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i

33–594 2007

[H.A.S.C. No. 109–127]

ALTERNATIVE ENERGY AND ENERGY EFFICIENCY PROGRAMS OF THE DEPARTMENT OF DEFENSE

JOINT HEARING

BEFORE THE

TERRORISM UNCONVENTIONAL THREATS AND

CAPABILITIES SUBCOMMITTEE

MEETING JOINTLY WITH

READINESS SUBCOMMITTEE

OF THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

HEARING HELD

SEPTEMBER 26, 2006
(II)

TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES

SUBCOMMITTEE

JIM SAXTON, New Jersey, Chairman

ROBIN HAYES, North Carolina

W. TODD AKIN, Missouri

JOE WILSON, South Carolina

JOHN KLINE, Minnesota

BILL SHUSTER, Pennsylvania

GEOFF DAVIS, Kentucky

JOEL HEFLEY, Colorado

MAC THORNBERRY, Texas

JIM GIBBONS, Nevada

JEFF MILLER, Florida

FRANK A. LOBIONDO, New Jersey

MARTY MEEHAN, Massachusetts

ADAM SMITH, Washington

MIKE MCINTYRE, North Carolina

ELLEN O. TAUSCHER, California

ROBERT ANDREWS, New Jersey

JAMES R. LANGEVIN, Rhode Island

RICK LARSEN, Washington

JIM COOPER, Tennessee

JIM MARSHALL, Georgia

CYNTHIA MCKINNEY, Georgia

READINESS SUBCOMMITTEE

JOEL HEFLEY, Colorado, Chairman

JOHN N. HOSTETTLER, Indiana

WALTER B. JONES, North Carolina

JIM RYUN, Kansas

J. RANDY FORBES, Virginia

JEFF MILLER, Florida

MIKE ROGERS, Alabama

JOE SCHWARZ, Michigan

CATHY MCMORRIS RODGERS, Washington

JOHN M. MCHUGH, New York

ROBIN HAYES, North Carolina

ROB SIMMONS, Connecticut

JEB BRADLEY, New Hampshire

CANDICE MILLER, Michigan

TRENT FRANKS, Arizona

BRIAN P. BILBRAY, California

SOLOMON P. ORTIZ, Texas

LANE EVANS, Illinois

GENE TAYLOR, Mississippi

NEIL ABERCROMBIE, Hawaii

SILVESTRE REYES, Texas

VIC SNYDER, Arkansas

ROBERT A. BRADY, Pennsylvania

SUSAN A. DAVIS, California

JIM MARSHALL, Georgia

KENDRICK B. MEEK, Florida

MADELEINE Z. BORDALLO, Guam

TIM RYAN, Ohio

MARK UDALL, Colorado

G.K. BUTTERFIELD, North Carolina

JENNESS SIMLER, Professional Staff Member

LYNN WILLIAMS, Professional Staff Member

BRIAN ANDERSON, Staff Assistant

HEATHER MESSERA, Staff Assistant
(III)

C O N T E N T S

CHRONOLOGICAL LIST OF HEARINGS

2006

Page

HEARING:

Tuesday, September 26, 2006, Alternative Energy and Energy Efficiency Programs of the Department of Defense .................................................................. 1

APPENDIX:

Tuesday, September 26, 2006 ................................................................................. 53

TUESDAY, SEPTEMBER 26, 2006

ALTERNATIVE ENERGY AND ENERGY EFFICIENCY PROGRAMS OF

THE DEPARTMENT OF DEFENSE

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Hefley, Hon. Joel, a Representative from Colorado, Chairman, Readiness Subcommittee .............................................................................................................. 2

Ortiz, Hon. Solomon P., a Representative from Texas, Ranking Member,

Readiness Subcommittee ..................................................................................... 3

Saxton, Hon. Jim, a Representative from New Jersey, Chairman, Terrorism,

Unconventional Threats and Capabilities Subcommittee ................................. 1

WITNESSES

Aimone, Michael A., Assistant Deputy Chief of Staff, Logistics, Installations

and Mission Support, U.S. Air Force .................................................................. 7

Bartis, James T., Senior Policy Analyst, RAND Corporation .............................. 42

Connelly, Richard, Director, Defense Energy Support Center, Defense Logistics Agency ............................................................................................................ 8

Grone, Philip W., Deputy Under Secretary of Defense for Installations and

Environment, Office of the Secretary of Defense .............................................. 5

Sklar, Scott, President, the Stella Group, Ltd. ..................................................... 40

Wagner, Mark, Member, Federal Performance Contracting Coalition, Business

Council for Sustainable Energy .......................................................................... 45

Young, Hon. John J., Jr., Director, Defense Research and Engineering, Office

of the Secretary of Defense .................................................................................. 4

APPENDIX

PREPARED STATEMENTS:

Aimone, Michael A. .......................................................................................... 166

Bartis, James T. ............................................................................................... 131

Connelly, Richard ............................................................................................. 158

Hefley, Hon. Joel .............................................................................................. 57

Ortiz, Hon. Solomon P. ..................................................................................... 64

Saxton, Hon. Jim .............................................................................................. 59

Sklar, Scott ........................................................................................................ 77

Wagner, Mark ................................................................................................... 67

Young, Hon. John J., Jr., joint with Philip W. Grone ................................... 138
Page

IV

DOCUMENTSSUBMITTED FOR THERECORD:

[There were no Documents submitted.]

QUESTIONS ANDANSWERSSUBMITTED FOR THERECORD:

[There were no Questions submitted.]
(1)

ALTERNATIVE ENERGY AND ENERGY EFFICIENCY

PROGRAMS OF THE DEPARTMENT OF DEFENSE

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED

SERVICES, TERRORISM, UNCONVENTIONAL THREATS AND

CAPABILITIES SUBCOMMITTEE, MEETING JOINTLY WITH

READINESS SUBCOMMITTEE, Washington, DC, Tuesday,

September 26, 2006.

The subcommittees met, pursuant to call, at 2:03 p.m. in room

2118, Rayburn House Office Building, Hon. Jim Saxton (chairman

of the subcommittee) presiding.

OPENING STATEMENT OF HON. JIM SAXTON, A REPRESENTATIVE FROM NEW JERSEY, CHAIRMAN, TERRORISM, UNCONVENTIONAL THREATS AND CAPABILITIES SUBCOMMITTEE

Mr. SAXTON. Good afternoon.

Today the subcommittee will hold a joint hearing with the Subcommittee on Readiness, chaired by my good friend, Joel Hefley, on

the alternative energy and energy efficient programs of the Department of Defense (DOD). We will also have an opportunity to learn

about options to affect both energy supply and demand in order to

foster lasting energy security, which is a component to national security.

Energy security and conservation of natural resources are crosscutting issues of great concern to many members of the committee.

In fact, we received a bipartisan request signed by more than 20

members of this committee requesting this hearing.

As the single largest consumer of petroleum fuels in the United

States, the military has an opportunity to serve as an early adopter

of alternative fuel sources and to offer a certain level of market assurance to alternative fuel suppliers. Nonetheless, Department of

Defense’s fuel usage represents less than two percent of the total

fuel usage in the United States. Therefore, we must set realistic expectations. The Department of Defense alone cannot shoulder the

responsibility of formulating and implementing a national strategy,

nor can it drive the market. However, it is appropriate for the Department to exercise the leadership role in this area, and likewise

for this committee to exercise appropriate oversight of those efforts.

Speaking of leadership, I would like to thank the Vice Chairman

of the subcommittee, Robin Hayes, for his work on this topic. Robin

has been productive in bringing about this matter to the subcommittee’s attention and in engaging the Department. This hearing follows a briefing that we had on the subject in June, which

was also prompted by Mr. Hayes.

These activities are intended to be the early steps of a multiphased oversight effort with regard to the investments in the utili-
2

zation of alternative energy and energy-efficient technologies within the Department of Defense.

Our first panel of witnesses will provide building blocks for

greater understanding of, one, the steps taken by the Secretary of

Defense to develop a comprehensive energy security strategy; two,

how the Air Force, as the largest consumer of fuel within the

United States Government, is actively conducting research, development, testing and evaluation of alternative fuels in order to reduce dependency on foreign oil and to maintain assured mobility;

and, finally, how the Department procures and distributes fuel, and

the Department of Energy Support Center’s efforts to assess the

current conditions of synthetic fuel markets.

The second panel of witnesses will share their nongovernmental

perspectives on several items: first, the Department of Defense efforts to incorporate energy-efficiency renewables and distributed

energy programs; second, nontraditional options for increasing energy supply; and finally, third, options for incentivizing the federal

contractors and incorporate energy efficiency into government programs in order to reduce energy demand in the federal sector.

We would ask the witnesses to begin by providing their perspectives on the issues. After the conclusion of the testimony, we will

open the floor for questions.

With that, I turn to my friend, Mr. Hefley, for any comments

that he would like to make.

[The prepared statement of Mr. Saxton can be found in the Appendix on page 59.]

STATEMENT OF HON. JOEL HEFLEY, A REPRESENTATIVE

FROM COLORADO, CHAIRMAN, READINESS SUBCOMMITTEE

Mr. HEFLEY. Thank you, Chairman Saxton. And I would like to

begin by thanking you and the Ranking Member and all the members of your subcommittee for your support in arranging this very

important joint hearing.

As we all know, DOD is the largest single consumer of fuel in

the United States. And while this may not be the most glamorous

subject we deal with, energy is critical to success on the battlefield.

Fuel and fuel logistics are an enormous part of the Department’s

operation and budget, as the military consumes over 350,000 barrels of petroleum-based fuels per day. And the Air Force alone

seeks a $600 million increase in the annual cost of doing business

for every $10 increase in the price of a barrel of oil. Although the

majority of energy consumption in the Department of Defense is for

transportation, installation energy requirements must also be considered as we work to maintain and modernize our military facilities.

I understand that the Department is actively looking into the energy needs across the board and working to find ways to reduce energy consumption, improve efficiency and employ alternative fuels

as they go about accomplishing their mission. And I am delighted

to be here today and look forward to this hearing from our distinguished witnesses.

Thank you very much.

[The prepared statement of Mr. Hefley can be found in the Appendix on page 57.]
3

Mr. SAXTON. Thank you, Mr. Hefley.

Energy conservation is a bipartisan issue, and so we are going

to turn to Mr. Ortiz for his comments.

STATEMENT OF HON. SOLOMON P. ORTIZ, A REPRESENTATIVE

FROM TEXAS, RANKING MEMBER, READINESS SUBCOMMITTEE

Mr. ORTIZ. Thank you, Mr. Chairman. I would also like to extend

our welcome to our distinguished witnesses.

The energy needs of this country are one of the most important

challenges facing our Nation today. Energy needs influence our

international policies and are key to our National Defense Strategy. For this reason, I am pleased that we are hearing testimony

about what the Department of Defense is doing to reduce its needs

for external sources of energy.

The rise in cost of gasoline has affected all Americans, and our

military is not immune. Rising energy costs are consuming a larger

portion of the operations and maintenance (O&M) budget, so every

dollar spent on fuel means fewer dollars for operation, training and

maintenance.

In a time of increasing needs and increasing budgets, the DOD

must find every way possible to stretch its energy dollars. And fuel

is not only expensive, it is also very heavy. Moving fuels takes an

enormous logistical effort and consumes a strategic lift that could

be better used moving soldiers, equipment and ammunition. The

most effective way to improve the deployability of our ground forces

is to reduce their fuel requirements.

So finding energy efficiencies isn’t just about money, it is also

vital to increasing the strategic capabilities of our forces.

I have been following the work of the services in developing new

technologies. Of particular interest is the historic B–52 alternative

fuels test flight conducted by the Air Force on December the 19th.

DOD testings and implementation of technology such as this will

ultimately influence the private sector and benefit the economy at

large. For that reason, it is vital that Congress continue to fund

new initiatives and for DOD to aggressively pursue them.

Energy security is vital to our national defense, so we must find

ways to reduce our energy needs and find new technologies to meet

our energy requirements.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Ortiz can be found in the Appendix on page 64.]

Mr. SAXTON. Thank you very much. Some years ago, Senator

John Bennett told me that he had purchased a hybrid car. And I

asked him about it and I asked him how fast it went. He said it

goes with the rest of traffic. And I asked him how he got his big

long legs in it; and he said, I don’t know, there is plenty of leg

room. So I went out and bought one. And it is really a remarkable

technology. And I guess we are here today to kind of do what Senator Bennett did to me: to find out where we are in DOD, let us

ask some questions, and hopefully spur not only some discussion

here today, but some activity inside of DOD that will lead to other

things both inside and outside of DOD to help us understand where

DOD is today.
4

Our first panel consists of the Honorable John Young, Director

of Defense Research and Engineering, Office of the Secretary; Mr.

Phillip Grone, an old friend who worked here on this committee for

many years, and he now serves as Deputy Under Secretary of Defense for Installations and Environment, also in the Office of the

Secretary; Mr. Mike Aimone, Assistant Deputy Chief of Staff, Logistics Installations Missions Support, United States Air Force; and

Mr. Richard Connelly, Director, Defense Energy Support Center,

Defense Logistics Agency.

We are anxious to hear your thoughts of these matters, and so

why don’t we begin, Mr. Young.

STATEMENT OF HON. JOHN J. YOUNG, JR., DIRECTOR, DEFENSE RESEARCH AND ENGINEERING, OFFICE OF THE SECRETARY OF DEFENSE

Mr. YOUNG. Chairman Saxton, Chairman Hefley, Congressman

Ortiz, and members of the committee, thank you for the opportunity to testify today.

I am pleased to have the chance to appear before the committee

to discuss the Defense Department’s broad range of activities on

energy.

Energy security, efficiency, and the use of renewable resources

has been of interest to the Administration long before the recent

publicity. The National Security Strategy, signed in March of 2006,

sets forth a challenge for the Nation to expand the types and

sources of energy and to foster private investment that can help develop the energy needed to meet the global demand.

The Defense Department also has unique energy requirements

which often align with the energy needs of the Nation. For example, in early August, Major General Richard Zilmer, our Anbar

Province commander, submitted an urgent request for renewable

energy systems for remote forward-deployed forces due to the vulnerability of supply lines to insurgent attack or ambush by roadside bombs.

The Defense Department has worked steadily toward many of

these goals and needs over the past several years. From the facility

side, by 2005 the Department had reduced the facilities’ energy use

by over 28 percent from the 1985 baseline, and the Energy Policy

Act of 2005 has reset the baseline and increased the reduction target.

Indeed, in 2005, military service installations received four of the

five Presidential awards for leadership in Federal energy management. My colleague, Phil Grone, will be able to talk in much greater detail about these efforts.

DOD continues to develop renewable energy technology and facilities on bases using geothermal sources, wind, solar, and ocean

temperature differentials. DOD has a range of research and development programs underway to improve energy efficiency. Examples

include the use of lighter-weight materials in platforms, fuel-efficient engine designs, drag-reducing coatings, and testing alternative fuels.

The Service Funded Energy and Power Technology Initiative has

focused on lightening the logistics burden of our ground forces by
5

developing efficient power generation, energy storage and power

control and distribution technologies.

Secretary Rumsfeld directed, in the Strategic Planning Guidance

this year, that a task force review the Department’s efforts on

power energy alternatives and efficiency. The Task Force reviewed

DOD plans to invest $1.8 billion on energy-related efforts between

fiscal years 2007 to 2011.

The military services, combatant commands and defense agencies, embraced this task force, and the result was tremendous collaboration. Indeed, a key early outcome is that the Department has

established a Web site for use by the Defense Department’s program and policy personnel working on energy. This site is being

populated with completed and planned projects, and lessons

learned on energy-related programs to allow continued collaboration and coordination. While the work of this task force is not yet

finalized, we are looking at a wide spectrum of ideas and opportunities to pursue even greater energy efficiency and flexibility.

Over the next few years, the Department plans to test and demonstrate new technologies for reducing energy consumption for our

weapons systems and their facilities. If the technologies are successful, DOD could realize substantial annual savings in energy

costs in the long run, with full implementation, and many of the

programs may start yielding net savings soon. Some of these technologies should also reduce maintenance cost and the associated logistics tails.

In addition, testing and certifying energy sources for our military

platforms in concert with the Department of Energy may help to

catalyze U.S. industry to produce these fuels, enabling the Nation

to move forward toward the goal of energy security and independence advocated by President Bush in his State of the Union message.

In closing, Mr. Chairman, I will stop, leaving much more to say.

The Department is truly grateful for your strong support of our energy initiatives and investments, and I look forward to working

with you as we increase energy security and reduce operating costs

for the Department. And I look forward to your questions.

[The joint prepared statement of Mr. Young and Mr. Grone can

be found in the Appendix on page 138.]

Mr. SAXTON. Thank you very much.

Mr. Grone.

STATEMENT OF PHILIP W. GRONE, DEPUTY UNDER SECRETARY OF DEFENSE FOR INSTALLATIONS AND ENVIRONMENT, OFFICE OF THE SECRETARY OF DEFENSE

Mr. GRONE. Chairman Saxton, Chairman Hefley, Mr. Ortiz, and

distinguished members of the joint subcommittees, I am pleased to

appear before you this afternoon to discuss the energy efficiency

programs supporting the management of military installations by

the Department of Defense.

As you are aware, the real property and asset management portfolio of the Department is extensive. The Department currently

manages nearly 570,000 buildings and structures, with a plant replacement value of more than $650 billion, and more than 46,000

square miles of real estate.
6

In support of that infrastructure, and as the single largest en- ergy consumer in the Nation, the Department expended nearly $3

billion on facility energy in fiscal year 2005.

To achieve the President’s objectives for energy independence

and to meet our management responsibilities under the President’s

Management Agenda, the Department has continued its development of a comprehensive energy program that conserves energy, invests in energy-demand reduction measures and the development

of alternative sources, and enhances our objectives to reduce the

total operational cost of our facilities. We are achieving these objectives in a number of ways.

First, conservation. As Mr. Young noted, in fiscal year 2005 the

Department reduced standard building energy consumption by 3.3

percent over the previous year, and since 1985 have reduced that

consumption by over 28 percent. Since 1990, DOD has reduced energy consumption in energy-intensive and industrial facilities by

nearly 22 percent. Energy savings performance contract authority,

reauthorized in the fiscal year 2005 National Defense Authorization Act, and extended for an additional 10 years in the Energy

Policy Act of 2005, is a key tool. In addition, the Department has

launched an aggressive energy awareness campaign.

Renewable energy. The Department has significantly increased

its focus on purchasing renewable energy and developing energy resources on military installations. The Department’s total renewable

energy purchases and generation accounted for 8.3 percent of all

electricity used last year, and we have established a goal of 25 percent by 2025.

A key program is the energy conservation investment program,

which focuses on projects that produce energy and water savings,

renewable energy, and the converting of systems, existing systems,

to cleaner energy sources. The Department has achieved significant

savings using this program, with projected savings on average of

at least $2.30 for every dollar expended. The success of this program led the Department to increase investment in the program

for fiscal year 2007 and to enhance the mix of renewable energy

projects in the program.

In 2003, roughly 10 percent of the Energy Conservation Investment Program (ECIP) program was dedicated to renewable energy

projects. For the coming fiscal year, we expect 28 percent of the

program to be dedicated to these types of projects. And also for the

first time, the Department proposes to invest an additional $2.6

million through the ECIP program for fuel cell projects that support installation and installation management.

Facility metering. In accordance with the Energy Policy Act of

2005, the Department is developing metering plans to install meters on all facilities where it is economically feasible to do so. We

expect that the data gathered can be used to enhance our conservation initiatives, and benchmarking state-of-the-art facilities will

provide the ability to prioritize future projects,.

Sustainable design. DOD recently entered a memorandum of understanding with multiple Federal agencies and is developing uniform facility criteria standards for sustainable renovation and construction. New facilities will be required to utilize the standards

and will operate under reduced energy consumption.
7

Alternative fuel vehicles. For nontactical applications, the Department continues its efforts to increase fuel economy and to acquire alternative fuel vehicles. In 2005, DOD represented 71 percent of the Federal purchase of biodiesel. In recent months, we

have installed four new E–85 ethanol stations, and the Marine

Corps has been particularly successful in meeting Federal objectives by increasing fuel economy in the nontactical vehicle fleet by

4.4 miles per gallon, reducing petroleum use by 26 percent and increasing the use of alternative fuels by nearly 30 percent from the

established 1999 baseline.

Last, biobased products. Although not strictly speaking in the energy efficiency program, the Department continues to implement

aggressively the requirements of the Farm Security and Rural Investment Act of 2002 that directed Federal agencies to establish

procurement preference programs for biobased products designated

by the Secretary of Agriculture. These products provide a sound alternative in a variety of applications, and many replace nonrenewable fossil-energy-based products, thereby supporting the President’s objective of energy independence.

As this committee knows, the Department is working hard to

reposition, reshape, and sustain our military installations worldwide. Your support of our efforts in energy conservation and demand reduction and innovative technologies is an important part

of sustaining those installations over time. We appreciate your support and look forward to continuing to work with you on these important programs. Thank you.

Mr. SAXTON. Thank you, Mr. Grone.

[The joint prepared statement of Mr. Grone and Mr. Young can

be found in the Appendix on page 138.]

Mr. SAXTON. Mr. Aimone.

STATEMENT OF MICHAEL A. AIMONE, ASSISTANT DEPUTY

CHIEF OF STAFF, LOGISTICS, INSTALLATIONS AND MISSION

SUPPORT, U.S. AIR FORCE

Mr. AIMONE. Chairman, and distinguished members of the subcommittee, I thank you for the opportunity to appear today to describe the Air Force’s new Energy Strategy for the 21st Century

and some preliminary results from our recent flight of a B–52

bomber using a blend of synthetic and crude-oil-based jet fuel.

In the aftermath of the hurricanes that impacted the Gulf of

Mexico last summer, the Secretary of the Air Force directed extraordinary actions by all airmen to help mitigate the resultant energy issues that faced the Air Force and the Nation. The Secretary

has formulated a solid vision and a concrete strategy to implement

this vision.

Our energy vision is creating a culture where airmen make energy a consideration in every action. Our strategy is twofold: first,

ensuring energy supply-side assurance to critical fuel and utilities

is achieved to meet combatant commanders’ requirements; and second, identifying aggressive demand-side conservation initiatives focused at aviation operations, ground transportation, fleet management, and an accelerated installations energy conservation program.
8

Mr. Chairman, and members of the subcommittee, I am sure you

are most interested in the Air Force’s dramatic flight of a B–52

Stratofortress bomber, powered partially by synthetic fuel manufactured from a pilot synthetic fuels plant in Tulsa, Oklahoma. The

flight took place on Tuesday, 19 September, after a set of careful

fuel compatibility tests at the laboratories at Wright Patterson Air

Force Base, and ground engine tests at the Oklahoma City Air Logistics Center. These tests allowed us to conduct an aviation flight

demonstration at the Air Force Test Flight Center at Edwards Air

Force Base.

To ensure maximum crew safety in the first Air Force jet aircraft

powered by synthetically manufactured liquid hydrocarbons, the

test was conducted using a blend of 50/50 liquid hydrocarbons and

crude refined jet fuel. Also, the first flight was arranged such that

only a single pod of two engines were powered by the blend; the

remaining six engines on the aircraft used crude oil refined jet fuel.

The first flight occurred on the morning of Tuesday, 19 September. And while there was an unrelated mechanical issue with the

aircraft, over two hours of flight time occurred to demonstrate that

the aircraft could fly and land safely.

Additional flights are scheduled. And in fact, if all the maintenance actions we have in place stay this afternoon, we expect the

second flight to occur tomorrow morning at about 6:30 local time

at Edwards Air Force Base, and it should be about a 10-hour duration flight.

As you know, we cannot accomplish our vision without the full

support and cooperation of industry, and, specifically with respect

to the aviation operations, without the support of the Federal Aviation Administration. We have partnered with industry throughout

our planning and flight testing, and next month we will meet with

our commercial aviation counterparts for the second time under the

auspices of the Air Transportation Association and the FAA. Our

collective goal in these meetings is to ensure we build a road map

to successfully create adoption of synthetic fuels for the aviation

transport sector.

Mr. Chairman, and members of the subcommittee, I stand ready

to answer your questions.

Mr. SAXTON. Thank you very much, sir.

[The prepared statement of Mr. Aimone can be found in the Appendix on page 166.]

Mr. SAXTON. Mr. Connelly.

STATEMENT OF RICHARD CONNELLY, DIRECTOR, DEFENSE

ENERGY SUPPORT CENTER, DEFENSE LOGISTICS AGENCY

Mr. CONNELLY. Thank you, Mr. Chairman.

Chairman Saxton, Chairman Hefley, Congressman Ortiz, and

distinguished members of the subcommittees, thanks for the opportunity today to describe to you the efforts of the Defense Logistics

Agency to support Air Force and Navy efforts to introduce synthetic fuel into the streams of jet and marine fuel that we buy on

behalf of DOD.

As the Director of the Defense Energy Support Center, or DESC,

as I will call it, which is a field activity of the Defense Logistics

Agency, it is my job to make sure that we an uninterrupted supply
9

of clean fuel for the military forces whenever and wherever they

want it. The surging cost of crude oil over the past few years has

made the job particularly challenging.

Even though we pride ourselves on acquiring fuel at prices which

meet or beat the industry averages, it is somewhat painful to be

captive to a crude oil commodity market that reacts to world events

in a manner that underlines the downside of our reliance on offshore crude resources.

DESC has been working for some time with the Air Force, Navy,

Department of Energy. And industry experts examining the potential for alternative domestic energy sources that might economically provide some relief from our dependence on offshore crude.

Among these alternatives are the conversion of the United States’

abundant domestic coal reserves to synthetic fuel using the FisherTropsch coal-to-liquid manufacturing process.

In April of this year, the Air Force requested that DESC poll industry regarding its ability to provide DOD with 100 million gallons of synthetic jet fuel, or JP–8 beginning in January of 2009,

along with capacity estimates for future years.

The Navy subsequently asked that we include 100 million gallons of Navy jet fuel, or JP–5, in that request.

The request for information, known as an RFI, was released in

May, with responses due on August 10th. The RFI asked the respondents a number of questions, including what their proposed

feedstock would be, where their plant would be located, when their

planned streams of synjet would become available, and what mitigation strategies they might be seeking.

Now, there was significant interest, with 28 firms responding, 22

of which intended to manufacture synthetic fuel. Twenty of the 22

proposed using the Fisher-Tropsch coal-to-liquid technology, and 18

said they would use domestic coal. If such endeavors could acquire

appropriate financing, the aggregate stream of synjet by 2016

would far exceed the amount necessary to supplant 50 percent of

domestic DOD needs.

The respondents identified significant risk mitigation requirements before they could engage in the development of coal-to-liquid

capabilities. Most identified a need for long-term contracts, 15 to 25

years, with guaranteed minimal annual DOD purchases; and, in

addition, most wanted a guaranteed minimal price for their product

during the contract term. These requirements are understandable

from the manufacturer’s perspective, but would expose DOD to a

significant risk of paying more than the market price for fuel. The

length of the contract term would be commensurate with the terms

of the financing arrangement. The guaranteed minimum price

would protect the oil industry from a dip in the crude oil commodity market below the level of economic viability, precisely the scenario that doomed an attempt in the early 1980’s to encourage synthetic fuel production. There was a time when the futures markets

were not yet available for private risk management.

Now, we estimate that crude oil price threshold to be $53 to $57

dollars per barrel. Both of these risk mitigators are currently beyond our authority. DESC is legislatively limited to 5-year contracts and must pay fair and regional prices for its fuel. In addition, both of these requirements are outside our normal purchase
10

practices for jet fuel contracts, which are tied to the market price

of jet fuel.

Many respondents also cited the availability of tax credits and

Department of Energy loan guarantees as essential to their ability

to enter the synfuel business. I believe that additional information

on this aspect is available from experts within the Department of

Energy.

Another challenge is that of carbon capture. The Fisher-Tropsch

process produces almost twice as much carbon as a crude oil refining process. There is no current requirement for carbon capture in

either process, but there is concern in the industry that such will

be required in the relatively near future. This would raise the price

of synfuel. Not requiring carbon sequestration would pose additional risk should it be required in the future.

Senior leadership in DOD is still considering the various options

for the way forward. As we wait for that, and with the concurrence

of the Air Force and the Navy, we will solicit for synthetic jet fuel

within the bounds of our current authorities to determine if there

is any interest.

There is little doubt that Fisher-Tropsch coal-to-liquid manufacturing could emerge as a significant source of synthetic fuel that

is fungible and interchangeable with the current supply of crudeoil-derived fuel. Without long-term contracts with price floors, financing this process will require confidence by the financial markets that crude oil prices will remain above the $53 to $57 range

per barrel.

Thank you for this opportunity, and I await your questions.

Mr. SAXTON. Thank you very much.

[The prepared statement of Mr. Connelly can be found in the Appendix on page 158.]

Mr. SAXTON. Before we begin questioning, let me just take care

of a little business.

After consultation with the minority, I now ask unanimous consent that Mr. Conaway and Mr. Israel, members of the House

Armed Services Committee, be allowed to participate in today’s

joint subcommittee hearing, and be authorized to question the witnesses. These members will be recognized at the conclusion of the

questioning by the other subcommittee members. Hearing no objection, so ordered.

Let me just begin with a question, kind of a general question.

Back in 1980, Congress, in consultation with the Administration,

created the Synfuel Corporation. It was a government corporation

originally funded at a healthy $88 billion. Even in today’s numbers

those are big numbers.

The Synfuel Corporation was intended to produce synthetic fuel

in partnership with the Department of Energy, which provided

price and loan guarantees. The three projects started in 1981. One

was Union Oil at the Parachute Creek Shale Oil Project. The second was the Oil Shale Corporation, COSCO. And the third was the

Great Plains Coal Gasification Project. None were successful, and

in four years Synfuel shut down.

The question is: How have conditions changed in the last four

years, and why might we be more successful this time in fostering
11

a supply base? And what, if any, role should DOD have in this endeavor?

Mr. YOUNG. I guess I would start, and the panel may have additional comments to make.

One thing that is obvious, I think, was noted in the statements,

in your statements, is the price of fuel or price per barrel of oil

today is significantly higher than the 20 to 30 that was seen in the

past, and that makes many of the new fuel processes economical

and potentially competitive. They are not initially competitive on

small scales, and the fuel that was purchased for the B–52 test was

significantly more expensive than the market price. But over time,

and with potential support in various forms, including the possibility of long-term contracts, the market can be created out there, and

the Department is looking at those issues.

I think the Department of Energy will play a significant role in

that. The new act grants them authorities to provide loan guarantees that can help foster businesses moving in this area, and the

Congress has provided tax credits that can assist businesses in this

area.

Mr. AIMONE. Chairman Saxton, I might offer several other additional comments to Mr. Young’s.

The experience over the last 30 years in the industry, both within the engineering and design community with regards to how to

develop and plan and design and construct these types of facilities,

has matured significantly. As you may be aware, there is a facility—actually, several facilities in South Africa that are very mature. There is an online facility in Indonesia; that didn’t exist in

the 1980’s to the level of today, although Sisal had built an early

plant in the middle 1970’s, building on the technology that they

had refined in the 1950’s and 1960’s. So engineering designs have

matured.

The second is, as I mentioned, the worldwide plan experience.

There are two plants online. There is a handful of plants that are

in the process of construction. There is a significant effort in China

going on, all this building in the worldwide experience of how to

build these plants effectively.

I might suggest to the committee that there is an excellent reference that is called The Unfulfilled Promise of the Synthetic

Fuels, and it was written in 1986, and essentially went through the

questions, sir, you asked in great detail, actually walking back to

1913 in this country when the first initial synthetic fuel attempts

were generated in the West Virginia coal valleys.

There is a lot to be understood in that textbook; and I constantly

re-read that, about every month, to say let’s not make these kinds

of mistakes again.

Mr. SAXTON. Have there been other technological changes or advances that have occurred in the last 20 years that give us more

hope?

Mr. AIMONE. In a nutshell, no, sir. The technology from the

1920’s and 1930’s is a very mature technology, at least, I am thinking, the indirect coal gasification technology. There is better ways

of using tooling and the like inside the catalyst to get better flow

of gases through the catalyst materials to give you more contact

area, thus more effort.
12

There are several universities that have significant research programs in place. To mind comes the University of Kentucky. I hope

to visit the University of Kentucky in two weeks to understand

their research program. Purdue University, Penn State University,

and several others that I am sure I could go on and explain. So

there is significant research in this country that is evolving, if you

will, not revolutionary, but evolving what is in fact a fairly mature

technology first introduced in the 1920’s.

Mr. SAXTON. Okay, great. What role should the Department of

Defense play in this process from each of your views perhaps?

Mr. YOUNG. Well, as I noted, the Department has in the current

President’s Future Defense Program, 2007 to 2011, about $1.8 billion in investment. The biggest piece of that is $700-plus million

in energy power technology initiatives focused on such things as

superconducting motors, efficient energy storage, new technology

and capacitors and distribution mechanisms, high power, high voltage, high current switching systems. There is a full spectrum of

technology in that space to try to help particularly focus on military systems to deliver more efficiency, maintain performance and

potentially enhance options, because, as you know, increasingly the

power load on our systems demand more electrical power in addition to the prime moving power for the vehicle. And so we have to

be conscious about the so-called ‘‘hotel’’ load to power radars and

sensors, as well as the load to drive the vehicle.

So in that technology space, the investments DOD makes I think

frequently have a dual-use aspect to them, where many of those

technologies can move into the commercial marketplace and enable

some of the things that Mike made reference to in other areas. And

Phil can talk more about that.

We help, at least in the marketplace, and even pushing the technology, by the deployment of systems in our facilities. And work is

being done in spaces such as Defense Advanced Research Projects

Agency (DARPA) on higher efficiency photovoltaic cells for solar.

So across the board I think the Department is a partner with

other agencies in the government and the commercial industry,

which is helping to drive this space and push the technology forward both in revolutionary places and in areas where we see—or

evolutionary spaces, and in places where we see chances of an evolution. And I will leave it to the panel to add to that.

Mr. GRONE. Sir, the only thing I would add to what Mr. Young

suggested is that there are, just from the perspective of the installation side of the portfolio and the nontactical vehicle fleet—I

mean, just recently we had the example of the Marine Corps taking

possession through the Army from General Motors a new technology, an alternative fueled vehicle which the Marine Corps will

test for several months to a year and provide data back.

So I do think there is a synergy of the activities of the Department and activities of the broader Federal family and industry,

both in research and development and the actual application of the

technology to vehicles, where we can have an effect on understanding and, ultimately, of markets in terms of demonstrating the viability of certain technologies. But certainly the throw weight, in

terms of the major investments and the technologies, the interfaces
13

of other technologies, are along the lines of what Mr. Young suggested.

Mr. AIMONE. Mr. Chairman, early on when the Secretary of the

Air Force asked me to look into this area, I thought of myself as

a facilities engineer, and had spoken to the Secretary about the Air

Force’s facility energy program. And he kind of put his thumb in

my chest and said, I like your program, now make this work on the

aviation side. And I started looking at it and first discovered that

80 percent of the energy of the Air Force is consumed on the aviation side, that the wonderful opportunities over the last 20 years

we have had to save 30 percent of facilities energy in the Air Force

was really untouched in energy conservation opportunities in the

aviation fleet. And, of course, the attitude was well, we can’t tell

the flyboys how to fly.

Well, the Secretary has helped me articulate to our aviation

counterparts how to effectively accomplish the same training and

operational capability, and do it with a little bit more sense of energy conservation in the aircraft system.

At the same time, I had the opportunity to go to Patuxent River

and look at the Navy fuels Integrated Planning Team (IPT) operation and what they were doing in fuels research. And then my

counterpart in the Navy and I went to Wright Patterson, and we

compared our programs and invited the Army and the Department

of Energy to come in place. And what we found out is there was

a phenomenal program that has been in being for years, but just

needed a little bit of executive leadership to bring it out of the

weeds. That, sir, is part of what the Air Force can do and I think

is doing.

We have the ability to certify fuel for aviation airworthiness. We

do that with our counterparts, as Mr. Young mentioned in the aviation sector, the original equipment manufacturers. We have had an

opportunity to meet with them in May, and we have a follow-on

meeting scheduled for about 30 days from now where we will continue walking down our road map of how do we work together to

create the conditions of certifying an alternative fuel.

Mr. SAXTON. Thank you.

Mr. Connelly.

Mr. CONNELLY. As my colleague was saying, I think it is the role

of the services and the Department, DOD, to give us the go-ahead

as the operational supply chain manager, to go ahead and move

forward in these markets.

You did mention, Mr. Chairman, earlier, the percentage of domestic consumption. Internationally that translates to something

less than one-half of one percent of total fuel consumed. So while

we are probably the biggest single purchaser of fuel in the world,

and certainly a voice to be heard in the marketplace, we are not

going to move the market, but we can try to exhibit some leadership. What is of main concern to us on the buying side is can we

do it economically.

Mr. SAXTON. We are going to move over to Mr. Ortiz shortly, but

I guess I would just like to say that it seems to me that the Department of Defense has a real role here to play in terms of showing

the appropriate kind of leadership on these issues. We are the biggest consumer of energy in the transportation sector. We have the
14

capacity to do things that perhaps individuals don’t. And if we put

our minds to it, we could have a public relations operation that

would let the rest of the world—or at least the rest of the people

in our country know what it is that we can do to be successful. And

to that extent, I think that we are to move forward as aggressively

as we can.

Mr. Ortiz.

Mr. ORTIZ. Thank you, Mr. Chairman.

You know, since 1980 to now, that is 26 years, and I am pretty

sure that there were some studies made as to what could work and

what couldn’t work and why they shut down. What has changed

from 1980 to 2006 that makes us believe that now we might be

able to come up with some type of fuel without having to spend another $80 billion?

Mr. AIMONE. Let me try to articulate two thoughts, sir, if I could.

First, one change is in 1983 and 1984, the price dropped out of

the oil market, and what had been fairly expensive oil—in today’s

market we would cheer for it at $40 a barrel—dropped to 15, $20

a barrel, literally overnight. That I don’t believe can happen in the

same kind of direction, given the worldwide growth of China and

India and the current state of most of the Organization of Petroleum Exporting Countries (OPEC) nations at or near capacity.

Probably second, sir, I would suggest that in this country, the

last new refinery built was 1976, which makes it about 40 years

old, admittedly having plant improvements all the way throughout.

And we operate in this Nation at about 96 to 97 percent of capacity

of refinery.

One might argue that given those kinds of margins in both the

supply worldwide crude, the demand in the worldwide marketplace,

and then ultimately the U.S. refining capability, something has to

change. It could be another refinery with oil that may or may not

be available in 20 or 30 years. Or maybe if we dream for a moment,

it could be an alternative form of energy conversion that would convert some of the U.S. sources of supply of coal, oil shale and biomass into forms of liquid. And although certainly there are opportunities for wind and portable in the infrastructure arena for transportation, and specifically for aviation, liquid hydrocarbons turns

out to be the sweet spot for energy per pound or energy per density.

So to sum, I believe the conditions in the marketplace, the conditions in where the plant and equipment is in this Nation, the opportunity of maybe locating a refinery other than along a coast that

might be prone to a hurricane or other natural disasters, say, on

the West coast, has an opportunity for this Nation to stand up and

make a difference.

Mr. Saxton, I would like to beg just one slight technical, if you

will, discussion point. Although some will claim that the Great

Plains Plant was a failure—and it certainly went bankrupt so from

a financial point of view it did—technically it operates still today;

it operates at a revenue-stream positive, producing natural gas

from coal as well as other significant products for the commercial

marketplace. And that is since 1983 it has been continuously operating. So it was an investment, admittedly a lot of money, and it
15

did in fact technically work. Financially, of course, sir, you are correct.

Mr. ORTIZ. Anybody else? If not, I have another question now.

And maybe can you educate us—I mean, you gentlemen are the

experts—in the difference between alternative fuels and synthetic

fuels. Now, I know that you cannot utilize pipelines to move it; am

I correct when I say that?

Mr. CONNELLY. I can take that. Yes, sir. The synthetic fuel certainly generated through the Fisher-Tropsch process would be a

fungible process and interchangeable and could be moved by pipelines, yeah. Some of the alternative fuels, ethanol, I don’t think

that is the case.

Mr. ORTIZ. Which is the most promising of the fuels that could

be used by the military? I mean, I know that when you are in combat, I mean, you have to move the fuel. And it—is very expensive

now; I mean, the gas that you get when you drive those Humvees

and tanks. You probably have to have a big storage area, just like

you do now, to move the fuel.

Mr. CONNELLY. I don’t think any of that would necessarily

change. The requirements would still be there, and the capability

we have today and we will have in the future will be there to store

fuel and to move fuel. I guess the point is here that this type of

fuel that we are talking about, Fisher-Tropsch and synfuel, would

be able to be moved in those same pipelines and stored in those

same tanks with our other normal crude-derived JP–8 fuel. And

that is the same fuel, by the way, that drives those ground vehicles

that you talked about, the tanks and the armored personnel carriers; they also run on JP–8, which is petroleum-based jet fuel.

Mr. ORTIZ. Thank you. I am going to be short because we have

a lot of——

Mr. SAXTON. Let me just ask a question for clarification for everybody—or at least for me. I have always used the atomic energy

alternative fuel and synthetic fuel as kind of synonymous terms,

but I get the feeling there may be a difference in meaning. Alternative fuels seems like—synthetic fuels are, in fact, alternative

fuels, and it seems to me like alternative fuels are synthetic. So

help me out.

Mr. AIMONE. Allow me to take a stab on that answer.

First of all, the terms are very interchangeable. If you look at

EPact, the Energy Policy Act of 2005, section 369, it defines the

term—I will even add another one, strategic unconventional fuels,

and define that as a combination of coal, oil shale or biomass material that could be converted through an indirect gasification process

into liquid products. So maybe if we fall back on the law and say

the terminology, or the term of art, it might be strategic unconventional fuels.

I tend to believe that all these terms, alternative fuels, synthetic

fuels, unconventional fuels are all in the same class. For example,

there are subtle differences. Oil shale is a precursor to oil that has

not formed underneath the pressure of temperatures of hundreds

of millions of years, and that precursor material can be retorted;

i.e., cooked under pressure and turned into oil that could be refined, or it could be turned into—or gasified, as any carbon mate-
16

rial can be gasified, and turned into carbon monoxide that passes

through a Fisher-Tropsch process gasification.

So it gets very steep into the terminology, but I would even suggest to you that wind and photovoltaic would fall underneath this

class of alternative energies, and I would refer to Mr. Grone on

that.

Mr. SAXTON. Thank you. Mr. Hefley.

Mr. HEFLEY. Thank you very much, Mr. Chairman.

For years I represented the Solar Research Institute at Golden,

Colorado, and it is something else now, they have changed the

name, still there. They were doing some amazing things, but it

seemed like one of the consistencies there was that it cost more in

most cases to produce the power that they were producing than the

power they got out of it; in other words, they were producing a synthetic fuel; it cost more to produce that than you actually got out

of it.

Is that the case when you talk synthetic fuels or when you talk

coal liquefying and things like that? Does it cost more to produce

a gallon of that fuel than in fuel cost that you get out of it?

Mr. CONNELLY. At today’s prices, Chairman Hefley, it does not

cost more. What industry is selling as a response to our RFI is at

a price range for crude, $53 to $57. That is about the break-even

point where they can do Fisher-Tropsch—manufacture FisherTropsch fuel and break even, a crude class above that level. And

they are turning a profit is what they are telling us.

Although the financial markets haven’t had the confidence yet

that the price of crude will remain at a level that would allow them

to safely make an investment, and hence the risk mitigators that

asked us—or at least mentioned in response to our RFI.

Mr. HEFLEY. Well, let me ask you a little different way. If we are

not talking cost, then let’s talk about energy used. Does it take

more energy to produce a certain—so many British Thermal Unit

(BTUs) or whatever of energy than you are actually getting out of

it? Even if the cost might be a break-even at $57 a barrel, does it

take more energy to produce a unit of energy?

Mr. CONNELLY. I think that would require some research on my

part, sir. I will have to take that one and answer it for the record

if I may.

Mr. HEFLEY. Okay.

Mr. YOUNG. Chairman Hefley, if I could add some comments to

the discussion.

The Department has a Defense Science Board task force looking

at this issue, and also some work was done by a study group called

the JASONS for the Department. And they looked at some of the

issues you have raised, and we can try to get you that information.

But it is very important.

And Mike Aimone mentioned the process. You have to look very

carefully at the processes of energy in, energy out, and then the byproducts. And those can be optimized in certain Fisher-Tropsch

processes to be efficient, but there is still, as you rightly say, less

efficiency relative to crude processes. For example, it is estimated

that the Fisher-Tropsch processes there is as much as four times

more capital intensive to build the facilities than a comparable

crude process, and then less of the feedstock energy ends up in the
17

synfuel, if you will, that is produced out of that process in general.

So the efficiency losses are losses that are compensated by higher

prices in oil, making that process at least viable economically.

Ethanol, for example, which is less useable, in the Department’s

perspective, because it has two-thirds of energy by volume of a

comparable crude product, and it is also highly flammable, has a

lower flashpoint, people suggest that that is kind of a near breakeven or a little—it is very close to breaking even on the process to

produce that fuel. So you rightly say that you have to look carefully

at the energy in, versus the energy out, and then add that with the

cost factor to determine economic viability.

Mr. HEFLEY. Well, let me ask you, do you see yourself—and by

yourself, I mean the Department—does the Department see itself

as a test bed facility for new energy resources, energy savings and

energy economy? Or do you see yourself as just trying to solve the

day-to-day practical problems in saving energy and doing it? In

other words, do you see yourself at the cutting edge of trying to

produce new sources of energy, or are you just trying to meet the

daily requirements?

Mr. YOUNG. Where the requirements of the military demand it,

we are prepared to be at the cutting edge of technology. And some

of those include the example I mentioned in the beginning, of the

complications of getting logistics fuel to forward-deployed and remote base locations make some of the renewable energy methods

or alternative energy methods very useful to the military and,

frankly, safer for our forces. So in those spaces, we are prepared

to work hard and make investments and potentially be first adopters.

In other spaces, we can help enable a market that needs to be

driven by the Nation, and probably a significant role by the Department of Energy, and, as was pointed out, the Air Force is

working to qualify synfuels and ensure that they don’t have detrimental effects on our engines in terms of engine maintenance or

wear or premature decay of seals and some of the other things that

some of the synfuel properties have.

So I think we can be, as was well noted, a large single source

but not a market-driving source, but a force to enable industry to

take those steps. Some of that will clearly require additional steps,

particularly by the Department of Energy, with the authorities invested in them by the Energy Policy Act.

Mr. HEFLEY. The reason I ask that is that I can see us investing

additional moneys over and above what we might invest otherwise

if you were just using conventional fuels, if you are a test-bed facility, because with the amount you use this could be the place to test

the new technologies and so forth.

And let me ask you, and then I am through, Mr. Chairman, the

medical researchers tell us if they just can do their research with

stem cells and so forth, that we are on the very verge of solving

Alzheimer’s and multiple sclerosis and Lou Gehrig’s Disease and

all manner of diseases if we can just take this one little extra step.

Do you see anything on the horizon that is one of those breakthrough, gee-whiz type things, and if we just take this other step

we can really have a breakthrough?
18

Mr. YOUNG. Other panel members may have a comment. I think

I mentioned earlier I am very pleased with the Energy Task Force.

The services made substantial contributions and brought to bear

their knowledge and experiences. DARPA brought to bear the work

they are doing. And I think one conclusion of the task force is it

will take a lot of different efforts, each effort producing some incremental benefit, to make a big step in this space.

And I don’t see any single thing that makes a dramatic big step

right now. There is a lot of work that needs to be done in a lot of

areas, from materials to facilities to energy cycle or engine cycle

changes, all of which will yield significant benefits that in many

cases have a business that pay for themselves for the Department,

but no single breakthrough area has a dramatic promise right now

that is easily within reach of us.

Mr. HEFLEY. Thank you very much.

Mr. GRONE. Mr. Hefley, on your former question—in the business

area of installations, the question is really not a question of test

bed, it is a question of applying technology, and the aggressive implementation of applied technology to solve energy-efficiency-demand management issues. So as we talk about what we have done

in the last few years, even in the modest ECIP program, of

ramping up what we do in the renewable energy category, which

is wind, solar, geothermal and similar technologies. As those technologies continue to improve and mature and we apply those, to

some degree yes, there is lessons learned, there is what one might

call them test bedding; but really it is aggressive application of

technology to meet these problems. And again, we are seeing significant savings accrue from that within a reasonable break-even

period, on average about six years.

So that kind of return on investment, that kind of stimulus for

both market purposes and lessons learned that we can apply to

other installations, is an important part of the seed capital we provide through ECIP. But again, it is not a test-bed question. It is

different than the tactical question that Mr. Young has to wrestle

with with the service acquisition executives and the research and

development community, but from a facilities perspective, we are

trying to take every aspect we can of new technologies and apply

them to how we can have better energy conservation and better demand management, particularly for power on a daily basis.

Mr. HEFLEY. Thank you.

Mr. HAYES. Thank you.

Mr. SAXTON. The gentleman from Arkansas Mr. Snyder.

Dr. SNYDER. Thank you, Mr. Chairman. I appreciate you all

being here today. I feel a bit like I am sitting in a sex education

class in the seventh grade, which should be a very exciting thing

somehow became exceedingly tedious when you have it presented

in this manner. But I think what you are saying is we are down

to a lot of hard work, and I think your word was incremental in

response to the question from Mr. Hefley what was the big and

dramatic thing.

Let me go at this a different way. What innovation that—are you

aware of any innovations that have been developed, invented in the

military or through defense research dollars that have now spun off

into the civilian world that I now have in my car or that was in
19

the plane I rode out on here from Little Rock yesterday or Monday?

What innovations in the energy area have been developed by the

military that have now spun off into the civilian world?

Mr. YOUNG. Well, I would say, as you probably well know, success has 1,000 fathers usually. So I am cautious to claim success.

If you go back 10-plus years, a lot of work was pioneered at

DARPA on applying energy—electrical power to military vehicles,

and some of those things I think are showing up in the cars, the

hybrid cars you see today; regenerative breaking, the idea you

would use a system to stop the car that is actually the load on the

generator and that generates electricity to help recharge your battery. Some of those ideas were extremely unique to DOD, so I am

careful about it, but some of the investments by DARPA made

those technologies more and more practical, and then they get

picked up in the commercial sector.

A lot of work has been done in DOD, DOE and NASA on foldable

tags and solar cells to get the efficiency up, and today we have

DARPA looking to kind of crack a glass ceiling on the current efficiency of solar cells to get to a new level that makes them much

more economically viable. Across that space, I think several departments, including the Defense Department, can claim credit for

being a first adapter, being willing to pursue a technology and,

when it has payoff, you can see it quickly picked up in the commercial sector.

Dr. SNYDER. You all said several times that the volume of fuel

that you all—and energy that you all consume is actually a fairly

small part of the world’s use and U.S. use, and I understand that.

But who do you think is the leader in the United States Government in terms of aggressively pursuing energy efficiency and new

energy sources?

Mr. YOUNG. Well, I think the Department of Energy has a significant mission assignment there. The Department of Defense, because of our opportunity for investment and, as the Chairman

pointed out, as well as some of our unique military needs, certainly

is on par. And in terms of a lot of different metrics, our installations are leaders in this space. Maybe better to let Phil comment,

but the Department has been recognized with, in many cases, a

majority of Federal awards because of the steps taken in facilities

to make some of those modest, but significant improvements in efficiency and reduced energy consumption in our facilities.

Dr. SNYDER. A few days ago, or within the last week or two, a

column, the Commander SEALS I think it was called, SEALS Column or something like that, at a naval air station, that these commanders do very well in terms of communicating with their base

and their troops and their military families, and wrote a column

about—what the real problem the military is having now that we

are underfunding a substantial number of things. We are cutting

back the number of hours the libraries are open, and cutting grass,

and painting and a whole lot of things.

He was discussing the impact on services to military families on

his particular base, but then in the last column he starts talking

about we all need to work together to turn off the lights and make

sure we are doing the most energy-efficiency stuff. I am thinking,

shouldn’t we have already invented that? Shouldn’t that have been
20

something 30 years ago that every base in the country before we

ever had any kind of an energy—you know, $60-plus a barrel, we

all should have been doing that? It should be automatic at this

point, shouldn’t it?

Mr. YOUNG. Yes, sir. I agree, and I think in some cases the extreme of that is there are many situations where that is automatic.

The facilities that are being renovated in the Pentagon, actually to

the anxiety of some of the very dedicated people who work long

hours, have situations where the lights go off automatically, and

you have to take a step to turn the lights back on. I know for a

fact the lights go off in the restroom if nobody—for a while and

comes back on. So a lot of those steps have been taken proactively.

Mr. GRONE. My observation, Mr. Snyder, from a facility management perspective, his awareness is a continuing concern. And while

it may seem self-evident after 25, 30, 35 years that those are the

kind of small steps we all should be taking, that kind of awareness

campaign, to put it in the forefront of everyone’s mind is something

we have to continually come back to. It is important to do. It is important to remind people of the effect that those small steps have

on the overall management of the facility, the conservation of the

resource, the conservation of the dollars.

There is a natural human tendency to stray toward the free rider

problem, and making sure the people understand the contribution

that they can make, as small as it might be. Making people aware

of the importance of energy conservation is something that we take

very seriously in the portfolio from a business perspective to make

sure that our people understand how important conservation on a

daily basis is.

Mr. YOUNG. I think if I could, I agree totally with what Mr.

Grone said, but I would add—pick up on something Mike Aimone

said. All the services are trying to bring that to light in people’s

minds, including those of our military operators. The Navy has had

initiatives to make the captains of ships very conscious of the fuel

they consume and how they consume that fuel. The same is being

done in the Air Force in terms of aircraft, and same thing is being

done with tactical vehicles in the Army. A lot of emphasis is being

put on simulation to try to reduce the steaming or flying or driving

hours, so on a big scale, and then on a small scale in terms of the

lights. That is, I believe, pervasive and being led by leadership in

the Department to accomplish those objectives.

Mr. SAXTON. The gentleman from Minnesota Mr. Kline.

Mr. KLINE. Thank you, Mr. Chairman.

Thank you, gentlemen, for being here.

Every time the DDR&E company show up, I always wish I had

paid more attention not in the sex class that apparently Mr. Snyder was having difficulty with, but in chemistry.

Let me just sort of see if I can focus this down on a couple of

issues. We talk about—or you talk about in testimony particularly

in the facilities using more—increased use of E85, and I think

there was a percentage of something like 71 percent biodiesel, and

it seems to me that is pretty straightforward to be able to start to

use more E85 or certainly E10, E20 in the facilities. And then the

DDR&E said, well, we can’t use E85 in the military vehicles, I am
21

assuming we are talking about tactical vehicles, because it is too

flammable and some other issues.

Can we—I guess, Dr. Young, can we go to you and just sort of

explore that? What are you and the Department looking at in

terms of using biodiesel or E85 or E20 or E10 in what I will broadly call tactical vehicles, a little bit separate from the synfuel we are

talking about using, the B–52, I assume, but particularly those ethanol and biodiesel sort of blends?

Mr. YOUNG. I think where it is appropriate, those fuels can be

used. By some analytical work that has been given to me, 62 percent of DOD fuel use is expended in combis, so where appropriate,

some of those fuels, including ethanol, may be viable options, but

for, as you said, tactical fuels, there is two-thirds of the energy in

a gallon of ethanol versus a gallon of crude-based product, JP–8,

and that leads to significantly less energy. You would have to take

more fuel, and then the flammability creates a danger situation. So

that would not be a preferred option for us, certainly for our deployed forces, and in some cases for training operations day to day

on aircraft carrier and the other hazardous situations military

equipment is used in. Facilitieswise it is potentially a very viable

option, and I will let the panel talk to that.

Mr. KLINE. Before you leave that, I really want to focus a little

bit more on this tactical use. Is there someone in the Department

who has the responsibility for looking at making the engines more

efficient so that you could, for example, use one of these blends of—

it could be E85 or biodiesel or something like that to get more efficient use out of it, the turbochargers and that sort of thing? I

mean, would you look in the commercial—civilian commercial

world now? You are seeing vehicles being made so that they are

flexfuel vehicles, and that efficiency loss of increased ethanol use

is being addressed. So I am just—who is, who is looking at that?

Is anybody in the Department?

Mr. YOUNG. Absolutely. I think, again, as the task force, I think,

did a very positive thing in response to Secretary Rumsfeld’s direction, looked across the Department and shared that knowledge

across the Department, and we have created a Web site to continue

to share with the program managers and program officials that information. But within the Department there is work in the services

on kind of incremental and even some next-generation-type engines

where you would adjust the cycle to achieve upwards of 25 percent

reduction in fuel consumption. It is called High-Energy Embedded

Turbine Engine Program. It is a follow-on to a precursor where we

continually looked at all the features you said, the combuster, the

cycle, the turbines themselves to try to get more efficiency. The

DARPA has some similar work focused on UAV-class engines that

could be scaled to again achieve the fuel consumption reductions

that you are talking about.

So across the board, the Army—we are partnered with the Army

to look at a ground vehicle demonstrator. The current heavy

Humvee gets about 8 miles per gallon at 45 miles an hour. We believe we can build a lighter vehicle using other materials and get

as much as 30 to 40 percent fuel savings in a lighter vehicle to that

point of view.
22

So across the board there are a full range of efforts, including

putting codings—some of these came to the attention of the task

force, and the Department is reviewing them right now. We could

put coatings on Navy ship propellers and potentially get four to five

percent savings in fuel efficiency and possibly some reductions in

maintenance. Looks like it pays for itself and no more—in about a

year.

So we are going to put forward all these business cases and let

the Department come to, you know, evaluate if we can work them

in the budget, but clearly the best business cases I am very hopeful

will be part of the President’s budget in the coming year.

Mr. KLINE. Okay. Thank you very much, and I see my time has

expired, so I yield back.

Mr. SAXTON. Ms. Bordallo.

Ms. BORDALLO. Thank you very much, Mr. Chairman, and, Mr.

Grone, it is good to see you again, and I would like to thank the

Members for their testimony. I have a rather specific question to

my district. And I would just like to share with the committee that

I met just this morning with Assistant Secretary of the Navy B.J.

Penn, and our conversation included discussion on the potential for

alternative energy production out of Guam as part of the development of the new infrastructure to support the 8,000 to 10,000 Marines and their families who are moving to Guam.

Now, this gentleman needs nearly 20,000 new personnel moving

to Guam over the next 10 years, and Guam’s appetite for energy,

like so many other places, will increase substantially. With at least

$740 million expected to be invested in base utilities to support this

move, there will be opportunities to construct energy-efficient housing, workplaces, and perhaps even a new alternative energy powergeneration facility.

Let me therefore go on the record and strongly encourage you

and your colleagues, as you look at the development on Guam, to

incorporate as many energy-efficient and modern technologies as

you can. And to this end, can you tell me what are the most promising types of energy efficiency projects that the Department is currently utilizing or considering that might be employed on Guam?

Perhaps you could comment on waste energy technology and wave

energy power generation. And because the over 3,000 new family

housing units will be built under a privatized housing plan, can

you tell me how we can ensure that the private industry undertaking this construction is using as much energy-efficient technology

as possible? And I guess, Mr. Grone, we will begin with you.

Mr. GRONE. Well, certainly, ma’am, in the context of the facilities

that will be built on the island to support relocation of Marines

from Okinawa to Guam, our standard requirements versus sustainable design to improve energy efficiency, water conservation will all

be built into those facilities.

In terms of specific technologies, for—to support the utilities, for

example, or waste energy or whatever it might be, I think we have

to continue to look to the Marine Corps and the Navy as they look

at the design criteria, the infrastructure requirements, and they

continue to take the master planning process to additional levels

of detail to get a better handle on that before we can have a specific discussion about that. I just don’t think we are quite far
23

enough along to tell you that we have come to a specific set of assumptions or recommendations in that regard, but we know it is

of deep interest to you and to the committee, and we will keep you

informed as things proceed.

Ms. BORDALLO. Would any of the other witnesses care to comment further on that?

If I could then, Mr. Grone, if I could ask any of the witnesses

or yourself to please let my office in on any development that will

be made, because this is specifically what we talked about this

morning, and I would appreciate any information you could give

me.

Mr. GRONE. Yes, ma’am. We will certainly do that. And when you

ask about specific technology, certainly one of the things we may

look to, when we privatized housing on Hawaii, one of the things

that was done there by our private sector partner, the largest solar

enterprise, solar development in the context of a major housing development is that DOD housing privatization development on Hawaii. So certainly in terms of the work that we have done in housing, other facilities and the project on Hawaii I think sort of proves

that. We are looking toward using those applied technologies as aggressively as we can to get the best efficiency and long-term sustainability of those assets as we can.

Ms. BORDALLO. Mr. Grone, my second question is when you

speak of this alternative energy, I understand that DOD has a program in Hawaii called the wave energy. Are you aware that there

is a pilot program?

Mr. YOUNG. Yes, ma’am.

Ms. BORDALLO. I am curious. We have just as many waves

around Guam; in fact, I think they are bigger. Could you comment

on that?

Mr. YOUNG. We just—there is a project that is in pursuit. I believe it was proposed by an enterprise in Hawaii. And so through

a process we at least endorsed testing of that proposition, and so

there is tests underway. Largely driven by where the company was,

I think it proposes the idea, but certainly if it is productive technology, it is yet another avenue to produce energy, as you said,

very efficiently because there are waves available for largely free

all around the world. So very interested in how that project

produces——

Ms. BORDALLO. Is that a private program, or is it sponsored by

DOD?

Mr. YOUNG. Oh, DOD is participating in the research and paying

for a portion of it.

Ms. BORDALLO. Thank you. Thank you very much, Mr. Chairman.

Mr. SAXTON. Thank you.

Mr. Hayes.

Mr. HAYES. Thank you, Mr. Chairman.

Gentlemen, thank you for being here. I have been listening very

carefully. This is something that I have been thinking and saying

frequently is the future for energy in America, but just as an observation, your responses have been careful, calculated, cautious, as

they always are, and I appreciate that. But is this cautious, tepid

approach realistic or just cautious? Where are we? Brazil, we say,
24

is energy-independent. Can we get there? Are we looking in the

wrong direction? Can you give me a little help here?

I am just not seeing a level of enthusiasm or interest in the

project. I know it is the nature of the Department, but can we step

it up a notch here?

Mr. YOUNG. Well, sir, I guess that at least falls to me to start.

Mr. HAYES. Or we could get Phil to volunteer.

Mr. YOUNG. Actually this would be a great chance to set him up

maybe. I apologize if we are doing that. We don’t mean to do that.

I was extremely pleased and a bit surprised to see the Department has 1.8 billion over the next 4 to 5 years, 5 years invested

in this space. It is—most of the investment is tailored to help meet

our needs, but it has that great benefit of helping the Nation also

get toward its goals.

So I think it is positive, but as a result of the tasking for Secretary Rumsfeld, we said that is not enough. So the Energy Task

Force that had tremendous participation from the services and

agencies put forward another set of new ideas that we are combing

through now, looking at the business cases. Many of those, I think,

pay dividends for the Department, but also have dividend potential

for the Nation.

And then, as you have heard from other panel members, DOD

is looking, even though there is an expense, to be a first adopter

of some of the synfuels that—we are actively testing them to see

if our engines can run successfully on them, and there is tremendous excitement about that.

You know, visually the market has got to catch up because we

can’t alone carry that marketplace, and that is the only hesitation,

that it is going to take other parts of the government, Department

of Energy in particular, and, frankly, the private sector to carry

some of these much further toward the finish line than DOD can

alone. But we are extremely pleased to be a party to this and having the attention of Secretary Rumsfeld down on pushing forward

these initiatives and being willing even in a tight fiscal environment to make investments, help our own energy efficiency, and recognize fully that pays dividends for the Nation.

Mr. HAYES. I feel better already.

Thinking in terms of plateaus, obviously with ethanol, methanol,

biodiesel, all these different products, we have gone from purely petroleum-based to a plateau of sorts, and again, based on you all’s

experience and professional opinion, is this a plateau that needs to

move up and out at the same pace? When I say up and out, more

effort in development than what we have got on the table. Do we

need to have a similar lateral look at what else might be out there.

Being an Aggie as well, there is tremendous amount of value as

well for the agricultural sector if we are successful going up with

some of these renewable fuels.

Anybody want to take a shot at that? Again, we have this new

tone of enthusiasm and level of excitement going.

Mr. AIMONE. Mr. Hayes, I have never been accused of not being

enthusiastic or passionate about the subject of energy. I have had

the opportunity to be in basically every energy initiative the Air

Force has created since the 1970’s as a form of a crisis, and when

I had the opportunity in May to brief the Defense Sciences Board,
25

my getting off the slide bullet was, been there, got the T-shirt, done

it before, dot, dot, dot; how do we prevent this from again happening?

And I know the Secretary of the Air Force personally made the

trip out to Edwards for this B–52 flight. The Under Secretary of

the Air Force flew out and, in, fact flew on this initial maiden

flight. That is a pretty enthusiastic——

Mr. HAYES. I was going to ask if they flew or watched.

Mr. AIMONE. There was a discussion about both not flying on the

same airplane.

Mr. HAYES. A lot safer than driving out there in the same car

out there together.

But anyway, using that particular example, one of the things

that I found when I got interested in, I think we need to, among

other things, understand that the marketplace, the petroleum traditional marketplace. And it is human nature, it is not just them,

traditionally resist change, particularly if it threatens what they

have always done.

So do you all in the research that you are doing see more interest

on the part of the petroleum companies, foreign and domestic, to

add that to their—to diversify their industry by using their expertise and appropriate materials to get into this business?

Mr. AIMONE. Sir, when Mr. Connelly was talking to the process

official, tropes, he mentioned one of the challenges we have to address in this Nation is the carbon capture or the carbon sequestration that might come from a coal gasification process. I might suggest to you that one of the opportunities that exists with the partnership of the oil industry is the ability to take that carbon dioxide,

flood it into oil wells that are essentially depleted, and do what is

called enhanced oil recovery; in fact, the potential of providing several more years beyond the, if you will, conventionally termed peak

oil.

So I do see some opportunities of synergism between the various

marketplaces if we can go forward and do this right, and the key

word is doing it right.

Mr. HAYES. I appreciate that.

One more comment, if I may, Mr. Chairman.

Mr. SAXTON. Make it a good one.

Mr. HAYES. Okay. It is two good ones. Two things: We have to

keep the pressure on so that the traditional energy folks know we

are serious; because the price of gas is coming down, which is

great, we are not going to stop doing our work. And again, the

other thing, having the energy put into the distribution so we can

begin to successfully use these products.

Thank you, Mr. Chairman, for your indulgence.

Mr. SAXTON. You are a great American.

Mrs. Davis.

Ms. DAVIS OF CALIFORNIA. Thank you. Thank you, Mr. Chairman. Thank you to all of you for being here.

I wondered if I could go back for a second to the memo that General Zelmer put out that basically looked to creating a self-sustainable energy solution on the battlefield. Could you discuss more—

I guess my first question is, in response to some of my colleagues,

too, how come it took the general to ask for that? Is it something
26

that had already been contemplated, we have been working on, trying to figure out how in the world you got that kind of supply, energy supply, to the field without having to transport it and risk the

lives of those that are transporting? Had you been working on

that? And where are we in trying to actually bring that to bear?

Mr. YOUNG. Well, certainly we have deployed in many cases with

the equipment we have had, but made changes as fast as we can

through things like the Joint Rapid Acquisition Cell or the Army’s

Rapid Equipping Force or Operation Respond Navy Marine Corps.

And so when we see an adjustment in the requirements, we act.

And then to answer your question more directly, we are already

working in those spaces pretty aggressively. So essentially on the

shelf there was a system that generates a small amount of wind

energy and a battery storage device. There was a separate system

that stored solar energy or produces solar energy through solar and

can store that in the battery. Those have kind of been combined

into something they call the transportable hybrid and electric

power station. It generates, I think, a kilowatt, roughly, of energy

by wind and has the potential to generate six kilowatts by solar.

And there then there is a tactical quiet generator that can generate

like three kilowatts, and so you can get a modest steady load and

some peak loading, and it looks like that system can serve and answer some of the requirement that General Zelmer tabled, and we

expect to have systems in the field by February, if not sooner.

Ms. DAVIS OF CALIFORNIA. If there is a cost to that, obviously,

in creating that, how do we balance that? How do we make the

judgment then in terms of whether the cost in deploying that is

worth it? Has that been an issue?

Mr. YOUNG. I don’t think that has been an issue. You know, you

get variations in the—I guess the best way I can say is it the commander has a mission to accomplish. General Zelmer has been one

of the first, I think, to rightly say, I can do that mission, but in

addition to doing that mission, I would like to reduce aspects of it

in terms of supply, if you can bring me some technology.

Some commanders have asked not to see technology until it has

been fully tested and vetted, so you get this full range of willingness to be a first adopter, if you will, on the battlefield, which has

certain risks, as well as others who don’t want to take those steps.

But across the board, when we get those requirements, the Department set up processes, and the Congress has been very helpful

in providing some funds that let us have these quick reaction capabilities, if there is a technology solution address a need right away,

and that is what is happening.

Ms. DAVIS OF CALIFORNIA. Is there anything else you need from

the Congress in exploring those possibilities?

Mr. YOUNG. The one thing I would say, and I have said this in

previous hearing opportunities, is there are places where technology moves quickly these days. You know, you all are familiar

with how quickly new models of home computers come out. Other

technologies move in that space quickly, and the commercial market has begun to be a primary force in developing and delivering

new technologies, especially if you get on the information side. And

increasingly the Global War on Terror demands some of those information-side technology tools. So the more we can have flexibility
27

and speed and funding, the better we are going to be able to adopt

technologies and give them in the hands of troops.

We have some challenges now. I have small companies that feel

like they can’t get a contract fast enough. Our budget process, you

know, if I started today and wanted to do something brand new

that required some significant amount of funds, we would put it in

the 2008 budget, and maybe 12 to 18 months from now I could do

something. That doesn’t work as well as the places where the Congress has been very supportive in giving us pools of funds for quick

reaction, rapid equipping or counterterrorism, so we can act very

quickly when either a requirement or a technology opportunity presents itself.

Ms. DAVIS OF CALIFORNIA. Okay. Thank you very much.

One other—I was just going to suggest, I feel somewhat encouraged with the discussions between the Department of Energy and

the Department of Defense. We talk a lot about interagency coordination, or we have started talking more about that. Can you just

tell me, the next panel might want to comment on this, how would

you characterize that relationship in terms of how well we are

working today to make sure that we are vetting issues properly between the two agencies, or even as you go; you know, not just—

even agriculture, for that matter, in terms of finding new solutions,

where are we? How would you characterize that? Quickly, I am

sorry.

Mr. YOUNG. I think there is positive progress there, and there is

always more room for improvement. But I had on my calendar—

I have a meeting with senior levels of the Energy Department, the

task force engaged with senior levels and even working levels with

the Department of Energy, and we have made them aware of the

work that came out of the task force. So I intend to hold the Department as an open book and encourage and invite others to look

at the portfolio. The Energy Department has accepted that and

wants to work with us particularly in some of the areas where they

are going to have some significant primary responsibilities in terms

of are loan guarantees made to stimulate synfuel production and

others. In other areas where our technology is dual use, but driven

by military needs, they are keenly interested in seeing how those

programs progress. So the partnership is good, and we are going

to keep working at it.

Mr. SAXTON. Thank you very much. The gentlelady’s time has expired.

Mr. Schwarz.

Dr. SCHWARZ. I would like to talk about the Navy. We don’t use

NSFO anymore, which was Navy Special Fuel Oil, for some of you

who know what it is, black oil. That was my time in the Navy.

Would a member of the panel or anyone that wants to step in tell

me what the Navy is doing both at the level of the fleet, fleet air,

land-based air to increase their energy efficiency?

I was interested to hear about the coating on the propellers,

which I assume is some sort of a Teflon material or some sort of

a plastic to cut down friction to make that—the props a little more

efficient. Winglets on aircraft, the most efficient nuclear propulsion

for carriers and for submarines, hull design; somebody just give me

a good summary of what the Navy is doing at the seagoing level
28

and the land-based level and at the level of aircraft to be as energy-efficient as it can possibly be.

Mr. YOUNG. If you would offer us a chance to expand the record,

I would really like to do that, but I can give you the starting point

and tell you——

Dr. SCHWARZ. Real quickly for purposes of the hearing, and if you

would like to provide something in writing, I would be delighted.

Mr. YOUNG. The new ship designs have bulbless bows, which provide a few percent efficiency improvement in fuels savings. The

DDX design during the time I was in the Navy was changed from

four large turbines to two large turbines and two small turbines.

The ship can do, you know, basic loitering and some maneuvering

speeds and run the whole load on the two small turbines, and only

at really high-end tactical speeds move the turbines. That provides

several percent of fuel efficiency.

On the aircraft side, the Navy has worked very hard in making

particularly the operators conscious of the cost of flying hours and

help make decisions about when to fly as well as how to fly to save

funds. And the Navy has taken, you know—some of that is a mentality approach. The Navy has made improvements adding stern

flaps to ships that added both stability and several percent savings

in the fuel economy there. So I would tell you the Navy has a pretty comprehensive—and Phil can add on the facility side, but on the

side you are asking about, ships and airplanes, some comprehensive and cultural efforts to improve efficiency either through technology or operating choices on the part of the sailors and marines

out there.

Mr. GRONE. Sir, from a facility perspective, the Navy, as Mr.

Young indicated, is also stepping out and doing a good deal of leading on the design of facilities. We are also doing—the Navy is actually doing a good deal of work for the interagency on the cost impact of some of the new requirements in the Energy Policy Act in

the design and construction program to identify where those requirements are and to develop the energy efficiency measures to

achieve the 30 percent reduction that is required by the act.

So the Navy is not just on the hardware side, but also on the

brick-and-mortar side, stepping up very aggressively to do the applied technology work, to do the design work, to do the construction

activity work that is necessary to achieve the kind of conservation

savings that we hope to achieve.

Dr. SCHWARZ. What is the power plan of choice for the Navy surface ship, the Navy combatant surface ship? And then you have to

start saying, what kind of combat are you talking about, the medium to larger-size combatant surface ships for the 21st century

Navy up to the year 2050.

Mr. YOUNG. Well, I am operating from my previous experience,

but the current fleet is, I think, largely certainly the majority-plus

level.

Dr. SCHWARZ. We will exclude nuclear carriers and nuclear submarines.

Mr. YOUNG. Right. Equipped with a General Electric turbine, I

think 2,500 and 2,500-plus. Going forward in the new generation

combatant DDX, and there will—the Navy, I believe, anticipates a

competition between at least a couple of vendors for large turbines.
29

Dr. SCHWARZ. But the very efficient steam turbine is where we

are going to go, would you say?

Mr. YOUNG. Right. But the new turbine design, exactly as you

said, it offers significant improvements, and it is derived from some

of the aircraft engines that have made those step improvements

driven by the commercial airlines.

Dr. SCHWARZ. How about very efficient diesel for smaller combatants, yes or no?

Mr. YOUNG. The JASON study I referenced earlier recommended

that we take a very hard look at some of the new improvements

made, additional diesel engines and potential for a small diesel engine to be used even in many of the Army vehicles, and possibly

even reengining the M–1 from a turbine to a diesel. So these recommendations are on the table for us to go back and take a hard

look at right now.

Dr. SCHWARZ. Thank you very much.

Thank you, Mr. Chairman.

Mr. SAXTON. Thank you, Mr. Schwarz.

Mr. Taylor.

Mr. TAYLOR. I want to thank the gentleman and follow up to my

colleagues’ questions.

I am amazed. I guess I have to point this at Dr. Young. The first

atomic bomb was detonated in 1945. To the best of my knowledge,

by 1953 we had operational nuclear propulsion submarines. So 8

years from a weapon to an ideal source of power for a submarine.

Admiral Rickover worked very hard with some success of getting

a nuclear-powered surface fleet in the early 1960’s, and everything

that he said made sense then, makes sense now as far as cutting

down your vulnerabilities when you have to refuel, as far as the

amount of time you can spend to see—as far as the amount of time

you can spend at high speeds when you have to.

But two things have changed. I am going to guess in the early

1960’s our Nation still probably produced about 70 percent of its

own oil, certainly more than 50 percent and probably closer to 70

percent. Second thing is in the early 1960’s, I would imagine fuel

wasn’t even a factor in the Navy’s budget, it was probably so reasonably priced. So given our dependence on foreign oil, given to a

certain extent our involvement in Iraq as a result of our dependence on foreign oil, given the volatility of that market, the price

spikes, it is still very expensive even though it has come down a

little bit coincidentally in time for an election.

Why has the Navy shown such reluctance to go back to nuclear

power for the surface fleet? I am convinced that is the way to go.

I believe I can speak for my colleague Mr. Bartlett that he is certainly leaning in that direction. But if I look back at what happened with Admiral Rickover, he is the one who came to Congress

and said this is the way we need to go. He spoke for the Navy and

got a reluctant Congress to come along. Why is it that Congress is

now asking the Navy to look at it? What is the reluctance on the

Navy’s part?

Mr. YOUNG. If I could, I would really like to let the Navy leadership have a chance to answer your question.

Mr. TAYLOR. But I think you are in a very good position; having

held that job and now doing something else, I think you can, as we
30

say, speak freely on this. I would like to hear your opinion on the

Navy’s reluctance.

I mean, obviously we pay the guys who work in those engine

rooms. We spend a lot of money to train them. We spend a lot of

money to retain them, but that pipeline for training those people

is already there. I am told that the ship is more survivable. It obviously makes sense as far as replenishment, as far as the amount

of time you can spend. So there are so many reasons why the Navy

ought to be pushing for it.

Give me the downside again based on your experience—and I

will open this up to the panel. Give me the downside on why the

Navy hasn’t pushed for it sooner, and why they apparently don’t

seem real crazy about the idea right now.

Mr. YOUNG. I don’t have enough knowledge as to what led the

Navy to retire the surface fleet, and the other knowledge I don’t

have is what is the complete cost to the Federal Government of

that process, because, you know, the fuel really doesn’t come—all

the costs to the fuel supply are not within the DOD budget.

So I assume the Navy is looking at all those different factors and

probably willing to consider the issue especially in light of, as you

said, where the price of fuel is in the economy. But there is a clear

difference in price between the nuclear fuel ships in the Navy and

the conventional fuel ships, too. There is a difference in cost. There

is a difference in the labor structure because of the training and

skill of the workforces required build those ships.

So there are a lot of different aspects of that issue that I think

have to be looked at to give a total answer on that, and I can’t answer it today, but we will ask the Navy to get you additional comments.

Mr. TAYLOR. In your previous job did anyone, you know, fairly up

in the office or corps say this is the way we ought to going? Is there

within the existing office or corps of the Navy right now, anyone

to carry that proposal to the extent that Admiral Rickover did back

then? Because I haven’t met that fellow, and I would like to meet

him.

Mr. YOUNG. Well, there is some people that definitely feel strongly about its potential in the nuclear side of the Navy, but I can’t

say people have advocated its broad expansion to surface ships and

others as aggressively as you have recommended.

Mr. TAYLOR. If you think of anyone. Thank you very much.

Thank you very much, Mr. Chairman.

Mr. SAXTON. Mr. Shuster.

Mr. SHUSTER. Thank you, Mr. Chairman.

My question concerns the coal to liquid to coal jet fuel program,

and I know that there was a test of the B–52, I think you mentioned earlier, out of Edwards Air Force Base about a week ago.

Could you first speak to how that test went? And I know it is probably too early to get the full analysis on the performance, but preliminarily what was the outcome?

Mr. AIMONE. Sir, the first test flew for about two hours. It had

a landing gear retraction issue, so we couldn’t go up to flight altitudes and fly what is called the test points for the ten-hour flight.

So essentially we flew successfully with the engine. We went

through various throttle adjustments as we burned down fuel to be
31

able to abort the mission and land. So from the point of view of a

success of an engine operating with synthetic fuel, having thrust

and all the things associated with it, and to quote the pilot of the

airplane, I saw no difference.

The instrumentation and the telemetry and all that is being analyzed as we speak. We are actually putting most of our energy in

maintenance of the aircraft, fixing, tweaking some of the instrumentation from what we saw on the first flight so that we can collect the best information, as I would like to hopefully be able to report tomorrow morning the flight schedule for 0630 local takeoff for

about a 10-hour flight where it would go up to altitude, go through

a full set of flight regime envelope—etched to the envelope type of

tests to see how the fuel operates.

So the short answer is it was able to start, taxi, rotate, fly and

land successfully.

Mr. SHUSTER. And you said that hopefully tomorrow you will be

able to announce another test flight. How soon?

Mr. AIMONE. There is a test flight that is scheduled for right now

in the morning, and I can certainly inform the committee of the

success or not of that flight. And it will take several days of data

reduction to gather the data and analyze the exact pressure temperatures and thrusts and those types of things, and we expect to

have a full report out for all the tests, including the roughly 50

hours of engine run time to date. In the late December, January,

February time frame is when we expect to wrap up this entire test

program.

Mr. SHUSTER. That is good to hear. And is it accurate to say that

the Navy and the Air Force are very enthusiastic about turning

coal into jet fuel?

Mr. AIMONE. We are enthusiastic to look for alternative sources

of supply to achieve energy independence, yes, sir.

Mr. SHUSTER. I also understand you are getting pushed back

from the White House. Office of Management and Budget (OMB)

is reluctant to give long-term contracts for coal to fuel, coal to jet

fuel. Is that an accurate——

Mr. AIMONE. I would have to refer you, sir, to OMB.

Mr. SHUSTER. From your standpoint in the DOD, you are moving

forward. You are enthusiastic about, if this test works out, which

it sounds like it very well will work out, that you want to move forward with those long-term contracts?

Mr. AIMONE. Yes, sir. I want to move forward and achieve the

ability to certify another source of supply of fuel for aviation purposes, manned aviation flight, yes, sir.

Mr. SHUSTER. And I think Mr. Young may have answered this

question Mrs. Davis put forward. What can we do in Congress?

And I think you said we were very good at putting programs together, pots of money out there to be able to pursue. Is that something that we should be undertaking?

Mr. YOUNG. I think those efforts can be helpful, and in this space

you have rightly focused—and the Department is internally going

to think through whether any additional flexibilities would help us.

You know, one that is on the table for discussion is there is an approach that lets a contractor come onto a facility, and I really

would like Phil to talk more about this, and make an energy im-
32

provement, and if it creates a savings stream, they can be paid

from that savings stream.

There may be an opportunity the task force has brought to the

table through some of the services and recommendations to let that

be done on our platforms or systems. If we let someone come in and

consider reengining airplanes or putting winglets on airplanes or

doing something on ships, and if they made that investment and

created a savings stream, we could do the same thing with a piece

of tactical equipment that has been done with the facility. So we

are going to study that and see if there is enough opportunity to

come and ask for your help with the legislation that would enable

us to go into these kinds of partnerships.

Mr. SHUSTER. I think everybody said today there seems to be a

lot of reluctance out there, why we are not moving forward faster.

I mentioned the OMB pushed back. Also the Administration, from

what I have heard, is reluctant to get involved in what they believe

is pushing the market one way or the other, but we do that every

day whether it is developments at NASA or Department of Defense. It is something we should embrace, and we are looking at

an alternative fuel supply that is a national security issue.

You are saying you don’t have those things in place now legislatively that can move forward to do that program. You need us to

act?

Mr. YOUNG. I am not sure I am aware of any particular reluctance. I think we still need information, just as you will ask us for

information so you and we can make the best possible decisions.

The law governing all the branches of government right now, I

think, limits in general the five-year contracts, and indeed when

we want to enter into a multiyear contract particularly for tactical

systems, we have to have specific legislative authority even when

there is a great business case.

So to go beyond five years I think we will need some legislation,

and we will need to bring you the data, but in many cases, and I

would be more comfortable with my colleagues talking about it, the

indications are to us that in some of these areas because of the capital costs and the facilities to produce these synfuels, just being a

customer and an anchor tenant customer may not be enough. We

may need to be a long-term anchor tenant customer and agree to

some price floor that keeps that enterprise viable. And as you can

see, there will be some that will be for that and some that will be

concerned about that, because if the price of oil were to drop significantly, we would find ourselves committed to a contract with a

pricing floor because we agreed, as Chairman Saxton has pointed

out, to go into a long-term business venture.

So we need, I think, to keep collecting a data set, but I don’t—

I would not want you to perceive that as a lack of enthusiasm and

determination. In fact, I hope you have heard from the desire and

qualify and tests of the fuels. Right on the heels of that is a desire

to see that marketplace be able to produce it domestically, because

right now we don’t have a domestic source for the quantities that

even DOD might want to buy synthetic fuels, and so there is a potential for that to be bought offshore.

Mr. SHUSTER. Thank you very much.

Mr. SAXTON. The gentleman’s time has expired.
33

Mr. Secretary, let me just ask you this. I am told that the Secretary of Defense already has the authority to waive the application of any provision of law prescribing procedures to be followed

and award contracts if, number one—and that is under 10 USC,

section 2404—if market conditions for the fuel source have adversely affected DOD’s ability to buy it; and, two, the waiver will

expedite the government’s ability to buy the fuel. Why is this authority not sufficient in this case?

Mr. YOUNG. I think the statistics have said, frankly, the Department of Defense’s demand for fuel can be met by domestic production sources. So there is not an extremist situation here. We can

make—we can be a positive customer in pushing forward the demand for synthetic fuels and in creating capital investment to

those facilities, but the conditions that would let the Secretary of

Defense recommend a waiver I don’t think exist right now, because,

frankly, DOD’s needs can more be met by U.S. production capability.

Mr. SAXTON. Charlie, did you have a comment?

Mr. CONNELLY. I would agree with that comment, sir. We have

thought about it, but we are certainly not in a position to say we

are in that kind of situation now, and we are able to adequately

source all the fuels we need worldwide to perform our mission.

Mr. SAXTON. Maybe we can talk about this some more as we go

forward. This is really an important point, and we will work with

you.

Mr. Langevin.

Mr. LANGEVIN. Thank you, Mr. Chairman.

Gentlemen, thank you for your testimony today. It is a very interesting and timely topic, and it is essential that we maximize this

issue of developing alternative fuels for our own national security

needs long term.

During the discussion we talked about—Mr. Connelly, you

touched on the fact that the capital markets have not yet seen the

payoff investing in big dollars in this area, and, Secretary Young,

you said that DOD can’t do this all on its own. And the previous

line of questioning, I think it kind of gets to the point of isn’t it

just, you know, clear here why we need a long-term national energy policy in place with a dedicated funding, significant amounts

of funding to sense prime purpose, so to speak, and start to get the

benefits from it, the breakthroughs? And can we get the attention

of the capital markets. Could you comment on that?

Mr. YOUNG. I think some of those issues are particularly going

to be addressed by DOE. As the Chairman noted, there are some

tools that under the right extreme circumstances could let us take

action. Without extreme circumstances the Energy Policy Act gives

the Department of Energy authority with some modest set-alone

guarantees and other tools to help stimulate that investment. I

think DOD’s purchase of fuels and testing fuels helps stimulate it.

So all these are moving forward progressively.

I am not sure I see the Department of Defense getting into the

loan guarantee business, and we are trying to understand, though,

the full spectrum and the task force’s table, a full spectrum of ways

the Department—and Mr. Connelly might be able to comment

more—that we can do this. Either long-term contract to buy, would
34

we provide some support? The commercial marketplace seems to be

willing to make those investments. I think he can say better than

I but something like 28 responses to requests for information on

the potential for us to purchase 200 million gallons of fuel. So there

is a lot of interest in energy out there. We need to frame the rest

of the details and figure out what is going to be the appropriate

role and the role the Congress would support for the government,

and some of that rests with the Department of Energy as well as

the Department of Defense.

Mr. LANGEVIN. Mr. Connelly, would you care to comment?

Mr. CONNELLY. The clear signal from our respondees to our responders was that they would be seeking risk mitigation factors

from us before they would be able to obtain the financing they

would need.

Mr. LANGEVIN. On the test of the B–52 using the synthetic fuel,

can you elaborate on—did you get more flying hours out of the synthetic fuel that was used? And basically cost ratio, was it—was

there significant cost savings in using this, or is that too early to

determine?

Mr. AIMONE. Sir, it is a great question. We blended the fuel such

that it was a drop in for JP–8. So from a testing point of view, it

acted like jet fuel. It was, in fact, blended such that it would meet

the jet fuel specifications, so it had no more or no less efficiency

in amounts of BTUs per pound. Both become very significant in

aircraft use. So it is status quo because we blended it to be such.

The fuel itself inherently has the same energy component as any

of the liquid hydrocarbons in aviation, JP–5, JP–8 aviation, JP–8,

et cetera. Where there is a difference is the environmental characteristics of the fuel in its nature. That is to say, if it burnt 100 percent synthetic, it would not have sulfur, and it would not have the

so-called aromatics or benzene rings that are producers of both soot

and, in the case of benzene rings or the case of the sulfuric acid,

some type of a small component. So the environmental consequences are significant there. Although we would like to make

sure that we look at the whole picture, which is the manufacturer

of the fuel and ensuring that we take care of the carbon management issues in the industry manufacture and fuel.

Mr. LANGEVIN. The cost issue.

Mr. AIMONE. The cost that we have, this was a research quantity

of 100,000 gallons of fuel, a one-time purchase, so these costs were

fairly high. In fact, the actual cost of—the actual was about $23 a

gallon of the neat or the 100 percent synthetic before it was blended.

Mr. LANGEVIN. How much regular jet fuel?

Mr. AIMONE. It was blended 50/50.

Mr. LANGEVIN. But the cost of regular jet fuel is——

Mr. AIMONE. Is about $2.50 a gallon, so 10 times, roughly.

Mr. YOUNG. So if I can use that maybe to tie together the previous discussion, that fuel was on the order ten times more expensive than what we are paying every day for fuel. This is the right

thing to do to test and certify and give ourselves an alternate

source, but nobody would be comfortable with the idea that DOD’s

fuel costs would go up by a factor of ten, and even if we could pay

that bill, as you have heard testified today, that stimulus alone
35

would not likely by itself create the capacity in the marketplace.

It is going to have to be add, buy with other demand. And if we

created that demand, the price would come down.

The question is, how fast would the price come down, and when

can we get it closer to the market? Because I think the desire on

the Department’s part and probably the Congress’s part is going to

have this fuel cost get as close to market as possible in the end

state over some period of time.

Mr. SAXTON. The gentleman’s time has expired.

Mr. Bartlett.

Mr. LANGEVIN. Thank you.

Mr. BARTLETT. Thank you very much, gentlemen, and thank you

very much.

The Corps of Engineers commissioned the study on oil, I think

it was dated last September. It was several months before it was

available openly. In that study it was concluded that oil production

has either peaked, or its peaking is imminent with potentially devastating consequences.

On page 10 of The Washington Post today was a little article referencing a paper just printed in the proceedings of the Academy of

Sciences which said that the Earth was at its highest temperature

in the last interglacial period, which is about 12,000 years long.

Mr. BARTLETT. And indeed, the article said that the earth was

at its highest temperature and highest carbon dioxide level in a

million years. Mr. Young and the rest of the panel, I am asking you

if you see any common interest or challenge in these two reports,

the one by the Corps of Engineers on peeking of oil, and the article

in the proceedings of the Academy of Sciences, that the world has

reached its highest level of CO2 and its highest temperature in the

last million years, and if so, what ought we be doing about it?

Mr. YOUNG. Mr. Chairman, I know you are, frankly, more familiar than I with some of those statistics. One statistic in some of the

studies is, as much oil as has been recovered and consumed to date

will be recovered and consumed from now until 2030 and make a

significant dent in the known reserves. These factors raise questions about the long-term price of oil, which you are extremely familiar with, and they are driving a lot of the Department’s demand

and desires to have options ranging from our investments in fuel

cells to solar across the border, but the Nation as a whole has got

to take those steps, and I think the department is trying to be a

participant, if not, frankly, a leader, in many of those areas in

pushing that effort forward.

Mr. BARTLETT. I would be very skeptical of Energy Information

Agency projections as to the amount of oil that is to be found. They

are based on data from USGS, which makes the assumption that

the 50 percent probability is the equivalent to the 50th percentile

and therefore the most probable. And most of the experts that I

know of in the world believe that we have probably found about 95

percent of all of the oil that we will ever find. There is a very interesting oil chart, which you may have a copy of, and Professor

Laherrere says that it is essentially inconceivable that with all of

our exploration techniques and computer modelling and 3–D seismic, that the world will find as much or more oil than as now exists. We have about a thousand gigabarrels of oil out there yet to
36

be pumped. USGS assumptions assume that we are going to find

another thousand gigabarrels of oil out there; that is absolutely improbable.

And I checked with the head statistician from the Congressional

Research Service, and this is an absolutely bizarre use of statistics,

to assume that the 50 percent probability is the 50th percentile,

and therefore the most probable thing. Indeed, they have a chart

10 years old from which they make projections from where they

think oil discovery is going to go, and it is not following their optimistic 50 percent probabilities. It is following, as you would suspect

it would follow, the 95 percent probability because that is what the

95 percent probability said.

If indeed these two studies—and I think I that they are related—

what we need to be doing is aggressively moving from an economy

based on fossil fuels for two reasons: One, they are going to run

out; and second, we are now releasing more carbon—on renewables, you are releasing exactly the amount of carbon in the atmosphere that you sequestered from the atmosphere in making the renewables.

And so I think there is indeed a common thread between these

two articles, and they both demand that we do something much

more aggressive in the energy area than we are doing. And I am

appreciative of what you all are doing, but it is in—the reality is,

they are simply nibbling at the margins, and that is maybe all

that, in Defense, we would expect it to do, but it sure as heck, as

a country, it is not what we would expect it to do.

Thank you very much for your testimony.

Mr. SAXTON. Thank you, Mr. Bartlett.

Mr. Udall.

Mr. UDALL. Thank you, Mr. Chairman.

I want to thank the panel as well, and thank my colleague, Mr.

Bartlett, for his continued advocacy of paying attention to the reality of the situation we face.

Mr. Connelly, I was glad to see in your testimony that you mention the concern that industry has, and by extension the DOD has,

about possible future requirements for carbon capture and the

Fischer-Tropsch processes. And I want to thank you for thinking

about it. And if I could, I want to ask you for the record at a later

date if you would just submit some of the ideas that the DOD and

your office is generating as to how you would respond to that eventual development, and that is that we will require some form of

carbon sequestration with a cap and trade program to back it up,

whatever it might be. If you do would that, I would be greatly appreciative of it.

Mr. CONNELLY. I would be pleased to do that.

Mr. UDALL. Director Young, Mr. Aimone, great to see you. You

testified about the Energy Task Force, and I know your report is

due—I think it is looming, right, in the very near future? I have

read in some of the testimony that the Task Force might lead to

a permanent Assured Fuels Task Force, and I wonder if you could

comment on that. And I would like to put a pitch in that, if a permanent group, committee or body were chartered or put into force,

would you also consider including power solutions to such a body?
37

Mr. YOUNG. One of the recommendations from the Task Force is

to continue, if you will, the Task Force. And specifically, I think

you probably—you said one recommendation is that there might be

a—the Task Force or a smaller group to look at the assured fuels

issue and develop options and solutions. I think that will be the

recommendation we take to the Secretary.

And on a personal basis I will tell you that the participation of

the services and agencies in this group to achieve collaboration and

coordination is one of the highest benefits, aside from tabling ideas.

And so I would be a fan of continuing this forum and sharing the

lessons so the Department continues to maintain an integrated program going forward as we especially consider new investments and

opportunities and make sure those are fully informed by the knowledge that exists in the Defense Department.

Mr. UDALL. Mr. Grone, do you care to comment?

Mr. GRONE. I am going to associate myself with Mr. Young’s remarks. And I think to the extent—and one of the benefits of the

work that we have done today is it is broadbased. It is not just an

R&D question. It is not just a platform question. It is—we have

tried to take a holistic approach to the entirety of the Department

of Energy’s requirements, be they facility based or system based.

And I would expect that that kind of work in collaboration between

our sides of the house and certainly with AT&L and certainly with

the components would continue.

Mr. UDALL. I think there is just so much opportunity here as we

have discussed in the past. And I would like to be a part of seeing

that those task forces are stood up in a permanent way.

I would like to thank the Chairman, Mr. Saxton, and the other

chairman, Mr. Hefley, for responding to the broadbased interest on

the part of the committee members to have this hearing today. I

know 20 Democrats or more signed a letter asking for this kind of

hearing to be held, and I am pleased that it has unfolded in this

way. And I have never seen in my eight years on the Hill so much

interest in this across party lines. And I think the challenge for us

is to keep this commitment very steady over the next decades, because of the threats but also because of the opportunities this presents. And we have often asked the DOD and the men and women

in uniform to lead our society forward in ways that aren’t necessarily center to the mission, but whether it is integration of our

troops, new products and services that have resulted in civilian advances in their quality of lives, this is key, I think, and I have got

great faith in what you all can accomplish.

I wanted to just finish two quick points. I want to thank you for

your emphasis on the nontactical fleet liquid fuels opportunities,

because historians are going to excoriate us for burning oil in our

automobiles because there are so many uses of petroleum; there

are so many of uses of it that have higher value. But as you push

a nontactical fleet expansion in ethanols and otherliquid fuels, you

could make the case that that leaves the petroleum for the higher

uses in our battlefield and in our airplanes and so on. So I want

to encourage you to continue to do that.

And then, much more specifically, I know we have talked, Mr.

Grone, about what you might do in Colorado as we expand the

presence of the Army, particularly with a fourth ID moving to Colo-
38

rado, but also the academy is there, and NORTHCOM NORAD.

And you had some plans afoot for the installations there. I could

make a pitch again that we would like to see that in Colorado. We

style ourselves as the Saudi Arabia of whatever it is, renewable

technologies. And I see my time has expired, but if you had ten seconds worth of thought on that, I would appreciate it.

Mr. GRONE. Well, certainly we continue to work with the services

on issues related to installations in Colorado. As we came out of

a fairly comprehensive base realignment and closure process, those

installations proved to be enduring installations. And the work that

we are doing—it is important that—there is a lot of opportunity I

think for joint approaches in the Colorado Springs area between

the Army and the Air Force, and we are continuing to explore

those. As those mature, we will keep you and the rest of the Colorado delegation and the committee informed as we move forward.

Mr. SAXTON. Thank you very much, Mr. Udall.

Mr. Israel.

Mr. ISRAEL. Thank you, Mr. Chairman. And thank you so much

for extending me the courtesy of sitting in on this subcommittee.

I am a member of the full committee, not this subcommittee, and

I appreciate your kindness and Ms. Simler’s assistance.

I won’t abuse the privilege; I just want to make one point. I have

one very quick factual question and then a slightly broader question. The point that I want to make is that Mr. Bartlett and I have

been working very closely together on a bipartisan energy security

working group, which we will kick off on Thursday with Secretary

Gordon England. We are trying to bring members together, again

on a bipartisan basis, to focus in on this issue. And I appreciate

the cooperation of the Department, as well as Jim Woolsey, who

has been one of our key advisors.

Quick question to Mr. Aimone. Is the Air Force Research and Development Program on SynFuels fully funded in this fiscal year?

We are going to do a DOD appropriation at some point today. To

the best of your knowledge, do you have all of the resources that

you need for that specific program, or are there any funding shortfalls that you are concerned with?

Mr. AIMONE. Mr. Israel, for fiscal year 2007, what we are work- ing is approximately $13 million worth of funding to be sourced

from within Air Force needs—existing Air Force capability to be

able to meet this need. We think that moves us to the continued

steps that we are wishing, including the purchase of twice the

amount of fuel that we purchased this year, so 200,000 gallons.

There will be a problematic issue with that in that the pilot plant

that we were able to secure the 100,000 gallons from this year is

shut down, so we don’t know exactly the route to secure that fuel,

but that will be part of our challenges and will be part of our challenge to understand how to do that.

So the short answer is, I believe the money exists within the

funds available to the Department.

Mr. ISRAEL. For this fiscal year?

Mr. AIMONE. For fiscal year 2007. For fiscal year 2006, that is

terminating in three days, we have achieved exactly what we wanted to do, and we have enough money to finish out the flight tests.

We actually believe that we will have a little bit of fuel left when
39

we get done with the second and potentially third flight test to

move the jet up and do some on-the-ground engine starts in a very

cold weather environment. So we think fiscal year 2006 funds are

sufficient. We believe that with the funds that we have available

within the Department, we can proceed in the direction we were

hoping to go to with the Secretary of the Air Force for fiscal year

2007. And then fiscal year 2008 is going to be what we are debating internally.

Mr. ISRAEL. We will work together on that, and I am sure my

colleagues will do just that.

A slightly broader question to Mr. Young. On the issue of DOD’s

role as a test bed or facilitator or a catalyst, Mr. Saxton and I sat

in a Stryker combat vehicle in April in Iraq; great platform, great

tactical vehicle, gets between five and ten miles to the gallon.

Shortly after that, I met with representatives of the big three, and

I said, you have Members of Congress driving around Capitol Hill

in hydrogen demo vehicles; why aren’t you starting to work on

plug-in hybrids and hydrogens and other applications for the battlefield? And here is what they said, Congressman, we can make

anything you want. You want hydrogen, we can do it. You want to

plug in hybrids, we can do it. The problem is, don’t tell us what

to do, ask us to risk all of our capital and our R&D dollars to build

something that nobody wants to buy. The two worst selling vehicles

in America right now are the Hummer H1 and the Honda Insight,

which is a hybrid.

The DOD has always been a test bed. DARPA helped create the

computer chip, the Internet, the Boeing 707. So my question is,

what are you doing specifically with Detroit to incentivize and facilitate new partnerships for R&D that may make sense for our

tactical vehicles? My belief is you are spending about, departmentwide, about $500 million a year on R&D for advanced energy, alternative fuels programs. How much of that is spent in investments

with Detroit and partnerships with Detroit, not only to protect our

national security but create jobs in the manufacturing industry?

Mr. YOUNG. I would have to expand on that. You know, we target

the research to need, and then go out and competitively award it.

And so some of it is incumbent on companies to come and bid and

propose ideas to us, we can’t necessarily go out and pick a small

group of three and say, we want to give you money. But in those

cases, the Army in particular has a strong partnership, both

through past experience and proximity, with some of the auto manufacturers. And I think TARDEC has done a lot of work with them

on a range of technologies. The Department of Energy has particular relationships with—I suspect you are extremely familiar with—

on hydrogen vehicles and other such things. Hydrogen poses some

unique problems for DOD in terms of tactical battlefield use, but

there are other options that we are very interested in discussing

with them, and in many cases, some of the Special Forces and others use some specialty or slightly modified commercial vehicles to

accomplish some of their missions. I know the sealed delivery vehicles, some of them are pulled by the high end trucks that we buy

off the commercial line, so when those products can meet our

needs, we certainly pursue them because they are usually cost effective.
40

Mr. ISRAEL. Thank you, Mr. Chairman.

Mr. SAXTON. Well, thank you very much. This has been an interesting two hours. Thank you for being with us to share your ideas,

and thank you for your patience. We appreciate your participation,

and we look forward to working with you as we move forward.

We will move on now to our second panel, which consists of Mr.

Scott Sklar, who is president of the Stella Group Ltd.; Dr. James

Bartis, Senior Policy Analyst of the RAND Corporation; and Mr.

Mark Wagner, member of the Federal Performance Contracting Coalition of the Business Council for Sustainable Energy.

Thank you for joining us, gentlemen. We look forward to hearing

from you.

Gentlemen, thank you for being with us, we appreciate it. We are

interested in what you have to say, so why don’t we get right to

it, Mr. Sklar.

STATEMENT OF SCOTT SKLAR, PRESIDENT, THE STELLA

GROUP, LTD.

Mr. SKLAR. Yes, thank you, Mr. Chairman. I will try to keep this

short, since I know it is late.

First, I want to thank the subcommittee for just looking at these

issues. As you know, it is important.

Secretary Rumsfeld has two activities underway, the Defense Research and Engineering Power and Energy Task Force, and then

the Defense Science Board Task Force on DOD energy strategy.

These are good, too, this is good news. And it is good looking at

these issues from 60,000 feet, but there are some ongoing activities

that DOD is doing that need to be lauded. DARPA programs are

really very sophisticated and have been ongoing. Some of the work

that I wanted to highlight is work on fuel cells, biomass, waste utilization. I brought a sample of the Nano technology solar they support that they are putting on tents. These are light sensitive dyes,

totally new materials that can make the tents on the battlefield

produce their own electricity.

There are a lot of specialized programs, too. The ones I like on

the procured programs, we have 10,000 solar blankets for powering

field phones. Here is one of them that is put out that—just so that

you can keep the field phones running on sunlight during the day

and then use their batteries at nighttime. And obviously, they are

out in the military and on the battlefield today.

We have the Air Force’s Advanced Power Technology Office doing

cutting edge stuff the way the military ought to in distributed generation from fuel cells to solar to biomass to combining power. And

the Centers for Army Analysis and for Naval Analysis are doing

the analytical work we need.

We have had four executive orders under President Bush and an

overarching one of President Clinton that have set the stage for

some of these activities.

And last, I participated in two studies under DOD auspices on

November 2003 on Army installation security and then a report to

Congress issued March 2005 that took about two years and dozens

of experts within DOD primarily and a few of us on the outside.

The first one was important because it was really a response to the

President that, if we had catastrophic grid failure or if we had
41

pipelines down, either natural gas or fuel, for any length of time,

could we have critical functions at key military bases? And it was

pretty dismal, actually. So we need to look at new technology to ensure that we can meet the challenges that we face, particularly

after September 11th.

We have a lot of these reports and programs going on throughout

DOD, but we have a problem. And the problem really is that there

is no central place within that agency where the studies, the ongoing programs and the experts within DOD, retired from DOD or

have supported DOD, that people within the military can sort of

find out what is going on. So you have a lot of times—every year,

we are spending time and money repeating the same learning

curve. We have got to stop that. We need to have experts—projects

need to be conveyed both in a database and in ongoing programs

via National Defense Universities, and at the War Colleges for the

emerging leadership, so they know about what we have discussed,

what we have studied, and what new technologies either DOD is

testing, evolving or in fact trying to adopt.

And, you know, Major General Zimmer, we talked about so

much; he found out about the units by chance. And we have a

demo in Arlington, Virginia,10 minutes from here—I am happy to

show the committee—using solar and wind in a deployable unit

using shipping containers, where you can add diesels, you can expand—contrary to what Mr. Young testified to you—into hundreds

of megawatts on the field, battle hardened. And they were stunned.

They should have known about that.

Similarly, the Defense Science Board—as you know, that is underway—was stunned that the Army Analysis Center had already

done fuel-cost analysis on what it actually cost the military to bring

one gallon of fuel to the battlefield front. It is exorbitant. And so

if you are going to do cost/benefit analysis, you ought to know what

your costs are.

I included in my testimony lots of studies, but I want to point

out a few of them.

First of all, we have commercial technologies in our markets that

can impact on the military. We have shown, for instance, that we

can have new technologies—and a recent Department of Energy

study showed that Europe recycles lubricating fuels three times

that of the United States—that if the Department of Defense

looked at new processes and new technologies—and we have one

company in Texas with a pilot line that has shown that you can

recycle lubricating fuel used by the military. I have a little sample

here from this company. And most of that recycled fuel is the highest quality lubricating oil you can use, so it is military quality, and

diesel fuel. So why wouldn’t we want to have that capability at virtually every base and at the front lines so we are recycling the fuel

we have rather than concocting new ones? Good idea. And this is

very superior to sort of what I call the primitive recycling we use

now.

Mr. SAXTON. Excuse me for just a moment. Did you say that

you—you confused me when you said you can recycle fuel.

Mr. SKLAR. In this case, lubricating oil; I wanted to say, in this

case, you are correct.
42

I also want to say that we have an immense set of new technologies from efficiency renewables and distributed generation, I

listed them in my testimony and provided pictures. I brought in,

it just hit the markets, our screw-in bundled Light Emitting Diode

(LED) lights that take about 60 percent of the energy for the same

lumens. And so now we can screw them in in basic traditional sockets for lighting. We ought to reduce military facilities and on-field

installations, and with a real move by 60 percent in reduction.

I would like to add—and again, I am abbreviating my remarks—

to push that the advanced technologies—and I include all the advanced distributed technologies—fuel cells, combined heating

power, wave-powered buoys, micro hydro photovoltaics, solar, thermal, ground-coupled heat pumps, modular biomass—I am sure I

missed a few, small wind—are utilized cost effectively in real

terms. The military is using them all, and they are hidden away

or pushed to the side. We need to expand it. We need to replicate

it. We need to train our emergency officers and leaders with it. And

then as these markets expand, which they are at 30 percent a year,

they will come down in cost, and we will have a more resilient, a

more agile military force and a greater defense that will have less

chance of having fuel disrupted.

And then I would like to just comment that there was a

misstatement here by one of the Defense testifiers that the energy

balance on biofuels was even. And the Department of Agriculture

has completed two studies during this Administration to show a

positive energy balance of 1.4 to 1.8.

And last, the question of fuels might be better addressed with we

want a portfolio of fuels, and we want to follow the private sector

approach of multi-fuel vehicles. And I yield to the Chairman—who

has a few more hybrids than I own—to understand that. But the

fact of the matter is we have the technology to utilize a range of

liquid fuels in our military and be agnostic about it, which would

give us far more agility in the field than worrying about a particular fuel here and there that needs to be centralized, pipelined and

centralized.

Thank you very much.

[The prepared statement of Mr. Sklar can be found in the Appendix on page 77.]

Mr. SAXTON. Mr. Bartis.

STATEMENT OF JAMES T. BARTIS, SENIOR POLICY ANALYST,

RAND CORPORATION

Mr. BARTIS. Mr. Chairman and distinguished members, thank

you for inviting me to testify today.

My testimony addresses alternative fuels for military operations,

specifically alternatives to JP–8 and its close relative, JP–5.

These fuels are preferred for combat operations because of their

high energy content per unit of volume and because they are less

subject to accidental ignition, as compared to gasoline. In the

United States, there exists only two technically viable alternatives

to crude oil for producing significant amounts of JP–8 over the next

20 or so years. One option is to tap abundant and rich oil shale deposits in Utah, Colorado and Wyoming. The other option is based

on a method known as Fischer-Tropsch synthesis. This method
43

uses coal or a combination of coal and local agricultural wastes or

other types of biomass to produce liquid fuels.

But beyond the co-feeding of biomass with coal, no other technically viable approaches are ready today for using renewable resources to produce significant amounts of JP–8, or similar fuels

such as diesel or home heating oil.

In particular, the potential for biodiesel, which is produced from

vegetable oil today, is severely limited by very low yields per cultivated acre and because of the amount of suitable arable land

available in the United States. Also, at the current state of technology development, there is no fermentation type process capable

of us producing a product that would be suitable for blending with

JP–8, as is the case for gasoline, which can be blended with ethanol.

Some very promising near-term development work on oil shale is

underway in Colorado, but pending success in this work, oil shale

remains a very expensive option for producing liquid fuels. For this

reason, the remainder of my remarks will be focused on the prospects and policy issues for coal-to-liquids development.

My bottom line is that the prospects for a commercial coal-to-liquids industry developing within the United States remain very uncertain. Three major impediments block the way forward: uncertainty about the costs in performance in coal-to-liquids plants; uncertainty about the future costs of world oil prices; and third, uncertainty about whether and how greenhouse gas emissions, especially carbon dioxide emissions, might be controlled in the United

States.

Given the importance of these three uncertainties, an immediate

national commitment to rapidly put in place a multi-million barrel

per day coal-to-liquids industry would be premature. Rather, Congress should consider a more measured approach to developing a

coal-to-liquids industry.

The focus of that measured approach would be to foster early

commercial experience by promoting the construction and operation

of an unlimited number of commercial-scale plants. Getting early

commercial operating experience from a few coal-to-liquid plants

would yield important benefits. Cost and performance uncertainties

would be reduced. Early operating experience would promote post

production learning. And most important, a small number of early

plants could form the basis of a rapid expansion of a more economically competitive coal-to-liquids industry in the future.

But just as it is in the national interest to promote early production experience, it is just as important that this early experience

be limited to a few plants. A Federal subsidy of fuel production

from such plants could be very expensive. A mere $10 per barrel

subsidy for a single small commercial plant producing 30,000 barrels per day would add up to a taxpayer burden of about $100 million per year.

A second reason for a measured approach is to avoid adverse economic impacts that would be associated with a dramatic increase

in orders for specialized materials and equipment, and such cost increases could spill over to other sectors of the U.S. economy. The

third reason is that a large increase in coal use may just not be
44

consistent with the need to reduce worldwide greenhouse emissions.

An advantage of the Fischer-Tropsch approach is that carbon dioxide generated at the plant’s site can be easily captured. Therefore, the first few coal-to-liquids plants might be able to put that

carbon dioxide to a good use, such as enhancing petroleum in U.S.

oil fields. However, until carbon sequestration on a large scale is

demonstrated as technically viable, we must recognize the possibility that coal use for both power generation and liquid fuel production may not be a sustainable path for the United States.

There are productive measures that the Federal Government can

take. The Federal Government should consider cost sharing the development of a few site-specific designs. The information from such

efforts, which each design costs about $30 million, would also provide Congress with a much stronger basis for designing broader

measures to promote unconventional fuel development. The Federal

Government can also take a number of approaches to reduce the

risk to owners of coal-to-liquids plants of a sustained drop in world

crude oil prices.

The challenge here is to protect the taxpayer by minimizing Federal expenditures while at the same time providing appropriate incentives to motivate private investment. Purchase agreements,

which basically involve a guaranteed minimum purchase price, are

one approach for mitigating financial risk that we understand are

being considered by the Department of Defense. This approach can

be effective for reducing risk to plant investors. However, I do caution against the use of Federal loan guarantees. Firms with the

technical and management wherewithal to build and operate firstof-a-kind coal-to-liquids plants generally have access to needed financial resources. Loan guarantees induce the participation of less

capable firms, thereby increasing the financial liability passed to

the public.

If the Federal Government is prepared to promote early production experience, then expanded efforts in other areas would also be

needed. Most important, the Federal Government should accelerate

the development in testing, including large-scale testing of methods

of long-term sequestration of carbon dioxide. This could involve

using an early coal-to-liquids production plant as a source of carbon

dioxide since they are excellent producers of it for the testing of sequestration options.

Finally, consideration should be given to enhancing long-term,

high-pay-off, high-risk research in both fossil as well as renewable

routes to distillate fuels, including routes involving fermentation.

In closing, I thank the committee for looking at this very important issue. Thank you.

[The prepared statement of Mr. Bartis can be found in the Appendix on page 131.]

Mr. SAXTON. We thank you, Mr. Bartis, for your very excellent

testimony.

Mr. Wagner.
45

STATEMENT OF MARK WAGNER, MEMBER, FEDERAL PERFORMANCE CONTRACTING COALITION, BUSINESS COUNCIL

FOR SUSTAINABLE ENERGY

Mr. WAGNER. Thank you, Mr. Chairman.

I am here on behalf of the Federal Performance Contracting Coalition. We are a group of energy service companies, including

Ameresco, Chevron Energy Solutions, Honeywell, Noresco, and my

company, Johnson Controls. Our business is to help military installations become energy efficient and energy secure. And please let

Mr. Hayes know that we are darn enthusiastic about it.

Mr. Bartlett referenced a recent Army Corps report that issued

an insightful analysis on energy issues facing U.S. military installations. The critical issues in that report were energy availability,

affordability, sustainability, security, and they did mention the fragility of the electric grid.

The report recommended energy efficiency measures, because

they are readily available and pay for themselves; expansion of renewable energy and onsite generation at military bases; and

leveraging financial options.

Currently, we have the technology to address many of the problems and the recommendations in the Army Corps report. The

issue is whether we can adequately deploy those solutions. Let me

cite several successful projects on military bases that provide energy efficiency, reliability, security and renewable power.

At Elmendorf Air Force Base, a 50-year-old heating and power

plant was replaced with a new energy-efficient distributed generation system. Picatinny Arsenal in New Jersey, again, distributed

energy and back-up generation was installed to address energy efficiency and mission needs. At Twentynine Palms in California, a

dual-fueled co-generation plant was erected, and one of the largest

photovoltaic solar plants in the country was installed. This co-generation plant is fueled by gas line, and if the gas line is disrupted

by an earthquake or mischief if you will, this plant can switch immediately to diesel fuel, which is on base and on critical loan to the

base for the two weeks. That is energy security, sir.

Naval Station Guantanamo Bay, high-tech windmills are now

providing more cost-effective power than off the extensive grid. And

Fort Bragg now has a new combined heat and power plant for energy efficiency and security.

Unfortunately, Mr. Chairman, these successful projects are more

the exception than the rule. We need the will and the way to deploy efficiency and alternative energy technologies that we already

have at more military installations throughout the country, the

world and even in Guam, sir.

To do this, investments are needed in energy-efficient equipment

and systems. One way to do this is to appropriate more dollars, but

we know sufficient funding for infrastructure improvements are

tight. The main program Mr. Grone mentioned earlier today was

the ECIP program, the Energy Conservation Investment Program.

According to the Office of Management and Budget, this program

has a 3–1 return on investment ratio. For every dollar that Congress appropriates for this program, the Department of Defense

saves $3 in energy in these projects. Unfortunately, funding for

ECIP is basically at the same $50 million level that it was when
46

it was created 15 years ago by this committee. To be honest, with

a 3–1 return on investment, this program should get a $100 million

increase.

The alternative to direct appropriations if the dollars aren’t

available is financing projects through the energy savings, which

Mr. Grone also brought up, programs such as the Energy Savings

Performance Contracting Program. Let me explain how that program works. Under the program, the private sector energy companies finance, install and maintain new energy-efficient equipment

in Federal facilities at no upfront cost to the government. The energy service company is paid back over time from the dollars saved

by the agency on its energy and maintenance bills. The key is that

project costs are guaranteed by the companies to be paid from the

energy cost savings. As you can see on the chart, the second bar

can exceed the first bar, the original energy cost. If the energy savings do not occur, the contractor doesn’t get paid. In addition, the

energy savings for each project are measured and verified on a regular basis. This acts as an insurance policy for the government.

The bottom line is that the energy use is guaranteed to be reduced; the military base has new energy-efficient equipment, and

it does not pay any more than it was already paying for utilities.

The five successful projects I mentioned earlier were all done by

ESPC, with no upfront funding from the government.

The infrastructure investments for these five projects were worth over $200 million to the Department of Defense. This was financed

by private sector capital and paid back with guaranteed energy cost

savings.

While the ESPC program has enjoyed support from Congress and

the Administration, quite frankly, the program needs to be supercharged. It has yet to rebound from 2004, when the authority

lapsed and all projects stopped. In our written testimony, we have

offered a number of specific recommendations to improve and accelerate the program. I won’t go over each one individually. But the

important thing to note is this program is one of the few ways

DOD can afford to address its critical energy needs of its facilities.

Agencies need to be encouraged—no, sir, they need to be required

to develop energy-efficient projects at their installations.

Finally, let me close with a few comments on sustainable buildings. The private sector has embraced green buildings because they

save money. Sustainable buildings optimize energy efficiency and

water efficiency, reduce operational costs and improve indoor environment and worker productivity. To the private sector, it is all

about the bottom line because sustainable buildings are better and

cost less to maintain.

DOD has embraced the concept of sustainable buildings and have

signed on to the Federal-wide Memorandum of Understanding supporting sustainable buildings, but the problem is resources to build

them. Far too often MilCon dollars are forced to focus on first costs,

and the ability to build sustainable buildings suffer. The Congress

and the Department need to find solutions to the first cost trap and

develop ways to consider the long-term operational impact if we

don’t build sustainable buildings today.

DOD buildings built with fiscal year 2007 MilCon dollars will be

around long after most of us in this room are gone. We should not
47

burden the Department’s O&M budgets long into the future because we didn’t build sustainable buildings today.

Thank you, Mr. Chairman. I appreciate the opportunity to testify.

[The prepared statement of Mr. Wagner can be found in the Appendix on page 67.]

Mr. SAXTON. Thank you very much, Mr. Wagner.

I would just like to explore a couple of practical issues that came

to my mind.

First, Mr. Wagner, while you were talking, I gather from the title

of your organization that you are a business man?

Mr. WAGNER. Yes, sir, I work with Johnson Controls.

Mr. SAXTON. Good. Then you are the perfect guy for me to ask

this question.

Currently in the Department of Defense, we have a privatization

housing program that is well underway; are you familiar with it?

Mr. WAGNER. Yes, sir, very familiar.

Mr. SAXTON. My understanding is that, with regard to solar,

there are many programs in the country where a house built with

solar energy or with solar energy applied to it—solar energy application, if you will—that the power company will actually give a

credit for electricity that is fed back into the grid.

Mr. WAGNER. Yes, sir.

Mr. SAXTON. That is okay. Good. My understanding——

Mr. WAGNER. In some States, I know they do it.

Mr. SKLAR. It is called net metering, and it is accepted in 29

States.

Mr. SAXTON. Okay, that is a good thing. What would prevent the

Department of Defense from writing specs from a privatization

project involving housing to build a—to put specs in a proposal that

would include electrification through solar? And I am not quite

sure about the logistics of whether the contractors would pay for

the electricity or be reimbursed through the solar process, or

whether the military family would, but if we put those specs, that

would be a private investment in military housing not only for the

housing, but for the energy.

Mr. WAGNER. I would say you would probably have to have the

project be in a location where solar energy is certainly viable and

there is a good return on investment, because the way I understand the housing privatization project works there, there is a certain amount of income stream that the private sector is using to

finance the cost of the housing that is built.

The other problem you have got is, who is paying the utility bill?

If the housing privatization firm isn’t on the tab for the utility bill,

then there is not going to be an incentive for them to install higher—but you could structure the program like that.

Mr. SAXTON. Good. I will tell Mr. Grone next time I see him.

Thank you.

Mr. Sklar, the other issue that I thought was interesting was

your lubricant recycling suggestion.

Mr. SKLAR. Yes.

Mr. SAXTON. On a military base in theater, is it practical to move

in a recycling process that would work on a relatively large scale?

I mean, if you are at Baghdad Airport or you are at the air base
48

north of Baghdad, which I can’t think of the name at the moment—

Balad, thank you—or any other number of other places, I mean, I

have been there. There are fleets of cars and trucks, as was pointed

out a little while ago, Strykers and other tanks, whatever; seems

to me like there would be a very large need where this process

could not only save us the necessity of using up additional lubricant but also the cost of getting it there.

Mr. SKLAR. Mr. Chairman, you are absolutely right. I am a private business man as well, and I have been asked by many of the

military bases here, domestic, as well as in Iraq and Afghanistan,

as to looking at recycling. They have to collect the fuel, the recycled

lubricant anyway. There are concerns about the military for recycling or getting rid of fuel that is extended, old lubricants. By being

able to have the capability onsite not only to recycle the lubricant

but to return it to its highest lubricant value and have diesel fuel—

and remember, diesel fuel is used extensively for generators overseas—it could really be of value.

In addition, we have waste, moving pallets and other biomass,

and there has been a big move to bring modular biomass generators, gasifiers to get rid of that waste as well. And the reason that

Major General Zimmer was interested in solar and wind shipping

containers was also to get rid of the miles high of shipping containers over there, trying to figure out what to do with them as well.

So this concept of recycling what we have for higher value has to

be a critical concept not just here in the States but as we create

this next-generation, more agile military force.

Mr. SAXTON. Thank you very much.

Ms. Davis.

Ms. DAVIS OF CALIFORNIA. Thank you, Mr. Chairman.

Thank you to all of you for being here.

I think what sometimes happens with the second panel, unfortunately, we have fewer people here, but there is also a kind of disconnect between what is said in the first panel and the second

panel, and unfortunately, we don’t have you all together. And I always find that to be quite frustrating, not just on this committee,

but on others as well.

Mr. SKLAR. Happy to do that in the future.

Ms. DAVIS OF CALIFORNIA. Could you address—we can point to

a whole lot of issues, culture perhaps of the DOD, vis-a-vis private

industry and a host of areas. If there is a way of trying to bring

those two together, do we not have enough individuals working in

DOD on these kinds of issues that are embedded from time to time

in the private sector that would make a difference? You know, I

know there are no silver bullets here, but are there some ways in

which you think we can better bridge the gap between what is actually going on in the private sector with the military? I know that

we have certainly—Homeland Security, for example, major companies that were so frustrated because they couldn’t bring their technology to bear in the Homeland Security effort. And we were just

getting geared up for that process, but on the other hand, it just

took forever, and it still is not easy. Can you help me out with

that? What do you suggest?

Mr. SKLAR. In my testimony, I recommended that there are some

brilliant lights in the Department of Defense programs going on,
49

and we need to figure out a tactic—and it really has to be the prodding of this subcommittee, actually—to highlight those programs

and to get them acknowledged by their peers. We have to, again,

develop databases so that their knowledge and their successes are

easy to access because there is no—it is so big, it is such a giant

agency it is hard to get control of. So a lot of the successes that

Mr. Wagner just testified on are not known generally in the agency, except by some of the people involved.

And last, we need to integrate these successes in the War Colleges at National Defense University and the service space war colleges so that the leaders of that are coming through them—that

will be your generals and admirals and colonels—will be aware of

what is going on, will have seen that those doing these kinds of

cutting-edge things are getting acknowledged and rewarded so that

they feel open to do it. And unless that is all done in sort of a parallel set of tasks, you are going to have these hearings again four

years from now wondering why we are not caught up and having

it service-wide. So we really need your help as a full committee to

help pursue this.

Ms. DAVIS OF CALIFORNIA. Did you want to comment?

I appreciate you all addressed that to a certain extent, but there,

obviously, is a push back, and I am trying to get through that.

Mr. WAGNER. We work with some great folks on bases who really

want to do the right thing and deploy technology, but oftentimes

we are faced with the fear of action is greater than any greater

consequence of inaction, not doing something. We find people are

at their, gee, I don’t know if I should do that; is this the right thing

to do? These contracts are complicated. They are long term. They

frankly wring their hands over them. They are concerned about approval processes for them.

We need more top level cover, if you will, from leaders in Congress and the Administration to say it is okay to go do these

things. You need to be doing energy efficiency projects, and you

need to bring these technologies to bear. There ought to be a—

there are goals out there right now, but they are goals. There are

not a lot of requirements. And I think that is truly important. And

I think we find that a lot of projects get stalled because someone

along the line starts asking a whole lot of questions about it, and

then everybody backs off because they are afraid, you know, let’s

not get in trouble for this one. And we find that on a lot of initiatives that are out there.

Ms. DAVIS OF CALIFORNIA. Okay, I guess that is for us, Mr.

Chairman, to follow through.

Mr. SAXTON. Thank you very much, Mrs. Davis.

Mr. Udall.

Mr. UDALL. Thank you, Mr. Chairman. I appreciate your question, Mr. Chairman, about net metering, and I think Mr. Sklar

said, in 29 States, net metering is in place. I would invite you to

take a look at a couple of pieces of legislation here that would

apply to that metering standard in the entire country. There are

some vested interests that get pushed back with a great deal of

alacrity against such an idea, but it has proven to be quite a great

tool to promote residential as well as commercial use of solar technologies to generate electricity.
50

Mr. SAXTON. Good. We are going to be in touch with Mr. Grone

about it and see if we can’t use this as an example where the Air

Force or the military can have some significant level of demonstration project for the American people to take a look at. I think that

is a great thing.

Go ahead, I am sorry.

Mr. UDALL. No, I appreciate the commitment to pursuing this

further.

Mr. Wagner, I just want to thank you for pointing out in your

testimony the need to combine existing MilCon and O&M resources

and look at a longer life cycle, if you will. And I think that is the

opportunity here in all of these fronts, is to look at the external

cost as well as the longer lifecycle cost. And then if you amortize

those correctly, you can make a case that almost all of these technologies are equal to or surpass existing technologies. So thank you

for doing that.

Dr. Bartis, you talk about the approach that would work, excuse

me, for coal-to-liquids production, and I want to commend you because I think you have really uncovered the way to perhaps promote the private sector’s involvement in this in ways that would

really make sense. In particular, you talk about the loan guarantees and how they have actually created the wrong kinds of incentives, and I think history bears that out. And I hope we listen as

a committee and as a Congress to those recommendations.

Did you want to make any other comments in that regard?

Mr. BARTIS. I believe the Chairman asked the question, what is

the difference between now and the SynFuels Corporation in the

1980’s, and hopefully, we have learned some lessons. In the 1980’s,

the SynFuels Corporation was basically industrial policy that said

the United States is going to produce massive amounts of synthetic

fuels, independent of what economics said of the environment. And

what we are advocating is a much more measured approach when

it comes to shale oil or coal-to-liquids in which we test the waters

to see what we have there. And if we are going to do that, do what

else has to be done, especially push the renewable side, push the

environmental side and make sure we understand what these technologies do.

Mr. UDALL. And particularly in Colorado, we are sensitive to the

oil field dynamic. There are new technologies, the so called in-situ

processing of oil shale, and it has some promising potential. But

the oil companies themselves are moving slowly, and certainly of

the communities that were burned by this sudden dissolution of

that whole effort don’t want to experience that again. So I think

you remind us that history is a great teacher.

Mr. Sklar, thank you for being here today and for your enthusiasm. I think Congressman Hayes would not have asked you the

question that he asked the previous panel——

Mr. SKLAR. I brought toys and technology for him.

Mr. UDALL. And I do think there is a great interest in OSD and

the DOD in general because they understand the vulnerabilities

that we now have because of our dependence on or foreign oil and

particularly in the liquid fuels area. And of course, we are discussing liquid fuels and transport fuels in one category, and then the

other is electricity and power generation in another. And they are
51

linked, but I think the most pressing challenge we face, if you set

aside the carbon equation—which I don’t—is on the liquid fuels

side.

I think Congresswoman Davis asked you my question, but I

wanted to give you a chance to elaborate. You have outlined the

work you have done with the Department of Defense, and you have

talked about creating a database and putting this in the history

and the opportunities here into the War College curriculum. Would

you care to comment on any additional length about what you envision?

Mr. SKLAR. Well, I do want to point out that, in 2003, under the

Office of the Assistant Chief of Staff for Installation Management,

they also recommended a development of a standard verifiable

database on new generation technologies, analytical tools dealing

with reliability and robustness for distributed generation. And the

U.S. Air Force, in the same year, under a security benefits study

said that by adding distributive generation to diesels for critical

load support added several days without traditional fuel supply capability, and I have this in my testimony.

And if 70 percent of the tonnage that the U.S. Army brings into

battle is fuel, 70 percent, if there is any way to reduce that tonnage

by using, you know, lubricant recycling, distributed generation to

reduce traditional diesel and more advanced technologies, frankly,

even for vehicles, it would be immense not only the savings but the

agility of the military. And it is that recommendation that I mirror

out of that 2003 study, but that I see day to day in dealing with

DOD, that if we don’t create the centralized database, if we don’t

use the bully pulpit of both Congress and OSD to highlight the

good activities that we see—some of which you heard today—and

then embed it in this War College program, which is the teaching

vehicle for our leaders of the future, we are going to miss the boat.

And I have been involved with National Defense University.

They bring me different energy experts in to interact with senior

military officers. And in most cases, they are stunned about this

stuff. I mean, I brought this bundled LED light that produces the

same lumens for a 60th of the energy, that you can screw in. And

the officers were told these are not commercial yet, that there is

no screw in LED lights. Well, there are. So the private sector is

using them. And I think what Mr. Wagner said is, the private sector is willing to put up its own money in many cases where they

can build margin, and we ought to support that as strong and as

fast as we can. And then where there is learning to be occurred,

we ought to support the programs within the military, which is

willing to take the risk, to put them in real world situations.

And, you know, again, if we don’t do it, you will be sitting here

four years from now—I will be a lot grayer and a lot less hair—

saying the same thing, and you will be chiding these guys saying,

why aren’t they doing it? So we need your help.

And that is why, by the way, Mr. Chairman, this hearing is so

important, and I thank you for doing it.

Mr. UDALL. Mr. Chairman, just 20 more seconds because I know,

Mr. Chairman, the chairman has sat here for a long time this

afternoon, but the chairman is known as a champion of the Special

Forces branch of our military, and he understands how important
52

it is to winning the war on terrorism. And much of what is being

discussed here today and the mobile solar panels you have here

will be very, very helpful to our Special Forces efforts as they become more agile, as they are also dependent on information and

some of the modern ways that we fight, and that is why this is also

important in this particularly specialized area of Special Forces.

So, Mr. Chairman, thank you again for your indulgence and for

holding this important hearing.

Mr. SAXTON. Thank you, Mr. Udall.

I just would comment on your last comment that one of the biggest problems Special Forces soldiers have is, when they put that

knapsack on their back with a 100-plus pounds on it, a lot of that

100-plus pounds is batteries.

Mr. SKLAR. Yes, sir.

Mr. SAXTON. To the extent that we can lighten that load or replace those pounds that are taken up with batteries with other

technology that does the same job, the further ahead we will be in

giving them the capabilities that they need. Good point.

So thank you all for being with us. We appreciate it very much.

We hope you will stand by in case we have some questions as we

move forward and thanks for a stimulating discussion.

Mr. SKLAR. Thank you, Mr. Chairman.

[Whereupon, at 5 p.m., the subcommittee was adjourned.]
A P P E N D I X

SEPTEMBER 26, 2006

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SEPTEMBER 26, 2006

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