the

           9    transmission system or other plants put on

          10    line or load, you also may be overweighting

          11    the sort of random outages.

          12              MR. TSENG:  Well, actually the

          13    supply curve -- each month, I estimate a

          14    supply curve based on the monthly dispatching

          15    pattern.  So the situation you just described

          16    will be corrected the following month, right.

          17    If you have unplanned outage of a coal power

          18    plant in, say, March, then in April, this

          19    flat curve will return to normal.

          20              And by looking at that monthly

          21    supply curve data, actually you can notice

          22    the irregularity there.  So that's very easy




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           1    to pick.  And the other thing is,

           2    theoretically, it's nice to just use the raw

           3    data, for when you look at, say, 13 regions,

           4    and you want to do scenario analysis and you

           5    say, well, what happens if you shut down a

           6    few power plants in certain regions?

           7              Once I create the matrix, it's much

           8    easier.  Just go to the matrix and say which

           9    region it is and how much capacity you lost,

          10    in terms of processing.  Maybe that's not as

          11    important as you think, but in terms of using

          12    the time series data, I think it really comes

          13    down to the question, like Neha mentioned,

          14    the model tend to overproject coal.

          15              But using the actual time series

          16    data, the model actually overproject coal a

          17    lot more because of the relative ranking,

          18    because if it's in the same region -- and

          19    coal is always reporting higher utilization

          20    rate than natural gas because coal is

          21    cheaper, even though both power plants may be

          22    using 80 percent.  But because of the way the




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           1    model structures, we have to make some

           2    adjustment to the capacity of the coal power

           3    plant.  You know, what's the justification?

           4    So that's another layer of difficulties.

           5              MR. NEERCHAL:  I think I'm going to

           6    use my executive privilege here.  I think

           7    that I would ask Phillip to be available

           8    during lunch, and maybe at the end of one

           9    side of the lunch table, maybe we can

          10    continue these discussions.  It seems like a

          11    very interesting sort of questions.

          12              But before we break -- in fact,

          13    before we eliminate the break and go to the

          14    next session, what I would like to do is to

          15    invite those who came a little bit later than

          16    we did our introductions, to go ahead and

          17    introduce yourself and announce your name and

          18    affiliation.

          19              MR. WEINIG:  Please use your

          20    microphone.

          21              MR. NEERCHAL:  I think we can start

          22    with Moshe.




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           1              MR. FEDER:  I apologize for being

           2    late.  Moshe Feder, ASA Committee.

           3              MR. NEERCHAL:  Anybody in the

           4    audience?

           5              MS. KIRKENDALL:  Jae, would you --

           6              MR. NEERCHAL:  Audience -- oh, Jae?

           7              MR. EDMONDS:  I'm Jae.  Pacific

           8    Northwest National Laboratory.

           9              MR. NEERCHAL:  And Walter?

          10              MR. HILL:  I was here early.

          11              SPEAKER:  You're the same as you

          12    where in the beginning?

          13                   (Laughter)

          14              MR. GRUENSPECHT:  No forced

          15    outages.

          16              MR. HILL:  I'm Matt Breslin with

          17    the EIA.

          18              SPEAKER:  Okay.

          19              MR. NEERCHAL:  We can figure where

          20    we're going.

          21              MR. MAYO:  Mark Mayo.  I'm with the

          22    EIA, the Office of Oil and Gas.




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                                                          112


           1              MR. CONNER:  I am Mike Conner, EIA

           2    Office of Oil and Gas, Petroleum Division.

           3              MR. KYDES:  Andy Kydes, Energy

           4    Information Administration.

           5              MS. JENNINGS:  Alethea Jennings,

           6    EIA.

           7              MR. RADICH:  Tony Radich, EIA.

           8              MR. SCHAAL:  Michael Schaal, EIA.

           9              MR. NEERCHAL:  So we go directly to

          10    the breakout session, grab a cup of coffee or

          11    doughnut or whatever you want to keep

          12    yourself awake.  So that's a warning.  And be

          13    back here at 11:45.

          14              We are running a few minutes

          15    behind, but the discussions are definitely

          16    worth it.

          17                   (Recess)

          18              MR. NEERCHAL:  Let's get started.

          19    I have the speaker and discussant here, so I

          20    think it's a good crowd right there.  I just

          21    want to remind people that if you have not

          22    introduced yourself at the microphone, this




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                                                          113


           1    is for the transcription purposes, please go

           2    to one of the mics nearest to you and

           3    announce your name and affiliation.

           4              And also, as Renee was suggesting

           5    just now, if you want to participate in this

           6    discussion more actively, you can come in,

           7    sit in any of these vacant chairs, but with a

           8    request that whenever you ask a question or

           9    make a comment, please announce your name

          10    first, because again, this is for the

          11    transcription purposes.

          12              So if you agree to do that, you can

          13    come and join the roundtable here, because

          14    that definitely makes it for a more lively

          15    discussion.  That's what we really hope to.

          16              MS. KIRKENDALL:  Actually, why

          17    don't the oil and gas people come.

          18              Sue, and Mike, and Mark.

          19              MS. HARRIS:  I'm sorry?

          20              MS. KIRKENDALL:  Sue and Mike and

          21    Mark, why don't you come sit at the table, so

          22    if you have something to say, you can just




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           1    talk with everybody.

           2              MS. HARRIS:  I don't have anything.

           3    I'm just here to listen.

           4                   (Laughter)

           5              MS. KIRKENDALL:  Sue?

           6              There will be a presentation first,

           7    and then there'll be some committee

           8    discussion.  But you guys know some things

           9    that will contribute to the discussion, and

          10    that's why you should be here.  And Paul, if

          11    you'd like to come too, whatever.

          12              MR. BRADSHER-FREDRICK:  I don't

          13    know if Paul and Sue have introduced

          14    themselves formally.  You need to do that.

          15              MS. HARRIS:  Is there a mic?

          16              MR. BRADSHER-FREDRICK:  Yeah.

          17              MS. KIRKENDALL:  Well, there's a

          18    mic at the table.  Why don't you just sit at

          19    the table.  You can use the mic at the table.

          20              SPEAKER:  These people are coming

          21    back?

          22              MS. KIRKENDALL:  They will, but




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                                                          115


           1    after our discussion.  They're down in the

           2    other breakout room, so they are not using

           3    these chairs right now.

           4              MR. BRADSHER-FREDRICK:  My

           5    presentation is short; there's just going to

           6    be discussion afterward, yeah.

           7              Shall we get started?

           8              MR. NEERCHAL:  You're on.

           9              MR. BRADSHER-FREDRICK:  Okay.

          10              Good morning.  I'm Howard

          11    Bradsher-Fredrick.  I'm with the Statistics

          12    and Methods Group of Energy Information

          13    Administration.  Today I'm going to talk

          14    about some work we've done comparing U.S.

          15    Customs Service petroleum imports data with

          16    EIA data.

          17              You see the appropriate disclaimers

          18    at the bottom of the first slide.

          19              Sorry.  Getting used to the

          20    equipment here.  Okay, this is the outline of

          21    my presentation.  I'll begin by introducing

          22    the subject.  Then I'll discuss the overall




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           1    goal of our work, and the short-term

           2    objectives before I get to the preliminary

           3    results that we have.

           4              These results involve comparing the

           5    geographical coverage on the two sources,

           6    differences in definitions of the various

           7    petroleum products, and finally how the data

           8    compare.  The last slide will show the

           9    questions for the committee.

          10              I should begin by mentioning that

          11    EIA is always on the lookout for ways of

          12    saving resources while not reducing data

          13    quality.  This is the impetus for this work.

          14              Also, some of EIA's respondents

          15    have made the suggestion that EIA should

          16    study the use of Customs data and not ask

          17    respondents for what they regard as, in their

          18    opinion, essentially duplicative data.

          19              The Customs Service data on each

          20    import transaction -- collected that

          21    information one record per transaction.

          22    That's the way they keep it.  These data are




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           1    disseminated to subscribers on a monthly

           2    basis through the Census Bureau.  Actually,

           3    the Census Bureau disseminates a CD-ROM on

           4    the 12th of the month following the

           5    transactions.

           6              EIA presently collects petroleum

           7    product imports data on its EIA-814 survey

           8    form, which is entitled, the Monthly Imports

           9    Report -- and these data from EIA are also

          10    very comprehensive.

          11              Since EIA has access to this

          12    alternative source of data at nominal cost,

          13    how could this be useful in some way to make

          14    our data more accurate, lessen the reporting

          15    burden of our respondents or cut overall

          16    costs?

          17              The short-term objectives.  In the

          18    short-term, we're interested in how to best

          19    use the Customs data.  However, we need to

          20    begin by comparing months of entry,

          21    definitions, geographical coverage, some

          22    historical data from the two sources, and




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           1    consider the practicality of using these

           2    alternative data, particularly cost,

           3    timeliness, and any other considerations.

           4              We'll get to the any other

           5    considerations later.

           6              Let's first talk about the Customs

           7    Service data.  They come on a CD-ROM, as I

           8    mentioned.  In a typical month, there are

           9    about 45,000 import transactions.  About 700

          10    of these transactions per month involve

          11    petroleum products.  There are a total of 67

          12    different petroleum product classifications

          13    on the CD-ROM.

          14              By comparison, EIA has 24 product

          15    comparisons.  Incidentally, the disc also

          16    contains export data on a separate file.  The

          17    transaction month from the Customs Service

          18    data comes from the entry data specified on

          19    U.S. Customs form "Entry Summary."  And the

          20    pertinent fields, the ones we would be

          21    particular interested in, are product code,

          22    the country of origin, the district of entry,




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           1    the quantity or volume, and the month of

           2    product entry.

           3              The EIA data.  Let's first talk

           4    about the month of entry.  As I mentioned,

           5    the Customs Service requested the designated

           6    month to be drawn from the entry date on the

           7    entry summary.  This is also an option on the

           8    EIA Form, but there are also three other

           9    possibilities.  And I got this information

          10    from the instructions on the EIA-814 for the

          11    respondents to determine the report month.

          12              Geographical coverage.  EIA

          13    considers an import as a product entering the

          14    50 states or the District of Columbia.  The

          15    Customs Service considers an import into

          16    Puerto Rico or the Virgin Islands as an

          17    import, in addition to the 50 states and the

          18    District of Columbia.

          19              Thus, products entering Puerto Rico

          20    or the Virgin Islands are not included in EIA

          21    data.  I should point out that in all the

          22    numerical data that I'm going to show for the




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           1    Customs Service in this presentation, imports

           2    into Puerto Rico and the Virgin Islands have

           3    been removed.  So the data should be

           4    geographically comparable.

           5              Let's talk about the comparison of

           6    definitions.  To generalize, EIA's

           7    definitions are based upon the intended or

           8    actual use of the product.  On the other

           9    hand, the Customs Service product definitions

          10    are usually based upon the physical or

          11    chemical properties of the product.

          12              However, in some cases, the product

          13    definition is based upon intended or actual

          14    use of the product, but the Customs Service

          15    intended usage definitions at times are very

          16    narrow.  So this is not necessarily a very

          17    good formula for matches between the two.

          18              Here's an example.  And this is

          19    sort of extreme from the Customs Service.

          20    There are 13 categories of lubricants that

          21    Customs has.  Each has its own definition and

          22    product code.  This is one of them that you




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           1    can see up here.  You'll notice that there's

           2    a chemical criterion shown, a hydrocarbon

           3    which contains by weight not over 50 percent

           4    of any single hydrocarbon compound.  But

           5    there's also an intended usage specification

           6    in italics, which is fairly narrow,

           7    "insulating or transformer oils."

           8              On the other hand, EIA has only one

           9    petroleum product named "lubricant" as

          10    opposed to the 13.  It's fairly broad, but

          11    includes a specified intended usage.  I won't

          12    read this, but you can have a look at it.

          13              Here's another example comparing

          14    Customs with EIA on a definition.  You'll

          15    notice that Customs defines special naphtha

          16    as light oils and preparations; naphtha,

          17    except motor fuel or motor fuel blending

          18    stock, while EIA defines special naphtha as

          19    oils with a boiling range equal to or greater

          20    than 401 degrees Fahrenheit, which are

          21    intended for petrochemical feedstock.

          22              Here, one can see some basic




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           1    differences in the definitions that would

           2    need to be investigated to determine how

           3    different they really are.

           4              Let's get to some numerical

           5    comparisons here.  And I notice that the

           6    pointer doesn't work, so I'll have to try to

           7    point out sections of the chart as I'm going

           8    along.  Here, I chose a month arbitrarily.

           9    It was January 2005.

          10              In this case, I began looking for

          11    products that compared well numerically and

          12    in terms of product definitions.  And these

          13    were the ones that seemed to do fairly well.

          14    You notice on the left-hand side, we have the

          15    Customs description, the EIA description on

          16    the right-hand side, and the comparison of

          17    the numbers that we have for that month.

          18              You'll notice that these numbers

          19    are reasonably close, and you'll notice that

          20    the descriptions are reasonably close, at

          21    least for the titles, even though there's

          22    some slight variation, like finished motor




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           1    gasoline, Customs says, "unleaded, not

           2    reformulated," while EIA's description is

           3    "conventional."

           4              You'll notice also that there are

           5    no exact matches even though the

           6    kerosene-type jet fuel is fairly close.  Also

           7    an interesting thing is when one sums up the

           8    total petroleum products, you see numbers

           9    that are reasonably close for the two.  It

          10    may give one the impression that perhaps

          11    there's just a difference in classification

          12    that just doesn't mesh very well.

          13              When one now looks at nine months

          14    from January to October 2005, and you look at

          15    the data comparisons, I've shown the mean

          16    absolute percent difference and the mean

          17    percent difference in different columns here.

          18    And you'll notice that these close

          19    associations you saw in January seem to go

          20    away when you start looking at a lot of other

          21    months.  Only crude oil seems to be fairly

          22    consistent.  I'm still not getting it.




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           1              Well, that's okay.

           2              I think everybody can see the two

           3    columns.  So crude oil is the only month

           4    where the comparison seems to be fairly good,

           5    and it's not very good anywhere else.  And

           6    you'll also notice we're looking at the mean

           7    percent differences, the negative indicates

           8    that EIA is higher, that it seems as though

           9    EIA tends to be higher over the entire

          10    course.

          11              MR. NEERCHAL:  There's a question

          12    here.

          13              MR. HELKIE:  Well, what is it for

          14    total petroleum products?

          15              MR. NEERCHAL:  Can you come to the

          16    mic and state it?

          17              MR. BRADSHER-FREDRICK:  Yeah, I

          18    didn't hear the question.

          19              MR. HELKIE:  What was the

          20    difference for the total petroleum products?

          21              MR. BRADSHER-FREDRICK:  Actually,

          22    over the ten months, I didn't make that




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           1    computation.  There was a lot of work, but it

           2    could be done.  I just have to add up all the

           3    products, and I didn't do this.

           4              MR. HELKIE:  I had one just one

           5    minor clarification.  Did you add the Virgin

           6    Islands or Puerto Rico back in or --

           7              MR. BRADSHER-FREDRICK:  No, this is

           8    without the Virgin Islands and Puerto Rico.

           9    So presumably these numbers --

          10              MR. HELKIE:  So these are taken out

          11    of the EIA?

          12              MR. BRADSHER-FREDRICK:  I took it

          13    out of the Customs.

          14              MR. HELKIE:  I mean took it out of

          15    the Customs.

          16              MR. BRADSHER-FREDRICK:  So as I was

          17    saying, you'll notice that these numbers tend

          18    to be higher for EIA than for Customs.

          19              Okay, the challenges with Customs

          20    data.  The product classifications in Customs

          21    data are sometimes unreliable.  For example,

          22    EIA has noted many cases of gasoline -- in




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           1    effect motor fuel being reported to Customs

           2    as special naphtha, in effect hydrocarbon

           3    solvents.

           4              Of course, Customs does attempt to

           5    correct errors in their data.  However, this

           6    may be a particular problem with respect to

           7    the date.  It is sometimes questionable if

           8    Customs applies revisions to the month in

           9    which an import actually occurred, as opposed

          10    to the month in which the revision was

          11    processed.

          12              This stands to reason that Customs

          13    may be more worried about product

          14    classifications in volumes rather than the

          15    dates.

          16              Another challenge is that Customs

          17    data do not include a category of "unfinished

          18    oils."  EIA makes a distinction between

          19    products that require further processing

          20    versus those that do not.

          21              This distinction isn't made by the

          22    Customs Service.  Thus, residual fuel oils




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           1    being imported with the intention of further

           2    processing by a refinery would be reported to

           3    EIA as an unfinished oil, while reported to

           4    the Customs as a residual fuel oil.  And this

           5    isn't necessarily a small volume.  In fact,

           6    in January 2005, EIA shows 12 million barrels

           7    of unfinished oil, which appears to have been

           8    reported to the Customs as "residual fuel

           9    oil."

          10              I should mention that there have

          11    been discussions with Customs on this issue

          12    in the past.

          13              It should be noted with regard to

          14    the other considerations, that the monthly

          15    data collected by EIA on the 814 survey

          16    provide the means for selecting the frame to

          17    serve as the basis for the weekly survey.

          18    The weekly survey is a sample rather than a

          19    census of importing companies.

          20              Thus, without the company-level

          21    data provided by the 814, EIA would need to

          22    develop an alternative mechanism for




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           1    identifying companies to respond to the

           2    weekly survey.

           3              Also unlike EIA data, company-level

           4    data cannot identified from Customs Service

           5    transaction data.  And also unlike EIA,

           6    Customs transaction data do not provide a

           7    means for distinguishing strategic petroleum

           8    reserve imports from other imports.

           9              Those are -- my last chart here

          10    shows a section of an EIA data dissemination

          11    that shows imports of crude oil for recent

          12    months.  It shows the strategic petroleum

          13    reserve imports and the remaining imports.

          14    You'll notice the small volumes in the

          15    strategic petroleum reserve column, which is

          16    the second column there from the left.  But

          17    although these numbers are small, they're

          18    probably important to some of our users.

          19              And the last slide are questions

          20    for the Committee.  What's the best way for

          21    EIA to benefit from data comparisons with the

          22    Customs Service?  And what other further




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           1    research would you recommend that we do in

           2    order to maybe shed more light on the issue?

           3              Thanks.

           4              MR. NEERCHAL:  Can I ask a

           5    question.  I was wondering, could you say a

           6    few things about what are the benefits of

           7    doing the integration.  What do we get from

           8    the Customs data that's not in EIA or how

           9    does it enhance it?

          10              MR. BRADSHER-FREDRICK:  I can throw

          11    this to oil and gas.  I could come up with an

          12    answer, but maybe they might have better

          13    answers.

          14              MR. CONNER:  This is Mike Conner.

          15              MR. WEINIG:  For the transcriber,

          16    would you note your name, please?

          17              MS. KIRKENDALL:  He just did.

          18              MR. BRADSHER-FREDRICK:  He just

          19    did.

          20              MR. WEINIG:  I'm sorry.

          21              MR. CONNER:  Part of this came

          22    from -- I went out to a conference with the




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           1    Foreign Trade Zones people and did a

           2    presentation on the data we collect, and one

           3    of their comments is, as Howard alluded to,

           4    was, well, why are you collecting all this

           5    data if you already have to report it to the

           6    Customs Service?  So there's that aspect to

           7    it.

           8              Then the other thing is, EIA

           9    maintains people, computer systems, survey

          10    forms, all the infrastructure that goes

          11    around doing an import survey, and if the

          12    data were available, we could, at least in

          13    theory, eliminate some resource commitment to

          14    that activity.

          15              Then the other factor to consider

          16    is, there's -- it's a fairly well-known fact

          17    that the imports tend to be one of the more

          18    difficult areas to maintain a frame, because

          19    refineries and pipelines and things are

          20    pretty hard to hide, but importers -- it

          21    doesn't take a lot.  You know, if you've got

          22    an office and a telephone, you can pretty




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           1    much be an importer.

           2              So keeping track of who all the

           3    players are is a pretty big project for us.

           4    And obviously, if the Customs and Census

           5    already have that done and probably

           6    ultimately do it better than we do it, then

           7    clearly there'd be some benefits to trying to

           8    use their data, for all those reasons.

           9              MS. KIRKENDALL:  In fact, you are

          10    using the data now.  We got the data.  It's

          11    just that we have to be very careful with it.

          12    These are data that are submitted on Customs

          13    forms, but they're collected by the Census

          14    Bureau, and we have to be very careful how we

          15    use them because they're protected.  Those

          16    data are not made public by the Census

          17    Bureau, and they don't want us to make it

          18    public either.

          19              MR. CONNER:  Right.

          20              MS. KIRKENDALL:  So there's a

          21    constraint on the use of the data.  We have

          22    to be very careful.  I think they -- our




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           1    staff, Mike and Mark and Sue and all try real

           2    hard to use the data to try to improve our

           3    data, make sure that we're capturing things

           4    appropriately.  But it takes a lot of

           5    resources and effort to do that.  So either

           6    we're always in a catch-up looking at their

           7    data or looking at our data trying to figure

           8    out what matches, what doesn't match, what

           9    should we do to make it better.  And so --

          10              MS. HARRIS:  I'm Susan Harris.  We

          11    also use our import data that we collect to

          12    calculate and classify the demand number, if

          13    you will, each month.  And there are some

          14    products that are not clearly defined in the

          15    Census data.  They may be contained in some

          16    of the product categories, but they're not

          17    clearly labeled.  And so if we continue to

          18    publish product supply information, then we

          19    need to have those products clearly defined

          20    in the Census information, and in some cases

          21    they are not.

          22              So in trying to map the information




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           1    with Census, you may not have categories

           2    defined as isobutane.  You may not have

           3    categories defined as coke.  You may not see

           4    clearly defined ethanol categories.  It's

           5    very hard for us to determine within the

           6    category's label what percentage of that

           7    volume is isobutane, what percentage of it is

           8    fuel ethanol?  What percentage is contained

           9    in that category that we want to include in

          10    our import figures, and they're used in our

          11    calculations product supply.

          12              So that's one reason why -- another

          13    reason why EIA is collecting their own import

          14    data is because we do calculate product

          15    supply information.  And if we were to use

          16    the Census data as it currently exists with

          17    the problems that we're encountering with the

          18    mapping, we would not be able to calculate

          19    product supply for some of the products that

          20    we currently do so.

          21              So we have been trying to work with

          22    Census to see if we can't resolve the issues




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           1    with these product classifications, but in

           2    some areas, we've reached a point where we

           3    need some further assistance from a different

           4    level of expertise at that point.

           5              MS. FORSYTH:  Is the difference in

           6    the -- I guess the classifications from the

           7    two data sets or the two sources, is it

           8    partly because commerce has one set of needs

           9    and petroleum economists have other sets of

          10    needs, so that somehow merging the two sets

          11    of definitions wouldn't satisfy one of the

          12    two sets of users?  Is that the --

          13              MS. HARRIS:  Uh-huh.

          14              MS. FORSYTH:  Okay.

          15              MS. HARRIS:  I think, as Howard

          16    alluded to in the beginning, they're

          17    collecting on a chemical base, and we're

          18    collecting on the end use.  And in some cases

          19    they match up pretty well, but in other cases

          20    they don't at all.

          21              MS. FORSYTH:  Since I don't know

          22    anything about chemistry, I can say kind of




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           1    cavalierly, you could report, let's say,

           2    chemical categories rather than functional

           3    categories, and what would be the cost to

           4    your users if you did that?  What would be

           5    the cost to your users if you reported their

           6    categories rather than yours?

           7              MR. CONNER:  Basically, our whole

           8    sort of survey infrastructure over and above

           9    the international trade stuff is based on

          10    this end use capital.

          11              MS. FORSYTH:  So it's all --

          12              MS. HARRIS:  All integrated.

          13              MR. CONNER:  So our data from the

          14    refineries, the inventory holders, and all

          15    the rest of them would have to be completely

          16    redone.

          17              MS. FORSYTH:  Right.

          18              MR. CONNER:  And then one would

          19    have to ask the question, well, okay, you've

          20    been doing this way for decades.  There must

          21    be some --

          22              MS. FORSYTH:  Reason why --




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           1              MR. CONNER:  Some value we needed

           2    to maintain.

           3              MS. HARRIS:  Right.  Presumably if

           4    it was redone, something important would be

           5    lost besides money and time.

           6              MR. CONNER:  Right, right.

           7              MS. FORSYTH:  Right, yeah.

           8              MS. HARRIS:  Okay.

           9              MR. CONNER:  All that being said,

          10    we do use the export data from Commerce in

          11    our product supply calculation.  It's

          12    imperfect; it doesn't have these unfinished

          13    oils; we don't get exactly the right match-up

          14    between the various products.  And exports

          15    are a smaller components of the total

          16    equation, but we have gone through the

          17    exercise of --

          18              MS. HARRIS:  Same thing, right?

          19              MR. CONNER:  Dividing up all these

          20    various codes on the export side.  They're

          21    not exactly the same codes as the imports,

          22    but many of them are similar.




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           1              MR. BINGHAM:  David Bingham.  I'm

           2    kind of curious.  So just to give you a

           3    little bit of history.  Back when they did

           4    the Canada-U.S. Free Trade Agreement, there

           5    was this harmonization of items going across

           6    borders so that people could -- Canada could

           7    measure the same things as the U.S. to make

           8    sure that there was no dumping or anything

           9    going on.  And in doing that, they had to

          10    change some of the systems of national

          11    accounts.

          12              So basically, one country was

          13    measuring things one way and one country was

          14    measuring the other things the other way and

          15    they had historic timesavers to go with these

          16    things.  And eventually what they had to do

          17    was sit down and say, okay, we measure

          18    thousands of goods going across the borders

          19    every day, and so what was classified as

          20    onions now is broken up into five different

          21    categories, right?

          22              And that's not so bad, because you




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           1    could build a model that said, well,

           2    75 percent of all onions is white onions and

           3    things like that.

           4              So my first question is, is there

           5    any aggregate level at which things do match?

           6    That would be one thing.

           7              And the other question I would have

           8    is, is it impractical to use the Customs data

           9    to lower -- so rather than saying we're going

          10    to use this instead, but use what you have

          11    for Customs data, incomplete as it may be or

          12    slightly mismatched as it might be, to lower

          13    your own uncertainty estimates instead?

          14              So I imagine that with everything

          15    you report, you have some sort of variance

          16    estimate or some sort of uncertainty

          17    estimate.  Maybe the best thing that can be

          18    done with this data is to say these two

          19    classifications seem to be highly correlated

          20    with what we're measuring in their own way,

          21    and we know that they're being classified

          22    differently into maybe these two




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           1    classifications or these three

           2    classifications going to one of EIA's.

           3              Maybe the best thing is to say here

           4    is the EIA reported number plus some other

           5    stuff that we -- a particular model

           6    that's -- here's the EIA number plus some

           7    other stuff, and that resulting estimate is

           8    going to have a lower uncertainty level.

           9              Is that of any value at all to do

          10    something like that?

          11              SPEAKER:  Uh-huh.

          12              MR. BINGHAM:  Is that impractical

          13    to do because there are -- there's too many

          14    items or too many --

          15              MR. CONNER:  I think that's

          16    essentially what we're doing.

          17              MR. BINGHAM:  Right, okay.

          18              MR. CONNER:  Is we're going through

          19    the information that we have access to and --

          20              MR. BINGHAM:  To building

          21    individual models?

          22              MR. CONNER:  Well, not building




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           1    models necessarily, but comparing our data

           2    against what Customs is giving.  And where we

           3    see discrepancies, we're trying to follow-up

           4    on that on our side to get it resolved.

           5              MR. BINGHAM:  So what exactly does

           6    that mean?  I'm curious.  So if they intend

           7    on reporting some particular product one way

           8    and maybe it's three products, but you would

           9    view it as three products and they'd view it

          10    as one, for instance, just because of the way

          11    they're counting something or vice versa, how

          12    do you mean -- how do you mean looking

          13    into -- what's looking into it mean, and how

          14    would you want to use that information?

          15              MS. HARRIS:  In some respects, we

          16    have the three categories and compare it to

          17    the one we have.

          18              MR. BINGHAM:  Okay, sure.

          19              MS. HARRIS:  We also use the

          20    information to see if we have the same

          21    companies reporting to us as reports to

          22    Census.




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           1              MR. BINGHAM:  Sure.

           2              MS. HARRIS:  And the MOU that we

           3    have with them allows us to use their data as

           4    a frame reference to ensure that EIA is

           5    collecting import information from the same

           6    companies that are filing with Census.  And

           7    that's strictly what we're allowed to use the

           8    data for, as a frame reference.

           9              MR. BINGHAM:  Okay.

          10              MS. HARRIS:  If we find categories

          11    that don't match -- what Mike I think is

          12    alluding to, and you can speak up for

          13    yourself -- is that we try and contact those

          14    companies as best we can and request that

          15    they file with EIA, and capture the data that

          16    way.  That's what we're trying to do right

          17    now.

          18              MR. BINGHAM:  Okay, so --

          19              MS. HARRIS:  We don't typically

          20    take the data and take the difference between

          21    the two and expand our information; that's

          22    not part of this MOU.




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                                                          142


           1              MR. BINGHAM:  Okay.

           2              MS. HARRIS:  We're trying to

           3    capture those respondents that should be

           4    filing with EIA and they're only filing with

           5    Census.  That's how we're trying to use the

           6    information as a frame.  But there are some

           7    categories where we clearly don't have a

           8    match, and those are the ones that we have

           9    difficultly in resolving through the

          10    information -- we have issues.

          11              MR. NEERCHAL:  Can I ask a quick

          12    follow-up on that one?  And if you make that

          13    table, the categories that kind of

          14    100 percent agreement and categories where

          15    there's overlap, categories that are

          16    split -- used in more ways than they do and

          17    the other way around, what could be the kind

          18    of a distribution now?  What is the

          19    percentage of categories where you have full

          20    agreement?  Do you have an idea?

          21              MR. CONNER:  I don't know.  Did you

          22    do that as part of --




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           1              MR. BRADSHER-FREDRICK:  Well, I

           2    tried to, given my limited knowledge, and

           3    it's a fairly limited number.  It seems like

           4    where one was reasonable confident, and

           5    partly I was looking at data, too.  So you

           6    may be influenced when you start seeing data

           7    matches or non-matches.

           8              MR. HILL:  Actually, I had the same

           9    question.

          10              MR. BRADSHER-FREDRICK:  Okay.

          11              MR. HILL:  Maybe it was possible

          12    to -- if you're reporting three different

          13    numbers in an order, since it's reporting in

          14    one way -- there's some way to look at the

          15    data that in essence matches those?  You

          16    pointed out in maybe screen 13 here, that

          17    best matching to be for kerosene-type jet

          18    fuel, and then on the next slide,

          19    kerosene-type jet fuel is actually the worst

          20    match.

          21              MR. BRADSHER-FREDRICK:  Yeah,

          22    that's right.  It was good on one month and




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           1    it was terrible on the others.

           2              MR. HILL:  Which makes it look like

           3    it might be harder to make a guess.  So

           4    that's the 50 percent.  Or it's the worst

           5    example there.

           6              MR. BRADSHER-FREDRICK:  Yeah.  And

           7    EIA was high on every month except for that

           8    first one, I think -- higher than Customs.

           9              MR. HILL:  The introduction was

          10    that we want to try to reduce unnecessary use

          11    of our time, and I guess having additional

          12    categories is just the opposite effect that

          13    you'll undercollect, more disaggregated data.

          14              MR. BRADSHER-FREDRICK:  Uh-huh.  In

          15    the paper there's a lot more information than

          16    I showed here.  I mean, you may have looked

          17    at some of those long sets of tables that

          18    show all the products.  So I did do some

          19    product comparisons, at least for one month

          20    showing everything.  So you can see some of

          21    the attempts at some comparisons.

          22              It seemed as though like LPG that




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           1    we have -- when I combined the butylenes and

           2    butane, and I've forgotten all of the

           3    different types -- I guess propane, butane,

           4    propylene and butylene, it seemed like the

           5    numbers were fairly close early on, but then

           6    this went away to some extent.

           7              MR. HILL:  I noticed that those are

           8    one of the smaller -- noticed that kerosene

           9    was one of the smaller category.  LPG-1

          10    with -- this maybe three times the kerosene

          11    use.  It maybe possibly with the smaller

          12    categories there's more overhead but really

          13    that's not the case either.

          14              MR. BRADSHER-FREDRICK:  I didn't

          15    fix --

          16              MR. HILL:  The smaller categories

          17    are -- there's only one type of -- or a small

          18    number of types of -- propane that you got to

          19    use and so that's -- there's a more natural

          20    match.  I mean, that's not even true, which

          21    would mean this -- the process of

          22    disaggregating --




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           1              MR. BRADSHER-FREDRICK:  If you look

           2    at the big table, it seems as though, like I

           3    mentioned with the lubricants, that Customs

           4    just has a huge number of slight

           5    differentiations on things.  I tried to

           6    combine them and look at total aggregates and

           7    compare these with EIA data, but you can see

           8    in a lot of cases this just didn't come out

           9    very well.

          10              I did look at a second month, which

          11    I didn't show in great detail -- October.

          12    And one was seeing -- in terms of the total

          13    products, one saw again a very close

          14    comparison.  It was like within one percent,

          15    like January was, but you still saw

          16    everything just -- probably no better, no

          17    worse than this.  And it probably should've

          18    been somewhat worse, I don't remember.

          19              But when one looked at all the

          20    categories there -- so I mean, one could do

          21    this exercise for several more months and see

          22    if one starts seeing any patterns whatsoever.




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           1              MR. NEERCHAL:  Ed.

           2              MR. BLAIR:  Ed Blair.  I have three

           3    nave questions.  The first is, you've picked

           4    out some that you hoped would match pretty

           5    well, and I guess there were some that were

           6    hopeless, like that unfinished oil.

           7              MR. BRADSHER-FREDRICK:  Uh-huh.

           8              MR. BLAIR:  Would there be a

           9    benefit to being able to use Customs/Census

          10    estimates for just these categories and not

          11    for the ones that are hopeless?  Are there

          12    benefits in terms of frame maintenance, data

          13    collection, reporting burden, or is it all or

          14    nothing?

          15              MR. CONNER:  This is Mike Conner

          16    again.  That's one I guess we really haven't

          17    considered all that closely.  I mean,

          18    conceivably you could say that, well, maybe

          19    the answer is we have a survey that goes out

          20    and collects some of those things that aren't

          21    identified in the Census/Customs data, like

          22    unfinished oils.




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           1              And you could say, well, since

           2    there's only a limited number of players who

           3    would import unfinished oils -- refiners in

           4    particular, that you could almost say, well,

           5    okay, the frame for that is the same as the

           6    frame of our refiners, and therefore it's

           7    easier to do it.

           8              The problem I guess would be that

           9    then you would have to -- and then you'd say,

          10    well, we'll use the finished products, except

          11    that the finished -- the unfinished oils are

          12    in the Census/Customs data.  It's just that

          13    they're classified as distillates and

          14    residues and kerosenes and various other

          15    things.

          16              So you'd have to somehow I guess

          17    back those back out of the Census/Customs

          18    data.  So I mean, yeah, I guess conceptually

          19    you could do something like that.  I don't

          20    know that we've really looked at sort of the

          21    cost benefit, whether the cost of doing that

          22    would --




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           1              MR. BLAIR:  In any case, at the

           2    risk of stating -- I hold on to my second

           3    question -- at the risk of stating the

           4    obvious, if it's in for diamond for dollar,

           5    then there's no sense splitting the stuff

           6    out.  And if it is then the question is, is

           7    there a way to make it work.

           8              And my second question is, you've

           9    shown a month where they matched real well,

          10    and then you've shown over a period of 10

          11    months that on average they didn't match very

          12    well month-by-month, but I think you also

          13    indicated that there's issues in terms of how

          14    the two parties treat timing.

          15              And so the question is, if we

          16    accumulate it over the 10 months or if we

          17    accumulate it over 6 months -- you know, you

          18    talked about aggregation across categories,

          19    how about aggregation over time from a user's

          20    perspective?  Is there anything magic about

          21    one month?

          22              MR. CONNER:  And I think in the




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           1    analysis of petroleum data, yes, there's a

           2    lot of interest in individual months, because

           3    of the seasonal variations and what goes on

           4    and things like that.

           5              MR. BLAIR:  And if you note that

           6    would shoot that, and then the third question

           7    really would be a pipe dream, okay, you have

           8    your particular way you have to classify the

           9    data for consistency with everything you're

          10    doing.  Is there any room for negotiation on

          11    the other side?  I realize you can only

          12    control what you can do, and I'm going to

          13    guess that likewise, Customs has very

          14    specific requirements -- for example, that

          15    they use chemical composition for purposes of

          16    auditability, and they may -- I don't know if

          17    they have different tariff structures or

          18    anything like that, but if nothing else, just

          19    auditability.  So --

          20              MS. HARRIS:  And taxes.

          21              MR. BLAIR:  Yeah, right.

          22              MR. CONNER:  And as I recall, I




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           1    wasn't really heavily involved in this, but

           2    from what I understand when we approached

           3    Customs about creating an unfinished oils

           4    category, their objection was what's the

           5    difference between kerosene and unfinished

           6    oils and kerosene and anything else?  And the

           7    answer is, well, nothing other than their

           8    intended end use.  And so they didn't really

           9    care too much for that.  So --

          10              MS. HARRIS:  Since it had the same

          11    chemical composition?

          12              MR. CONNER:  Right.

          13              MS. HARRIS:  Susan Harris again.  I

          14    can recall -- I've been here for a little bit

          15    of time, and I can recall us collecting our

          16    import form where at one point we did not

          17    collect liquefied petroleum gases; that we

          18    picked up the Census information and used it

          19    for a period of time.

          20              And we did collect all the other

          21    finished products and the unfinished

          22    products, but it was the LPGs primarily that




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           1    we were relying upon for Census information.

           2    And I'm trying to recall the exact year, but

           3    I think it was back in the '70s that we

           4    discontinued that, and we ended up collecting

           5    it on our own import form because the data

           6    became so unreliable when we started looking

           7    at -- talking with other industry

           8    associations.

           9              We went to the GPA, and they would

          10    raise issues about some of the products and

          11    what we were seeing.  And we just went back

          12    and started adding it to the form.  And I

          13    believe this was back in the late '70s where

          14    we added it on the form.

          15              There were some calculations.  I

          16    think we ended up with FA and FV (?), and

          17    there were some mixes going on.  We had EP

          18    mixes going on.  We had started changing our

          19    survey forms in the '70s and the '80s, I

          20    think.  And the classifications of how

          21    they're figuring out the mixes, we had some

          22    categories, percentages that we had to come




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           1    up with, and the information and the

           2    calculations that we were doing weren't

           3    giving us what we were looking for.  So we

           4    ended up adding to our forms themselves.  And

           5    so we have tried in the past only collecting

           6    certain types of products, but currently, we

           7    have gone through -- now we're collecting

           8    everything.  So --

           9              SPEAKER:  Of course --

          10              MS. HARRIS:  Not to say it couldn't

          11    be done again, but --

          12              MR. CONNER:  And in fact, the whole

          13    thing would -- comparing the data works both

          14    ways, because fairly recently, the EPA was

          15    beating us up because they said that the

          16    Customs data was showing more butane imports

          17    than we had, so --

          18              MS. HARRIS:  Right.  So now we're

          19    trying to --

          20              MR. CONNER:  Goes both ways.

          21              MR. NEERCHAL:  Could I ask a

          22    question?  I don't know I should




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           1    even -- maybe this is the time to be off the

           2    record, I guess.

           3              Is there a political pressure for

           4    us to use the other dataset?  I mean, I'm

           5    beginning to get the feeling that the effort

           6    involved in making it really benefit

           7    maybe -- you know, suppose you conclude that

           8    it's not worth the effort of going through

           9    this integration process, is that the end of

          10    it?  Should somebody -- no, no, no, you got

          11    the time of efficiencies and so on?

          12              MS. HARRIS:  Actually, I've been

          13    interested in trying to resolve some of the

          14    mapping issues, only because of the frame

          15    issue -- and also based on our resources.

          16    We're constantly going and comparing

          17    information trying to make sure that the same

          18    companies that file with Census are filing

          19    with EIA.

          20              And at some point you reach a break

          21    where it's not beneficial.  They're so small.

          22    Some of the companies only import once a




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           1    month, and based on our current resources,

           2    you have to ask yourself the question, do we

           3    have 90 percent of the companies filing with

           4    us, and should we then be using the Census

           5    information to benchmark against some of the

           6    other products and just putting in some other

           7    calculation in there to capture the companies

           8    that float in and out each month, or what

           9    percentage are we actually capturing and

          10    where is our -- at what point do you say I

          11    don't need 100 percent of these respondents,

          12    but I can get the additional volumes through

          13    another method?

          14              But that would be at a total level.

          15    It still wouldn't be at the subcategories

          16    I've been looking for.  So we still have the

          17    mapping issue even if you were to do that.  I

          18    still couldn't hit propane, couldn't hit

          19    butane.  I can hit a total, maybe, but I

          20    wouldn't be able to get the breakdowns I've

          21    been looking for.  I still think -- I don't

          22    think that resolves our mapping issue.




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           1              MR. NEERCHAL:  I think there's

           2    something you can do, you don't have to do

           3    every year.  Something you can do every once

           4    in a while perhaps.  That kind of a

           5    comparison made -- it's category comparison.

           6    And that doesn't change very often, does it?

           7              MS. KIRKENDALL:  The categories

           8    don't change very often.

           9              MS. HARRIS:  The categories don't

          10    change.  The volumes are obviously

          11    very -- they fluctuate every month,

          12    considerably.

          13              MR. NEERCHAL:  I see.

          14              SPEAKER:  As well as the

          15    differences.

          16              MS. HARRIS:  As well as the

          17    differences.  Yeah, as you can see in the

          18    charts, January might look good, but if you

          19    look at 10 months, it's kind of -- there are

          20    certain months that because of the

          21    seasonality have particular problems.

          22              MR. BRADSHER-FREDRICK:  There's a




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           1    question in the back?

           2              MR. NEERCHAL:  State your name,

           3    please.

           4              MR. HELKIE:  Bill Helkie.  I have a

           5    comment more than a question, and my comment

           6    is I think we're pooh-poohing a little bit

           7    this territorial difference.  This

           8    territorial difference is huge, right?

           9    Because you've got this -- at least I think

          10    we still have this big Hess refinery in

          11    Virgin Islands, right?

          12              SPEAKER:  Yes.

          13              MR. HELKIE:  I can tell you some

          14    horror stories about that what that Hess

          15    refinery did to macrodata in the

          16    settlements, (?) okay?  Basically because the

          17    Bureau didn't do a very good job of doing a

          18    territorial adjustment.  So this going from

          19    this -- from the Census definition of the

          20    U.S. through the GDP and DOE definition of

          21    the U.S. is not trivial.

          22              And so I think if one decided that




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           1    they wished to use Census data, after about 6

           2    or 12 months, The Bureau of Economic Analysis

           3    would come back and say, why didn't you ask

           4    us?  Because we really need that territorial

           5    adjustment to make sense out of the GDP data.

           6    So I just think it's not -- at least in the

           7    old days, especially in the old days in the

           8    '70s, when GDP data was 72 basis -- so the

           9    GDP data constant price, what do you price

          10    oil at in 1972?  $2?

          11              So you look at 1983 data, what was

          12    the price of oil?  $33?  So you had a 16

          13    times, okay?  Where was the territorial

          14    adjustment done on non-oil?  So they're just

          15    making incredibly huge errors in the GDP

          16    estimate, right?

          17              So we at the Fed, where I worked at

          18    that time, would say, well, this is what the

          19    PA (?) say GDP is, but it's screwed up

          20    because of these inventory adjustments in

          21    Virgin Islands.  And here is what GDP really

          22    is.




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           1              They don't -- you would think it's

           2    not much.  It was 6/10ths, 7/10ths, 8/10ths

           3    of a percentage point annual rates, and

           4    sometimes bigger, okay?  So that's not a

           5    trivial issue -- the territorial adjustment.

           6              MR. CONNER:  This is Mike Conner

           7    again.  If I can just clarify the way we do

           8    this.  We do in fact have imports going into

           9    the Virgin Islands or Puerto Rico.

          10              But when we do our product supply

          11    calculations and we do our reports and

          12    things, we only consider the 50 states.  And

          13    the supply that comes from the Hess refinery

          14    and other places in the territories is

          15    reported as an import.  If you look at our

          16    country of origin tables, we have the Virgin

          17    Islands and Puerto Rico listed as countries

          18    of origin.  When we do our reports for the

          19    IAEA, we add those back in.

          20              MR. HELKIE:  But if you weren't

          21    doing it, you couldn't do it.  If you weren't

          22    doing the survey, you couldn't do it, right?




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           1    If all you were doing was use the BA's

           2    data -- I mean Census data, and you weren't

           3    collecting the imports from the Hess

           4    refinery, how could you do it?

           5              MR. CONNER:  I honestly don't know

           6    it.

           7              SPEAKER:  I don't know.

           8              MR. CONNER:  Do you know how the

           9    Census is handling --

          10              MR. BRADSHER-FREDRICK:  Well, I'm

          11    not sure how Census handles it, but the

          12    transaction data just shows the imports in

          13    the Virgin Islands and Puerto Rico.

          14              MR. CONNER:  But I believe --

          15              MR. HELKIE:  There are imports

          16    there, too, but they don't know what's coming

          17    back on.

          18              MR. BRADSHER-FREDRICK:  Yeah,

          19    that's right.

          20              MR. HELKIE:  And you got the

          21    inventory change in the middle.  So it's

          22    not --




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           1              MR. BRADSHER-FREDRICK:  That's

           2    right.

           3              MR. HELKIE:  Just really an

           4    exercise.  If you then report the data, I

           5    think it will be a real issue in trying to

           6    work it all out.  So --

           7              MR. CONNER:  I think there's a

           8    Customs form that tracks -- and maybe

           9    somebody knows this -- but I think there's a

          10    Customs form that tracks movements from

          11    territories to the 50 states.

          12              MR. HELKIE:  There might be, but I

          13    remember in the old days, they got it from

          14    you.

          15              MR. CONNER:  Right.  And I'm not

          16    sure how that --

          17              MR. HELKIE:  Maybe they changed it.

          18              MR. CONNER:  Gets into this.

          19              MR. HELKIE:  I don't know.

          20              MR. CONNER:  That's actually one of

          21    the reasons to go through this exercise,

          22    because there's that kind of issue.  There's




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           1    also the whole thing with the Foreign Trade

           2    Zones and the bonded products that we really

           3    need to do some work on on our end to get

           4    that right, and make sure that we're

           5    collecting the data appropriately.  So

           6    there's a lot of different dimensions to this

           7    thing.  This is only one aspect of it, but to

           8    the extent that we're able to better

           9    understand these Census and Customs

          10    numbers, it's going to be a benefit to EIA.

          11              MR. HILL:  But are Customs here

          12    intentionally underreporting -- could you

          13    have the (inaudible) again -- underreporting

          14    because of things like taxes?  That's maybe

          15    another political issue.  You may want to

          16    underreport what's coming in at that level,

          17    but then once it's in the country the proper

          18    number of years.

          19              MR. BRESLIN:  Matt Breslin.  I

          20    don't think they underreport, if that's what

          21    you're asking.  But I get nervous with -- and

          22    I might be incorrect, but I get nervous with




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           1    the classification of the product is

           2    different because of the taxes applied to it.

           3              I don't think that they

           4    under-report anything.  It's just that if

           5    finished motor gasoline is "X" amount of

           6    dollars or whatever and special naphthas is

           7    this, they're going to report it as a special

           8    naphtha to pay that, and that's where we

           9    get -- when we are comparing -- unless we

          10    research the company, we really have no idea

          11    what it actually is.

          12              MR. NEERCHAL:  Any other comments?

          13              Go ahead.

          14              MR. BLAIR:  No, I was just going to

          15    say we need to bring our representatives --

          16              MR. BRADSHER-FREDRICK:  Yeah.

          17              SPEAKER:  Oh, yeah.

          18              MR. BRADSHER-FREDRICK:  I think

          19    others are coming back.

          20              MR. NEERCHAL:  I think they're kind

          21    of trickling in.  We'll wait for others to

          22    show up and then do the summary.




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           1              Let's have a break.

           2                   (Recess)

           3              MR. NEERCHAL:  We are back, more or

           4    less.

           5              We will start with the summary of

           6    the two breakout sessions.  We had designated

           7    people taking --

           8              MS. FORSYTH:  Sorry.

           9              MR. NEERCHAL:  I was going to

          10    actually turn it over to you.

          11              MS. FORSYTH:  Well then --

          12              MR. NEERCHAL:  So we had designated

          13    people taking notes on this one so that they

          14    can report to the entire Committee.  I'm

          15    going to invite Barbara to summarize this

          16    session on Petroleum Imports Data.

          17              MS. FORSYTH:  Howard presented a

          18    paper looking at similarities and differences

          19    in two data sources on petroleum imports, or

          20    at least I think that's -- I am going to

          21    invite other members of the workgroup to

          22    contribute at any time.




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           1              At least one of the ideas was that

           2    if Customs, one source of data, is collecting

           3    information on petroleum exports that is

           4    similar to data that EIA is collecting, then

           5    perhaps there is some benefit to letting

           6    Customs continue to collect that data and

           7    benefit in someway from the either reduced

           8    need to collect data on the part of EIA or

           9    perhaps simply to enhance the data that EIA

          10    currently uses.

          11              And so I think there are some cost

          12    and benefit considerations into comparing the

          13    two data sources to see just how comparable

          14    they are and how they could be used.

          15              So I think Howard focused on three

          16    comparisons between the two datasets.  First,

          17    the geographical comparison -- what counts as

          18    an import and what counts as an import to

          19    where in each dataset, then the definitions

          20    of the petroleum categories, how much do they

          21    match between the two datasets, and then

          22    numerical comparisons.




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           1              When you get categories that kind

           2    of match, do you have similar estimates or

           3    similar quantities of imports, and if you

           4    do -- if you don't, what does it mean for how

           5    you can use the data?

           6              And I think most of our discussion

           7    focused on the comparison of the definitions

           8    of the petroleum products, and it's important

           9    because, at least in part because people who

          10    work with the import data on the Customs side

          11    have different needs than people who work

          12    with the data as end users in energy

          13    statistics.

          14              So the questions I think for the

          15    Committee were what is the best way to make

          16    use of EIA data and comparisons between the

          17    data, and is there further research that the

          18    Committee would recommend.

          19              And I think we focused -- I think

          20    we answered -- tried to give some suggestions

          21    on both topics.  But I think the petroleum

          22    people actually discussed more on the best




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           1    way for EIA to benefit from the data.

           2              And I think there was at least one

           3    way that they could benefit, and that's in

           4    monitoring the frame and assessing the frame

           5    that EIA uses to gather data on petroleum

           6    imports.  And so at least my understanding

           7    was that the frame and monitoring the frame

           8    is one important contribution that using the

           9    Customs data could provide.

          10              And I think then the Committee

          11    focused on expanding the research and

          12    comparing the definitions, possibly looking

          13    at different ways that the definitions match

          14    and mismatch.

          15              So are there Customs definitions

          16    that tend to be broader than the EIA

          17    definitions, and is that the standard kind of

          18    mismatch, and if it is, can you take

          19    advantage of it by possibly disaggregating,

          20    or are there overlaps that aren't necessarily

          21    hierarchical?  And if those are more

          22    prevalent in the mismatches, then how can you




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           1    take advantage of those kinds of mismatches,

           2    and possibly use the data accordingly in a

           3    different kind of disaggregation?

           4              So I think looking into the natures

           5    of the mismatches and the systematicity in

           6    the mismatches was one research topic that

           7    was suggested.

           8              We talked about other ways of using

           9    the Census data that might be more useful.

          10    For example, aggregating them across time and

          11    possibly getting better numerical matches,

          12    but because of the specific needs of EIA,

          13    aggregating across time it seems isn't a very

          14    good use of resources.  And I think that's

          15    what I got from it.  So if the Committee got

          16    other things --

          17              MR. NEERCHAL:  Anyone want to add

          18    anything?  Moshe, you were going to --

          19              MR. FEDER:  Yeah.  I'm --

          20              MR. CLEVELAND:  Could I just ask

          21    one question?  I wonder what's in the ongoing

          22    discussions you want --




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           1              MR. FEDER:  They want my time to be

           2    limited.

           3              MR. CLEVELAND:  I just came at the

           4    end, and I was watching the table comparing

           5    EIA values versus Customs, and they seemed

           6    very close in almost all cases.  So I guess

           7    the question is --

           8              MS. FORSYTH:  For one month.

           9              MR. NEERCHAL:  For one single

          10    month, yes --

          11              MS. FORSYTH:  The particular ones

          12    that were closest to --

          13              MR. NEERCHAL:  January 2005.

          14              MR. CLEVELAND:  The nave question

          15    is why not just let Customs do it?

          16              MS. FORSYTH:  Exactly.

          17              MR. CLEVELAND:  So what are the

          18    reasons not to have Customs do it?

          19              MS. KIRKENDALL:  Well, they don't

          20    agree all the time, for one thing.

          21              MR. BLAIR:  And those were selected

          22    categories.




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           1              MS. FORSYTH:  And the users need

           2    different categories.

           3              MS. KIRKENDALL:  We have a wide

           4    variety of products in both Census and in

           5    EIA, and the ones that were on the screen are

           6    the ten that actually matched.

           7              MR. BINGHAM:  Yes, what they

           8    have --

           9              MS. FORSYTH:  Kind of.

          10              MS. KIRKENDALL:  Kind of.

          11              MR. BINGHAM:  Would they have to

          12    name, but they actually showed -- there was

          13    another slide that actually showed a

          14    ten-month average difference and some of them

          15    were as high as 50 percent, that sort of

          16    thing.  So --

          17              MR. CLEVELAND:  The EIA --

          18              MS. KIRKENDALL:  Yeah, the one on

          19    the -- closest on the first slide had an

          20    average percent error -- I mean, an error of

          21    50 percent.

          22              SPEAKER:  You mean 50 percent




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           1    difference --

           2              MS. KIRKENDALL:  Right.

           3              MS. FORSYTH:  And the differences

           4    were also systematic, so that EIA's numbers

           5    tended to be lower.  Do I remember that

           6    correctly --

           7              SPEAKER:  EIA's were higher --

           8              MS. FORSYTH:  Higher.

           9              MS. KIRKENDALL:  I think EIA's were

          10    higher.

          11              MR. EDMONDS:  Do these observations

          12    all come from a common pool -- or are

          13    different people collecting things at a

          14    different point in the system?  Obviously,

          15    the tax guys are collecting it when they

          16    collect their taxes.  Is the EIA getting its

          17    information from a different pool of

          18    observations?

          19              MS. KIRKENDALL:  We don't think

          20    it's supposed to be a different set of

          21    observations --

          22              MR. KOKKELENBERG:  Are they




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           1    sampling or are they Census --

           2              MS. KIRKENDALL:  For the monthly,

           3    it's supposed to be anybody who imported.

           4    Now, that's a hard to frame to keep up

           5    because people can come and go.  So there's

           6    always some challenges around the edges

           7    figuring out is there a new importer or isn't

           8    there, and is that a reason for the

           9    differences, because we only ask the same set

          10    of people to report.

          11              I think there's a -- that we say if

          12    you imported, you have to report this.  But

          13    I'm not sure a new importer would actually

          14    know that he needed to do that, and he might

          15    slip through the cracks.

          16              MR. KOKKELENBERG:  So the tax

          17    people might be more accurate because they

          18    have to collect the tax?

          19              MR. HILL:  I actually have raised a

          20    question like that, and really the cursory

          21    answer that's still in the audience is

          22    they -- the answer was that the tax people




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           1    might get the product that has the lower tax.

           2    So that -- a product might come in.  There

           3    are several ways of reporting it.  The tax

           4    people are more willing to see that listed as

           5    the item that's the lower tax on it.  And

           6    then when it comes to EIA, they now see a

           7    different -- that product was in a different

           8    category.

           9              MS. FORSYTH:  I'm not sure there

          10    were data on that, though.

          11              MS. KIRKENDALL:  No.

          12              MR. EDMONDS:  No, no, there was

          13    not.

          14              MS. KIRKENDALL:  That was a guess.

          15              MR. EDMONDS:  So there really is a

          16    different information set --

          17              MS. KIRKENDALL:  The product

          18    details just don't match very well at all.

          19    Census tends to use the chemical composition.

          20    EIA tends to use end use.  Neither is

          21    perfectly in that category, but that's sort

          22    of a tendency, and so they just don't match.




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           1              MR. EDMONDS:  I think the answer to

           2    my question is very clear, that it really is

           3    two different sets of observations.  That is,

           4    you're asking the same people, but it's a

           5    different set of observations.

           6              MS. KIRKENDALL:  Well, they can

           7    send us this -- they are supposed to be based

           8    on the Customs data.  At least I think they

           9    are.

          10              MR. EDMONDS:  They're filling out

          11    two separate forms.

          12              MS. KIRKENDALL:  There's two

          13    separate forms, and they don't match at all.

          14              MR. EDMONDS:  Right.  And they are

          15    being asked slightly different questions.

          16              MS. KIRKENDALL:  That's true.

          17              MR. EDMONDS:  It's two different

          18    observations sets.

          19              MR. BLAIR:  At the end of the day,

          20    yes.

          21              MS. KIRKENDALL:  At the end of the

          22    day, yeah.  Only there's supposed to be a




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           1    linkage, and so that's what we're trying to

           2    establish, and it's a little difficult.

           3              MR. NEERCHAL:  Correlated.

           4              MS. KIRKENDALL:  Yeah.

           5              MS. FORSYTH:  Some respondents

           6    maybe in the same place you are.  They are

           7    like, okay, we got these Census

           8    classifications, how do we turn this into

           9    what is being questioned from EIA?  I mean,

          10    in the end, we would be working from a single

          11    records -- a single record to produce both

          12    sets of data?

          13              MS. KIRKENDALL:  Mike, got any

          14    observations on that?  You're the one who has

          15    gone to some meetings where some of these

          16    people may have talked to you.

          17              MS. FORSYTH:  I hope the question

          18    is worth the effort.

          19              No?

          20              MR. CONNER:  Actually, I'm not the

          21    one that's done most of the work on this, but

          22    it's my understanding -- hello -- I mean, we




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           1    do have at least anecdotal evidence to

           2    support the notion that the product

           3    classifications that we get on the Census

           4    data are in fact being reported based on the

           5    lower tax rate, because what happens is we

           6    call the companies up and we say, well, we

           7    notice that you got all this volume.

           8              And then we ask them what it is and

           9    they describe it to us.  And we say, well,

          10    okay.  That's gasoline.  Gasoline that was

          11    reported on the other data as special

          12    naphtha.  So I mean, we do have at least

          13    experience that suggests that that happens

          14    quite frequently.

          15              And what was the other part of the

          16    question?

          17              MR. BLAIR:  Are the users

          18    essentially using the same information to

          19    answer both questions?

          20              MS. KIRKENDALL:  The respondents.

          21              MR. BLAIR:  The respondents.

          22              MS. KIRKENDALL:  Do the respondents




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           1    use the same information to fill out the two

           2    sets of forms?

           3              MR. CONNER:  Yes.  I mean, if this

           4    isn't right, somebody tell me, but I don't

           5    think they have two sets of import records

           6    that they are using to fill out forms for

           7    Customs versus forms for us.

           8              MS. FORSYTH:  Or two offices that

           9    manage the separate data collections, because

          10    that in essence would be the same thing.

          11              SPEAKER:  Mark.

          12              MR. CONNER:  Yes, that happens.

          13    Yes, that actually does happen.  So yes, in

          14    that sense, we may be getting two different

          15    people reporting to us.  But it's also

          16    possible in many cases to kind of draw

          17    conclusions based on the company and the

          18    activity that we know they're engaged in and

          19    the location that the product comes in to.

          20              You know, for example, that you're

          21    going to get a lot more petrochemical

          22    feedstocks coming into the Gulf Coast than




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           1    you are into New Jersey because -- and the

           2    stuff coming into New Jersey is probably

           3    going to New York Harbor and is probably

           4    gasoline.  So based on those kinds of sort of

           5    other information that we have, we can get a

           6    pretty good idea of what the product really

           7    is.

           8              MR. KOKKELENBERG:  Isn't there a

           9    North American Industrial Classification

          10    System which would -- it may not have the

          11    level of detail you want, but it specifies

          12    all the products, and the plants that makes

          13    those products.  That used to be the Standard

          14    Industrial Classification System.  Now, it's

          15    North American because of NAFTA.

          16              MR. CONNER:  Yes.  I understand

          17    what you're saying.  If all this coding has

          18    already been done for international trade,

          19    then how come we're trying to put it into

          20    different buckets, and the reason really is

          21    because we're trying to take the import data

          22    and fit it into the context of all the other




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           1    data that we're collecting from the U.S.

           2    refiners, U.S. inventory holders, and various

           3    other operations.

           4              So we have to get our import data

           5    to be consistent with all those other things

           6    that we're collecting data on so that we can

           7    calculate these demand figures, product

           8    supply.

           9              MR. NEERCHAL:  Any other comments

          10    or questions?

          11              Thank you.

          12              MS. KIRKENDALL:  Thanks, Mike.

          13              MR. NEERCHAL:  Thank you, Mike.

          14              Moshe, you're on.

          15              MR. FEDER:  Yes.  We started by

          16    talking about the Annual Energy Outlook,

          17    which is one of EIA's most-read publications,

          18    specifically the 2007 edition.  But it turned

          19    out in the discussion that the questions that

          20    I'm going to describe to you, and some of the

          21    questions that Cutler and others raised

          22    actually have the general scope.  And




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           1    fortunately, Howard was the group inspector,

           2    and he helped put things in context of EIA in

           3    general.  So I think these are very

           4    interesting questions.

           5              For instance, I'm probably not

           6    using the right term -- what do you attribute

           7    certain components that say of E85 or other

           8    fuels that have gasoline and ethanol in them,

           9    and things like that, other biofuels,

          10    questions of this sort.

          11              And another question is corn.

          12    Energy that's in corn, which is an

          13    input -- in turn, how do you balance that

          14    against the output, which is energy in the

          15    ethanol.  And a point that was made by Cutler

          16    regarding the energy balance here -- we are

          17    not talking about -- am I saying this

          18    right -- thermodynamical balance.  But it's

          19    rather a social or economic definition of

          20    what the balance should be.

          21              And maybe you can break this --

          22              MR. CLEVELAND:  I think we're




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           1    introduced to how EIA is now reporting

           2    biomass and ethanol, because it's such a

           3    growing fraction of our motor fuel

           4    consumption, and it's an important political

           5    issue as well.

           6              So we need to keep track of it.

           7    And I think there was one issue of how

           8    should -- how do you, in an appropriate

           9    mathematic way incorporate ethanol into the

          10    tables.

          11              And I think we were relatively

          12    happy with the way they did that.  There was

          13    another issue of how people who were going to

          14    use that information to ask different

          15    questions had access to the information.  So

          16    there was debate on how the information was

          17    presented in the tables themselves, and --

          18              MR. FEDER:  I was referring to

          19    specifically the question of the energy

          20    balance, and it should zero out.  Again, that

          21    was actually the part of the question that

          22    was posed to the Committee and what the




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           1    Committee responded -- so I think I'll move

           2    on to that, and then everyone can comment on

           3    this.

           4              One question that became quite

           5    clear during the discussion is other

           6    reporting changes that have been made, are

           7    they sufficient.

           8              And the answer that became apparent

           9    is no, there's more to be done, particularly

          10    as Cutler pointed out, people are seeking

          11    information in the tables, and some can and

          12    some cannot be found, although we did find

          13    during the discussion in some footnotes and

          14    some even more prominently stated comments on

          15    the tables that you can find them, but not

          16    necessarily where everyone thought they would

          17    be.

          18              Another question -- no, it's not

          19    necessarily any deficiency of the table.  It

          20    is the complexity of the tables and the many

          21    ways -- for instance, even E85 is not just

          22    E85.  It is in fact also -- anywhere from




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           1    E70, I believe, to E95, and what do you do

           2    when you have a product which is mostly

           3    gasoline, but has up to 15 percent ethanol in

           4    it?  Then there were two other questions,

           5    which are closely related.

           6              One was, if time and resources

           7    permit, would anything else that we currently

           8    model be added to the Annual Energy Outlook

           9    tables.  And two comments that were made on

          10    that: one had to do with what Cutler said,

          11    it's a political question, or maybe policy

          12    issue, rather, that needs to be made.  It is

          13    not a professional or a statistical question.

          14    And Ed raised the issue of oxygenates, which

          15    I'm not sure I am qualified to talk about.

          16              So maybe if there's any further

          17    comments on that -- and the last question

          18    that was made is about other liquid fuel

          19    technologies on the horizon that we should

          20    watch.  And that again was -- the Committee

          21    members that commented had thought that was

          22    partially a policy issue, what should or




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           1    should not be looked at.  And nothing obvious

           2    was mentioned in this respect.

           3              Ed, do you want to talk about the

           4    oxygenates?  I totally missed that particular

           5    aspect.

           6              MR. KOKKELENBERG:  Basically,

           7    oxygenates consisted of ethanol and some

           8    chemical --

           9              MR. CLEVELAND:  MTBEs --

          10              MR. KOKKELENBERG:  Water, MTBE.

          11              MR. FEDER:  Okay.

          12              MR. KOKKELENBERG:  That's been

          13    removed from the refiners.

          14              So we don't need --

          15              MR. FEDER:  So it's just ethanol

          16    now, okay.

          17              MR. KOKKELENBERG:  It's kind of

          18    historical information, and that's why --

          19              MR. FEDER:  Okay.

          20              MR. KOKKELENBERG:  And that's

          21    covered elsewhere.  So --

          22              MR. FEDER:  So I didn't miss much




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           1    then, okay.

           2              So the main point perhaps that the

           3    Committee certainly felt that there should be

           4    more changes, yes.  But the changes that were

           5    made were clearly good and in the right

           6    direction.

           7              MR. CLEVELAND:  Is Tony here?

           8              MR. RADICH:  Yes.

           9              MR. CLEVELAND:  He's in the back.

          10    Yeah, he did, I think, a good job.

          11              Mike -- I want to add two things to

          12    that.  One is I had made the -- Tony did a

          13    good job of kind of showing how on the

          14    transportation of petroleum tables we were

          15    dealing with ethanol, so things balanced out

          16    energetically, and they do, which is good.

          17              Then I had a question of where in

          18    the aggregate tables -- if someone wants to

          19    come to the EIA and say how much ethanol do

          20    we produce?  Where do I find that number,

          21    whether it was an E85 or E10 or E12 whatever

          22    it is.  Howard handed me the latest copy of




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           1    2007, and indeed it is there in Table A2.

           2    There's a line that says total ethanol

           3    consumed in motor gasoline, E85, so you can

           4    find that information there.

           5              I would just suggest, given that

           6    ethanol is such a hot button issue, that it

           7    would be worth in some upcoming issue you put

           8    a little thing in there, a little story about

           9    the whole -- what you have done in terms of

          10    system boundaries, how you're treating the

          11    ethanol question from this overall system

          12    boundary issue, not necessarily get into the

          13    net energy issue because you don't want to go

          14    there, I don't think.

          15              But just telling people how EIA is

          16    dealing with the system boundary issues, how

          17    you're dealing with co-products as a little

          18    story, because people are going to be

          19    interested in how you actually do that now

          20    that it's showing up more prominently in your

          21    table.

          22              SPEAKER:  But as he was --




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           1              MR. RADICH:  Writing something for

           2    issues and focus in AEO 2008, and my

           3    supervisor is enthusiastically nodding --

           4              MR. KOKKELENBERG:  In 2003, you did

           5    a piece on biomass and ethanol, and that was

           6    very helpful to me for re-reading before

           7    coming to this meeting.  Maybe that's the

           8    kind of thing he is talking about updating,

           9    because it was a standalone piece.  But it

          10    could refer to places in the AEO and

          11    elsewhere where you could find more data, or

          12    at least that's where the data series is, but

          13    reproduce it in the standalone.

          14              MR. FEDER:  When I used to be at

          15    Stats Canada many years ago, they used to

          16    have a publication called The Daily, which

          17    was most for newspapers to pick up and

          18    republish.  It was a very brief publication,

          19    could be an item, half a page -- and that was

          20    very useful for them because you didn't need

          21    to be an expert to understand, and easily

          22    quotable.  Maybe something like that just on




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           1    ethanol or other biofuels would be useful.

           2              I forgot to mention that in the

           3    discussion, it turned out that EIA is moving

           4    towards clarifying -- and not just

           5    clarifying -- but using the same approach to

           6    how components of energy are used the same

           7    way across its products.  So it's not just

           8    for the Annual Energy Outlook, but in other

           9    areas as well.

          10              MR. EDMONDS:  One thing I'd add to

          11    this is that the presentation was very nice,

          12    and what it did was it -- about the changes

          13    in the way the tables are being put together,

          14    and the accounting is being done.  And it

          15    actually took on a generic problem, which is

          16    that over time, the simple energy system that

          17    we grew up with, which was coal -- it was

          18    coal when it left the ground and it stayed

          19    coal until it turned into electricity, and

          20    oil was oil and it stayed oil -- we burned it

          21    in our cars and gas was gas, it never

          22    changed.




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           1              And we've entered a world in which

           2    things are changing, that in fact you've got

           3    gas to liquids going on out there, you have

           4    the beginnings of coal to liquid technology,

           5    you've got biofuels, which start off as a

           6    solid.  Now you in fact have a -- you know, a

           7    solid category that's not just coal, but it

           8    has got these biofuels in it.

           9              And so the set of accounts is in

          10    fact evolving in a way that is necessary to

          11    reflect the fact that the simple energy

          12    system that we had as kids is no longer with

          13    us, and in fact, that system is a much more

          14    sophisticated system.  And so there were

          15    other change -- and of course, it gets

          16    highlighted in the bio.  I mean, bio sort of

          17    captures most of these problems.  I mean, you

          18    know, you have got a new form of solid,

          19    you've got a transformation from a solid to a

          20    liquid.

          21              But it's occurring all over.  And

          22    so what you're finding is that there's a




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           1    category that's no longer labeled oil when

           2    you get to the end users, because the end

           3    users really don't care what this thing

           4    started off as.  All they care about is that

           5    it's a portable hydrocarbon that works in the

           6    device they're using.  And so there's this

           7    change in vocabulary that now it's not oil in

           8    the consumption, it's liquid fuels.

           9              And so I think there's a more

          10    general story that was told which I think is

          11    a really important story, and sort of comes

          12    out in the nuances of what Moshe and Cutler

          13    were describing as they described what was

          14    happening in ethanol.  So that's just sort of

          15    another perspective on this.

          16              MR. CLEVELAND:  And you also draw

          17    in -- not only is coal no longer coal, but at

          18    least in the case of coal, you were starting

          19    with an energy feedstock.  In the case of

          20    ethanol, now it's -- you're over in the

          21    agricultural sector, right?

          22              MR. EDMONDS:  Right.




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           1              MR. CLEVELAND:  One example,

           2    obviously, we're interested in the price of

           3    coal and oil, because they are feedstocks

           4    from important energies that we use.

           5              Is the EIA now going to be in the

           6    business of dealing with corn prices, because

           7    it's an important -- I don't know.

           8              SPEAKER:  I think we already are.

           9              MR. EDMONDS:  And in fact -- I mean

          10    this is a problem because the work that I do

          11    is just longer term.  It is strategic kind of

          12    modeling and analysis that -- we have already

          13    been forced long ago to describe the energy

          14    system, and incorporating how it might

          15    evolve -- we were forced not only to take the

          16    energy supplies and the graded resources and

          17    all the forms of transformation, but we

          18    actually are now forced to do -- to handle

          19    all agriculture, and land use.

          20              And in fact, you actually have to

          21    compete -- if you want to grow biofuels, you

          22    actually have to compete lands, you have to




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           1    deal with these co-product issues that Cutler

           2    raised, and the other thing, as you're

           3    thinking forward into your modeling, what

           4    does it mean for NEMS?  Does it mean you

           5    actually have to build an agricultural model,

           6    and the land use and the land cover model,

           7    but you also have to track the carbon

           8    stocks and all of the above and below ground

           9    bioentities.

          10              MR. CLEVELAND:  If you start

          11    doing --

          12              MR. EDMONDS:  That'll keep you

          13    busy.

          14              MR. CLEVELAND:  If we start doing

          15    cylolystic ethanol, then you bring forestry

          16    in, too.

          17              MR. EDMONDS:  That's what I'm

          18    saying.  You have to cover all land use, all

          19    land cover and you have to do the dynamic

          20    stock of carbon calculations.  You actually

          21    have to grow the trees in the models.

          22              SPEAKER:  Right.




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           1              MR. FEDER:  Well, I was not joking,

           2    but I asked if I eat corn and then ride my

           3    bike, how does that energy compare to if I

           4    use the corn to make ethanol and use it in my

           5    car?  I think one way it's counted, but I was

           6    told that model --

           7              MR. EDMONDS:  I think you're better

           8    off in the car in terms of the energy to the

           9    drive wheel, but inversely, in fact maybe

          10    you're better off if you ride your bike.

          11              MR. KOKKELENBERG:  But in terms of

          12    distance and time, there's nothing like

          13    gasoline --

          14              MR. FEDER:  Okay.

          15              MR. KOKKELENBERG:  That's what

          16    you're trying to do.

          17              MR. FEDER:  All right.

          18              MS. FORSYTH:  But don't drink it.

          19              MR. FEDER:  Well, I'm afraid you're

          20    being recorded.

          21              MR. NEERCHAL:  Any comment?  Ed?

          22              MR. KOKKELENBERG:  No, that's okay.




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           1              MR. NEERCHAL:  Comment?  Any more

           2    comments?

           3              I think I would like to invite the

           4    public for comment on any of the sessions of

           5    this morning.

           6              MR. EBEL:  Hi.

           7              MR. NEERCHAL:  Please identify

           8    yourself to the transcriber.

           9              SPEAKER:  Look this way.

          10              MR. EBEL:  Steve Ebel with

          11    Lyondell.  I had a couple of questions.  In

          12    the earliest part -- and I'm attending this

          13    as an interested consumer of this data and

          14    trying to understand a little bit better

          15    about how it's put together -- really two

          16    questions.  One of them was in the initial

          17    presentation, there was a discussion of,

          18    based on the additional budgeting provided

          19    for this year that's going to allow for some

          20    improvements in terms of the petroleum and

          21    natural gas data collection and some of the

          22    statistical modeling, I was just wondering if




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           1    someone could comment on exactly what

           2    deficiencies are being addressed or what

           3    improvements are being proposed.

           4              And my second question is just to

           5    understand a little bit better as far as

           6    quality checks go, and how that's

           7    incorporated into the routine collection of

           8    data.

           9              We were talking about import data,

          10    for example, and when I tried to look at,

          11    from an engineer's perspective, of mass

          12    balance of supply-demand, how that impacts

          13    stocks, and I'm not always able to make the

          14    numbers add up.

          15              Is there a routine process by which

          16    the data is checked across not just the

          17    individual pieces of the data, but how the

          18    big picture adds up?

          19              MR. FEDER:  Can I just comment on

          20    what you said?  That actually is another

          21    aspect of what I was worried about, the

          22    discussion that I attended had to do




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           1    specifically with the Annual Energy Outlook,

           2    but it turned out to be a question that

           3    should apply to all of EIA's activities and

           4    products.  And I think the same should apply

           5    to your question, right?

           6              MR. EBEL:  Uh-huh.

           7              MR. FEDER:  Anything that's done,

           8    how consistent data should be, and again, how

           9    should we verify and check --

          10              MR. EBEL:  Right.  On more of a

          11    macro basis.

          12              MS. KIRKENDALL:  That's a big

          13    question.  In general, each data system that

          14    we have does its own quality check, does its

          15    own imputation.  I think you're going to get

          16    a comment from Sue.  She's the manager of the

          17    petroleum surveys.  So she can tell you

          18    something about what they do.

          19              But basically all the different

          20    survey systems at least use different quality

          21    checks.  They all do quality checks, and they

          22    try to make sure we get the data out.




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           1              But Sue, why don't you talk about

           2    yours?

           3              MS. HARRIS:  Hi.  I'm Susan Harris.

           4    I'm here again.  Susan Harris.  I work in the

           5    Office of Oil and Gas within EIA, and we're

           6    responsible for collecting the survey forms

           7    that you may know as the petroleum supply

           8    survey forms, EIA-800 through the 820.  We

           9    also collect marketing information 782(a) (b)

          10    and (c) forms, 821, collect pricing

          11    information.

          12              To address your question, we're

          13    taking a look -- re-examining how we're

          14    conducting the editing of our information

          15    internally as well as externally.  We do have

          16    consistency checks within the surveys

          17    themselves.  We do aggregate the data across

          18    all levels of the industry and look at the

          19    supply and demand balance.

          20              We compare the information to

          21    historical five-year patterns.  We look at

          22    our information we collect on the monthly,




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           1    and compare it to what we have on our weekly

           2    information.  And then we also look at other

           3    industry information to see how we're

           4    compared with that.

           5              On the outside, going out to

           6    industry, we are initiating a program to go

           7    out and conducting additional site visits.

           8    We have in the past gone to several companies

           9    and conducted site visits, but because of

          10    resources and budget constraints, we have had

          11    to limit what we had been able to do.

          12              And now, with our new budget in

          13    '07, we're trying to initiate site visits

          14    once again, to go out to companies and ask

          15    them what validation they perform before they

          16    send the information to EIA.

          17              What consistency checks do you

          18    perform when you collect the information and

          19    put it on our forms before sending them in?

          20    At both ends, we think we can do some

          21    improvements.  A better understanding of how

          22    industry collects the data, what problems




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           1    they're encountering in trying to file forms

           2    with the EIA so that we can work together as

           3    a team so we get better and more accurate

           4    information out to the public.

           5              Did that answer your question at

           6    all?

           7              MR. EBEL:  It did.  Thank you.

           8              MS. HARRIS:  If you want to talk

           9    offline, that would be good, too.  Okay.

          10              MR. EBEL:  Thank you.

          11              MR. NEERCHAL:  I think I want to

          12    add, as a Committee member for the number of

          13    years now, that we periodically have sessions

          14    dealing with data quality.  We've had a

          15    number of those so that it does come up to

          16    the Committee level for discussion and

          17    advice.  Thank you very much, and I think I

          18    have a couple of announcements.

          19              We have lunch for the Committee,

          20    presenters, and the invited guests downstairs

          21    in a different room this time, it's room

          22    number 2E081.




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           1              It is the exact same corridor as

           2    this one except six floors down.  So same

           3    corridor, six floors down, and -- it is just

           4    12:10, so we're just only a few minutes

           5    behind.

           6              And also we need another head count

           7    here.  We have a reservation for dinner at

           8    Clyde's -- Clyde's Gallery Place.  It is on

           9    707 7th Street near Chinatown, or in

          10    Chinatown, and is accessible by Metro.

          11              Can I please have a show of hands

          12    who will be going for dinner?  One, two,

          13    three, four, five, six, seven -- dinner,

          14    Moshe -- and you can always --

          15              MR. FEDER:  Two for dinner.

          16              MR. NEERCHAL:  So I think you

          17    can -- if you want to join, during lunch,

          18    catch Bill and let him know that you will do

          19    that so.

          20              MR. FEDER:  Okay.

          21              MR. NEERCHAL:  I just want to give

          22    him an approximate number.  All right?




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           1              And with that, I think -- what do

           2    we do?  Will I have to ask a move for adjourn

           3    for adjourning, no?

           4              MS. KIRKENDALL:  No, I don't think

           5    so.

           6              MR. NEERCHAL:  We just adjourn for

           7    lunch.

           8                   (Whereupon, at approximately

           9                   12:20 p.m., a luncheon recess was

          10                   taken.)

          11

          12

          13

          14

          15

          16

          17

          18

          19

          20

          21

          22




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           1            A F T E R N O O N     S E S S I O N

           2                                             (1:25 p.m.)

           3              MR. NEERCHAL:  I think we should

           4    come to order here and start.

           5              I would like to check to see that

           6    we have our speaker and the discussants.

           7              This afternoon, we have one plenary

           8    session and two breakout sessions following

           9    that, so there's --

          10              MS. KIRKENDALL:  Actually, there

          11    are two plenary sessions.

          12              MR. NEERCHAL:  Sorry.  Two plenary

          13    sessions and then a break and then directly

          14    into the breakout session.  And so we will

          15    start with our first plenary session here.

          16    And the speaker is Robert Schnapp; the title

          17    is Clearance of Electricity Surveys.

          18              MR. SCHNAPP:  Good afternoon.  My

          19    name is Bob Schnapp.  I'm the director of the

          20    Electric Power Division.

          21              I have come back again today to

          22    talk to you about our Electricity 2008




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           1    project.  The point of this project is to

           2    update our electric power survey forms to

           3    have them operational by January 1 of 2008;

           4    hence the title Electricity 2008.  So what

           5    I'm going to talk to you about today is I'm

           6    just going to -- I've already briefed this

           7    committee a couple of times on where we are

           8    on the project, so I'll just give you an

           9    update at this point on where we are.

          10              And then I will talk to you about

          11    just two of the forms.  We are proposing to

          12    merge about six forms into two and explain

          13    what we're proposing there.  And actually

          14    after I speak, then Bob Rutchik will talk a

          15    little bit more about one of them.

          16              Review of data confidentiality

          17    issues that we are addressing and then just

          18    show you the Federal Register notice that we

          19    have issued on April 4th.  So I'm not going

          20    to go through all of the phases of our

          21    project, but just leave it to say that the

          22    first phase, which is data requirements, we




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                                                          204


           1    had to figure out what we're going to be

           2    collecting or changing.  We've done that

           3    because we have issued our Federal Register

           4    notice, as I said, April 4th, the public has

           5    60 days to comment.  Then we would be

           6    assessing those comments and going to the

           7    Office of Management and Budget, which is in

           8    phase two here, by September of 2007.  And

           9    then hopefully they would approve it by

          10    November of 2007.

          11              The third phase is data collection

          12    and processing.  We would have to change our

          13    processing systems to accommodate the new

          14    elements that we would be collecting, and

          15    that would have to be done by the end of this

          16    year in order to be operational for

          17    January 1.  And then phase four is

          18    dissemination; we would have to modify our

          19    publications to accept whatever changes that

          20    we had.

          21              Just briefly, and I'm going to go

          22    over these, but in leading up to our Federal




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           1    Register notice, we met with a whole host of

           2    stakeholders from all parts of industry,

           3    consumer groups, environmental groups,

           4    federal government, state government, and

           5    this is just a list of some of the groups

           6    that we've met with already.

           7              So let me kind of get into the

           8    heart of the matter.  The first form that

           9    we're proposing to create is a new form,

          10    EIA-923, which is listed on the bottom.  This

          11    would be a merger of several forms: the

          12    EIA-423, which collects cost and quality of

          13    fossil fuels delivered to non-utility plants;

          14    the 906 collects generation, consumption and

          15    fuel stocks at electric plants that only

          16    produce electricity; the 920 collects the

          17    same information from the combined heat and

          18    power plants; and the 767 is our

          19    environmental form.

          20              And we have proposed to move the

          21    annual operational emissions information onto

          22    this form.




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           1              But the new form, the 923, as set

           2    up has a couple of different schedules.  We

           3    would collect some plant-level information,

           4    some prime-mover-level information, some

           5    boiler-level information, and then there

           6    would also be annual data that we would

           7    collect from everybody.  So let me get into a

           8    little bit more detail here.

           9              So first at the plant level for the

          10    923, we would collect the quantity and

          11    quality of the fossil fuel receipts.  We

          12    already collect the heat, sulfur, and ash

          13    content, and the underlines in this slide

          14    indicate those are new elements that we would

          15    collect.  So we're proposing to collect

          16    mercury content for the first time.  We

          17    already collect the delivered cost of the

          18    fuel, where we're proposing to collect the

          19    cost of the commodity before it gets shipped.

          20    So in other words, the mine mouth price of

          21    coal.

          22              The transportation modes, we would




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           1    probably collect the primary and secondary

           2    modes of transportation.  And then the Mine

           3    Safety and Health Administration number.

           4    That's the number that's assigned by MSHA to

           5    each coal mine.  And so we would be able to

           6    kind of track the coal through the system

           7    with that.  And then we would also continue

           8    to ask for ending stocks.

           9              And what this would do is -- in

          10    addition, we would also be collecting

          11    consumption a little bit later on here, but

          12    what we would have here is we would be able

          13    to establish a balance on one form.  So we

          14    would start out -- we would actually tell the

          15    respondent what their ending stocks were at

          16    the end of last month, or beginning stocks of

          17    this month.

          18              We would add in receipts, subtract

          19    consumption; the remainder should be their

          20    ending stocks.  If that doesn't equal what

          21    they're reporting, then they actually -- on

          22    our Internet data collection system, they




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           1    really couldn't even submit it.  So they

           2    would have to balance this form in order to

           3    submit the data.  And when they do, then the

           4    data is quality assured right there.  Yes?

           5              MS. KHANNA:  Suppose I made a

           6    mistake, it was my ending stocks last month.

           7    But I didn't realize it until this month I

           8    started to report my data and realized that

           9    things don't balance out.

          10              MR. SCHNAPP:  Right.

          11              MS. KHANNA:  Can I fix that

          12    somehow?

          13              MR. SCHNAPP:  We have an adjustment

          14    right here.

          15              MS. KHANNA:  Thank you.

          16              MR. SCHNAPP:  Yes, sir?

          17              MR. FEDER:  Since you're changing

          18    the mode of collection, after all -- not

          19    mode, but change instruments -- how are you

          20    going to make sure that the time series

          21    continuity will be there?  Is there going to

          22    be any parallel run of the old and new forms,




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           1    or some way to assess the impact of this

           2    change on the time series?

           3              MR. SCHNAPP:  I don't know why

           4    there would be a change in the time series,

           5    frankly.

           6              MR. FEDER:  But you don't --

           7              MR. SCHNAPP:  As Bob will talk

           8    about, we're going to go out and test the

           9    form, though, to make sure that they're

          10    replying accurately before we issue it in the

          11    first place.

          12              MR. FEDER:  Well, sometimes

          13    improved accuracy also produces a change in

          14    the series.  I mean, what we do is usually we

          15    have a split sample in the year when we make

          16    a transition, so we -- I'm not saying you

          17    should do it, I'm just saying that's one

          18    thing that people do -- to study the impact.

          19    Actually, it's usually -- improvement -- you

          20    wouldn't change if improvement wasn't

          21    intended, but you want to know what the

          22    magnitude of the improvement is and what




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           1    impact it has on the series so you can

           2    measure it.

           3              MR. KOKKELENBERG:  Couldn't you get

           4    that from the pilot study, though?

           5              MR. SCHNAPP:  I'll let Bob talk to

           6    that when he comes up here.  I think that we

           7    could probably get something along those

           8    lines, but I must say I don't really think

           9    that's going to be a change.  I'm having a

          10    hard time imagining why it would be

          11    different.  But nevertheless, even if there

          12    is a change, I must say that there are really

          13    no resources to do that.

          14              MR. HILL:  Completely different

          15    categories?

          16              MR. SCHNAPP:  No, the exact same

          17    information.

          18              MR. KOKKELENBERG:  But Moshe's

          19    point I think is valid.  It's the unexpected

          20    that could happen.  You are switching forms,

          21    asking the same questions.  How will they

          22    interpret it?




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           1              MR. FEDER:  If you improve your

           2    coverage, you're going to see changes, and if

           3    you want to know if there was indeed a rise

           4    in consumption or whatever, you wouldn't be

           5    able to tell what it has to do with the

           6    change in the instrument or because of the

           7    true change.

           8              MR. SCHNAPP:  We'll take that under

           9    advisement.  We'll consult with Bob on that.

          10              MR. FEDER:  In our case, if I can

          11    just take one more half a minute is, we

          12    changed from a paper instrument to a

          13    computer-aided interview, which certainly is

          14    an improvement, because people are more frank

          15    when they enter the responses into the

          16    digital media, which is supposed to be

          17    anonymous.  But that created improved

          18    measures that showed the change in the time

          19    series.  So for that year when it was done,

          20    we had the split samples so we could compare.

          21    And indeed we saw there was a change, and in

          22    your case, surely you're making it to improve




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           1    reporting, and improvement does show a

           2    change.  So you want to know what in the past

           3    was not measured that we're now measuring.

           4              MR. SCHNAPP:  We'll think about it.

           5              MR. CLEVELAND:  How does an

           6    operator know how much mercury is in her or

           7    coal, say?

           8              MR. SCHNAPP:  There are analyses

           9    done of the coal before it's shipped and

          10    after it's shipped.

          11              MR. CLEVELAND:  Okay.

          12              MR. SCHNAPP:  In the lab.  Okay.

          13    So anyways, so we're hoping that this balance

          14    will help improve the quality of the data

          15    that we're collecting.

          16              Then there's information -- I don't

          17    think this was the latest slide that I had,

          18    but that's okay.  We're going to be

          19    collecting some information at the prime

          20    mover level and some at the boiler level.  We

          21    would first collect net and gross generation

          22    from the all-electric plants and just gross




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           1    generation from the combined heat and power

           2    plants.  We've unfortunately found that the

           3    CHP plants are not grasping what we mean by

           4    net generation.

           5              And so it's a minor calculation for

           6    us to estimate net generation from the gross

           7    generation, so we will be doing that.  That

           8    will be collected at the prime mover level,

           9    but the consumption, we will collect by fuel

          10    type and heat content.

          11              We currently collect it only at the

          12    prime mover level.  But we're proposing to

          13    collect it at the boiler level for fossil

          14    fuel plants that are 10 megawatts and

          15    greater.  This is the piece that's on the

          16    environmental, the 767 form.  The respondents

          17    actually provide this information twice to

          18    us.  They first read the information, the

          19    consumption information, at the boiler level,

          20    then they aggregate it and report it to us

          21    during the year at the prime mover level.  At

          22    the end of the year, they take that




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           1    information that they have not aggregated up

           2    and just at the boiler level on a monthly

           3    basis and provide it to us in the 767.  So we

           4    think that this would actually reduce the

           5    burden on industry, and we would still

           6    continue to collect information that's

           7    needed, particularly for environmental

           8    analysis at the boiler level.

           9              I have spoken to this group a

          10    couple of times about issues of collecting

          11    information from combined heat and power

          12    plants and splitting the fuel that's in the

          13    boiler between fuel that's used to produce

          14    electricity and fuel for use of thermal

          15    output.  I think we're on the third life of

          16    trying to do that, and I think we're going to

          17    go to another one now, which is we would ask

          18    them for total fuel consumption and electric

          19    generation, and then we will try and figure

          20    out what the split is.

          21              We're in the process of trying to

          22    develop a methodology to do that split, and




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           1    we have already gotten an agreement from the

           2    American Council for an Energy Efficient

           3    Economy -- the other folks that represent the

           4    combined heat and power plants -- they've

           5    agreed to review the methodology with us to

           6    make sure that it makes sense and is

           7    accurate.

           8              So we would continue to collect

           9    annual data on the sources and disposition of

          10    electricity -- sources being gross generation

          11    and other incoming electricity.  Disposition

          12    would be station use, direct use, wholesale

          13    sales, retail sales, and other outgoing

          14    electricity.  The one additional item we're

          15    proposing to collect is wholesale revenues.

          16    We apparently were not collecting that

          17    before -- there was a hole in our series, so

          18    we felt we needed to fill that in.

          19              And then we would add on another

          20    schedule for annual emissions data, and this

          21    information is picked up again off the 767.

          22    We collect by product disposition, cooling




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           1    system and flue gas desulfurization annual

           2    operations.  Those questions would not change

           3    at all.

           4              Moving on to the other proposed

           5    merger -- let me just back up one second.  It

           6    is also possible that we could get the

           7    FERC-423 added into all of that.  And the

           8    FERC-423 collects the same thing as the

           9    EIA-423, except they collect it from

          10    utilities, and we collect it from the

          11    non-utilities.  So that could be another

          12    factor in here.

          13              The other merged form is combining

          14    the 860 with the 767.  The 860 collects the

          15    kind of static information: capacity, what

          16    the prime mover is, the types of fuel that

          17    they would be using, fuel switching

          18    capabilities and what their plans are five

          19    years into the future.

          20              We are proposing to pick up the

          21    static information off of the 767 and just

          22    move it onto the 860.  And so these are the




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           1    items that we would again just pick up off of

           2    the 767: plant configuration, air emissions

           3    standards, boiler design parameters, NOx

           4    emission controls, cooling system design

           5    parameters and so on.

           6              To move onto confidentiality, this

           7    is a list of the data elements that we

           8    currently hold confidential.  So there's fuel

           9    cost, which is on the 423; fuel stocks is on

          10    the 906 and 920.  The monthly retail sales,

          11    revenue and number of customers for the

          12    energy service providers only.  So those are

          13    the folks that are in retail competition in

          14    the states.  And that's collected on the 826.

          15              Latitude and longitude on the 767

          16    and 860.  The maximum tested heat rate under

          17    full load conditions on the 860, and then

          18    there are electricity maps and power flow

          19    cases that we collect.  Those are also

          20    collected by FERC.  We merely ask for a copy

          21    of that.  They hold it confidential, so we

          22    hold it confidential.




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           1              So the next slide shows what we're

           2    proposing to change in that list; first is to

           3    make latitude and longitude not confidential.

           4    To give you a little bit of background, some

           5    of you may be familiar with it as I've

           6    explained it before, is that we, for

           7    Electricity 2002, which was two projects ago,

           8    we submitted our proposal to the Office and

           9    Management and Budget to change our forms at

          10    that point, and were proposing not to hold

          11    latitude and longitude confidential.

          12              That was submitted to OMB on

          13    September 11, 2001.  And I called OMB a few

          14    days later and said, did you want me to hold

          15    latitude and longitude confidential?  And I'm

          16    not really asking just for the electric power

          17    forms but I'm really asking for the

          18    government, if you want this?  Because EIA

          19    had already begun removing a lot of

          20    site-specific information off our Internet

          21    site.

          22              And they called back a few days




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           1    later and said, yes, please revise your

           2    submission and then we will approve it as

           3    confidential.

           4              By the time we got around to the

           5    next project, Electricity 2005, it was

           6    getting a little bit difficult to defend

           7    that, because the information is kind of all

           8    over the Internet, and public utility

           9    commissions have it in their files, which is

          10    available to the public.

          11              So our argument at the time was we

          12    really don't want to have in one place a list

          13    of locations for a terrorist who picked them

          14    up off the Internet.  So what we're

          15    proposing -- now it's even more out in the

          16    public domain.  And in fact, there was an

          17    interagency committee that was established

          18    that gave out guidelines on what should be

          19    held confidential.  And what that said was

          20    that if the information for the most part is

          21    in the public domain already, you can't claim

          22    it's confidential.




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           1              So what we propose to do is to not

           2    put the data onto the Internet, but we would

           3    have the information in a file, and if people

           4    asked us for it, we would give it out.  So

           5    that's what our Federal Register notice says.

           6              MR. FEDER:  Couldn't they go to

           7    Google Maps and --

           8              MR. SCHNAPP:  Exactly.  Yes, they

           9    could.  They could get it anyplace, yes.

          10              MS. KHANNA:  If it's so easily

          11    available, why just not make it available?

          12    If I can get it by going to Google Maps or

          13    actually to the EPS websites, why not -- why

          14    would anyone even contact you for the

          15    information?

          16              MR. SCHNAPP:  The idea is we're not

          17    trying to make it easy for them.

          18              MR. KOKKELENBERG:  Why do you

          19    collect it to begin with?

          20              MR. SCHNAPP:  Certainly inside the

          21    Agency, people to do mapping to understand

          22    where --




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           1              MR. CLEVELAND:  Information

           2    resource.  You kidding me?  Any kind of

           3    place/space information is really useful.

           4              MR. KOKKELENBERG:  So you do use

           5    it?

           6              MR. SCHNAPP:  Yes.

           7              MR. KOKKELENBERG:  Okay.

           8              MS. KHANNA:  I would use it.

           9              MR. SCHNAPP:  We got calls from

          10    outside the Agency for it as well.

          11              MR. KOKKELENBERG:  If you can get

          12    it elsewhere --

          13              MR. SCHNAPP:  They only get it from

          14    us.  Before we held it confidential, it was

          15    in the public domain and EPA picked it up at

          16    that point.

          17              MR. NEERCHAL:  But I think there's

          18    a difference between something being

          19    available as one piece at a time versus you

          20    providing it as a spreadsheet.

          21              MR. SCHNAPP:  Right.

          22              MR. NEERCHAL:  I think there's a




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           1    tremendous difference.

           2              MR. SCHNAPP:  So that was about as

           3    much protection as we could give to it.

           4    We've gotten some kind of -- the electric

           5    utilities really don't want it in the public

           6    domain at all; they want it confidential.

           7    But I gave this presentation a few weeks ago

           8    at an EIA conference, and one of the speakers

           9    that I had brought was from the Edison

          10    Electric Institute.

          11              And when he heard these comments,

          12    he said not sure we agree with you yet, but

          13    that certainly gives me a lot -- feel a lot

          14    better about you not putting it out on the

          15    Internet.  So --

          16              MR. CLEVELAND:  So the information

          17    that you can get in EPA's website on the

          18    location of power plants is the data you've

          19    collected?

          20              MR. SCHNAPP:  I believe it's from

          21    when had collected it probably last in 2001.

          22              MR. CLEVELAND:  That's interesting.




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           1    I was wondering where they came from.  Not a

           2    very accessible database in any case.

           3              MR. SCHNAPP:  Are you talking about

           4    e-grids?

           5              MR. CLEVELAND:  I'm not sure.  I

           6    know I had a student who used it in a term

           7    paper I think last year or the year before,

           8    where I know there was -- she had made this

           9    nice GIS of all the power plants in New

          10    England, for example, where we're working.

          11    She used it.  It was latitude and longitude

          12    data.  So --

          13              MR. SCHNAPP:  So another change

          14    that we're proposing is that some of the

          15    monthly data that we collect, we would

          16    release nine months after the end of the

          17    reporting year, hopefully that it would not

          18    affect the ability of companies to compete.

          19    In other words, the data would be aged enough

          20    so that it wouldn't hurt them.

          21              So if we're talking about the fuel

          22    cost and the fuel stocks, the monthly sales




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           1    and revenue of the energy service

           2    providers -- that information right now on

           3    another form, our Annual 861 form, that they

           4    provide the same information on an annual

           5    basis -- that information is not

           6    confidential.  So to make this available to

           7    the public nine months after the end of the

           8    year, when we're going to be putting up the

           9    annual data anyway, really didn't seem to be

          10    too much of a stretch for us.

          11              And the last item that we're

          12    proposing is that in data tables that we put

          13    out for elements where we have confidential

          14    data, we have to figure out which cells to

          15    hold confidential if there are not enough

          16    observations.  So for example, if there's a

          17    state table and the columns are the different

          18    sectors plus a total column, if just one

          19    state in a column has to be withheld, now we

          20    have to look inside the region to see what

          21    else has to be withheld.

          22              We might have to go to other states




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           1    in that column.  Then we have to look across

           2    the row and see if we have to withhold any

           3    other data elements, because by simple

           4    mathematics or algebra, you can figure out

           5    what that number is if you don't withhold

           6    another item.  That's one table.  Then you

           7    have to go to complimentary tables as well.

           8    We have a lot of demand, particularly from

           9    the states, to have all their data available

          10    to them.

          11              So what we're proposing is not to

          12    withhold those individual cells.  We wouldn't

          13    say out loud who is in that cell, but if you

          14    personally knew who was in that cell -- you

          15    know, if there was one or two observations,

          16    you might have a little more information than

          17    somebody else.  But we're proposing to put

          18    that out without the withheld symbol.

          19              As I said, we issued our Federal

          20    Register notice -- dates really are April

          21    4th.  Comments are due -- I think it's

          22    June 4th.  And we have put our proposed forms




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           1    on the website along with the Federal

           2    Register notice, along with a spreadsheet,

           3    which is a crosswalk from the 767 to the 923

           4    and the 860 so that people can see where each

           5    of the elements goes.  It also lists the

           6    elements that we wouldn't be collecting;

           7    there's just a handful that we wouldn't

           8    collect.

           9              That was not our idea.  When I gave

          10    that presentation at the EIA conference, one

          11    of the people most concerned with the

          12    environment asked for that crosswalk.  I

          13    thought it was a great idea.  So we put that

          14    out there, and I think it will be useful to

          15    them.

          16              So those are the comments I had

          17    today.

          18              Am I supposed to take questions now

          19    or wait after Bob?

          20              MR. NEERCHAL:  Maybe we'll have

          21    Bob's and then take the comments together.

          22              MR. SCHNAPP:  Okay.




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           1              MS. KIRKENDALL:  Discussion should

           2    follow.

           3              MR. NEERCHAL:  Yeah.

           4              MR. RUTCHIK:  All right.  Good

           5    afternoon.  Can you hear me?  I'm Bob Rutchik

           6    of Statistics and Methods Group of EIA.  But

           7    before I start to discuss some of the details

           8    and problems of combining the four electric

           9    power surveys that Bob just discussed into

          10    the EIA-923, I very much would like to

          11    acknowledge the efforts in constructing the

          12    survey of my colleagues, Lawrence Stroud, who

          13    is here, and Carrie Uzkronic (?), who is not

          14    here.

          15              Carrie and Lawrence spent a lot of

          16    thought and effort into designing the survey,

          17    a copy of which you have in front of you, and

          18    they should be acknowledged.

          19              Now I got the technology down.

          20              There are two purposes to this

          21    presentation.  First, I'm going to go into

          22    more detail on how the EIA combined the four




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           1    electric power surveys that Bob just

           2    outlined.  Surveys with different respondent

           3    populations, different data reporting levels,

           4    different data, and different due dates into

           5    the EIA-923.

           6              To elaborate on the point that Bob

           7    has made in past presentations, the idea is

           8    to have a survey that's more efficient both

           9    for respondents and for EIA.  Plants will get

          10    one survey instead of three in many cases.

          11    Respondents hopefully will spend less

          12    resources and time getting better data to

          13    EIA.  And EIA will save resources and survey

          14    dissemination data collection, particularly

          15    in data processing.

          16              Combining the surveys has created

          17    some problems in testing and notifying the

          18    plants.  The second part of the presentation

          19    is to discuss and to get the Committee's

          20    feedback on some of these problems,

          21    specifically on planning and conducting a

          22    cognitive and/or a field test, and helping




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           1    companies respond to the EIA-923.

           2              MR. WEINIG:  Bob.

           3              MR. RUTCHIK:  Yeah?

           4              MR. WEINIG:  Can I interrupt just

           5    for a moment?  The form that you distributed

           6    is for the Committee, right behind Bob's

           7    slides in your binders, and in your tab --

           8              MR. RUTCHIK:  Okay --

           9              MR. WEINIG:  For those who have

          10    tabs, it's in Tab 5.

          11              MR. RUTCHIK:  It's about a 16-,

          12    17-page survey.

          13              MR. WEINIG:  Both sides.

          14              MR. RUTCHIK:  Power plant

          15    operations -- oh, he did?  Okay, then it's

          16    about eight or nine.  But it's called the

          17    EIA-923 Power Plant Operations.

          18              MR. WEINIG:  I'm sorry to have

          19    interrupted you.

          20              MR. RUTCHIK:  No, that's fine.

          21              As this diagram illustrates, the

          22    respondent populations that have become




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           1    EIA-923, they're not separate.  There is

           2    overlap; there's overlap particularly between

           3    the EIA-423 and the other three surveys.

           4    There's overlap between the 423 and EIA-906

           5    respondents with 50 or more megawatt

           6    generating capacity than EIA-920 respondents,

           7    our old friends who combined heat and power

           8    plants with 50 or more megawatt generating

           9    capacity, and also between 767 respondents

          10    and the EIA-423 -- 767 respondents with 50 or

          11    more megawatt generating capacity.

          12              There is also some overlap between

          13    the 906 and the 767.  There is even

          14    some -- not much, but some between EIA-920

          15    and the 767.  So eliminating all this overlap

          16    is one efficiency for EIA.

          17              Bob has discussed a lot of this

          18    already.  Combining the four populations into

          19    the EIA-923 also means that respondents will

          20    have to report data to EIA that they have not

          21    reported to us before.  As Bob pointed out,

          22    there are data requirements that would be new




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           1    to all EIA-923 respondents.

           2              One is the -- actually four

           3    variables in Schedule 2.  That's the EIA-423

           4    cost and quality data that's been brought

           5    into the 923.  Then there's the data balance

           6    in Schedule 4.  And the data balance, as Bob

           7    also alluded to, is the key element in the

           8    collection.  Because they'll now be one

           9    survey processing system, EIA will be able to

          10    double-check efficiently the integrity of the

          11    receipts consumption and stocks data that we

          12    collect.

          13              Finally, new to all respondents

          14    will be the annual revenues for sales from

          15    resales in Schedule 7.  Finally again, the

          16    current cost and quality data, the data again

          17    from the EIA-423, will be new data to a still

          18    undetermined number of EIA-906, EIA-920, and

          19    EIA-767 respondents with less than 50

          20    megawatt generating capacity.

          21              This slide, which you should have

          22    as a handout with the copy of the EIA-923,




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           1    summarizes the different data reporting

           2    requirements for different plants.  Again, at

           3    the risk of repeating some of what Bob said,

           4    the major difference in data report

           5    requirements to the EIA-923 is between steam

           6    electric plants with a 10 megawatt or greater

           7    generating capacity and all other plants.

           8              There will be a simple

           9    diagram -- two circles, no connection, no

          10    overlap.  For consumption, Schedule 3 and

          11    generation, Schedule 5, the difference is on

          12    the level at which the data will be reported.

          13    Like generation and consumption, but the

          14    difference again will be in the level, plant

          15    boiler and prime mover in Schedule 3.

          16              It's for generation at the

          17    generator level and at the prime mover level.

          18    For the annual emissions operating data

          19    Schedule 8, only steam electric plants with a

          20    10 megawatt or greater generating capacity

          21    will report these data, everybody else will

          22    not.




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           1              Further, Schedules 1 through 5 will

           2    be both monthly and annual, and Schedules 6

           3    through 8 will be annual.

           4              And so I think this slide also

           5    illustrates the testing question of how does

           6    EIA design a test that includes enough plants

           7    in each of the population subgroups.

           8              And this I'll elaborate on a little

           9    bit more shortly.  This is another place

          10    where hopefully the EIA will make the -- 923

          11    will be more efficient.

          12              Consolidating the four surveys into

          13    one survey will also decrease the number of

          14    due dates by which many respondents will have

          15    to send surveys to EIA.  Now for example,

          16    many respondents have four due dates: one for

          17    the monthly EIA-423, two for the

          18    EIA-906 -- one monthly, one annually, and one

          19    for the annual EIA-767.  Now, these

          20    respondents will have only two due

          21    dates -- one monthly and one annual.

          22              Still, there are some trade-offs




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           1    here, particularly for respondents.  The

           2    EIA-423 data are now reported 45 days

           3    following the close of the reporting month.

           4    For the EIA-923, these data will be reported

           5    one month after the close of the reporting

           6    month.  The EIA-767 operational data on the

           7    923 are now reported no later than April 30th

           8    following the close of the reporting month.

           9              On the EIA-923, it will be March

          10    30th.  This could have implications for

          11    respondents' recordkeeping and reporting

          12    systems.  Will respondents have to change

          13    them, and how much?  And this again is a

          14    further reason for an optimal testing and

          15    notification strategy.

          16              No.  Back up.

          17              SPEAKER:  Okay?

          18              MR. RUTCHIK:  Yeah.  Okay.

          19              Going backwards.  I think

          20    Lawrence -- okay.  Here we go.  Sorry about

          21    the technological glitch, which was my fault.

          22              Now I want to discuss the testing




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           1    and respondent notification issues.  At this

           2    point, EIA probably will not have enough time

           3    to do both a cognitive test and a field test.

           4    Again, the survey is going to be fielded in

           5    January.

           6              If EIA has to pick one, we will do

           7    a field test.  The reason is that when we did

           8    a cognitive test for the EIA-920, the

           9    respondents told EIA that they can provide

          10    EIA with fuel used to generate electricity

          11    data, the key variable in the EIA-920.

          12              Actual data collection on the

          13    EIA-920, however, raised red flags about the

          14    quality of the fuel used to generate

          15    electricity data.  At least with a field test

          16    on the 923, EIA will collect and analyze data

          17    and hopefully avoid what we did or did not do

          18    when we cognitively tested the 920.

          19              Whatever test we choose to do, the

          20    basic problem is still the same.  With

          21    limited time, what is the best testing method

          22    to ensure that EIA gets enough plants from




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           1    the subpopulations?  Those who fill out the

           2    survey annually, those who fill it out

           3    monthly, and within these categories, those

           4    who complete one set of schedules and those

           5    who complete another.

           6              Do we pick a random sample and hope

           7    we get enough of the subpopulations, or do we

           8    use some type of stratified sample?

           9              When EIA actually fields the 923 in

          10    January, getting the right schedules to the

          11    right plants we think will not be that much

          12    of a problem.  With the Internet data

          13    collection, we can use unique IDs or screener

          14    questions to make sure a particular plant

          15    gets the schedules it's supposed to complete.

          16              On the paper form, we can use skip

          17    patterns.  The problem is prior to fielding

          18    the survey and within the plant.  Currently

          19    as we have discussed, one plant can get up to

          20    three surveys.  That means three different

          21    respondents or contacts any plant -- and

          22    Lawrence has done some research on this.




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           1    With EIA-923, one survey will be sent to a

           2    plant, almost specifically to one contact.

           3              This person will need to get the

           4    different schedules to the right people or

           5    departments within the plant.  For example,

           6    those who have the receipts data for

           7    Schedule 2 and those who have the consumption

           8    data for Schedule 3 and so on.  There are two

           9    aspects on this which we would like to get

          10    the Committee's advice.  What is the best way

          11    to test a plant's ability to do this in a

          12    cognitive or field test?

          13              And assuming EIA learned a lot from

          14    testing about a plant's ability to collect

          15    data for the survey from different

          16    departments within it, what is the best

          17    notification strategy to reach the most

          18    plants, or more specifically get the most

          19    attention so we can help the respondents to

          20    reply to the EIA-923?

          21              Do we use a letter and a follow-up,

          22    and what type of follow-up?  Do we use an




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           1    e-mail and a follow-up, and what type of

           2    follow-up -- do we use one mode, or do we use

           3    a multimode strategy?

           4              This is just to sum up the

           5    questions that I'd like the Committee to

           6    discuss.

           7              Again, do we use a cognitive or a

           8    field test?  And two, what is the best design

           9    to conduct a cognitive or field test with

          10    limited time to get the most valid and

          11    reliable results?  And three, what is the

          12    best strategy to notify respondents about the

          13    EIA-923?

          14              Thank you very much.

          15              MR. NEERCHAL:  I think we have two

          16    designated discussants.

          17              Ed, do you want to start?

          18              MR. BLAIR:  I'll be happy to start.

          19    Ed Blair.  I think I've got about six or

          20    seven points.  First of all, just a

          21    background point.  The comment has been made

          22    that questions are unchanged, just




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           1    consolidated.  There are I guess a couple of

           2    new items.

           3              MR. RUTCHIK:  Yes.

           4              MR. BLAIR:  And this would be

           5    repetitive reporting as I understand it,

           6    where the same person, in effect, would be

           7    reporting all the time.  So whatever they

           8    learned or didn't learn, at least they would

           9    be consistent.  Regarding the

          10    questions -- the questions you were asking on

          11    testing, I was really struck, being new to

          12    the Committee and new to your management

          13    procedures -- I was really struck by the fact

          14    that this in no way resembled a

          15    questionnaire.  As I would understand it, it

          16    was a form -- it was a tax form with sort of

          17    a separate detached set of detailed

          18    instructions to tell me how to figure out the

          19    form.

          20              And by looking at those

          21    instructions, I could figure out, for

          22    example, that in Schedule 2 that I should




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           1    record my receipts of fuel and my

           2    transportation mode and my coal mine by

           3    listing in effect source by source by source

           4    by source, but I should put my cost of fuel

           5    and quality of fuel -- that it was on me to

           6    go ahead and aggregate that and calculate a

           7    weighted average and give you a weighted

           8    average off that.

           9              So in a sense, it just really

          10    strikes me very much as a business form on

          11    some accounting document that somebody puts

          12    together rather than a questionnaire.  Along

          13    those lines, it seems to me that cognitive

          14    testing would be virtually useless to you.

          15    The question is usability testing.  We're

          16    probably on the same page, just using

          17    different semantics.

          18              But the real issue here is

          19    usability testing, but the thing to do is

          20    give -- put the respondent on the job.  Give

          21    them the package and just watch them do it.

          22    Just sit down and watch them do it, take




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           1    notes, consider videotaping them, maybe have

           2    some of them do think-alouds so that they

           3    give you some access into where they're

           4    having problems, but also have some do a lot

           5    without think-alouds in case think-alouds

           6    somehow enhance the procedure.

           7              But the main thing is

           8    out-of-the-box usability testing.  Just watch

           9    somebody do it and watch the problems that

          10    they're having as they do it.

          11              Sort of a side point, obviously, to

          12    do an expert review of the instrument before

          13    any testing.  But I'm sure that's already

          14    been done.  As far as stratification in doing

          15    this, my pre-meeting response was, are the

          16    response problems going to be obviously

          17    different by groups?

          18              And if so, which groups, and that

          19    would be the basis for the stratification.

          20    As I now understand that you're considering

          21    stratification essentially based on -- you

          22    know, some people do it monthly, some people




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           1    do it annually -- and I suppose that would

           2    that would be a sensible thing.

           3              The survey notification of how you

           4    get the respondent -- I have to say this has

           5    been characterized in the presentation as a

           6    simplification of the respondents' world, and

           7    that's not 100 percent clear to me.  Once

           8    you've carried on and talked about the fact

           9    that somebody was going to have to run around

          10    the plant to get a bunch of different people

          11    to fill out a consolidated form that it used

          12    to be that they all filled out their own

          13    individual parts of.

          14              But it seems to me that there's not

          15    going to be any kind of deep insight.  But

          16    the thing to do is to let the respondents

          17    tell you who would be the best person

          18    naturally within their company, and who would

          19    have charge for running around and getting

          20    everybody onboard.

          21              But absolutely, this is something

          22    that's going to have to be tested or




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           1    pre-tested, because this seems to be -- if

           2    everybody has already been filling up these

           3    forms, this seems to be the place where it

           4    could blow up; just not getting to the right

           5    person or the data being transmitted

           6    incorrectly.

           7              Let me think -- what else -- just a

           8    couple of small points.  And this point has

           9    already been made by Moshe earlier.

          10              You know, if we're going to new

          11    reporting for some people, consolidation of

          12    respondent populations, very plausibly, data

          13    continuity will be an issue.  I understand

          14    they've all been filling out this information

          15    before -- all of this information before, but

          16    to the extent that new people are on the job

          17    or you're reaching into new companies.

          18    Didn't sound like that to me.

          19              But if you're sending new people

          20    around the job -- just the idea, for example,

          21    forcing respondents to face possible

          22    inconsistencies in their information allows




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           1    for the possibility that there will be

           2    discontinuity.  So I wouldn't pass over that

           3    issue as quickly as you seem inclined to do.

           4              And then last, on the

           5    confidentiality issue -- releasing data even

           6    if confidentiality is compromised, I

           7    suppose -- you know, this is not my issue.  I

           8    suppose you'll get this from public comment,

           9    but I have to say, if I were in the industry

          10    that would kind of stick in my throat a

          11    little bit.

          12              MR. FEDER:  It could effect

          13    response rates and also truthful reporting,

          14    so you lose quality of data if you don't

          15    guarantee confidentiality.

          16              MR. BLAIR:  Those are my comments.

          17              Thank you.

          18              MR. NEERCHAL:  Thank you.

          19              Barbara.

          20              MS. FORSYTH:  Yes.  I agree with a

          21    lot that Ed has said.  First of all, I think

          22    it's commendable that you have found a way to




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           1    put together four forms that at least reduces

           2    or eliminates some overlap in some of your

           3    data collection.  So I think that's

           4    noteworthy and ambitious.  I'm grateful

           5    you're doing it even though I'm not a

           6    supplier.  There are a lot of things I don't

           7    know about the data collection, and so when

           8    you talk about a cognitive test as opposed to

           9    pretest, I think we probably use the tools

          10    differently.

          11              MR. RUTCHIK:  Field test.

          12              MS. FORSYTH:  But I do think there

          13    are some -- if not cognitive testing, at

          14    least site visit testing issues that -- maybe

          15    usability or something else -- but especially

          16    to the extent that you have new data

          17    elements, which sounds to me like you do have

          18    some new data elements -- and I can't tell

          19    whether you've tested them already or not.

          20              MR. RUTCHIK:  No, we have not.

          21              MS. FORSYTH:  So that a reason for

          22    finding a way of combining cognitive with




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           1    field testing might be to get some insight

           2    into those new data elements, particularly if

           3    they're important, which I think that

           4    balancing act probably is, because as Moshe

           5    and Ed have suggested, it may alter the data.

           6    So let's see -- I think there are ways -- I

           7    understand the major goal in doing testing is

           8    to do it fast, because it has to be done in

           9    January.

          10              And I think there are ways to

          11    combine cognitive and field test methods so

          12    that you could get estimates, which I think

          13    you need for some of your purposes -- with

          14    some retrospective or respondent reactions

          15    afterwards.  The trick is, if you're going to

          16    combine those two testing goals in a single

          17    testing method, it has to be in a way that

          18    you can respond to results from both.

          19              So if you are going to have the

          20    opportunity to respond to respondents'

          21    complaints about burden or respondents'

          22    complaints about how they've been notified,




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           1    then it may be a waste of resources, at least

           2    at this point, to ask about it.  And so I

           3    guess another -- for the purposes of speed,

           4    it would be really nice to do a data

           5    collection and then go back into a

           6    retrospective site visit, tell us what

           7    happened, tell us what didn't work.

           8              But that would be useful to you

           9    only if you're able to respond to what didn't

          10    work in the time frame that you have.  And

          11    the advantage of separating them is that you

          12    can get that respondent reaction early,

          13    folded into your pretest, and see if what you

          14    changed worked.

          15              So it really depends on what your

          16    time frame allows you to do and what you

          17    think the biggest issues are for you to

          18    address -- that estimation issue as opposed

          19    to these operational issues.  Or finding it a

          20    mix of both that lets you take advantage of a

          21    combined cognitive and pretest -- field test.

          22              Let's see -- I didn't have a real




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           1    good sense for it -- we talk about

           2    respondents at lots of levels.  There is a

           3    responding organization --

           4              MR. RUTCHIK:  Right.  Yeah.

           5              MS. FORSYTH:  And then within the

           6    organization, there may be multiple

           7    respondents.

           8              MR. RUTCHIK:  Right.  The form

           9    survey will go to a plant --

          10              MS. FORSYTH:  Right.

          11              MR. RUTCHIK:  And within the plant,

          12    we go to one contact, and that contact will

          13    be the person who put the data together.

          14              MS. FORSYTH:  Filled it out.  Yeah.

          15              MR. RUTCHIK:  But we assume, since

          16    it's asking for a wide array of data, this

          17    data could come from different departments

          18    within the plant.

          19              MS. FORSYTH:  Right.

          20              MR. RUTCHIK:  So that person would

          21    have to go to department A for this and

          22    department B for that and department C --




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           1              MS. FORSYTH:  Right.  So if I talk

           2    about those department-level respondents on

           3    the average -- I know it'll vary by those two

           4    strata, but on the average, how many do you

           5    expect per organization?  How many people do

           6    you expect to be involved in this?

           7              MR. RUTCHIK:  Within an

           8    organization?  I can honestly say I don't

           9    have a good feel for that.

          10              MS. FORSYTH:  So that would be a

          11    good reason to do a cognitive test ahead of

          12    time, because I think your selecting a

          13    notification strategy might vary depending on

          14    how many people there are within an

          15    organization and what their relationships

          16    are.  If they work closely together, then

          17    notifying one of them is essentially

          18    notifying all of them.

          19              But if there are institutional

          20    barriers between departments, as there often

          21    are, then an alternative notification

          22    strategy, possibly tailored to strata, might




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           1    be a better approach.  So the bigger the

           2    organization -- as you get larger

           3    organizations, you might want to alter your

           4    notification strategy to address individuals

           5    more directly.

           6              Let's see -- so the number of

           7    respondents and relations between them -- I

           8    think those are nice cognitive -- well, site

           9    visit testing issues.  For these new data

          10    elements, you'll -- a nice site visit issue

          11    is how well they match the records.  And I

          12    anticipate that you design them to match the

          13    records.  But that's a site visit issue.  And

          14    the difficulty of providing -- I don't know

          15    which is bigger, the boiler or the plant.  I

          16    think probably the plant.

          17              MR. RUTCHIK:  Plant.

          18              MS. FORSYTH:  But looking at how

          19    difficult it is, or the burden in providing

          20    both, and how that's changed with the new

          21    form, and kind of responding proactively to

          22    that is another good site visit topic.  I




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           1    think those are my suggestions.

           2              MR. RUTCHIK:  Thank you.

           3              MS. FORSYTH:  I hope it's helpful.

           4              MR. RUTCHIK:  They have been.

           5              Thank you very much.

           6              MR. NEERCHAL:  Can we have a

           7    discussion?

           8              MS. KHANNA:  Mr. Chairman?

           9              MR. NEERCHAL:  Okay.

          10              MS. KHANNA:  What I was going to

          11    say -- that you somewhat try to accommodate

          12    the number of people involved in answering

          13    the -- or filling out the form, because some

          14    things could be interpreted differently by

          15    different people.  And I'll give you just one

          16    example, and this is probably the result of

          17    my training in economics.

          18              But you ask for data -- you ask for

          19    information on costs and revenues.  My first

          20    question is, do you want me to include taxes

          21    or not?  And it's not clear on the form.  I

          22    mean, if I was not an economist, I probably




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           1    would just say, okay, here is the money I

           2    gave somebody.  But is that what you're

           3    looking for, or are you actually looking for

           4    some other information?  Or do you want this

           5    element separated out?

           6              And that depending on who answered

           7    the phone may interpret slightly differently.

           8              MR. RUTCHIK:  You mean within an

           9    organization?

          10              MS. KHANNA:  Uh-huh.  Somebody is

          11    in a --

          12              MS. FORSYTH:  An engineer?

          13              MS. KHANNA:  An undergraduate

          14    degree is going to look at cost and revenues

          15    and say -- net of taxes or gross of taxes.

          16    And if somebody has an accounting degree,

          17    he's probably going to say of course, gross

          18    of taxes.

          19              MR. NEERCHAL:  Thank you.

          20              MR. KOKKELENBERG:  I just wonder

          21    now how much of this site visit could be

          22    conducted in this pilot study, pilot testing.




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           1    But also, the question of who responds I

           2    think is really the crucial one, and Barbara

           3    made that point.  Would it be possible in

           4    this pilot testing to really discuss this

           5    issue with those plants where you're

           6    conducting these pilot tests?

           7              My experience is that when you ask

           8    a plant manager what did they do last year,

           9    they look at it as another form from the

          10    federal government and they hand it to the

          11    least --

          12              MR. FEDER:  Reliable?

          13              MR. KOKKELENBERG:  Not necessarily

          14    the least reliable, but the least --

          15              SPEAKER:  The last one --

          16              MR. KOKKELENBERG:  Yes, the one

          17    with the lowest opportunity cost --

          18              MR. RUTCHIK:  We have seen that.

          19    We have seen that.

          20              MR. KOKKELENBERG:  To work on this

          21    thing, and they give them the last year's

          22    form and say, this is what we did last year,




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           1    fill it out and let --

           2              MR. RUTCHIK:  If Stan Friedman (?)

           3    was here, Stan would tell his only and

           4    favorite story about cognitive testing.

           5              This happened when we

           6    were actually during our training about this

           7    at the Census Bureau.  And one gentleman in

           8    there, and his quote was -- Stan's going to

           9    kill me for stealing his material, but that's

          10    tough.

          11              I take great store in what I did

          12    last year, and he said -- basically I take

          13    last year's records, look at it, maybe make a

          14    little juggle, and this is this year.  And we

          15    have seen instances where we tested, we have

          16    gone to meetings, and the people who were in

          17    charge had brought in the summer interns,

          18    so -- yeah, we're all over the problem.

          19              MR. KOKKELENBERG:  Right.  The

          20    summer interns also --

          21              MR. RUTCHIK:  Yeah.

          22              MR. KOKKELENBERG:  Okay.




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           1              MS. FORSYTH:  So in some ways you

           2    kind of wish for a break in the time series,

           3    suggest a --

           4              MR. KOKKELENBERG:  But I think

           5    asking how they go about this might open some

           6    possibilities on how you might want to

           7    proceed with this in the future.  And what

           8    kind of notification that you were talking

           9    about -- how do you get three different

          10    people now to coalesce into one.  So that's

          11    the only comments I have.

          12              MR. BINGHAM:  It's just a

          13    curiosity.  So if you were to go off and do

          14    site testing what -- and if you learn

          15    something, right, you learn that people are

          16    going to interpret this question one way that

          17    wasn't quite what you meant, that sort of

          18    thing -- how would you communicate that more

          19    clearly?

          20              So you think, well, maybe this

          21    particular element needs better explanation.

          22    How would that change to when it's actually




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           1    rolled out?

           2              MR. RUTCHIK:  Hopefully we'd have

           3    time to make that type of fix without

           4    actually changing the element.

           5              MR. BINGHAM:  Right.

           6              MR. RUTCHIK:  Because if you change

           7    an element, that's a clearance issue --

           8              MR. BINGHAM:  So I'm kind of

           9    curious to -- is it traditional to have,

          10    like, an FAQ webpage and things like that go

          11    along with the surveys, as a result --

          12              MR. RUTCHIK:  I think some of our

          13    surveys do have that.

          14              MR. BINGHAM:  Is it traditional?

          15    Is it -- certainly the summer intern would go

          16    right to the webpage, right?

          17              MR. SCHNAPP:  We have tutorials on

          18    the Internet -- tutorials and help buttons.

          19              MR. BINGHAM:  So is all that going

          20    to be updated and based on -- like, that kind

          21    of resources exist based on those surveys?

          22              MR. SCHNAPP:  Absolutely.




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           1              MR. BINGHAM:  Okay.

           2              MR. NEERCHAL:  Occasionally, you do

           3    some follow-up calls, though, right?  You

           4    know, when you get a form and follow-up calls

           5    and I'm wondering that since you're

           6    sending -- putting the responsibility of

           7    distributing the task to different people

           8    within the plant rather than directly sending

           9    it to the separate respondents, when you do a

          10    follow-up call, you may have a little bit of

          11    trouble tracking people down, because you've

          12    called the person, your contact person.

          13              Then he has to go and find the

          14    person who filled the other schedule.  So

          15    there's kind of a chain thing and I think

          16    that you may not be quite as efficient as you

          17    were before in the follow-up calls -- since

          18    you're moving that responsibility one notch

          19    away from yourself.

          20              I don't know whether that's a

          21    factor.  I don't know how many follow-up

          22    calls you make.  I don't know -- I don't have




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           1    a feel for it whether it's an issue or not.

           2              MR. SCHNAPP:  For being late?

           3              MR. NEERCHAL:  For being late or --

           4              SPEAKER:  Inconsistent.

           5              MR. NEERCHAL:  Not having the

           6    correct number or you need some data quality

           7    check for --

           8              MR. SCHNAPP:  At the moment, we do

           9    have monthly forms, which is what a big

          10    portion of this is going to be.  For the

          11    monthly forms, there really aren't that many.

          12              MR. NEERCHAL:  Okay.

          13              MR. SCHNAPP:  Forms are

          14    too -- well, say to 906 is due like 30 days

          15    after than the reporting month, I would say

          16    that probably another two weeks after that we

          17    have close to 100 percent.

          18              MR. NEERCHAL:  Okay.  Ed.

          19              MR. BLAIR:  Ed Blair.  There have

          20    been some comments around in a sense testing

          21    the meaning of the items, testing the

          22    instructions.  At one level, I agree with the




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           1    comments in that I went through the

           2    instructions, and of course I don't own a

           3    power plant so -- you know, kind of guessing

           4    at what everything means.

           5              But I went through the

           6    instructions, I certainly found places where

           7    there was some doubt in my mind.  Having said

           8    that, if it's the same questions and the same

           9    instructions that the same people have been

          10    filling out over time, and you have limited

          11    time and resources, I personally would not

          12    make that a huge priority.

          13              That might be a to-do at some

          14    point, but in that sense, the imperfections

          15    that will exist are the imperfections that

          16    have existed.  I do think that the big issue

          17    is literally some -- in effect, somebody's

          18    ability to fill out this particular form.

          19    And so I come back to my point of usability

          20    testing in that regard, and this whole

          21    question of how the handoff procedure is

          22    going to work within organizations, because




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           1    that's absolutely workable.

           2              SPEAKER:  Okay.

           3              MS. KHANNA:  Well, actually

           4    that's -- he said what I was going to say in

           5    his last sentence.  You're right, if it's

           6    exactly the same person who's always been

           7    filling out the form, whatever they're

           8    interpreting it as, it doesn't matter.  It's

           9    not going to change.

          10              But if you're merging three or four

          11    different forms into one, the same person may

          12    not be filling out the form.  And that's

          13    where it matters and that's what (inaudible)

          14    the end.  I think it covered the same point.

          15              MR. BLAIR:  I think so.  And I

          16    think this sample dates back to March 31st,

          17    I'll put it on the table. (inaudible) will do

          18    is show there's a data continuity problem.

          19              MR. NEERCHAL:  Thank you.

          20              MR. RUTCHIK:  Thank you very much.

          21              I appreciate your comments.

          22              MR. NEERCHAL:  So we move on to the




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           1    second plenary presentation of the afternoon.

           2              MR. LU:  Okay, good afternoon.

           3              MR. NEERCHAL:  Good afternoon,

           4    Ruey-Pyng Lu.

           5              MR. LU:  My name is Ruey-Pyng Lu.

           6    I'm from the Statistics and Methods Group of

           7    EIA, and I'm going to present the new

           8    research program we developed in association

           9    with the National Institute of Statistical

          10    Sciences.

          11              This is the standard disclaimer.

          12    It's a working document, okay?  And we try to

          13    get help and comments from you.

          14              The purpose of my presentation is

          15    to introduce you -- the name we call it,

          16    Applied Methodology Student Research Program,

          17    establishing with the NISS, and also ask your

          18    guidance in how we're attracting students and

          19    the new researchers to do their research for

          20    us.

          21              And my presentation will be giving

          22    you what is the NISS, National Institute of




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           1    Statistical Sciences, and what is this

           2    Applied Methodology Student Research Program.

           3    How is the student can apply?  And we have

           4    four projects as example presented here, and

           5    then I will get your input how to better

           6    enhance and advocate this.

           7              National Institute of Statistical

           8    Science was established in 1990, in the late

           9    1980s, established a committee, trying to set

          10    up a independent research institute.  There

          11    are several places being competing for this,

          12    like the Bay Area, Texas and the Research

          13    Triangle Park, and that was the Research

          14    Triangle Park in North Carolina.

          15              And it -- is a chance to perform,

          16    stimulate, across disciplinary research

          17    involving statistics, and generally they're

          18    going to come from the complex data treatment

          19    problems.  And those will provide career

          20    development for the statistician and

          21    scientists, especially those for the

          22    formative stage, the new researchers.




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           1              In the parent organization of NISS,

           2    this ASA, Biometric Society, IMS, Duke, North

           3    Carolina State and UNC-Chapel Hill, and also

           4    RTI.  And it's governed by a Board of

           5    Trustees.

           6              So I believe this parent organizing

           7    have the representative, and also some other

           8    statistical and scientific communities.  The

           9    interesting thing is so far they have 15

          10    industry affiliates and 10 government

          11    agencies and the national labs.  We just

          12    joined them this year -- and 32 university

          13    affiliates; those are the different -- either

          14    the statistic department or mathematics

          15    department.

          16              So we have been talking with NISS

          17    since last year.  So we will say this is a

          18    great way to go.  So we may establish a new

          19    research program, which is the response to

          20    the external study.  So we're going to engage

          21    students, especially those in the graduate

          22    program, to collaborate in doing some




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           1    research for us which are important to our

           2    programs.

           3              And the procedure to apply is

           4    student can apply either the full-time summer

           5    support or full-time or part-time during the

           6    academic year, or in certain cases, they can

           7    just get the co-operative agreement, they

           8    come here to access our sensitive data, okay?

           9    Because they think that the data is good to

          10    their research.  And in ordinary academic

          11    year, they can be conducted at their

          12    students' university.

          13              And summer research, they can be

          14    here onsite or either the -- students and

          15    institution and with a couple of visit

          16    possibly to the EIA, which means they come

          17    here, consult with the EIA project sponsor,

          18    and maybe access and utilize EIA data.  Maybe

          19    that's -- it's required to do their project.

          20              So we're going to solicit students

          21    from statistical science disciplines, okay,

          22    like statistics, operation research,




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           1    economics, et cetera.

           2              So if the faculty mentor can

           3    identify a research area proposed by us and

           4    define the research objective with EIA staff,

           5    then they can submit a proposal.  Then

           6    they'll submit to the NISS, which NISS will

           7    do the initial review, then after that, send

           8    to us.  We will select if it fit our needs,

           9    then the award were based on the strengths of

          10    the application.  So -- and it maybe

          11    renewable, it depends on the accomplishment,

          12    and if we have future plans, to continue on.

          13              So there are several potential

          14    projects available, but I'm just giving you

          15    four of them here, with some of them already

          16    discussed last year or even today.  So the

          17    first one is the imputation and the editing

          18    method so we can help our establishment

          19    surveys.

          20              The second one is a combined heat

          21    and power plant -- how to allocate the fuel

          22    in the previous form, the -- previous talk.




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           1              Then the third one is a biodiesel

           2    production and distribution, which is the hot

           3    topic of biomass area.  And the fourth one is

           4    the cointegration of EIA projection models,

           5    okay?

           6              Our goal is trying to give students

           7    some details which enhance their research

           8    interest but it keeps it short, and we will

           9    put these descriptions to the NISS; they will

          10    put on their website right after this

          11    Committee meeting.

          12              So Project 1: Editing and

          13    Imputation.  So we want -- get a project

          14    which can -- testing the alternative editing

          15    and imputation methods for our establishment

          16    surveys.  Can this new model base or other

          17    approaches, micro data editing improve our

          18    accuracy micro data?  So we will provide some

          19    dataset for the student to analyze, and this

          20    project had two parts.

          21              We will like -- because they're

          22    already editing lots -- editing procedures in




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           1    the imputation techniques.  So student have

           2    to know at least three different

           3    alternatives, then propose -- and those

           4    should be appropriate for a large-scale

           5    production system.  Then the student will

           6    propose one or two methods which will improve

           7    the imputation and the editing and they

           8    empirically test the methods, which they'll

           9    compare to what we're currently using.

          10              The second one:  Combined Heat and

          11    Power Plant Fuel Allocation.  So this is

          12    related to the 923 forms.

          13              And Stan Kaplan discussed this last

          14    spring, 2006, in a meeting.  So we would like

          15    to have the proposal review our current and

          16    past approach to take this problem in how the

          17    combining heat and power being allocate; one

          18    for the fuel for electricity, one for the

          19    other -- for the heat, okay?

          20              So we'd like to see the project

          21    recommend a new technology to performing the

          22    allocation, such as -- and it may not be




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           1    collect -- allocated data.  So it may be

           2    useful from the model, okay?

           3              And Project 3 is the Biomass

           4    Production.  So this morning talk about the

           5    biofuel and -- which is ethanol.  Then we're

           6    trying to do some related to the biodiesel,

           7    okay?

           8              According to the Energy Policy

           9    Act -- so we -- EIA will do an inventory of

          10    renewable fuel, okay?  Also, we're going to

          11    develop a projection for the future inventory

          12    of the renewable fuels.

          13              So this project will involve the

          14    biodiesel production issues, such as how the

          15    biodiesel is currently produced, and then who

          16    are the major producers, and fuel quality,

          17    and also the blended production and how they

          18    ship the biodiesel.  Then once they're

          19    produced, how they distribute it, okay?

          20              So they have to describe the

          21    biodiesel distributor and how this biodiesel

          22    will enter in the petroleum supply chain, and




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           1    will that be put into the AEO or AER; and

           2    what kind of blends to the blender or

           3    wholesaler to distribute it?  And we want to

           4    have the final deliverables, which we can put

           5    on our website, give the information to the

           6    general public about biodiesel, okay?

           7              The fourth project is the

           8    cointegration, which this is in the

           9    econometrics area, okay?  So you can see our

          10    four examples are in the different areas.

          11    One in the statistics survey methodology,

          12    then energy-specific, okay?

          13              And this is econometrics.  And

          14    this -- projection models, Jose Vilas

          15    discussed in last spring Committee meeting

          16    here.  So we want to know are there

          17    cointegration relationships between the price

          18    series, like all the different -- oil, gas,

          19    coal, electricity, et cetera.

          20              And how can EIA adapt either the

          21    short or midterm models to accommodate these

          22    relationships, okay?  So there are two parts




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           1    here.  Fitting the cointegration model.  In

           2    this, we're going to determine whether this

           3    has changed over times -- now that means we

           4    will have a time series to fit in.  And

           5    advantage or disadvantage, including the

           6    trend and some other economical variables or

           7    commodities, okay?  So the frequency of the

           8    time series of the data will be daily,

           9    weekly, monthly, or annual.

          10              The second part of this project is

          11    we'd like to see the advising to us

          12    concerning how the identified relationship we

          13    can use in our models to enhance the EIA

          14    projection capabilities.  So the researcher

          15    will develop sufficient understanding -- the

          16    EIA model recommends how the finding can be

          17    incorporated to our projection models.

          18              My questions to you Committee

          19    members will be what can EIA do to attract

          20    interests of students, especially

          21    interdisciplinary graduate program, and new

          22    researchers in this EIA project, this is just




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           1    for example.  And improve the project

           2    descriptions, put on the website or in

           3    other -- some other modes, and how we

           4    advertise.

           5              And we already communicated -- with

           6    NISS will actively advertise this, put on

           7    their website, while we need broader

           8    exposure, too.

           9              So that's my question and your

          10    comments and suggestions.  Okay?

          11              MR. NEERCHAL:  I think we will go

          12    with the designated discussants first --

          13              MR. LU:  Okay.

          14              MR. NEERCHAL:  And then we'll open

          15    it up.  Cutler?

          16              MR. CLEVELAND:  Thanks for that

          17    nice summary.  I think this is a great idea.

          18    I think it will serve many useful purposes

          19    for EIA, not the least of which is insight

          20    into some questions that we have -- issues

          21    that we have been debating -- discussing over

          22    the past few years, but also -- getting your




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           1    information out there to a broader audience,

           2    helping to fill some of these employment gaps

           3    that you're facing by getting new students

           4    involved, and getting faculty across the

           5    country more aware of what you're doing and

           6    interested in these issues.

           7              So I think there's a lot of benefit

           8    to this.  I think the questions you've raised

           9    there are easy.  But I think there are some

          10    more fundamental questions that we need to

          11    talk about, and that is how to structure this

          12    program?

          13              It seems to me -- and maybe you

          14    guys have thought about it more than what

          15    you've presented here, but it's not clear

          16    what -- this seems like sort of in-between a

          17    summer internship and a real fellowship.  And

          18    I think that of, for example, the EPA Star

          19    fellowships, which a couple of my students

          20    have got, which are really prestigious highly

          21    competitive awards that really attracts the

          22    cream of the crop of students in the




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           1    environmental field, and also gets a lot

           2    of -- who oftentimes by the way end up going

           3    to work for EPA afterwards -- those are real

           4    fellowships that pay a real wage to students.

           5              At the other end, you have

           6    something like a summer internship, which you

           7    guys already have.  And the difference is

           8    important because the product you get at the

           9    end will be very different, and the type of

          10    students and the experience they have will be

          11    very different.  So for example, if you want

          12    someone to work on a project -- and this is

          13    going to vary by institution because the

          14    research programs are structured differently.

          15              At BU, if you want a student to

          16    work on this -- really dive into it for a

          17    full academic year, you can't pay

          18    them -- well, the way it works at BU is you

          19    have to pay a student on a grant about $2,000

          20    a month.  If you pay $2,000 a month, you

          21    trigger tuition remission for the student.

          22              Now the student doesn't have to




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           1    take -- he can take one or two classes

           2    instead of four, and is expected to work more

           3    or less half or three-quarters time on this

           4    project.  And different institutions have

           5    different types of arrangements, where if you

           6    want someone to really work on something as

           7    an independent research grant, you have to

           8    hit a certain financial threshold.

           9              I guess my question to you is what

          10    is the amount of money you're allocating to

          11    this?  What is the size award you're thinking

          12    about?  What are you really expecting from

          13    students?  If you're not going to generate

          14    that kind of support, that's okay.

          15              But what you're going to get out of

          16    it, you're going to get a different type of

          17    student applying for it, and you're going to

          18    get a different return in the end in terms of

          19    the quality and depth of the product, and a

          20    different level of faculty involvement as

          21    well, because they're going to be to spend

          22    more time with a student who's funded on a




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           1    grant that's going to generate that kind of

           2    time, and a different -- a less amount of

           3    time probably on something that's more of an

           4    internship-like project.

           5              So I think it would be good to have

           6    a more of a feedback from you guys on what

           7    you had in mind for this type of project.

           8              MS. KIRKENDALL:  Maybe what our

           9    challenge is, we had everything in mind.  I

          10    don't know whether we need to be more

          11    specific now, but NISS had told us that they

          12    thought a $20,000 a year --

          13              MR. CLEVELAND:  Okay.

          14              MS. KIRKENDALL:  Which sort of is

          15    in --

          16              MR. CLEVELAND:  So if that's in the

          17    ballpark, then what would do this?

          18              MS. KIRKENDALL:  That's something

          19    We might have to expect with something like

          20    this.

          21              MR. CLEVELAND:  Uh-huh.

          22              MR. KOKKELENBERG:  Plus travel or




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           1    something like that if you --

           2              MS. KIRKENDALL:  That would be

           3    annual.

           4              MR. KOKKELENBERG:  Periodically.

           5              MS. KIRKENDALL:  That kind of

           6    detail has to be worked out.

           7              MR. CLEVELAND:  So then that's in

           8    the range of --

           9              MS. KIRKENDALL:  We did want to

          10    include something cheaper, too --

          11              MR. CLEVELAND:  Yeah --

          12              MS. KIRKENDALL:  Something that's

          13    more of a little research project that could

          14    be --

          15              MR. CLEVELAND:  That's fine

          16              MS. KIRKENDALL:  Somebody to come

          17    down for us summer or to work on a project

          18    over the summer at their university.  Yeah,

          19    so we're really, at this point I guess,

          20    because it's so new, we were keeping it open.

          21              MR. CLEVELAND:  It's good to be

          22    open, but I think you need to have some




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           1    specificity in your guidelines so people know

           2    what to propose, and maybe you could develop

           3    a couple of different types of grants that

           4    people could apply for.  One which would be a

           5    shorter term, smaller-scale project versus a

           6    year-long fellowship in which they

           7    could -- some of the things you put up there

           8    would take two students two years to do --

           9              MS. KIRKENDALL:  Yeah.

          10              MR. CLEVELAND:  Where some of them

          11    were smaller things that they could do.  So

          12    it would be good to get people that type of

          13    feedback.

          14              MR. NEERCHAL:  I think this is

          15    something a lot of people want to say, can we

          16    have Derek -- he's discussed --

          17              MR. CLEVELAND:  I've got a bunch of

          18    more important things to do.

          19              MS. KIRKENDALL:  He's not done.

          20              MR. NEERCHAL:  I understand, yeah.

          21              MR. CLEVELAND:  If you'll forgive

          22    me.




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           1              MR. NEERCHAL:  You can probably to

           2    these; make sure that he has a chance to do

           3    that and then come back, because it becomes a

           4    dialogue.

           5              MS. KIRKENDALL:  Ruey-Pyng Lu, come

           6    sit down.

           7              MR. NEERCHAL:  We may just run out

           8    of time.  I don't want to drag this --

           9              MR. CLEVELAND:  I'll just

          10    bullet-point then some of the other questions

          11    that I have.  So that's one thing.

          12              I think -- you need to be, in

          13    regards to what we just talked about -- be

          14    more explicit in terms of your project

          15    description about the dates and the terms of

          16    the contract -- again, that might vary by the

          17    types of things that you offer.  What are the

          18    deliverables that you expect?  Again, that

          19    could be fairly project-specific.

          20              You could provide more information

          21    at your website.  I think a one-page

          22    description of each project with some generic




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           1    program-wide discussion on dates,

           2    deliverables, eligibility, so on and so

           3    forth.

           4              Look at the EPA Star fellowship

           5    website.  It's a good template to use.

           6              MR. NEERCHAL:  How are the

           7    projects --

           8              MR. CLEVELAND:  The question is how

           9    are their projects picked themselves?  Who

          10    does -- how do you guys decide what you want

          11    to do to support?  What's the review

          12    procedure internally?  What exactly does

          13    renewability mean?  We know that when NSF

          14    says renewable, it means one thing, when NIH

          15    says renewable, that means something

          16    different.  So I'm sure you have something in

          17    mind.

          18              And then advertising.  I think

          19    there's a lot of things we can talk about.

          20    You need to get on the e-mail and listservs

          21    for different departments in related

          22    disciplines -- a bunch of contractors you




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           1    deal with, they have listservs.  You have

           2    places like the IAEE.

           3              Dave Williams at IAEE could give

           4    you his e-mail list.  I'm sure he'll share it

           5    with you.  There's AARE.  All these

           6    professional organizations.  For something

           7    like this, they'll give you their e-mail list

           8    probably to contact --

           9              SPEAKER:  Probably their

          10    newsletters.

          11              MR. CLEVELAND:  Their newsletters.

          12    That has a time lag, though, so you need to

          13    be aware of that.  Blogs -- there are

          14    probably 20 or 30 good blogs out there run by

          15    academic energy economists that you would

          16    reach a large audience.  We can help you with

          17    that.

          18              In your homepage, you can post on

          19    your homepage, which gets a lot of visits.

          20    So I'm sure other people will have lots of

          21    ideas on outreach as well.  But it's a great

          22    idea.  This could really be a really a big




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           1    return on investment for you guys.

           2              MR. BINGHAM:  Derek Bingham.

           3              So basically I'm just going to

           4    continue Cutler's comments, because it's a

           5    run-on sentence.  And the other thing I'll

           6    mention is that -- so I'm very enthusiastic

           7    about this.  I think it's a really neat idea,

           8    and I think you can get a great return on

           9    investment.  But just like an academic would

          10    receive a referee report that would start off

          11    by -- I really like this paper.  Here are the

          12    20 ways it sucks.

          13              And so I'm going to ask a whole

          14    bunch of questions -- kind of what Cutler was

          15    doing.

          16              So a lot of these projects, some of

          17    them look like research, and some of them

          18    look like a summer intern for an

          19    undergraduate.  So if you're going to get

          20    somebody to do a literature review for you,

          21    that's an undergraduate project.

          22              So the first comment is that




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           1    vetting your projects and saying here are the

           2    research topics.

           3              The reason I'm saying that is that

           4    there are going to be Master's students for

           5    instance, who -- so a lot of this are kind of

           6    Masters' level work, and the type of people

           7    that you maybe targeting to hire when they're

           8    done -- not all disciplines, not all

           9    departments -- have a project or a thesis.

          10              MS. KIRKENDALL:  Uh-huh.

          11              MR. BINGHAM:  And so those are the

          12    places that are going to most probably want

          13    to engage you.  And if there's research

          14    potential, that's where you're going to find

          15    the advisor willing to really back it,

          16    because they know that someway, the student

          17    training highly qualified personnel is going

          18    to get them -- is going to be important for

          19    the next grant.  So maybe they'll be a

          20    research paper on it.

          21              So I think that highlighting that's

          22    going to be important, because that will give




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           1    faculty interest -- I think at least.  So

           2    part of it's just engaging faculty, whatever

           3    mechanism you can.  So that's part of it.

           4              Just check off all the things that

           5    Cutler has mentioned.

           6              So it's not -- when you talk about

           7    the application process, which at this point

           8    was a bit vague -- but I think that's

           9    actually good.  I think that being flexible,

          10    while it can be detriment if nobody knows

          11    what is going on, not locking yourself in too

          12    deeply to "this is the way it must work" is

          13    not the way to do it either.

          14              So I think that you could leave

          15    things flexible a bit.  But the question is

          16    how do -- if I want to really engage in work

          17    with you guys, and I'm not here on this

          18    Committee, I guess the question is how would

          19    I begin to work with you, because you

          20    mentioned working with an EIA rep -- how

          21    would I even begin that process of saying

          22    what is important to you?  What is the real




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           1    question you're trying to solve?

           2              And whether I have the talent to

           3    even -- or even the skill set to really

           4    advise the student to do that at a level that

           5    would produce publications, which is the

           6    currency in academics.

           7              Anyway, that's a general question I

           8    would have.

           9              I do have a question.  Why NISS?

          10              You know, I didn't see in your

          11    presentation what value NISS provides to you.

          12    I didn't see how NISS provides EIA anything

          13    other than just an administrative or --

          14              MS. KIRKENDALL:  Well, we're

          15    becoming an affiliate member of NISS.

          16              MR. BINGHAM:  Yeah?

          17              MS. KIRKENDALL:  So that's -- and

          18    as part of NISS membership, they do something

          19    for you.  So NISS is operating this and

          20    they're not charging us anything over and

          21    above our membership fee.

          22              MR. BINGHAM:  Okay.




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           1              MS. KIRKENDALL:  And we do get

           2    other benefits from belonging to NISS.

           3              MR. BINGHAM:  Okay.

           4              MS. KIRKENDALL:  It's worth

           5    becoming a NISS member regardless of this

           6    program.  The fact that they were wiling to

           7    entertain this program for us, because it

           8    fits in exactly what they're trying to do,

           9    too.  My guess is if we can do a good job

          10    putting together a good program, other

          11    agencies might be interested in it, too, and

          12    that would be fine with us.

          13              MR. CLEVELAND:  Whose money is it

          14    that will be paying the students?

          15              MS. KIRKENDALL:  We'll pay the

          16    students because --

          17              MR. CLEVELAND:  Okay.  They're

          18    administering the program?

          19              MS. KIRKENDALL:  They're

          20    administering the program --

          21              MR. CLEVELAND:  Okay.

          22              MS. KIRKENDALL:  A source of




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           1    contact with universities and industry and

           2    other government agencies, and they're trying

           3    to further this kind of collaborative work.

           4              They already have a new researcher

           5    program, which targets projects for faculty,

           6    junior faculty, and I have thought that we

           7    might be interested in that, too.  And maybe

           8    some of these projects would be suitable for

           9    that level of work.

          10              MR. NEERCHAL:  But I think one

          11    thing -- the key thing that's different

          12    between what NISS has been doing so far and

          13    this, I think most of their solicitation is

          14    somewhat general.  The researchers provide --

          15              MS. KIRKENDALL:  Uh-huh.

          16              MR. NEERCHAL:  Come up with the

          17    research problem, and you just -- it's

          18    basically like a grant proposal, whereas here

          19    it's more specific.  You have a problem in

          20    mind and in some cases, you even have a

          21    methodology that you want to be researched

          22    out.  So I think it's --




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           1              MS. KIRKENDALL:  One of the things

           2    is that we're not closing out other research,

           3    but what we're saying is that these are

           4    things that we're really particularly

           5    interested in.

           6              These are problems we have.  There

           7    may be data people could use.  There's

           8    methodologies that we think are cutting-edge

           9    or close to it, and we're just not sure how

          10    to use them, and we could use help in

          11    figuring all that out.  So what we would like

          12    to establish is something that really

          13    addresses some of our problems.

          14              Now, if somebody came in and sent

          15    us a project description that wasn't exactly

          16    what we asked for, but we thought it too

          17    addressed a project we were deeply interested

          18    in, then we would entertain it.

          19              MR. NEERCHAL:  Uh-huh.

          20              MS. KIRKENDALL:  But what I'm

          21    trying to do internally in the EIA, too, is

          22    that this shouldn't only be funded out of my




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           1    office.  Because then the program office who

           2    has the problem in the first place doesn't

           3    necessarily buy-in.

           4              MR. NEERCHAL:  All right, uh-huh.

           5              MS. KIRKENDALL:  So I would really

           6    like -- I don't mind -- it's not a huge

           7    amount of money anyhow.  But what I would

           8    like to have is have us partially fund and

           9    have the program office kick in a little bit,

          10    and it would really be better if the program

          11    officer was the main contact with the

          12    researcher, although there are some things

          13    where maybe we should be involved.

          14              MS. FORSYTH:  The student benefits

          15    that way, too, because they're more than a

          16    kind of --

          17              MS. KIRKENDALL:  We have different

          18    points of view.  We have somebody from the

          19    program office, somebody from my office.

          20              MR. LU:  Yeah.  For a CHP project,

          21    it would be like a NISS people, and for

          22    cointegration, it would be only OIE (?) --




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           1              MR. BINGHAM:  I missed some things

           2    here because people have been jumping into

           3    the pits.  So I'm going to run -- if I just

           4    run through this final --

           5              MR. NEERCHAL:  Yes.

           6              MR. BINGHAM:  I have two quick,

           7    quick things.  There is some other problems

           8    projects that I think -- I'm sorry, sources

           9    of knowledge, which maybe I will piggyback

          10    on.  You probably know about this, which is

          11    the MITACS, NPCDS training initiative.  They

          12    have a joint project with Stats Canada where

          13    they have student internships that are kind

          14    of run through this with the identified

          15    specific projects.  So I can get you some

          16    information on that --

          17              MS. KIRKENDALL:  That sounds good.

          18              MR. FEDER:  Actually, when I was in

          19    Stats Canada, I had a student from -- one

          20    from Canada and one from France coming and

          21    working for me.

          22              MR. BINGHAM:  So the government has




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           1    actually created this -- these kind of

           2    outreach things, much like what you're

           3    talking about.  So there's some structure and

           4    probably some experiences they can

           5    probably -- help you with.

           6              MS. KIRKENDALL:  Yeah, that would

           7    be great.  Thank you.

           8              MR. BINGHAM:  And SAMSI

           9    actually -- which is the Statistics and the

          10    Mathematical Sciences Institute in Triangle

          11    Park actually --

          12              MS. KIRKENDALL:  Uh-huh.

          13              MR. BINGHAM:  Has been running some

          14    programs and occasionally they'll overlap.

          15    So they had one on longitudinal data

          16    analysis, but actually, we have a lot of

          17    survey stuff that might actually been able

          18    to -- you could actually suggest themes.

          19              MS. KIRKENDALL:  I think they

          20    coordinate with NISS.

          21              MR. BINGHAM:  They do.  They do?

          22    Absolutely; we do all the time.




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           1              MS. KIRKENDALL:  Yeah, okay so --

           2              MR. FEDER:  So some of that could

           3    be SAMSI and NISS.  I think this --

           4              MR. NEERCHAL:  They are?

           5              MR. FEDER:  They are joint.

           6              MR. NEERCHAL:  One of them is a

           7    superstatute (?) of the other.

           8              MR. FEDER:  I think they're just

           9    the Big Guy (?) there.

          10              MR. BINGHAM:  One final comment.

          11    And this might maybe make things too

          12    entrenched than you'd like to, but one way to

          13    do things actually is to reach out to a

          14    couple of departments that have projects, and

          15    you can imagine -- so maybe Cutler's

          16    department has this, but I know BYU for

          17    instance still has a Master's thesis project,

          18    things like this.  And you say something like

          19    this: you'd like to propose that you have a

          20    small course.

          21              You want to program that's

          22    small -- on statistical consulting and energy




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           1    statistics.  And within that -- because what

           2    I did when I ran our stat consulting course

           3    was I just walked to researches on campus.  I

           4    said, hey, do you want our students to work

           5    on your data for you?  So you get some free

           6    stuff, and they get to work with other

           7    researchers and taught them other stuff.  It

           8    maybe actually not possible to build a course

           9    around one or two of your research projects,

          10    again, that's part of funding for a

          11    department, at the same time, get some

          12    students.

          13              It could -- instead of being

          14    something you have to fund, maybe they could

          15    get faculty advising right from the course.

          16    So I could imagine trying to do something

          17    creative by building it into a program.

          18              And that would probably be

          19    something that would be a real selling point

          20    for the program, and selling point for EIA as

          21    well.

          22              MR. NEERCHAL:  I think we'll start




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           1    with Ed because he had his hand up first a

           2    long time ago.

           3              MR. BLAIR:  Ed Blair.  I'd like to

           4    continue the run-on sentence, though I think

           5    Derek just threw a wrench into it with his

           6    last idea.

           7              Simplifying things.  I think you

           8    need to decide what your objectives are.  Do

           9    you want work done at a reasonable rate?  Or

          10    are you trying to recruit students?  What are

          11    you trying to do?  If you want work done at a

          12    reasonable rate, then you specify in detail

          13    the work you want, and you offer a Letter of

          14    Contract.

          15              MS. KIRKENDALL:  Uh-huh.

          16              MR. BLAIR:  If this is really

          17    different and this is about recruiting

          18    students and recruiting your next generation,

          19    then I think a lot of the comments that have

          20    already been made really, really come into

          21    play -- the amount of money that's involved,

          22    the level at which you have detailed the




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           1    project, as Nagaraj had just mentioned here.

           2              Census I think has just started a

           3    program, and they're explicitly interested in

           4    recruiting Ph.D.s in Statistics and M.S.s,

           5    and they're interested in improving the

           6    quality of the applications that they get, so

           7    that's specifically what it's about.

           8              So with their program, they say

           9    these are areas where we have problems.  But

          10    they don't say, here's what we want you to

          11    do.  They say here is an area where we have a

          12    problem, if you think you can do something

          13    interesting in this area, we're interested in

          14    talking about it.  But at the end of the day,

          15    it's really about forming a relationship.

          16              The other thing -- and this has

          17    already been mentioned -- do you want a

          18    relationship with the student or with the

          19    instructor?

          20              The academics who advise Census

          21    told them you want the relationship with the

          22    instructor, not with the student.  So it's




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           1    not the student who will be applying for the

           2    fellowships under Census' program, it would

           3    actually be instructors, who might not have

           4    the ability to pay their student, but then

           5    the idea is that you've formed a pipeline.

           6              And I think this idea that Derek

           7    just said about actually striking up

           8    relationships with selected departments,

           9    possibly even here in the D.C. area, will

          10    have a class -- possibly even hire people who

          11    can help you teach the class.

          12              That's a guaranteed winner.

          13              MR. NEERCHAL:  Cutler -- Moshe?

          14              MR. FEDER:  What I was going to say

          15    was already covered by them and by what he's

          16    going to say now.

          17              MR. NEERCHAL:  Is also covered?

          18              MR. CLEVELAND:  Go ahead.

          19              MR. FEDER:  No, no, no.  I said

          20    you're going to say it out, it was a

          21    perfectly -- I specified those people.

          22    Generally it was said that this gentleman




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           1    said --

           2              MR. CLEVELAND:  Ed?

           3              MR. KOKKELENBERG:  Much has been

           4    covered.  But one of the points that Blair

           5    made was that Census is doing something in

           6    this area.  Last fall, I went around to a

           7    number of agencies.  Every one of them has

           8    the same problem you have.  Their staff is

           9    disappearing and they need to recruit.  This

          10    is going to be used as a recruiting tool.

          11    You're going to have to be competitive if

          12    you're going to get recruits out of it.  Now,

          13    the other place which doesn't seem to operate

          14    the same way as Census does is the Federal

          15    Reserve Board.  And I can give you the name

          16    of a contact there.

          17              They do have an intern and research

          18    program that they bring people into pretty

          19    much like Derek was saying, making the

          20    relationships with the faculty.  And I'll

          21    pass that out to you later.

          22              MS. KIRKENDALL:  Okay.




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           1              MR. KOKKELENBERG:  That's all I

           2    have to say.  Thank you.

           3              MR. NEERCHAL:  Cutler, go ahead.

           4              MR. CLEVELAND:  No, go ahead.

           5              MR. NEERCHAL:  You know, I think

           6    that Cutler's point about the analogy between

           7    Star Grant I think is a very good one,

           8    because I think what is good about Star Grant

           9    is that you don't have to say it's an EPA

          10    Star Grant.  The moment you hear Star Grant,

          11    you know it has something to do with EPA.

          12    And they have been able to establish that

          13    kind of a -- you can say it's an

          14    environmental sciences provident.

          15              I think that maybe you should

          16    actually work towards that kind of a --

          17    brand-name recognition, so you have to kind

          18    of come up with a reasonable marketing plan

          19    saying that --

          20              MS. KIRKENDALL:  It is not the

          21    name.

          22              MR. NEERCHAL:  This is the Energy




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           1    Scholarship.

           2              MR. CLEVELAND:  Right.

           3              MR. NEERCHAL:  Something like

           4    Energy Fellowship.

           5              MR. CLEVELAND:  A name, a logo.

           6              MR. NEERCHAL:  And that's where I

           7    feel that if you go with the NISS format,

           8    it's going to be NISS blank -- and then I

           9    think the kind of projects -- kind of things

          10    that NISS has been doing is -- and they

          11    rotate from year to year.  It is not the same

          12    theme year to year.

          13              So we know what -- as a faculty, I

          14    am encouraging students to do this kind of

          15    stuff.  I know what I usually expect in a

          16    NISS advertisement.  I think you really need

          17    to establish that kind of a separate

          18    identity, the Energy-something.  And

          19    regardless of the discipline, you don't want

          20    to only focus on Stat or E-Con alone --

          21              MS. KIRKENDALL:  Right.

          22              MR. NEERCHAL:  And sort of, it's




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           1    the Energy and blank, whatever.  I think

           2    that's a good point.

           3              MR. CLEVELAND:  I think Ed more

           4    eloquently and succinctly said what I was

           5    trying to say originally in terms of what are

           6    you trying to be.  Is it the relationship

           7    with -- in terms of both the product and the

           8    relationship -- you know, if you're after

           9    some serious, really serious work on a

          10    project, you need to go hire a contractor.

          11              If you're after a relationship with

          12    the student or the faculty member, if it's

          13    really the faculty member, then the program

          14    has to be structured in a way that if you're

          15    not going to buy part of my time, then I want

          16    to be involved in a different way, that's

          17    fine.

          18              The EPA program is really about the

          19    student.  And the student is the focus, and

          20    it's all about the student and the faculty

          21    member's involved in a more tangential way,

          22    although it varies a lot by award.  So it




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           1    seems to me you are geared more towards the

           2    student on this.  But I think you need to be

           3    explicit about that.

           4              MR. NEERCHAL:  Yeah, okay.

           5              MR. BLAIR:  And just a real quick

           6    add-on:  I 100 percent agree with what Cutler

           7    just said.  I think what Census is

           8    doing -- and this is what the academics

           9    suggested to them -- that if you made it

          10    sweet enough that you can get the professors

          11    onboard even without buying their time -- and

          12    so there's our $50,000, with the anticipation

          13    that somebody goes bang, I mean I could pay

          14    my guy for a couple of years.  I'll do it.

          15              MR. NEERCHAL:  Uh-huh.

          16              MR. EDMONDS:  I think one thing you

          17    might do that would set yourself apart, in

          18    addition to funding these students' research,

          19    particularly if you're trying to attract

          20    people to EIA as opposed to any just sort of

          21    generally getting work done, would be to take

          22    the best of these papers and create a vehicle




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           1    in which you could provide a publication, and

           2    that's like something that's at your

           3    disposal.

           4              You have access to the ability to

           5    do peer review, and that creates something

           6    that would set you apart and give -- both the

           7    students and the faculty would be interested

           8    in that, because that's something that you

           9    know -- you could make that something that's

          10    attractive.

          11              MR. CLEVELAND:  That's a good idea.

          12              MR. NEERCHAL:  Neha?

          13              MS. KHANNA:  My last comment is,

          14    there's a slight disconnect or -- not a

          15    disconnect -- but a tension between getting

          16    work done and hiring people, because I

          17    understand you can only hire U.S. nationals.

          18    So you need to think about what is it that

          19    you want, because if it's going to be a tool

          20    to really build a relationship, you're not

          21    really interested in the foreign student

          22    who's really good because you can't hire




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           1    them.

           2              MR. KOKKELENBERG:  Whether he is

           3    good or bad or indifferent?

           4              MS. KHANNA:  Right, right.  Just

           5    something to keep in mind.  And I believe the

           6    Star fellowships are open to everyone.  I'm

           7    not sure.

           8              MR. CLEVELAND:  I'm not sure

           9    either.

          10              MS. KHANNA:  Not sure.  I don't

          11    remember either.

          12              MR. NEERCHAL:  I think it's

          13    actually in Star thing, it goes to NSF.  It's

          14    a NSF-EPA joint thing.  I think it's U.S.

          15    citizen only.

          16              MS. KHANNA:  NSF is open to

          17    non-citizens as long as they're permanent

          18    residents.

          19              MR. NEERCHAL:  No, I think they

          20    have quite a few of them just physically --

          21              MS. KHANNA:  It could be.  Because

          22    as I said, I'm not sure, but I know it's just




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           1    a question for you to think about because

           2    it's going to determine your pool.

           3              MR. NEERCHAL:  I think it depends

           4    on the level of the stipend also.  I think

           5    Star is a good comparison because that's been

           6    a successful program.

           7              MS. KHANNA:  And I think once you

           8    do figure out how big this program is going

           9    to be, I think it would be very important in

          10    your administrator's budget area to ramp up

          11    money (?) for it so that it becomes something

          12    that is committed to your work in a five-,

          13    seven-year period unless -- because you don't

          14    want to start building up a brand name and

          15    then two years later, say, oops, so sorry,

          16    we've got a request from the Hill and we

          17    can't do this.

          18              MR. NEERCHAL:  Right.  I think

          19    another related point is that the way you

          20    have said the research project here, this

          21    will require a staff from here to be involved

          22    in a --




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           1              MS. KIRKENDALL:  Uh-huh.

           2              SPEAKER:  Right.

           3              MR. NEERCHAL:  Close contact with

           4    the student.  That is sometimes -- you're

           5    targeting -- some people are also named, and

           6    they become very busy with some other

           7    project.  And all of a sudden, you have

           8    actually given this fellowship to the student

           9    and the student doesn't have the kind of

          10    support that student is expecting.

          11              And that's not very good.  I think

          12    that again kind of makes a strong case for

          13    you to make it less specific.  That way, the

          14    student and the student's mentor at the

          15    university take ownership of making the

          16    deliverables happen.  And if I have a student

          17    working with me as a Ph.D. student, I want

          18    that person to graduate.  So I'm going to do

          19    whatever it takes, right?

          20              MS. KIRKENDALL:  Right.

          21              MR. NEERCHAL:  And especially, I

          22    know his money is running out.  That's your




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           1    graduation day, the last date of your

           2    paycheck.  Something like that, and work

           3    towards it.  I think here, you're taking on a

           4    lot more responsibility.  That's kind of

           5    dangerous, because you're not that student's

           6    mentor, you know?  I don't want to give a

           7    project to another's -- among my colleague's

           8    advice, because I know it's dangerous.

           9              MS. KIRKENDALL:  Uh-huh.

          10              MR. CLEVELAND:  Yeah, that's a good

          11    point.  I agree with that.  On the other

          12    hand, I do like the idea of having -- you

          13    guys need help in certain areas.  Some of

          14    those things are things that we've struggled

          15    a lot with over the years, and I like the

          16    idea of essentially asking for help.  And if

          17    you make it attractive enough for the faculty

          18    member to get involved in a substantive way,

          19    and if your person on this side is going to

          20    cooperate to some minimum level to get them

          21    information in a timely way, I think there

          22    could be some real progress here.




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           1              But you're right that you

           2    do -- some of these projects will -- you guys

           3    need to pony up, have the institutional

           4    commitment of making sure the point person is

           5    going to respond in a timely way to the

           6    student and faculty.  But I do like the idea

           7    of targeted areas.  If you don't do that,

           8    then you're going to start getting -- are you

           9    then moving more towards, you know an NSF

          10    model, where we're funding energy research,

          11    and you're going to get every kind of

          12    proposal under the sun.

          13              MS. KIRKENDALL:  Right.

          14              MR. CLEVELAND:  Which may not be a

          15    bad thing, but --

          16              MR. KOKKELENBERG:  You need a

          17    committee to vet it.

          18              MR. CLEVELAND:  Yeah.  I'm not sure

          19    you had the -- it's a different kettle of

          20    fish.

          21              MS. KIRKENDALL:  Uh-huh.

          22              MR. BINGHAM:  So just some final




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           1    thoughts.  We're really going on in the same

           2    lines.

           3              I think it's going to converge to

           4    what I was going to say.  In Canada, there's

           5    a model, this MITACS -- this one they call

           6    MITACS -- I don't know what the acronym

           7    stands for any longer.

           8              But they've got a model which ends

           9    up funding a student pretty well.  But

          10    there's a kick-in -- they transfer $5,000 to

          11    the advisor to support the research.  That

          12    doesn't buy them -- there's no overhead in

          13    Canada.

          14              So basically, there's $5,000 more

          15    for research somewhere along the way.  And

          16    I'm not saying we should necessarily do this,

          17    but this -- as I said, there's two types of

          18    currencies, I guess.  The first one I

          19    mentioned was publication.  The other one is

          20    actually currency.  And sometimes it doesn't

          21    take a lot, right?

          22              MS. KIRKENDALL:  Uh-huh.




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           1              MR. BINGHAM:  Doesn't -- they don't

           2    have to give $50,000 to the advisor to buy

           3    them out of teaching or pay summer salary or

           4    something like that, but just enough to allow

           5    them to go to a conference and present this

           6    work -- something like that that's going to

           7    allow them to have a little bit of extra

           8    money to support the students -- and

           9    sometimes officially, it's supposed to go

          10    into sending the student places, which is

          11    what I've done with it, but it's not always

          12    used that way.

          13              MS. KIRKENDALL:  Uh-huh.

          14              MR. BINGHAM:  So that may be

          15    something you'd want to add on.

          16              You seem to have a good idea in the

          17    sense you want research, you want work to be

          18    done, you want to have a pool of people

          19    who -- some of these people will come and

          20    they'll stay and they'll do great work for

          21    you.

          22              MS. KIRKENDALL:  Uh-huh.




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           1              MR. BINGHAM:  And these are all

           2    goals but they're not necessarily strict

           3    goals.  So you do want them -- the crystal

           4    link that will then come in and write that

           5    Jaws (?) paper.  So restricting yourself to

           6    just the people who can be hired may be too

           7    restrictive for you.

           8              So I think that keeping it flexible

           9    and allowing people to kind of come in and

          10    mould a project would be beneficial.  I think

          11    the key thing is to highlight what the

          12    benefits are before people get involved and

          13    what are the basic -- what are the ground

          14    rules when they put those --

          15              MR. NEERCHAL:  Learning objectives?

          16              MR. BINGHAM:  So anyway.  You've

          17    obviously hit -- so this is the one thing we

          18    all know about.  So --

          19              MR. NEERCHAL:  Using the new

          20    language that I'm getting used to is the

          21    learning objectives, I write it down.

          22              So I think we will close the




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           1    session on that note, and I think this is

           2    definitely something I'm sure people will be

           3    coming and talking to you --

           4              MS. KIRKENDALL:  Uh-huh.

           5              MR. NEERCHAL:  Whatever ideas they

           6    have.  Is there someone who has not

           7    introduced themselves -- I think I should

           8    have probably done it in the beginning of the

           9    session.  This is for the purpose of the

          10    transcription, obviously.

          11              MS. WAUGH:  Hi.  Shauna Waugh with

          12    the Statistics and Methods Group.

          13              MR. NEERCHAL:  Anyone else?  So

          14    otherwise, we're just going to break, and

          15    directly from the break to the breakout

          16    sessions.

          17                   (Recess)

          18              MR. NEERCHAL:  Can we start this

          19    session?

          20              I think that anyone who has not

          21    introduced themselves, come to a microphone

          22    and please introduce themselves for the




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           1    transcription.  I think I should do it the

           2    beginning of each session.  Anyone who is

           3    here for the first time today who has not

           4    gone to the mic and introduced themselves,

           5    please introduce themselves.

           6              MS. KIRKENDALL:  There was a bunch

           7    of you back there.  I recognize some of you.

           8    One is Patty --

           9              MR. NEERCHAL:  Go to a microphone,

          10    say your name and affiliation.

          11              MR. GIELECKI:  Hi, I'm Mark

          12    Gielecki, and I work on the renewables team

          13    with -- called Nuclear Electric and Alternate

          14    Fuels, EIA.

          15              MS. GUEY-LEE:  I'm Louise Guey-Lee,

          16    I work in Nuclear Renewable and Alternative

          17    Fuels with Marie.

          18              MR. GIELECKI:  We are here for

          19    Marie.

          20              MS. NORMAN:  I'm Karen Norman, I am

          21    with SMG.

          22              MR. DOGETS:  I'm Vlad Dogets, on




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           1    the coal team, and this is my first week

           2    here.

           3              MR. CLEVELAND:  Oh, fresh meat.

           4              MR. LINDSTROM:  I'm Perry

           5    Lindstrom.  I do the U.S. greenhouse gas

           6    inventory that EIA does.  And it's not my

           7    first week here.

           8              MS. CHOU:  I am Patty Chou from

           9    CNEAF.  I am here to support Marie.

          10              MS. KIRKENDALL:  Thanks, Patty.

          11              SPEAKER:  Geez.

          12              MS. JOYCE:  Mary Joyce, I work on

          13    the Alternative Fuels part of CNEAF.

          14              MR. CLEVELAND:  What is this, a

          15    Marie fan club here?

          16              MR. NEERCHAL:  Thank you.

          17              So we'll start, Marie, you're on.

          18              MS. LaRIVIERE:  Can everybody hear

          19    me, or do I need the microphone?

          20              Guys, can you hear me?

          21              SPEAKERS:  Yes.

          22              MS. LaRIVIERE:  Okay.




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           1              MR. NEERCHAL:  Mic is better

           2    though.

           3              COURT REPORTER:  It needs to be

           4    recorded.

           5              MR. NEERCHAL:  Better with mic.

           6              MS. LaRIVIERE:  Is it on?

           7              COURT REPORTER:  Yes.

           8              MS. LaRIVIERE:  You can hear it,

           9    okay.

          10              So today I am going to be

          11    discussing some new methodology the EIA has

          12    implemented with regards to municipal solid

          13    waste.

          14              Let me just ask, anybody in the

          15    room have any interest in or experience with

          16    MSW?  Raise your hand.

          17              MR. CLEVELAND:  I generate a lot of

          18    waste.

          19              MS. LaRIVIERE:  That's fair.

          20              So I think I'm just going to give

          21    quick definition so everybody's on the same

          22    page.  MSW is just all residential solid




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           1    waste and non-hazardous institutional

           2    industrial and commercial waste.  Basically

           3    anything you would find in a landfill, this

           4    is MSW.

           5              Our objectives are twofold.  EIA's

           6    objectives are to split MSW into its biogenic

           7    and non-biogenic components so that we can

           8    assign it to renewable and non-renewable

           9    waste.

          10              Our objectives today are to get

          11    some advice from the Committee on three

          12    things:  We are looking for advice on

          13    forecasting the split; advice on the

          14    methodology used to calculate the split, and

          15    this will be for next year's redo of the

          16    paper.

          17              And we're looking for a Holy Grail

          18    of BTU values which would be a single source

          19    that we could get a BTU value for all the

          20    components of MSW.  I don't know if it

          21    exists; I don't know if anybody has any

          22    ideas.  But if you do, please let me know.




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           1              MR. CLEVELAND:  Can you flip back

           2    to that first slide --

           3              MS. LaRIVIERE:  Yeah.

           4              MR. CLEVELAND:  So why are we

           5    interested in splitting into biogenic and

           6    non-biogenic?

           7              MS. LaRIVIERE:  Let me get to that.

           8              So this is why.  The EIA has

           9    historically classified MSW as renewable, as

          10    a renewable fuel, but we've done it because

          11    the view has been that MSW is mainly

          12    biogenic components -- biomass, like wood,

          13    paper, paper products, things like that.  But

          14    it's true that MSW has some parts in it that

          15    are not biogenic, and so concerns have been

          16    raised that maybe we shouldn't be saying MSW

          17    is a wholly renewable fuel if some parts of

          18    it are not biogenic, therefore not renewable.

          19              So to answer these questions, what

          20    I did was I came up with a methodology, and I

          21    calculated the shares of heat content in MSW

          22    from biogenic and non-biogenic, and we used




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           1    that to break the MSW consumption, the

           2    electricity produced, into renewable and

           3    non-renewable parts.  And we did this using

           4    EPA data and various BTU sources.

           5              Our finding was that the heat

           6    content of MSW is increasing, and we'll get

           7    to why that is.

           8              Yes, you have a question?

           9              So we're going to start with EIA's

          10    definition.  And to be fair, it should be

          11    noted that there are a million different

          12    definition of renewable energy.  This is just

          13    one of them, and this is the one that EIA

          14    uses.  The important part to note here -- oh,

          15    I don't know if you guys can see this laser

          16    pointer, but naturally replenishing.

          17              So MSW is not naturally

          18    replenishing.  It's replenishable, it's

          19    replenished every day, but it doesn't happen

          20    by a biological, ecological cycle; it happens

          21    because we create it.  So even though it's

          22    replenishing, it's not what we would call




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           1    naturally replenishing.  And EIA says that

           2    renewable energy resources include biomass,

           3    hydrogen, geothermal, solar wind, and ocean

           4    energy.

           5              So part of MSW is biomass, but part

           6    of it not biomass.  This is where it gets

           7    tricky.  The contents of municipal solid

           8    waste are as follows.  On the left you'll see

           9    we have the biogenic portion; on the right,

          10    non-biogenic.  So what's biogenic?  Biogenic

          11    is roughly equivalent to biomass, which is

          12    what you saw in the previous slide right

          13    here, renewable energy resources include

          14    biomass.

          15              So the part here that's biogenic is

          16    what we will consider as the renewable part

          17    of MSW.  The non-biogenic part would then be

          18    the non-renewable part.  This definition up

          19    here is currently being decided on.  We don't

          20    have one in our EIA glossary, so we're

          21    working on this, but basically if something

          22    is biogenic, it's produced by the actions of




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           1    organisms, and this would exclude fossil

           2    fuels.  And that's why we say living

           3    organisms.

           4              So you can see on the left:

           5    Textiles, yard trimming, food waste, wood,

           6    leather, paper, and paper products, these are

           7    all natural biogenic products.  On the right,

           8    synthetics, we have plastics and we have

           9    rubber.  Here, this side is going to be

          10    important later on, but what we need to know

          11    here is that biogenic on the left and

          12    non-biogenic on the right.  In general,

          13    biogenic materials have a lower heat content

          14    per unit weight than do non-biogenic

          15    materials.

          16              MR. CLEVELAND:  Marie, where are

          17    metals and minerals?

          18              MS. LaRIVIERE:  Metals and minerals

          19    are not combusted, so --

          20              MR. CLEVELAND:  (Inaudible)

          21              MS. LaRIVIERE:  And sometimes

          22    they're left in the waste stream when it's




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           1    combusted, but we set their BTU values equal

           2    to zero.  So --

           3              MR. NEERCHAL:  Is it the higher the

           4    BTU value, the better fuel -- is that --

           5              MS. LaRIVIERE:  It produces more

           6    energy.  If you combust something with higher

           7    BTU value per unit weight, yes.

           8              MR. NEERCHAL:  All right.

           9              MS. LaRIVIERE:  So this is what we

          10    do with MSW, now that we know what's in it.

          11    There are basically four things that happen

          12    to any MSW that's created.  We landfill

          13    it -- this is what happens to the vast

          14    majority of MSW -- we recycle it; plastics

          15    are recycled at a different rate than glass,

          16    than metals.

          17              We combust it, which is what we're

          18    going to talk about today -- and compost,

          19    which is what would happen to things like

          20    yard trimming and residential food wastes.

          21              This is a historical trend of what

          22    happens to MSW.  You can see that in 1960




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           1    we're looking at about 7 percent recycled,

           2    93 percent landfilled.  If you fast forward

           3    to today to 2005, what we're interested in is

           4    the yellow part.  It's about 16 percent, I

           5    think in 2005, that's combusted with energy

           6    recovery.

           7              MR. EDMONDS:  Is there a pathway

           8    from the landfill to recoverable methane?

           9              MS. LaRIVIERE:  Yes, the landfill

          10    is where the landfill gas comes from.

          11              MR. EDMONDS:  Right.  So there is a

          12    pathway --

          13              MS. LaRIVIERE:  Is that what you're

          14    asking?

          15              MR. EDMONDS:  An energy pathway

          16    that --

          17              MS. LaRIVIERE:  Yes, absolutely.

          18    Energy can come out of the discards at the

          19    top.

          20              MR. EDMONDS:  Okay.

          21              MS. LaRIVIERE:  So we're looking at

          22    this --




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           1              SPEAKER:  Marie --

           2              MS. LaRIVIERE:  Yes, go ahead.

           3              MS. KHANNA:  Very quick question.

           4    What happened between 1980 and 1990 that --

           5              MS. LaRIVIERE:  This is when mostly

           6    municipal solid waste plants came online.

           7    People started to realize that we were having

           8    issues with MSW, we were creating too much of

           9    it, and this is when all the plants started

          10    coming online, and then we had a ruling in

          11    like 1994, that --

          12              MR. GRUENSPECHT:  In 1978, there

          13    was a bill passed called PERPA that said that

          14    the utilities had to buy stuff from

          15    independent generators.  And that really made

          16    the industry possible.  I think people wanted

          17    to burn some waste before --

          18              MS. LaRIVIERE:  Right, right.

          19              MR. GRUENSPECHT:  But since the

          20    electric utility didn't have to buy it,

          21    didn't want to buy it, they kind of didn't

          22    have much to do with it.  So it was




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           1    that -- and then there was this other thing

           2    that's --

           3              MS. LaRIVIERE:  The constraint --

           4              MR. GRUENSPECHT:  Going to get

           5    worse.

           6              MS. LaRIVIERE:  Right.  Municipal

           7    solid waste generators were deemed qualifying

           8    facilities under PERPA, so electrical sales

           9    had to buy the MSW at a voided cost.  So this

          10    is when all these plants started coming

          11    online.

          12              So the combustion with energy

          13    recovery is basically combustion in municipal

          14    solid waste, waste energy plants, where it's

          15    burned just like coal is burned -- in a

          16    boiler, the heat is used to generate steam,

          17    the steam is used to turn a turbine, and we

          18    get electricity.

          19              So what we're concerned with here

          20    is this electricity that comes out, we're

          21    classifying it all as renewable energy right

          22    now.  But again, because municipal solid




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           1    waste is not all biogenic, what we're saying

           2    is that not all the electricity should be

           3    allocated to renewable energy.

           4              So this is how I went about doing

           5    the split.  You guys all have a handout that

           6    looks something like this, if you want to

           7    follow along.  It's not too complicated, but

           8    I thought you might like to look at some

           9    numbers.

          10              So on the left we have the

          11    materials groups, and then in the discards

          12    column, we have the amount of MSW that's

          13    generated minus the amount that's recycled,

          14    and there a different recycling rate

          15    per -- for each materials group.  It just

          16    came out today, so maybe it's on the top of

          17    your --

          18              MR. NEERCHAL:  It is the last page

          19    in the packet.  Yes.

          20              MS. LaRIVIERE:  You got it?  Okay.

          21    So we take --

          22              SPEAKER:  Hot off the press.




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           1              MS. LaRIVIERE:  That's right.  We

           2    take the total weight of MSW that's available

           3    for combustion, and we separate it into the

           4    biogenic and non-biogenic fuel groups, then

           5    we take the BTU per ton factors that we have

           6    for each materials group and we multiply it

           7    by the number of tons, and this gives you

           8    your weighted BTU per ton value, for an

           9    average ton of MSW.

          10              And then you can calculate the

          11    shares of biogenic and non-biogenic just by

          12    dividing the amount of the total heat

          13    content.  The amount of the heat content

          14    contributed by the total heat content, and

          15    then that gives you -- in this example, you

          16    have 44 percent of your total heat content

          17    from MSW is non-biogenic in 2005, and

          18    56 percent is biogenic.

          19              You can do this for all data years.

          20              MS. KHANNA:  Really quick question.

          21              MS. LaRIVIERE:  Yes.

          22              MS. KHANNA:  Why are you interested




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           1    in calculating the average heat content of

           2    MSW when you have all the breakdowns?

           3              MS. LaRIVIERE:  I'm sorry, can you

           4    repeat that?

           5              MS. KHANNA:  You said you just

           6    calculated the average heat content of MSW.

           7              MS. LaRIVIERE:  Oh, because we

           8    wanted to know how the heat content is

           9    increasing by year.  So when you get the

          10    average heat content, you can make a nice

          11    trend line to see how the heat content is

          12    increasing over time, and this is going to be

          13    used by the forecasting office.

          14              MS. KHANNA:  And that's only going

          15    to depend on the shares of the --

          16              MS. LaRIVIERE:  Right.

          17              MS. KHANNA:  So we can just

          18    subtract the shares --

          19              MS. LaRIVIERE:  Well, unfortunately

          20    all we have is national level data of the

          21    shares, so we assume that this share applies

          22    to every plant.  So it's basically doing the




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           1    same thing.  Does that make sense?  Am I

           2    answering it?

           3              MS. KHANNA:  You just sort of

           4    generated one number out of ten, but there's

           5    no additional information on that one number

           6    that you got out of the ten.

           7              That's okay --

           8              MS. LaRIVIERE:  I'm sorry, I

           9    don't --

          10              MR. CLEVELAND:  I believe the model

          11    requires an input, an average heat content --

          12              MS. KHANNA:  Okay.  Thank you.

          13              MR. CLEVELAND:  Correct?

          14              MS. LaRIVIERE:  Yes, thank you.

          15              So we did this for all the data

          16    years, and for the years that EPA didn't have

          17    data, we interpolated.  And unfortunately, we

          18    didn't have perfect data, so we had to make

          19    some assumptions.  Some were more important

          20    than others, and some had bigger effects on

          21    the data than others.  First of all, as I was

          22    just saying, the data that comes from EPA is




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           1    a mixture of MSW, but it's at the national

           2    level, so we have to assume that it applies

           3    to all MSW combusted at any waste energy

           4    plant.

           5              Next is that MSW input materials

           6    were classified as biogenic or non-biogenic

           7    according to their predominant composition,

           8    so for example, rubber from tires is

           9    predominantly synthetic rubber with a little

          10    bit of natural rubber left in it, so we call

          11    that synthetic.  Textiles -- of course there

          12    are nylons, but there's also cotton and wool,

          13    and we classified it as organic.

          14              Other plastics was assigned to heat

          15    content -- that was the average heat content

          16    of all the other resins, because we didn't

          17    know what was in other plastics.  Unassigned

          18    other, this is a category in the EPA

          19    report -- it's just other waste; we just

          20    divided it equally by weight into the

          21    biogenic and non-biogenic groups.

          22              This is what you were asking about




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           1    before, the BTU values of glass and metal

           2    were set at zero.  This is because there's

           3    two different types of MSW combustion plants:

           4    There's Refuse Dry Fuel where they take out

           5    the larger pieces like appliances and things

           6    like that, and they also take out glass and

           7    metals for recycling, and then they shred it,

           8    compact it, and then burn it.

           9              But there's also mass burn where

          10    they just dump from a truck into the boiler

          11    and they burn it.  So we had no way of

          12    knowing if there was going to be glass or

          13    metal in the combustion, so we set the BTU

          14    values equal to zero because they don't

          15    combust anyways.

          16              MR. CLEVELAND:  When you do the

          17    dump, does the non-combustible stuff reduce

          18    or affect the heating value of the stuff?

          19              MS. LaRIVIERE:  In some cases it

          20    can reduce the heating value; it can actually

          21    pull heat out of the combustion process.  But

          22    we don't know enough to assign a value, and




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           1    we also don't know who is combusting Refuse

           2    Dry Fuel and who is combusting the mass burn.

           3    And then the last assumption that we made is

           4    that unspecified BTU values were assumed to

           5    represent higher heating value, which is the

           6    gross heating value of the fuel, as opposed

           7    to the net.

           8              MR. BINGHAM:  Is the heat

           9    content -- are those fixed costs, or is that

          10    something that's kind of recalculated?

          11              MS. LaRIVIERE:  The heat

          12    content -- like the BTU values?

          13              MR. BINGHAM:  Yeah.  So for

          14    instance, for textiles, you got 13.8 million

          15    BTU per ton, but if the composition of the

          16    textiles were to change and there's more

          17    nylon than there are --

          18              MS. LaRIVIERE:  Yeah, absolutely,

          19    that can change.

          20              MR. BINGHAM:  So does that get

          21    re-measured often or --

          22              MS. LaRIVIERE:  It depends on what




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           1    source we use for the BTU values, and what

           2    they include in their textiles.  So that's

           3    why we're looking for something like -- from

           4    an MSW perspective, what they would call

           5    textiles.

           6              Because EPA calls something

           7    textiles that might be a different definition

           8    for what somebody else uses, and the

           9    definition is what's going to change the BTU

          10    value.

          11              MR. CLEVELAND:  So are these heat

          12    contents -- higher heating values or low

          13    heating values?

          14              MS. LaRIVIERE:  The higher heating

          15    values.  The higher heating values.  In some

          16    cases, it wasn't specified -- if they were

          17    higher heating or lower heating, then we

          18    assumed them to be higher heating values.

          19              So we had some issues with the data

          20    also -- we'll talk about these.  EIA collects

          21    MSW data from its respondents, and what we

          22    get is a BTU per ton value for the MSW that




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           1    they combust.

           2              But unfortunately, what they report

           3    to us is just an overall BTU value, so we

           4    don't have the components of their

           5    combustion, so we don't have enough data from

           6    them to split into their biogenic and

           7    non-biogenic parts.  So we had to use other

           8    data that would show us what was actually in

           9    the MSW waste stream.

          10              So we used the EPA data, and

          11    therefore the number that you will see coming

          12    up is not representative of the number that

          13    we get reported from our respondents.

          14              BTU values, we got from best

          15    available sources, and it's possible that

          16    they might have been developed using

          17    different procedures, because not all of the

          18    values came along with the documentation of

          19    how they calculated their data, their

          20    numbers.  And again, EPA did not collect data

          21    for all the years.  So we had to do some

          22    interpolations.




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           1              So these are our results.  It's a

           2    pretty obvious trend line.  You can see on

           3    average year over year, the heat content of

           4    MSW is increasing.  And this is the shares,

           5    this is what we're going to use to split our

           6    MSW.  You can see that in 1989, it's about

           7    35 percent non-biogenic and about 65 percent

           8    biogenic.  And if you come to 2005, it's

           9    about 45 percent non-biogenic and 55 percent

          10    biogenic.  And if you just go on a couple of

          11    years, it hits 50-50.

          12              And this is with all the years that

          13    we interpolated.  So this slide is with just

          14    the data years, and you can see that the

          15    trend looks almost exactly the same.

          16              The line fits a little bit better

          17    here, but same trend, of course.  So there

          18    are two reasons this is happening:  There's

          19    an increasing amount plastics in the

          20    municipal solid waste stream without an

          21    accompanying increase in the recycling rate.

          22              And we've a decreasing round of




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           1    paper and paperboard in the waste stream

           2    because of increased recycling.  And plastic

           3    has very high heat content, and paper and

           4    paperboard have lower heat content.

           5              So the changing ratios of these two

           6    are mainly what's affecting the heat

           7    contents.

           8              This is what EIA is going to do

           9    with our split.  Starting in 2001, we started

          10    collecting MSW as an independent fuel from

          11    landfill gas; prior to that they were one

          12    fuel.  So we can start our split in 2001.

          13    The biogenic portion is going to be reported

          14    as renewable waste energy, and non-biogenic

          15    will be other non-renewable energy, or other

          16    non-renewable waste.

          17              So where you saw that 56 -- it's

          18    55/45, you take it -- and we have a total MSW

          19    consumption number down here at the bottom,

          20    you can see the total for 2005 is 299, and we

          21    just split it -- 55 percent will be the

          22    renewable waste energy, and 45 percent will




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           1    be the other non-renewable waste.

           2              We're going to take the historical

           3    trends in heat content and forecast them

           4    forward to use for the split in the NEMS

           5    model.  And we're going to ask for some

           6    advice on this, and we have a person here

           7    today who's going to be doing the split,

           8    which is not me.  You can talk to him.

           9              So these are our questions.  Again,

          10    advice forecasting the split, a methodology

          11    suggestion for future years.  This is a done

          12    deal for this year.  The paper is about to go

          13    out, hopefully, on the webpage.  And again,

          14    we're looking for a single source of BTU

          15    values for MSW, which I don't think exists,

          16    but if you can find it -- yes, Mark?

          17              MR. GIELECKI:  Nice job, first of

          18    all.

          19              MS. LaRIVIERE:  Thank you.

          20              MR. GIELECKI:  Second --

          21              SPEAKER:  Could you come to the

          22    mic, please.




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           1              MR. CLEVELAND:  He's president of

           2    the Marie fan club.

           3                   (Laughter)

           4              MR. GIELECKI:  Nice job.

           5              MS. LaRIVIERE:  Thanks, Mark.

           6              MR. GIELECKI:  It occurs to me that

           7    in those states that count MSW as part of

           8    their renewable portfolio standard, if all of

           9    a sudden we split MSW into renewable and

          10    non-renewable component, it may mess up all

          11    those RPSs.

          12              MS. LaRIVIERE:  It's not just the

          13    states.  It has applications to industries

          14    also that are burning MSW.  But yes, that's a

          15    good point.

          16              MR. GIELECKI:  But it'll mess up

          17    the split.  That's all.

          18              MR. CLEVELAND:  Where are these

          19    data showing up in the different EIA

          20    publications and series?

          21              Do you have that for me?

          22              MS. LaRIVIERE:  I can talk to you




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           1    about that.  So this will show up in --

           2              MR. CLEVELAND:  So renewable waste

           3    energy -- and so where does that show up?

           4              MS. LaRIVIERE:  Well, this will

           5    come out in our Renewable Energy Annual, and

           6    the other parts of renewable waste energy are

           7    landfill gas -- what else, Louise?

           8              MS. GUEY-LEE:  What are the

           9    other --

          10              MS. LaRIVIERE:  Of renewable waste

          11    energy.  Landfill gas --

          12              MS. GUEY-LEE:  Other biomass --

          13              MS. LaRIVIERE:  And other biomass.

          14    But in here, the series will be the

          15    generation of --

          16              MR. CLEVELAND:  That's how it shows

          17    up in the power sector.

          18              MS. GUEY-LEE:  Yeah, the series

          19    will be the electricity generation, energy

          20    consumed for electricity, energy consumed for

          21    combining power, energy consumed for

          22    steam only -- wherever MSW is consumed, we




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           1    have to divide it up between renewable and

           2    non-renewable.

           3              And that's in the electric power

           4    publications; it will have some effect in

           5    renewables.  Definitely greenhouse gases.

           6              MS. LaRIVIERE:  It's already come

           7    out in last month's Electric Power Monthly.

           8    They did the split.

           9              Any other question?  Go ahead.

          10              MR. NEERCHAL:  I think you're the

          11    designated discussant.

          12              MS. KIRKENDALL:  Me?  No.

          13              MS. LaRIVIERE:  This is a breakout

          14    session.

          15              MR. NEERCHAL:  Come back later.

          16              MS. LaRIVIERE:  She's going to

          17    report out on the discussion.

          18              MS. KIRKENDALL:  You'll report it

          19    later on.

          20              MS. KHANNA:  I'm reporting?

          21              MR. CLEVELAND:  No, no.

          22              MS. KHANNA:  Good.




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           1              MR. CLEVELAND:  It's not true.

           2              MS. KHANNA:  That's not true.

           3              Somebody who I don't know reported.

           4              MS. KIRKENDALL:  Vijay, who's not

           5    here, so it's Neha -- we wrote down Neha --

           6              MS. KHANNA:  Oh, I see -- well,

           7    okay.

           8              MR. NEERCHAL:  It's not a good

           9    answer for not paying taxes.  You know that.

          10              MS. KHANNA:  I have a question

          11    anyway.  Partly a suggestion, too.  Going

          12    back to your question about forecasting the

          13    split, which is -- from the slides that you

          14    showed us, you've got two straight lines,

          15    essentially.

          16              MS. LaRIVIERE:  Right.

          17              MS. KHANNA:  Which is going to lead

          18    you into trouble very soon.

          19              MS. LaRIVIERE:  Right.

          20              MS. KHANNA:  So really, you have to

          21    try and find some kind of asymptote to those

          22    lines.  And the only way -- your dealer is




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           1    not going to give you those asymptotes

           2    because they're essentially a straight line.

           3    So I think probably the easiest way to do

           4    this is to find out from the MSW industry,

           5    from landfill operators, do they have a sense

           6    of where this is going to pop up, where is

           7    this recycling is going to top out or where

           8    is -- yeah, where is recycling, what fraction

           9    of the waste is actually going to get

          10    recycled, and then sort of finesse -- put

          11    that as the upper limit, and fit a function

          12    that's going to asymptote to that.

          13              MR. CLEVELAND:  Uh-huh.

          14              MS. KHANNA:  Because otherwise

          15    you're going to run into negative territory.

          16              MS. LaRIVIERE:  Right.  We talked

          17    to EPA, their Solid Waste Division, and all

          18    they could really say to us was that they

          19    have a national policy in place designed to

          20    increase the recycling rates of all

          21    materials.  Doesn't really help in

          22    forecasting what's going to go where, so --




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           1              MR. CLEVELAND:  It's not just

           2    recycling, it's also the composition of the

           3    stream itself, which is -- it gets to

           4    household consumption, all kinds of crazy

           5    stuff.

           6              MS. LaRIVIERE:  Right.

           7              MR. GRUENSPECHT:  Do you rank the

           8    problem by 2030, or is it general enough that

           9    you know --

          10              MS. LaRIVIERE:  Well, it --

          11              MR. GRUENSPECHT:  It crosses, I'm

          12    sure.

          13              MS. LaRIVIERE:  It crosses in a

          14    couple of years.

          15              MR. GRUENSPECHT:  That's a steep

          16    slope.

          17              MS. LaRIVIERE:  Right.

          18              MR. GRUENSPECHT:  You wouldn't run

          19    in to a problem by 2030.

          20              MR. CLEVELAND:  That's a steep

          21    slope, though.

          22              MS. KHANNA:  Yeah, I mean --




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           1              MS. LaRIVIERE:  Right.

           2                   (Laughter)

           3              MR. EDMONDS:  It may be a problem,

           4    but you're not going to violate any laws of

           5    conservation.

           6              SPEAKER:  Laws of nature.

           7              MR. EDMONDS:  Right.

           8              MR. CLEVELAND:  No, but you're

           9    going to pretty quickly get to -- the

          10    non-renewable stream is going to be bigger, a

          11    lot bigger, faster.

          12              MS. LaRIVIERE:  Right.  And it's

          13    interesting because --

          14              MR. EDMONDS:  It may be

          15    implausible, although physically possible --

          16              MS. LaRIVIERE:  The weights of the

          17    MSW stream is -- the weight is still mainly

          18    biogenic, but the heat content, because of

          19    the increase in plastics, is now shifting

          20    towards the non-biogenic side.  We just don't

          21    know where it's going to -- where it's going

          22    to stop.




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           1              MS. KHANNA:  Aren't plastics being

           2    recycled more and more?

           3              MS. LaRIVIERE:  No.  Well, not

           4    according to the EPA data.  More plastic is

           5    being recycled, but more plastic is being

           6    created.  So the recycling rate, through 2005

           7    at least is staying -- they should have

           8    another publication out in the end of 2007.

           9              We'll see if anything changes.

          10              But there's just such a drastic

          11    increase in the amount of plastic produced

          12    that it's not doing much.

          13              MR. NEERCHAL:  What is the source

          14    of that MSW data at EPA?  What is the basis

          15    of it?

          16              MS. LaRIVIERE:  It's called

          17    Municipal Solid Waste in the United States

          18    Facts and Figures, and it first came out in

          19    1990, and then like '95 through 2000, and

          20    then every two years after that.  It's in the

          21    sources on the PowerPoint.

          22              MR. BINGHAM:  So you know the




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           1    recycling rates of plastics?

           2              MS. LaRIVIERE:  Yes.

           3              MR. BINGHAM:  Do you also know how

           4    much is being produced every year?

           5              MS. LaRIVIERE:  They give all that

           6    in the report.

           7              MR. BINGHAM:  Does any of this

           8    information actually help you try to

           9    build -- can any of this information be used

          10    to build a forecast, because if plastics are

          11    driving the trend, is there any way to kind

          12    of use that as a proxy for forecast?

          13              MS. LaRIVIERE:  It's possible,

          14    yeah.  I'm not sure -- Bob, do you have any

          15    ideas?

          16              MR. GIELECK:  We can't hear back

          17    here.

          18              MS. LaRIVIERE:  Oh, I'm sorry.

          19    It's possible, but I'm just not sure --

          20              MR. GIELECK:  So my question was

          21    this:  I guess part of the question to the

          22    Committee was how to forecast, how to build a




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           1    forecast in the future.  I was kind of

           2    curious, if recycling rates are known and the

           3    amount of plastics that are produced are

           4    known, and plastics are producing a lot of

           5    the trend driving the system, can knowledge

           6    about the plastics industry and recycling

           7    rates somehow help give a proxy to the

           8    forecast, be assertive (?) instead?  That's

           9    kind of --

          10              MR. CLEVELAND:  The problem is

          11    recycling rates are very local and regional.

          12    Not really -- lot of it's nothing national --

          13              MR. NEERCHAL:  County by county.

          14              MR. BINGHAM:  Yeah.

          15              MR. GIELECK:  But you mentioned you

          16    did have rates.

          17              MS. LaRIVIERE:  We have a national

          18    average rate the EPA gives which --

          19              SPEAKER:  A model, if you want to

          20    say --

          21              MS. LaRIVIERE:  Right.

          22              SPEAKER:  What are the driving




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           1    forces behind the observed trend and national

           2    recycling rates.

           3              MS. LaRIVIERE:  Right.

           4              SPEAKER:  The rate has been -- if

           5    you actually know the recycling rate and you

           6    know the amount of plastics produced, doesn't

           7    that help you tell you something about the

           8    composition of the waste?

           9              MS. LaRIVIERE:  It does, and it

          10    tells us --

          11              SPEAKER:  We are trying to

          12    forecast --

          13              MS. LaRIVIERE:  Right.

          14              SPEAKER:  Future recycling rates.

          15              MS. LaRIVIERE:  It tells us --

          16              SPEAKER:  Better than that, or

          17    should we do better than that, I guess

          18    constantly.

          19              MS. LaRIVIERE:  We've got to

          20    consummate -- it's like some percentage, I

          21    don't know, maybe 13 percent of plastic is

          22    recycled, whatever, and then you have the




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           1    production that's increasing every year.  So

           2    it tells us that plastics are going to be

           3    increasing in the wastestream.

           4              MR. EDMONDS:  What you're saying is

           5    that -- when you're doing your forecast

           6    model, you actually back up one step and

           7    actually produce, essentially, an estimate of

           8    plastics with a recycling rate which then

           9    gives you the flow off into MSW.  Same thing

          10    for the biological material, with a recycle

          11    rate -- and then actually have a structural

          12    model that --

          13              MS. LaRIVIERE:  That's part --

          14              MR. EDMONDS:  You might get a

          15    better job than just taking a trend.

          16              MR. BINGHAM:  So that's what I was

          17    trying to say.

          18              MS. LaRIVIERE:  If I understand you

          19    correctly, I think that that's already part

          20    of this model, because the data that we use,

          21    the weights on the methodology sheet that I

          22    handed out are the -- it's the amount created




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           1    in the U.S. minus the amount recycled.  So

           2    the recycling rate is already incorporated

           3    for each year.

           4              MR. BINGHAM:  Great.  I got nothing

           5    then.

           6              MS. LaRIVIERE:  Me neither.

           7    Because we know that the non-biogenic part is

           8    going to keep increasing, but it's really not

           9    going to increase to 100.  So we just don't

          10    know --

          11              MR. CLEVELAND:  Is this one of our

          12    research projects for students?

          13              MS. KIRKENDALL:  Yeah.

          14              MR. CLEVELAND:  There you go.

          15              MS. KHANNA:  So I have to ask you a

          16    question.  Somewhere during the presentation,

          17    you mentioned that the EIA does collect NSW

          18    data from the plants.

          19              MS. LaRIVIERE:  Uh-huh.

          20              MS. KHANNA:  What exactly -- what

          21    is the information that you collect, and how

          22    difficult is it going to be collect more




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           1    information?

           2              MS. LaRIVIERE:  Very difficult to

           3    collect more.  And what we do collect is the

           4    heat content of their fuels.

           5              MS. KHANNA:  Average of that.

           6              MS. LaRIVIERE:  Average, like where

           7    we have -- this here, this is what we collect

           8    from them, so we could make the same graph

           9    from them with their data.

          10              MS. KHANNA:  At the current level?

          11              MS. LaRIVIERE:  And theirs is

          12    increasing, too.  It's lower -- I think it's

          13    like a little bit under 10 to a little bit

          14    under 11 in the same time period.

          15              And who knows?  Maybe they are

          16    combusting MSW in a location that has a

          17    higher rate of plastics recycling or

          18    something like that.

          19              But their heat content is also

          20    increasing, but it would be -- I don't know,

          21    in my opinion, a burden on the people that

          22    fill out the surveys to say what they're




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           1    burning, because a lot of these places

           2    literally just -- a truck will back up to a

           3    bay, dump out what's in it and then a claw

           4    will pick it up and dump into an incinerator,

           5    and nobody ever looks at it.

           6              MS. KHANNA:  So I'm clutching,

           7    grasping straws here, okay?

           8              MS. LaRIVIERE:  No.  I know,

           9    appreciate it.

          10              MS. KHANNA:  If you know at the

          11    plant level the average heat content of a

          12    MSW, okay?  So you've got that information

          13    for every plant except for year 2005.

          14              MS. LaRIVIERE:  Right.

          15              MS. KHANNA:  But then you have the

          16    national average, which the EPA has given

          17    you?

          18              MS. LaRIVIERE:  Uh-huh.

          19              MS. KHANNA:  So you can tell

          20    something about that local plant as how it

          21    compares to some sort of average.

          22              MS. LaRIVIERE:  Right.




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           1              MS. KHANNA:  So if you have a local

           2    plant that has a higher heat average, heat

           3    content, average heat content than the

           4    national average, one could assume that this

           5    one burns more plastics.

           6              MS. LaRIVIERE:  Right.

           7              MS. KHANNA:  And if you have that

           8    data historically for (inaudible) maybe we

           9    can get some idea of trends at recycling

          10    rates, trends of shares at the bottom level

          11    and use that to somehow aggregate up to a

          12    national trend.

          13              Like I said, it's clutching at

          14    straws but from what you have got, it seems

          15    to be the only thing.

          16              MS. LaRIVIERE:  That's true.

          17    That's an idea.

          18              Bob, do you think you can work with

          19    that?

          20              SPEAKER:  You and I need to discuss

          21    this a little more before we actually

          22    implement it, and that's to get a 25-year




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           1    forecast.

           2              MS. LaRIVIERE:  Right.

           3              MS. KHANNA:  Oh, it will be a

           4    terrible forecast, I promise you.

           5              MR. SMITH:  Right, it'll have to,

           6    it's something that every year, when we get a

           7    new trend --

           8              MS. KHANNA:  But it won't be a

           9    straight line.

          10              MR. SMITH:  A new trend --

          11              MS. LaRIVIERE:  It's certainly not

          12    going to be correct, but it's less incorrect.

          13              MR. SMITH:  It's better than what

          14    we have right now.

          15              MS. LaRIVIERE:  Right.

          16              MR. WEINIG:  Could you join us at

          17    the table?

          18              MR. SMITH:  Sure.

          19              MR. WEINIG:  This is part of the

          20    discussion, and if you just announce for the

          21    transcriber who you are.  Your name and the

          22    sequence.




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           1              MR. SMITH:  Sure.  I'm Bob Smith.

           2    I work in EIA Office of Integrated Analysis

           3    and Forecasting Renewable Energy.

           4              MS. LaRIVIERE:  Any other

           5    questions?  Yes.

           6              MR. EDMONDS:  Just out of

           7    curiosity, I was looking at your table, the

           8    MSW consumption, renewable and non-renewable

           9    energy.  In 2002, there's a spike?

          10              MS. LaRIVIERE:  Yes.

          11              MR. EDMONDS:  And I was wondering

          12    whether or not that was something that's a

          13    story that goes with it.

          14              MS. LaRIVIERE:  I knew that

          15    somebody was going to ask that question.

          16    This happens because the electric utilities

          17    in this year just reported an increasing

          18    consumption of municipal solid waste.

          19    Without going in to the plant level data, we

          20    don't know exactly what happened.

          21              But these things change year to

          22    year just with flow and who's burning and




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           1    who's not.  So I don't know the answer to

           2    that question, but it wasn't the electric

           3    utilities, as opposed to somebody else who is

           4    combusting MSW.  That's all I can tell you.

           5              MS. KHANNA:  One other question: in

           6    the data that EIA collects, do you actually

           7    collect the total weight of MSW that's burned

           8    at each plant?

           9              MS. LaRIVIERE:  Yes.  Right, yes.

          10              MS. KHANNA:  So you know the share

          11    of the U.S. MSW that's burned in the plant?

          12              MS. LaRIVIERE:  Yes.

          13              MS. KHANNA:  Then it's possible to

          14    do the forecast and the -- look at the trend

          15    in each plant.

          16              MS. LaRIVIERE:  Right.

          17              MS. KHANNA:  And then look at the

          18    weighted average of what's not in --

          19              MS. LaRIVIERE:  It's better than

          20    what we're doing now.

          21              MR. NEERCHAL:  These are small

          22    areas.  Most --




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           1              MS. KHANNA:  Of course, this is

           2    grasping for straws, and you have to make

           3    assumptions about those averages changing or

           4    not changing and see what's happening, and it

           5    will be okay.  It may end up giving a

           6    straight line.  Who knows?

           7              MS. LaRIVIERE:  Is that it?  You

           8    guys were much nicer than you were this

           9    morning.  Made me a little bit nervous.

          10              MR. NEERCHAL:  They're getting

          11    tired.

          12              MR. CLEVELAND:  Philip always gets

          13    hammered; that's because he does all the

          14    electricity, which is a no-win proposition.

          15                   (Laughter)

          16              MS. LaRIVIERE:  I just want to say

          17    thank you.

          18              SPEAKER:  You had the whole

          19    committee --

          20              MS. KHANNA:  Can I see this?

          21              MS. LaRIVIERE:  Yes.

          22              MS. KHANNA:  This three questions




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           1    since I was completely unaware I was supposed

           2    to be doing this -- methodology for

           3    suggestions will continue.  Thank you.

           4              Hey, I was not informed.

           5              MS. LaRIVIERE:  Okay, I'm done.

           6              MR. GRUENSPECHT:  Just a little

           7    background, side ground -- it's challenging

           8    though, because so many of the laws and even

           9    some of the single (?) law will have five or

          10    six different -- and for purposes of one

          11    section of the law, all the MSW will be

          12    "renewable" and literally say for purposes of

          13    this section, renewable includes -- and a

          14    list will include solid wastes.  So it will

          15    include all of it, and then some other part

          16    of the same law, it will say -- here's money

          17    to do this work on renewable, and for

          18    purposes of this section, renewable includes,

          19    and it doesn't include it at all.

          20              In the state renewable portfolio

          21    standards, some of them do, some of them

          22    don't.  EIA's role is not to be -- we can't




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           1    decide for other -- although I got to say, we

           2    sent this to the municipal waste people, and

           3    they were pretty unhappy, and they of course

           4    pointed right to this section of some law

           5    that this is renewable, so how could you say

           6    it's not?

           7              But given that in the same law

           8    there's another section that says it's not

           9    renewable at all, we consider this to be a

          10    very Solomon-like solution -- expect

          11    literally carried out, we actually cut the

          12    baby in half, and it's interesting in the

          13    states with renewable standards, some of them

          14    count it, some of them don't count it.

          15    Environmental groups typically prefer not to

          16    be counted.  Big city mayors who have these

          17    plants typically prefer to be counted,

          18    surprisingly enough.

          19              MR. CLEVELAND:  Sure.

          20              MR. GRUENSPECHT:  We can't -- you

          21    know, it's not that we're trying to impose

          22    our will on other policy people, and I think




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           1    in the paper, there's sort of explicit

           2    language to that effect.  Like, we're just

           3    trying to provide the components that you

           4    count whatever you want.  I mean, the

           5    biogenic is there, the non-biogenic is there.

           6    You want to count them both, count them both.

           7    If you count them none, count them none.

           8              MR. CLEVELAND:  All right.

           9              MR. GRUENSPECHT:  We just have to

          10    have to have something that we do that's

          11    consistent with our system.  There is no way

          12    we're going -- the policy people feel that

          13    we're trying to torque their debate.  They

          14    get very antsy, depending on which side it

          15    feels like --

          16              MR. CLEVELAND:  It's good I think

          17    you called biogenic and non-biogenic, because

          18    you don't say renewable and non-renewable.

          19              MR. GRUENSPECHT:  Right.  We then

          20    have to decide -- but then we've a planned

          21    definition of renewable, where you put it,

          22    and we say we put it -- this one here and




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           1    this one there -- you put it wherever you

           2    like.  But that's really the approach that

           3    we're trying to take.  We are not trying to

           4    bury it in aggregates of renewable or

           5    non-renewable that somebody who has a

           6    different opinion or wants to have a

           7    different law can't have the law or the

           8    opinion that they want, but we still have to

           9    put it somewhere, and we have to do it in a

          10    way that we think is consistent with --

          11              MR. CLEVELAND:  I think it's

          12    entirely consistent with the way -- because

          13    you're literally burning oil.

          14              MR. GRUENSPECHT:  Yeah.

          15              MR. CLEVELAND:  So that you

          16    are -- I think it's a very defensible

          17    position from your perspective that when

          18    you're burning plastic and rubber, you're

          19    burning oil.  So why would you put it in, why

          20    would you --

          21              MR. GRUENSPECHT:  There is an awful

          22    lot of religion in this topic.




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           1              MR. CLEVELAND:  I know the --

           2              MR. GRUENSPECHT:  I think they'd

           3    say -- many of the same people who would love

           4    you to burn -- take a tree and chop it up

           5    into woodchips and burn it in a boiler will

           6    object violently if you take a tree, turn it

           7    into a newspaper, read it, and then put it in

           8    a boiler.

           9              The first one is good renewable

          10    energy.  The bad one is burning some

          11    recyclable -- what they consider something

          12    that should be recycled in a different way.

          13    So again, everyone -- we're not trying to

          14    form value judgments -- you could tell what

          15    mine are -- but it's a very -- we can't solve

          16    that for people.

          17              I think you definitely get caught

          18    in the crossfire, as I think Marie has found

          19    out, you know?

          20              MS. LaRIVIERE:  There is a lot of

          21    contention over renewable versus

          22    replenishable, because -- I mean, as long as




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           1    people are around, MSW is going to keep

           2    coming, so why are we saying that if it's

           3    replenishable, it's not renewable?  But it

           4    does contain petroleum products, and nobody

           5    is going to say you burn a barrel of oil,

           6    that's renewable, so -- a lot of definitions

           7    have to be, we're adding biogenic to our

           8    glossary on the website, so that --

           9              MR. GRUENSPECHT:  But this actually

          10    fits -- if there's a theme, it fits in a

          11    little bit with the reorganization of the

          12    some of the tables.  I was just looking a lot

          13    harder at all these issues.

          14              MR. CLEVELAND:  That's why I said

          15    that.  I think you're on -- philosophically

          16    and methodologically -- I think you're okay,

          17    from what EIA is doing across the board, and

          18    let the other people, the other people --

          19              MR. GRUENSPECHT:  Let the other

          20    people beat the crap out of us.

          21              SPEAKER:  Right.

          22              MR. CLEVELAND:  Which is entirely




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           1    consistent with --

           2              SPEAKER:  I will say, well, the

           3    Committee said it was good.

           4              MR. CLEVELAND:  Exactly -- has

           5    given us this less.

           6              MR. EDMONDS:  We told you to do it,

           7    and let us do it.  What's the heat rate of

           8    one of these plants?  I mean if -- you're

           9    throwing glass and refrigerators in, then you

          10    must knock the socks off of the heat rate for

          11    one of these things.  What kind of --

          12              SPEAKER:  I think they're --

          13              MR. EDMONDS:  Just the dynamics

          14    inside the --

          15              MR. GRUENSPECHT:  Would know if

          16    there was someone here, they would probably

          17    know, I think that's been probably pretty

          18    high.  They are probably up 13-, 14,000 per

          19    kilowatt hour, BTUs for kilowatt hour.  It's

          20    a lot higher than coal plant, which would be

          21    like ten, or our natural gas plant would be

          22    like 7000 in an efficient one.  So it's




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           1    probably pretty high, but on the other hand,

           2    if you've got to pay to haul the stuff away

           3    otherwise --

           4              MR. EDMONDS:  Yeah.

           5              MR. GRUENSPECHT:  They had it under

           6    control.  For a long time, this industry,

           7    they had trouble like -- I mean at the end of

           8    I guess Bush 41 administration, there was a

           9    big issue of mercury emissions and people

          10    surrounding the plant and the whole mercury

          11    in particular, but like -- apparently the

          12    industry is kind of moving along.  They are

          13    not building any -- but certainly they're

          14    cash cows, the ones that are there, mayors

          15    and the staff really love them.

          16              So it's kind of fascinating.  It's

          17    like, again, the politics of Washington, but

          18    like -- you had a Democratic Party which

          19    often has a lot of strong environmental

          20    concerns, but also has a lot of big city

          21    mayor concerns.  It's very funny to see these

          22    things get fought out, because it's not the




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           1    Ds versus the Rs.

           2              MR. EDMONDS:  Yeah.

           3              MR. GRUENSPECHT:  It's very much of

           4    a where you are and -- yeah, it's another

           5    source of revenue.  If these things qualify

           6    for renewal portfolio standard, if they

           7    qualify for production tax credits, more

           8    money for city that has it.  You know, the

           9    mayor is going to fight for that.

          10              It's a good thing to get on this

          11    while the numbers are still in -- what are

          12    they, means of PTU.

          13              MS. KHANNA:  Come up here, Mark.

          14              MR. EDMONDS:  While the units are

          15    still small, and get the accounting and get

          16    this all straightened away before they

          17    potentially can get to be big numbers.

          18              MR. CLEVELAND:  But they're not

          19    building any new --

          20              MR. EDMONDS:  They aren't building

          21    any now.

          22              MR. CLEVELAND:  Yeah, they're not




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           1    building any now.

           2              SPEAKER:  Too much public

           3    opposition.

           4              SPEAKER:  I would just think

           5    there's a -- one thing that you said reminded

           6    me of a -- not only do we have the RPS issue,

           7    we now have renewable energy certificates,

           8    which of course value the renewable

           9    attributes.

          10              SPEAKER:  Right.

          11              SPEAKER:  What do they do now?

          12              SPEAKER:  Now they were showing

          13    that MSW is not all created equal, what

          14    happens to those attributes?  How are they

          15    handled?  It presets a whole new --

          16              SPEAKER:  Whoever sets up the

          17    program will have to decide.

          18              SPEAKER:  Difficult.

          19              SPEAKER:  It's not our --

          20              MS. LaRIVIERE:  This is not yet,

          21    this is just EIA though, it's not like

          22    Congress is redefined.




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           1              SPEAKER:  Right, I understand that.

           2              MR. GRUENSPECHT:  Although we

           3    counted it all renewable before, some states

           4    said no.  This counts zero, so it wasn't like

           5    our -- what we -- people who have a problem

           6    with what we do always claim that what we do

           7    affects what they can what law they can pass

           8    and generally, that's sort of bullshit, I

           9    mean, this is not -- in the states that we're

          10    able to get it included, they were powerful

          11    enough to get it included.

          12              In the states where they weren't

          13    powerful enough to get it included, and the

          14    people who were against it, because they

          15    think it's dirty, not good.  But now they

          16    have ammunition, because now they have got

          17    something to look at and say aha.

          18              Again, this -- I mean, no one has

          19    advocated for this solution.  Everyone has

          20    advocated either include it all or exclude it

          21    all.

          22              MS. KIRKENDALL:  It's perfect.




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           1              MS. KHANNA:  Because the one part

           2    as the non-biogenic faction goes up, it

           3    essentially means it's becoming a dirtier and

           4    dirtier fill in terms of dioxins --

           5              MR. GRUENSPECHT:  It's becoming

           6    less renew -- certainly less renewable.

           7              MS. KIRKENDALL:  Yeah, yes.

           8              MR. CLEVELAND:  And it definitely

           9    contributes more to climate change, too.

          10              MS. KIRKENDALL:  Yeah.

          11              MR. GRUENSPECHT:  So if we go to

          12    renewable replenishable, because we think

          13    they'd be using the plastic anyway, then the

          14    argument that I think some of the --

          15              MR. EDMONDS:  The plastic if it

          16    went to a landfill, it would have been tied

          17    up for a very long time.

          18              That does not degrade, right?

          19              MR. GRUENSPECHT:  That's my point.

          20    That doesn't degrade.

          21              MR. CLEVELAND:  A good for carbon

          22    sequestration.




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           1              MR. GRUENSPECHT:  Which we also

           2    track here.

           3              MR. EDMONDS:  I guess she got about

           4    two quads (?) in this stuff.

           5              MR. GRUENSPECHT:  Not that much.

           6              MR. EDMONDS:  A trillion BTU,

           7    1900 --

           8              MR. GRUENSPECHT:  That's 100, it's

           9    200.  0.3 quads.  Those numbers that you

          10    have, Marie.

          11              MS. LaRIVIERE:  It's about -- it's

          12    trillion DTUs, so 200 trillion BTUs.

          13              MR. GRUENSPECHT:  That's 0.2 quads.

          14              MS. LaRIVIERE:  One, two, three,

          15    yes.

          16              MR. EDMONDS:  You're in trillions

          17    of BTU.

          18              MS. LaRIVIERE:  Right.

          19              MR. EDMONDS:  Six more zeroes to

          20    quads, right?

          21              MR. GRUENSPECHT:  No.

          22              MS. LaRIVIERE:  Three.




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           1              MR. EDMONDS:  Three more.

           2              So if you're in thousands of

           3    trillions, then you're in --

           4              MR. GRUENSPECHT:  But we're in

           5    hundreds of trillions.

           6              MS. LaRIVIERE:  Two hundred.

           7              MR. EDMONDS:  I thought this was

           8    1,968 trillion BTU.

           9              MS. LaRIVIERE:  What slide are

          10    you --

          11              MR. EDMONDS:  This methodology

          12    page.

          13              MS. LaRIVIERE:  This is the BTUs

          14    per ton -- this isn't --

          15              MR. EDMONDS:  I thought that was

          16    the total of BTUs attributed -- that reads --

          17              MS. LaRIVIERE:  But this is how

          18    much heat when you burn a ton.  This is not

          19    the electricity generated.

          20              MR. EDMONDS:  You're grading the

          21    heat per ton.

          22              MR. CLEVELAND:  In multiplying




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           1    column one by column two to get column three,

           2    which is joints of ETUs, and the bottom

           3    number there is about two quads.

           4              MR. GRUENSPECHT:  If that's all --

           5              MR. CLEVELAND:  But that's all the

           6    trash.

           7              MR. GRUENSPECHT:  Okay.  That's all

           8    the MSW, but you're -- only 2 percent of it's

           9    going into --

          10              MR. CLEVELAND:  So it's two out of

          11    100 quads.

          12              MR. GRUENSPECHT:  What you're

          13    tracking to roughly two quads.

          14              MS. LaRIVIERE:  This is the

          15    availability -- yeah, I do.  This is what's

          16    available for combustion.  This does not

          17    necessarily mean this is what is combusted.

          18              MR. EDMONDS:  Right.  And I

          19    understand, so what is combusted is only like

          20    16.

          21              MS. LaRIVIERE:  So what's combusted

          22    is 16 percent of this, or something like




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           1    that.

           2              MR. GRUENSPECHT:  Do you have that

           3    slide where you showed the amount going to

           4    landfill that was the biggest piece of it.

           5    So lot of it's not combusted.

           6              Let's find that slide.

           7              MR. EDMONDS:  Right.  This was the

           8    potential energy content of all the MSW.

           9              MR. GRUENSPECHT:  But only the

          10    yellow is being combusted.

          11              MR. EDMONDS:  Right.

          12              MR. GRUENSPECHT:  So that's only --

          13              MR. CLEVELAND:  What are these

          14    numbers?

          15              MS. LaRIVIERE:  This is to give us

          16    the million BTU per ton MSW.  The numbers on

          17    the left is the million tons that are

          18    discarded.

          19              MR. CLEVELAND:  So that's a total,

          20    the MSW wastestream in the country?

          21              MS. LaRIVIERE:  Yes, after the

          22    recycling.




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           1              MR. CLEVELAND:  After recycling.

           2              MR. GRUENSPECHT:  Dark blue on that

           3    picture.

           4              MS. LaRIVIERE:  It's composting.

           5              MR. GRUENSPECHT:  So this is both

           6    light blue and yellow?

           7              MS. LaRIVIERE:  Discards and

           8    combustion.

           9              MR. CLEVELAND:  Okay.

          10              MS. LaRIVIERE:  So that we have

          11    16 percent of that.

          12              MR. CLEVELAND:  I got you.  So

          13    we're at 16 percent of --

          14              MR. EDMONDS:  Two quads.

          15              MR. CLEVELAND:  I got it.

          16              MS. LaRIVIERE:  So it's not a lot

          17    of energy -- it's not a lot, but it's just

          18    one of those little things that needed to be

          19    taken care of.

          20              MR. CLEVELAND:  EIA's stirring the

          21    pot again.

          22              SPEAKER:  Think of it like Michael




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           1    Corleone.

           2              We solve all our problems on the

           3    same day.

           4              MR. CLEVELAND:  It's interesting

           5    how flat, how unimpressive the recycling -- I

           6    mean, if you look at where we are, the dark

           7    blue, and look at where we are now compared

           8    to even 15 years ago, it hasn't really gone

           9    up a whole lot.

          10              MS. KHANNA:  There's only so much

          11    of the work -- will get us.

          12              MR. CLEVELAND:  Interesting.

          13              MR. EDMONDS:  But of course you get

          14    10-year time stamps and then --

          15              MR. CLEVELAND:  Compare 1990 to

          16    2005, you go from, what, 12-15 percent to

          17    20 percent.  Over 15 years.  It's not a --

          18              MS. LaRIVIERE:  Right.  EPA was not

          19    too excited about this section, because we're

          20    basically showing that the recycling hasn't

          21    increased, but they're saying that they're

          22    actively trying to increase the recycling




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           1    rates, but even their our own data shows that

           2    it's not really happening.  So who knows?

           3              MS. KHANNA:  There is not much

           4    incentive to recycle in North America.

           5              MR. CLEVELAND:  You get to start

           6    hitting people in the pocket books if you've

           7    going to do anything there.

           8              MR. GRUENSPECHT:  It's actually a

           9    democratic solution.

          10              MR. EDMONDS:  Howard, we can do

          11    that study.

          12              MR. GRUENSPECHT:  Actually, I did

          13    that study.

          14              SPEAKER:  What is it?

          15              MR. CLEVELAND:  Pay as you throw.

          16    Pay as you throw.

          17              MS. LaRIVIERE:  There are some

          18    cities I think where you can find a few -- if

          19    they find recyclable --

          20              MR. CLEVELAND:  EPA has got a nice

          21    map of their website of all the pay as you

          22    throw programs around the country, and




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           1    they're starting to pop up.

           2              MS. LaRIVIERE:  Who knows when

           3    this -- five years down the road this might

           4    be slightly different.  But that would

           5    certainly have the effect on the wastestream

           6    for the heat content.

           7              MR. CLEVELAND:  Of course, the

           8    problem is that as you mentioned, there's a

           9    scale effect.  The fact that you're

          10    producing -- you might be recycling more, but

          11    you're consuming more, too --

          12              SPEAKER:  Right.

          13              MR. CLEVELAND:  It's overwhelming.

          14              MS. LaRIVIERE:  Thank you for all

          15    your recommendations.

          16                   (Recess)

          17              MR. NEERCHAL:  We're back on the

          18    record.

          19              MS. KIRKENDALL:  Back on record.

          20              SPEAKER:  Are we here tomorrow?

          21              MS. KIRKENDALL:  Yes, we're here

          22    tomorrow.  Same place.  8:30, it says.




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           1              MR. NEERCHAL:  Neha, do you want to

           2    do the summary of the session on MSW?

           3              MS. KHANNA:  Thanks.

           4              Yes, so our session was on how to

           5    allocate municipal solid waste between what

           6    the agenda says as renewable and

           7    non-renewable, but what the presentation said

           8    was biogenic and non-biogenic, and that's an

           9    important distinction because these are

          10    politically charged words -- renewable and

          11    non-renewable, and they take on different

          12    meanings in different contexts.

          13              So what was biogenic was something

          14    that was essentially created by a living

          15    organism.  So textiles, yard trimmings, these

          16    things were biogenic.

          17              Non-biogenic components of

          18    municipal solid waste is essentially

          19    petroleum products.  Different kinds of

          20    plastic and rubber, synthetic rubber.  So the

          21    question, the basic problem I understood was

          22    that they need a forecast from a




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           1    modeling -- well, one is just the data issue

           2    that we want to track this, and the second is

           3    that it forms an input into NEMS.  And we

           4    want to know what part of this is biogenic,

           5    what part of is not biogenic, and if you look

           6    at the data, which is actually not firsthand

           7    data that's collected by the EIA, but it's

           8    data that the EPA collects at a national

           9    level and makes it over to the EIA, you've

          10    got two very straight trend lines, which is

          11    that the non-biogenic component is rising and

          12    the biogenic component is falling.

          13              And the main reason for this is

          14    increased recycling of plastics for paper and

          15    paper products.  And therefore a larger share

          16    of plastics in the wastestream.

          17              The energy impact or importance of

          18    that as a plastic have a much higher heat

          19    rate.  So now per unit of input, which I have

          20    forgotten -- but per unit of input, we're now

          21    generating a lot more heat from municipal

          22    solid waste than we were 15-20 years ago.




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           1              And that's important from a NEMS

           2    perspective, and from a state's renewable

           3    energy portfolio standards perspective,

           4    depending on what they're calling renewable.

           5    Some states call municipal solid waste

           6    renewable, others don't.  The main question

           7    for the Committee was how can we forecast the

           8    split?  If you look at the split, it's

           9    currently 45-55, which used to be maybe

          10              MS. LaRIVIERE:  Like 35-65.

          11              MS. KHANNA:  They're just

          12    essentially two straight lines that are

          13    converging, so the issue is when you project,

          14    forecast forward, they cross over, and very

          15    soon you're going to go to plus 100 and

          16    negative numbers, and that just doesn't work,

          17    so how can they forecast these shares?  The

          18    second issue, big issue, was the source of

          19    the heat content.

          20              Now, from the EPA, I understand

          21    that they have heat contents for various

          22    categories of municipal solid wastes.  But




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           1    they're calculated in different ways; they're

           2    from different sources, and it's not clear if

           3    they're all exactly comparable or not.  And

           4    so there was a general question put out, if

           5    you know some source, please let us know

           6    because we'd like to have that information.

           7              Essentially, the Committee did not

           8    give very good advice.  But I think it's

           9    because not much information is available.

          10    And I think that's the Achilles' heel of the

          11    problem.

          12              The two major suggestions that came

          13    out was if there's some standalone

          14    information, let's say from the plastics

          15    industry or from the recycling industry that

          16    we can use to somehow guide our forecast, and

          17    not just have straight lines running into the

          18    future, that could be useful, but it doesn't

          19    look like that information is readily

          20    available and especially since there's a lot

          21    of local variation on things like recycling

          22    rights.




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           1              The only other suggestion was

           2    called it grasping for straws -- and I think

           3    that's what it is, which is that the EIA does

           4    collect data at the park level.

           5              These municipal solid waste

           6    combusted -- I should say, we were talking

           7    about that 16 percent of the MSW that's

           8    actually combusted.  So it's a small portion.

           9    About 0.2 quads, right?  So since the EIA

          10    does collect at the plant level the average

          11    heat content of the municipal solid waste

          12    that's combusted, that gives us some idea of

          13    how that plant compares to some kind of

          14    national average, and these data are

          15    available historically.

          16              So maybe we can use these plant

          17    level data to look at local trends, and from

          18    there back out to national trend, because we

          19    know the fraction of the total national MSW

          20    that's being burned at each plant.  Given all

          21    the issues with special considerations and

          22    everything else, but there doesn't seem to be




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           1    that much more data available.  And I think

           2    that's pretty much where we left it as far as

           3    the questions went.

           4              MS. LaRIVIERE:  You have a good

           5    memory.

           6              MR. NEERCHAL:  Thank you.  Anything

           7    Committee members want to add something to --

           8              MS. KHANNA:  Well, actually, I do

           9    have one more thing, which is Maria -- Maria

          10    came with her fan club and it's growing.

          11              MR. NEERCHAL:  Thank you.

          12              Walter, do you want to summarize

          13    the other breakout session?

          14              MR. HILL:  Certainly.  The other

          15    breakout session dealt with growth rates for

          16    petroleum supply, years 1995 to 2004.  The

          17    main problem was that -- clients want year to

          18    year growth rates in the petroleum supply;

          19    the example given was March 2004 to March

          20    2005.

          21              Data come out -- data are delayed

          22    when the -- so that's a problem is that to




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           1    give clients -- the clients want information

           2    before the last data are out.  The problem is

           3    to try to find some way of estimating the

           4    growth rate as soon as possible.

           5              Several different methods were

           6    suggested, and it was noted that the units

           7    used were barrels per day, and so that things

           8    like obvious calendar effects,

           9    months -- February has fewer days some years

          10    than others, so those sorts of calendar

          11    effects are taken out.  An equation used was

          12    called the gold standard, which is sort of

          13    the official number used to measure that

          14    annual growth.  But that gold standard number

          15    does not come out soon enough for the

          16    analysts.

          17              Weekly data are available.  There's

          18    sometimes been talk about how the weekly data

          19    are calculated.  It's a Friday to a Friday.

          20    That's a -- per Friday, the week starts on a

          21    Friday.  We interrupted Carol a couple of

          22    times.  I admit now that we interrupted her




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           1    there to deal with the issue of having a time

           2    series analysis within the data.  There

           3    wasn't a time series given in the main

           4    presentation, there's some time series now,

           5    but that was only in the computer -- and that

           6    would come up on the screen if -- suppose a

           7    week, come back in a week to revisit this.

           8              Remember, last year, the Committee

           9    was often told that we should recommend and

          10    we should -- EIA should be given more and

          11    more money.  I noticed at the initial session

          12    this morning --

          13              MS. KIRKENDALL:  It worked.

          14              MR. HILL:  It worked, yes.  And as

          15    in this presentation, it's noted that they

          16    have a local budget's been cut, so that, I

          17    mean, we should make a recommendation that

          18    more money should -- should go to the library

          19    here, so you get better data.

          20              MS. BLUMBERG:  They were asking

          21    about some stuff, and I actually had used my

          22    emeritus status from Winona State to get some




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           1    of the publications, because I could no

           2    longer access certain things from EIA,

           3    because once the library was

           4    disassembled -- also most of the databases

           5    that were not energy-specific were done.

           6    Like Lexis-Nexis has disappeared and other

           7    things.  So I'm saying that would -- as a

           8    researcher, I'm missing that a lot.  So then

           9    I have to go -- I do that at home now and I

          10    need to pay for that, you know?

          11              MR. HILL:  It was a running joke

          12    last session with --

          13              MS. BLUMBERG:  65,000.

          14              MR. HILL:  Mixed results in that.

          15              SPEAKER:  Candidature literature

          16    came up.

          17              MR. HILL:  So various methods of

          18    trying to estimate.  Somebody said there what

          19    you're trying to do is forecast the real

          20    annual growth --

          21              SPEAKER:  Very interesting.

          22              MR. HILL:  That's I think the way




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           1    you put it -- you try forecasting the annual

           2    growth with the data that are available

           3    before the annual growth number's out, it's

           4    the problem.

           5              A number of the estimates make use

           6    of weekly data, and there are various ways,

           7    given that the weeks appeared -- Friday to

           8    Friday weeks appeared different within each

           9    one of the months, the question about which

          10    sets of weeks do you use and how do you

          11    weight the various periods.  And there's a

          12    month-to-month type of -- there's a monthly

          13    type of estimate.  14 different ways of

          14    trying to do the estimate.

          15              There was a summary table.  I've

          16    looked at the paper a bit last night and had

          17    trouble trying to keep track -- you should

          18    note other people had trouble keeping track

          19    of the 14 methods -- that series of methods,

          20    used to try to make that -- making that

          21    estimate.

          22              And several different criteria used




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           1    to determine whether or not an estimate was

           2    good or not.

           3              One method was a biased estimate

           4    but had a smaller variance.  That was

           5    interesting because I know (inaudible) that

           6    what comments -- for lectures, students find

           7    that surprising that you want -- it may make

           8    sense that you have a biased estimate with a

           9    small variance.  It turns out that may be one

          10    of the best estimates.

          11              Another possible criteria was to

          12    see whether or not the estimates were off by

          13    one or two percent against what eventually

          14    became known as the correct estimate, the

          15    gold standard.  And that those varied quite a

          16    bit whether or not you're within one or two

          17    percent of the correct number.  Also noted

          18    was whether or not the sign of the estimate

          19    was correct, whether or not the direction was

          20    correct, which -- I know analysts, when they

          21    see business reports, I know some analysts

          22    are very excited about that, although I may




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           1    be less so, but if that's what the

           2    clients -- so if that's what the clients care

           3    about, you don't have to worry about this

           4    estimate.

           5              It sounded like they were more

           6    unhappy if that -- if the sign was correct

           7    but you had reported one -- 1/10th of a

           8    percent rather than 3 percent, but you have

           9    the correct sign, they were more concerned

          10    that you have the correct sign as opposed to

          11    having the incorrect sign of 0.1 -- it's like

          12    a 0.1 percent and 0.1 percent positive as

          13    opposed to -0.2 percent, gave an example like

          14    that.

          15              The analysts were unhappy with the

          16    sign problem, even though the magnitude of

          17    the error was smaller.  We spent a little

          18    time talking about -- since there may be a

          19    psychological problem in terms of -- we used

          20    that word -- psychological problem in terms

          21    of the clients, and the comments about maybe

          22    other -- re-educating the public on the




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           1    variety of the estimates.

           2              It was mentioned that estimates are

           3    written with cones -- sort of plus and minus,

           4    margin of error -- call it margin of error, I

           5    feel, of the estimate.  A word like

           6    "preliminary" was used and may be we should

           7    tell people that there's a -- or you should

           8    tell people there's a preliminary estimate

           9    and another estimate is coming out later.

          10    Given the range of estimates -- she had a

          11    couple of comments about which procedures to

          12    use or not to use.

          13              A specific one that should be

          14    avoided.  The PSM over the -- the PSA.  She

          15    mentioned one that should not be sued, but

          16    made no general recommendation about which

          17    estimate procedure is to be recommended.  We

          18    spent a little time talking about seasonal

          19    effects.  I guess there was some mixed

          20    feeling within the Committee whether or not

          21    seasonal effects were taken care of or not.

          22              And other comments about possibly




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           1    time series effects would improve the

           2    estimates.

           3              Reported confidence I think also

           4    came up in our discussion.  And maybe that

           5    could be reported and it would be understood

           6    that there's error within the estimate when

           7    it comes out, the early estimate, when it

           8    comes out.

           9              MR. FEDER:  I think we all felt it

          10    was very interesting, and I hope to see the

          11    next stage, next time or whenever, when it

          12    matures.

          13              MR. NEERCHAL:  Anything else?

          14              MR. FEDER:  Yes.  One comment on

          15    the seasonality.  I guess the point was made

          16    these -- because they were looking on ratios

          17    of similar months across years, the

          18    seasonality is already factored out by that,

          19    and indeed at the end we did see some -- one

          20    slide was time series analysis, where there

          21    was no significance I guess for -- nothing

          22    was significant just because of that.




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           1              So seasonality was -- and what I

           2    was suggesting to Carol is to repeat the

           3    analysis by not looking at ratios but

           4    actually the raw series and see if there's

           5    anything that you can get without doing this

           6    ratio, which does tend to wipe out some

           7    potentially interesting patterns in the

           8    series.

           9              MR. BLAIR:  There was a specific

          10    suggestion from Ed to look at how BEA handles

          11    this situation, because they've dealt with

          12    it.

          13              MR. KOKKELENBERG:  One other thing

          14    was -- no matter how you measure the shorter

          15    time periods, be consistent, and that

          16    diminishes the error.  You may have said that

          17    Walter, and I may have misunderstood.

          18              MR. HILL:  I think you brought it

          19    up initially.  You had a phrase like apples

          20    and oranges don't mix.

          21              MR. KOKKELENBERG:  No, the issue

          22    was that if you're measuring annual by a




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           1    proxy of monthly plus some noise, you want

           2    to -- and then you're looking at differences,

           3    the ratio, rather than the levels, make those

           4    two error terms exactly equal, the whole

           5    thing collapses to zero, and then you don't

           6    have any error in your growth rate estimate.

           7    So consistency was a hobgoblin of this

           8    particular problem rather than (inaudible)

           9    said that, was that --

          10              MR. FEDER:  There was a one little

          11    question -- I mean, the whole exercise is to

          12    allow for timely, speedy estimates before you

          13    can use the gold standard or anything better

          14    than that, so there's always a compromise

          15    what you use -- if you want to, and then I

          16    guess that led to the confidence bands idea

          17    is that what do we do if we publish something

          18    which is not something we can trust with

          19    money but it's good enough for now.

          20              How do you make the public aware of

          21    it?  And so we did say why don't you publish

          22    it with a caution -- there was a nod from the




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           1    people that that won't work.

           2              Then Barbara suggested, why don't

           3    you publish it with a confidence bond so you

           4    can visually see that we're not publishing

           5    something -- by we I mean you -- something

           6    that's definite but is something that you can

           7    use to appreciate what you do and what you do

           8    not, willing to bet your money on.

           9              MR. EDMONDS:  It may be your

          10    concern making things like it's not a common

          11    slide, here's our estimate, but it's not

          12    significantly different from zero.  I mean,

          13    this sounds like that's the issue, whether or

          14    not you hit a positive or negative estimate

          15    of a --

          16              MR. FEDER:  That was a

          17    psychological question.  Right, right.

          18              MR. NEERCHAL:  I would like to

          19    invite the public for comments, if they have

          20    any comments from any of the sessions?

          21              MS. KIRKENDALL:  The public is

          22    quiet.




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           1              MR. NEERCHAL:  They managed to get

           2    to sleep.  Thank you very much.

           3              I think before we break for the

           4    day, I think we'll have some logistics for

           5    tonight.

           6              MR. WEINIG:  For those of you who

           7    are on the Committee or coming to dinner or

           8    otherwise with the Committee, the name of the

           9    restaurant is the Gallery Place -- Clyde's

          10    Gallery Place, and the address is 707 7th

          11    Street, NW, in the Chinatown area.  Now, you

          12    can use the Metro, if you like, on a

          13    north-south path from over here, I'm sorry,

          14    about two blocks away, we can get to it on

          15    the yellow and the green line, to just take

          16    it to Gallery Place, Chinatown.

          17              MR. NEERCHAL:  And we'll be here

          18    tomorrow.

          19                   (Whereupon, at approximately 4:51

          20                   p.m., the MEETING was adjourned.)

          21                        *  *  *  * *

          22




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